Its not what you say, but how you say it…

Its not what you say, but how you say it…

rochemamabolo

Consider these two statements:

‘Hey, dont you see the rubbish bin is full!’

Or

‘It would be really great if you could empty the rubbish bin, honey’

C’est le ton qui fait la musique: its not what you say, but how you say it. If a message is communicated in different ways, it will also be received in different ways. In psychologists’ jargon, this technique is called framing.

We react differently to identical situations, depending on how they are presented. In the 1980s Kahneman conducted as survey in which he put forward two options for an epidemic-control strategy. The lives of 600 people were at stake, they told participants to the survey:

– Option A: Saves 200 lives
– Option B: Offers 33% chance that all 600 people will survive and a 66% chance that no one will survive.

Although options A and B were the same (with…

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“You can buy this from anyone, and we are anyone”

That is not going to get you very far when you sell stuff, raise money, look for a job and your skills or services can be found from anyone.

If your skills can be found anywhere, anytime and anyhow from anyone, you are fitting in and ultimately invisible.

What if instead, you created a reputation as the person or business that can honestly say, “you can’t get this from anyone but me?”

Which comes first: The product or the marketing?

Well, if you define marketing as advertising, then it’s clear you need the product first.

But wait.

Marketing is not the same as advertising.

Advertising is a tiny slice of what marketing is today, and in fact, it’s pretty clear that the marketing has to come before the product, not after.

A lot of products were produced after a lot of marketing (including market research) has been done.

Don’t look for customers for your products, look for products for your customers.

This means you need to know what you customers want first, then based on what they want, go out there an source (produce, innovate) products for them. This will result in a filling a gap in the market where there is proven demand. This is what entrepreneurship is about, filling a gap in the market.

In fact, just about every successful product or service is the result of smart marketing thinking first, followed by a great product that makes the marketing story come true.

If someone comes to you with a ‘great’ product that just needs some marketing, the game is probably already over.

This Might Not Work…

Change is powerful, but change always comes with the possibility of failure as its partner. ‘This might not work’ is not merely something to be tolerated; it’s something you must seek out.

If your new business plan disrupts an industry or pisses a lot of people off, there’s a good chance you are on to something good. You should worry more when nobody’s talking.

The State of Entrepreneurship in South Africa: Solutions and Recommendations

The following are some of the recommendations now how to remedy and create a culture of thriving entrepreneurship in South Africa. This list is not exhaustive, there are other recommendation:

Education:

• Entrepreneurial education – when offered – is unlikely to reduce/remove the deficit created by having a poor basic education.
• Entrepreneurship training and support should not be training for the sake of training. Impact of the training should be assessed. The impact should be monitored and measured. Without that we won’t make any progress supporting entrepreneurs and businesses.
• Relatively low number of individuals entering (and even lower completing) tertiary education. This needs to be addressed.

Market dynamics:

• Tight vertical integration of existing businesses makes it difficult for new firms to start.
• Big businesses essentially make it extremely difficult for small businesses to engage with them. The vendor registration processes is time-consuming and are complex and small businesses are expected to provide so much documentation. They are being treated like big businesses and there is no recognition of the cost of this compliance (both in time and real cost) to a small business. The compliance process could take up to 8 months just to complete. Corporates work with checklists and are driven by risk compliance people that have little or no understanding of the difficulties faced by small businesses.
• Up the value chain: big players dominate which leaves little room for new entrants. The competition is doing its best to curb monopolistic behavior, however more could be done to result in reasonable bank charges, telecommunications costs etc. This is a process and over time the desired results should be visible.
• Energy, transport, financial and communication markets too regulated – increased costs to small businesses and also reduces the flexibility for small businesses to find niche markets.

Culture and social norms:

• Banks are not open to funding people who have previously failed in business attempts.
• Entrepreneurship is a mindset. South Africa, in general, does not have an entrepreneurial mindset. Vast majority of South Africans have the mindset of an employee.
• Need to start young, at primary school. Schooling needs to encourage imagination and creativity. Expose young children to entrepreneurship based on activity.
• Entrepreneurship at school level should not have an academic focus. EMS as a school subject is not the same as entrepreneurship education.
• Government has hyped entrepreneurship to such a level that people with no more than a basic idea believe themselves to be entrepreneurs. However a number of ideas have not got the economic right to live.
• It is an odd phenomenon but despite (on paper) South Africa’s regulations being more onerous than in the USA, for example, they are much less rigorously enforced. In SA if your kitchen is not spotless you will have some time to rectify it. In the USA they will close you down very rapidly. So there is a freewheeling culture that is conducive to economic experimentation. This gives businesses the time to become compliant but in the USA you need to comply before opening your doors as the inspectors will be there in 48 hours to shut you down.

