Ms Stella Ndabeni-Abrahams, South Africa’s Minister for Small Business Development, commented on her department’s synchronicity with the hashtag for the Entrepreneurship Development in Higher Education (EDHE) Lekgotla 2022 during her opening address on the second day of the event in Gqeberha.
“I’ve seen the hashtag #movetomarket and this talks to the second element of our performance strategies – a focus on market access,” she said. ‘’We are happy to see our higher education institutions transitioning from exclusive and elitist ivory towers to drivers of inclusive innovation and entrepreneurship. This Lekgotla and the work being profiled over these few days is testimony to this,” she said.
“Despite the global volatility, which characterises the moment, I have no doubt that the next decade or two will be Africa’s moment of greatness. Africa’s youthful population will be its growth driver and give the continent its competitive edge, but only if we put entrepreneurship and innovation at the center of our policy focus, not as a rhetoric.”
Ndabeni-Abrahams (above) said universities needed to step up and forge new governance models built on principles of collaborative leadership. “We cannot be held back by state incapacity,” she said, saying she had asked the CEO of 22 On Sloane to join her at the event, hosted by Nelson Mandela University.
Based in Bryanston, Johannesburg, 22 On Sloane is Africa’s largest startup campus, offering incubation and accelerator programmes. Its partners include the Department for Small Business Enterprise as well as GEN Africa, which is part of the Global Entrepreneurship Network (GEN) that operates programmes in 180 countries.
She wanted them to look at a collaboration with the United Nations Development Programme and others involved in GEN Africa, “to better integrate the institutions of higher learning into the thinking on continental innovation and entrepreneurship ecosystem building.
“We owe this to the continent,” she said.
Building a better economy
She said South Africa was facing tough times as a country, with CoViD-19 having resulted in an estimated loss of two million jobs and up to one quarter of small and micro enterprises. Now there were global volatilities associated with the war in Ukraine as well as the escalating costs of loadshedding.
“Hunger poverty is on the rise, which is putting more pressure on government for social relief spending, something we are criticised for. This demands that we do things differently and with more urgency and deliberation.
“The time for talking is over. Active collaboration and partnerships are no longer just nice-to-haves but essential to our prospects for recovery. Economic inclusion can no longer be treated as an afterthought. The echoes of July 2021 still ring loudly throughout the land,’’ she said, referring to the orchestrated civil unrest and violence in parts of KwaZulu-Natal and Gauteng between 8 and 17 July last year which caused over 354 deaths, R50-billion in damages, and the loss of 150 000 jobs.
Government was executing its economic reconstruction and recovery plan, “aimed at building back better an economy that is faster growing, greener, more digital and more inclusive,” she said.
Why entrepreneurship is important
Ndabeni-Abrahams said they needed a paradigm shift in how they approach entrepreneurship and small business development.
Operation Vulindlela, a joint initiative of the Presidency and the National Treasury to accelerate the implementation of structural reforms and support economic recovery, meant they had to increase economic inclusivity through expanded innovation and entrepreneurship.
The national development plan, which aims to eliminate poverty and reduce inequality by 2030,” made it very clear in 2012 that of the 11m jobs to be created, nine million would come from SSMEs,” she said. “This is why you had President Ramaphosa saying in Parliament that government is not responsible for creating jobs, and everybody looked shocked. But the national development plan is clear about where those jobs are going to come from.
“This means that we need to turn citizens from grant seekers and job seekers. The students that are produced by universities must have that orientation. Make them entrepreneurs who in turn can be job creators,” she said.
New masterplan to develop SMMEs
The government’s new thinking is outlined in its National Integrated Small Enterprise Development (NISED) Masterplan, its third for the development and support of the SMME sector.
“Our evaluation of the previous two national strategies has shown that as government, we were too inward looking. We didn’t place enough emphasis on mobilising and leveraging all role players behind entrepreneurship and small enterprise development,” she said. NISED corrected this by taking an ecosystem approach, enabling various public and private sectors to operate in a targeted, collaborative and coordinated manner.
“We are currently developing game changer programmes around which strategic partnerships can be mobilised and organised. We invite you to be part of this process,” she said.
Four strategic performance areas
The Department of Small Business Development is focusing on four strategic performance areas:
- improving the regulatory environment for SMMEs and cutting red tape, working closely with formerExxaro Resources CEO, Sipho Nkosi, whom she referred to as “the redtape cutter in the Presidency”, coopted for that purpose;
- market access, which includes working with the Competition Commission to address market concentration and anti-competitive behaviour, proactively co-creating markets with the private sector through strengthened enterprise supplier development frameworks that include townships and rural businesses;
- prioritising financial inclusion – working closely with the World Bank and the National Treasury to find innovative fintech solutions to address the estimated R350b SMME credit gap and the fact that most township and rural enterprises operate without bank accounts; and
- entrepreneurship development, at the heart of which incubators and accelerators “are located, for business development support. She said they would like to combine the efforts of their 110 such platforms with the 100-plus ones driven by the private sector. She said their approach is to work with universities through technology demonstration centres and incubators which “provide a sheltered and protected environment” to support technology-based startups.
