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By Emma Montocchio, Decusatio
As a company, we are very fortunate to be able to work on several high social-impact initiatives in the fields of youth entrepreneurship and youth employability and this gives us a unique perspective around ways that organisations can deploy their B-BBEE budgets for maximum impact.
Below we have outlined some ideas around projects we are working on to highlight that you can think innovatively about how you deploy your spend:
It’s not just B-BBEE
One of the big shifts we are seeing in the markets – particularly with multinationals – is that it is no longer just about “B-BBEE”. Organisations are now having to comply with a number of Environmental, Social and Governance models as well as the UN Sustainable Development Goals (SDGs).
This is an important development as the conversations are shifting from South Africa specific to aligning with global goals and reporting.
Micro-franchise models rock!
One of the pain points around many of the Enterprise Development initiatives out there is a question about sustainability. Funding a small business sounds good in principle but if that business is not sustainable, it often feels like a case of throwing good money after bad.
SMEs in South Africa have very high failure rates and the goal is to de-risk the projects to the best of your ability. Enter the micro-franchise model.
Franchising has long been one of the most successful forms of entrepreneurship in the country as owners are given an established formula and they are able to scale them while playing off an existing skills base and marketing collateral.
Some examples of the micro-franchising opportunities that we are involved in include mini sanitary pad manufacturing factories, computer training centres, beauty spas and accounting businesses.
Provide off-take agreements
Access to markets remains one of the single greatest challenges that SMEs face and many businesses are reluctant to use suppliers who don’t have a track record.
Without being able to test their systems, develop cashflow inside of the business and grow their internal skills base they are unable to provide any evidence of success to future clients.
When the issue of “off-take” agreements is raised with many larger businesses, the first response is: “We don’t have a need for the services so we can’t see how to involve them in our supply chain”
It is all about thinking laterally.
For example, we have a beautiful model that we currently work with involving sanitary pad manufacturing micro-franchises which are women-owned and managed. Businesses commit to off-take agreements for ESD / SED purposes and then donate the manufactured pads to charities or schools of their choice.
The micro-franchises enjoy full order books, and the corporate is ticking multiple elements in terms of their scorecard and social recognition.
Tackle social mobility
Due to historical spatial planning issues, a major challenge that South Africa faces is the lack of social mobility: People don’t work where they live.
This in turn means that your staff are spending much of their salaries on transport costs, just to get to and from work.
What we really want to be doing is creating jobs where people live.
We do quite a lot of work with the Youth Employment Service (YES) who have rolled out “hub” models in communities such as Saldanha Bay and Alexandra and these provide local jobs for the surrounding communities. These include catering, manufacturing and technology-related options and provide funders with the opportunity to secure both SED and tax donation (Section 18A) recognition as part of their strategy.
Re-think suppliers for tactical and strategic benefits
Supplier Development remains one of the single biggest challenges that many organisations in the country face and we find that many focus on a “bottom-up” approach trying to build black-owned suppliers rather than a “top-down” approach. Instead of focusing on entry level suppliers, you can use your leftover B-BBEE spend tactically. A good example of this is one of our partners is a black-women owned consulting business assisting industrial and manufacturing businesses apply for grants and incentives out of the Department of Trade, Industry and Competition (DTIC) – an Enterprise or Supplier Development contribution here was able to give one of our clients access to insights around the DTIC incentives landscape which they could use to inform strategic decisions taken by the Exco.
Outrageous skills
We get it – Skills Development in South Africa has many detractors.
Every year billions of rands of Skills Development funding is pumped into the economy and it feels like there is no tangible change in the level of economic activity and we continue to bemoan the fact that we are not building the skills of the future.
Without economic growth and an opportunity to gain practical work experience and work hardening, these youth are trapped in a cycle of bouncing from one learnership to the next in the hope that they will be absorbed.
The nature of many of these programs is that they are looking to push as many people through a simple cookie-cutter recipe to tick their skills spend each year. But what about if you were doing something outrageous like training drone pilots, 3D printing specialists or developing data science skills?
We are working on a program this year to train 65 young drone pilots – 60% of whom are likely to be women. Initiatives like this have very high absorption rates across multiple industries including mining, security, logistics and agriculture.
Accounting is the language of business
One of the programs we are seeing a lot of success with now is our “Adopt-An-SME” which sees a corporation effectively funding accounting and back-office support for small businesses.
Accounting itself doesn’t sound particularly sexy at a first glance but a vast number of SMEs fail to sort out their compliance issues which then impacts their ability to get things like a tax clearance certificate. By sorting out their compliance issues, they can get onto vendor lists, qualify for other grants and incentives and be able to apply for finance.
Help your ESD beneficiaries speak the “language of business” and the world opens up for them!
The definition of insanity is doing the same thing over and over again and expecting a different result.
As a country we need to re-imagine the South African economy and find unique and novel ways to grow our skills and SME base and hopefully the above gives you some exciting ideas to re-imagine your B-BBEE spend.
Emma Montocchio is a consultant for Decusatio – a South African consulting firm assisting entrepreneurs tackle the twin challenges of Access to Finance and Access to Markets.
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