“Entrepreneurship and innovation are two sides of the same coin. We have a national system of innovation which takes a triple helix approach, drawing in government, private sector and knowledge institutions. We are working with all industries and the business sector.
“Our role as small business development is to focus more on the entrepreneurship support required to take early-stage startups from ideation to commercialisation, and ultimately to scale ups. Commercialisation is the most critical and difficult step of the innovation value chain. It requires the collaboration of multiple role players,” she said.
Hackathons and innovation challenges have proved especially successful in connecting innovators and early-stage entrepreneurs with support networks and they have recently designed the Youth Challenge fund, a startup support programme, for this very purpose. Online portals such as the Innovation Bridge Portal, on which her department is collaborating with Science and innovation, and the World Bank, are also important connecting platforms.
Praise to Nelson Mandela University
Minister Ndabeni-Abrahams said she was impressed with the entrepreneurial activities at Nelson Mandela university. These included:
- its Propella business Incubator that her department is supporting through the Small Enterprise Development Agency (SEDA), which provides support for innovators with technology focusing on renewable energy, energy efficiency and related technologies, advanced manufacturing and supply chain optimisation – and its satellite township hub;
- its innovation office, which is commercialising research and development,
- hosting the national uYilo Mobility Programme established in 2013, which aims to make South Africa ready for electric mobility technologies, and includes national accredited battery testing, material testing, vehicle systems, and a smart grid ecosystem;
- national technology station programmes such as the innovation hub, eNtsa, which focuses on engineering design, component and material testing, prototyping and industrial R&D, so improving the competitiveness of regional industry; and
- its Centre for Community Technologies, which engages with community members particularly in townships and rural areas.
“We are very supportive of the proposal for Nelson Mandela University in establishing the African Center for Entrepreneurship and Social Innovation. This will contribute significantly to the research and knowledge base we need to establish, to build an impactful and sustainable innovation and entrepreneurial ecosystem,” Ndabeni-Abrahams said.
She said she also liked the idea of the university’s continental focus. She knew it already had active partnerships with the Makerere University in Uganda, the University of Nairobi in Kenya, Addis Ababa University in Ethiopia and the University of Dar es Salaam in Tanzania.
This aligned with her department’s efforts to build the African continental free trade area, which will connect to 1.3 billion people across 55 countries with a combined gross domestic product of $2.5 trillion.
Universities, please share your initiatives
The Minister said although she had focused on the innovative work being done at the Lekgotla’s host university, Nelson Mandela University, she was sure “every institution represented here today has similar stories to tell”.
She invited them to do so. “I look forward to hearing these and looking to how we can enter into practical partnerships that give us greater scale and impact. It is these accounts that will change the narrative of mistrust and despair to one of hope and resilience, working together and putting youth at the center of everything we do. We will move the country forward to a more inclusive economy built on innovation and productivity-led growth.
“I commend EDHE for convening this lekgotla and providing a coordinating platform around which the institutions of higher learning and other role players can engage and partner,” she said.
This is an edited version of the discussion following the Minister’s address.
Professor Keolebogile Motaung (left), Director: Technology Transfer and Innovation at the Durban University of Technology, who facilitated the session, asked: Who oversees funding startups?
Ndabeni-Abrahams: SEFA (Small Enterprise Finance Agency) is the funding agency under the department. They carry the responsibility to fund startups and SMMEs.
Ms Carol Keshy, from the Johannesburg Business School: Thank you so much that SEFA has launched an online application platform. But in the past, there was a disjoint between the work that SEDA (Small Enterprise Development Agency) is doing and what SEFA is doing. What generally happens is that SMMEs will go to SEDA to get their business plans and their financials in order so that they can apply for funding. And when they take that document to SEFA, SEFA says it is not good enough. Has that disjuncture been addressed in the new systems that have been launched?
Ndabeni-Abrahams: That seems to really cause lots of confusion in our ecosystem. SEDA is a business development support agency. They do not provide funding, hence correctly so, they will assist entrepreneurs with the development of business plans, who then take them to SEFA to process for funding.
SEFA applies its own criteria. They do the due diligence because just getting a business plan does not mean automatic approval for funding. SEFA is governed by the National Credit Regulator (NCR) and they have the responsibility to make sure you tick all the right boxes such as viability. Does the business really exist? We are aware that lots of people are selling business plans.
As you correctly pointed out, at times, the business plan will be declined for funding. SEFA has a responsibility to make sure that they don’t decline a business plan without letting the applicant know what it is that they have not done right. As a department responsible for business development, declining an application without an explanation would mean we are not complying with that component.
You may have heard that SEFA and SEDA are merging. We have been given 20 months to look into it and identify priority areas.
Gillian Anstey is a contract writer for Universities South Africa.