Government policy:

• Legislation around the hiring and firing of staff scares many small businesses off from hiring staff. Once companies hire staff, it is very difficult to let them go if the business cannot afford them. Labour legislation needs to accommodate the up- and downswings in small businesses and the need to be able to hire and fire due to business reasons.
• With labour the key issues are the minimum wage and lack of productivity. Policies either need to be put in place to stop dumping or employers need to be allowed to reduce the minimum wage. For example: with massive imports on textiles, small businesses cannot compete. The choice is either to shield and protect industries, or reduce wages to be competitive. If neither of these happens, businesses will be forced to close.
• Productivity is probably the key labour issue and this goes back issues with poor quality education. Employers, potential employers and employees are all being let down by the state of education in South Africa. Under-skilled labour and low productivity limits the competitiveness of business.
• BEE is often more about redistribution i.e. share issues. Focus should be on skills development i.e. supply chains with links into the townships and rural areas. More beneficiation should be done in mining towns where small businesses are linked to big mining companies in the location.
• Government policies still have a ‘large-firm bias.’ The introduction of the Ministry of Small Business Development is a step in the right direction. Sufficient budget should be allocated to this Ministry so that it can be able to implement more projects that will have a positive impact on the economy.
• CIPC needs to improve on its business registration systems. This is step one of business and how entrepreneur experience CIPC will either encourage or discourage them in the entrepreneurship journey.
• Procurement policies needs to be transparent and need to focus on small business participation in the supply chain.
• Improvement in cross-border trade focusing on reducing documentation, costs and time.
• Priority fees offered to large organisations seen as impacting on small businesses’ ability to access physical infrastructure at a competitive price.
• Questions related to cost of telecommunication (particularly in comparison to other African and international competitors).

Business support:

• Business support needed in smaller cities and towns to spread the assistance.
• Significant amount of support available in major cities such as Johannesburg, Durban and Cape Town; however, the support is often uncoordinated and does not specifically target one of the three business types (namely necessity, opportunity, innovation).

Financial support:

• Banks do not lend at competitive rates – interest costs therefore extremely high.
• Not enough access to small loans with technical support. Due diligence sometimes hinders entrepreneurs from obtaining first round funding.
• There is a considerable amount of funding available. However accessing the funding is difficult and time-consuming as every funder has a different system, many requiring numerous (and differing) forms and requirements. There are so many unnecessary hurdles to accessing funding.

The State of Entrepreneurship in South Africa: Gauteng vis-à-vis Western Cape Entrepeneurs

The graph below analyses the entrepreneurial pipeline with respect to Gauteng, the rest of South Africa and the Western Cape.

• The pipeline begins with potential entrepreneurs: In this stage individuals have not embarked on any specific actions to start an enterprise, even though they believe they have the capacity and believe that there are plenty of opportunities to start a business.
• The second stage in the pipeline is intentional entrepreneurs: those individuals who intend to exploit these opportunities and express an intention to start a business. The following stage is represented by nascent entrepreneurs and new entrepreneurs, and
• Finally established businesses: Those who have started and are running their businesses.

Potential entrepreneurs are individuals who believe they have the capacity to run a business and that there are plenty of opportunities to start a business. This perception is important, as GEM has found that individuals who are confident that they possess the skills to start a business are four to six times more likely to be involved in entrepreneurial activity.

Gauteng (29.7%) has the highest provincial rate of potential entrepreneurs while just over a fifth (22%) of the population in the Western Cape and the rest of South Africa believe they have the skills and knowledge to start a business and that there are opportunities in the area they live.

The higher rate of potential entrepreneurs in Gauteng is unsurprising, as it is the commercial hub of South Africa.

Gauteng contributes over a third (33.7%) of South Africa’s GDP and has a gross regional product which is 2.4 times greater than the gross regional product of the Western Cape.

The increased amount of business activity is likely to increase the possibility of individuals believing that they perceive business opportunities.

42.2% of people living in Gauteng indicated that they perceive good business opportunities in the area in which they live, while only 34.5% of people living in the Western Cape indicated that they perceive good business opportunities in the area in which they live.

The rate of intentional entrepreneurs represents non-entrepreneurial individuals who have indicated an intention to exploit opportunities and an intention to start a business within the next three years.

A fifth (19.2%) of non-entrepreneurs in Gauteng expressed an intention to start a business in the next three years.

The rate of intentional entrepreneurs in Gauteng is 1.7 times the rate in the rest of South Africa and 2.7 times the rate in the Western Cape.

Even though an individual may indicate an intention to start a business, before this becomes an actuality there will be an assessment of opportunity costs, which involves comparing the expected returns of entrepreneurship to the expected returns of an alternative occupation.

The most common alternative is being employed. Remaining employed may be a more attractive option to many, especially where employment opportunities are sparse.

While the Western Cape has the lowest provincial unemployment rate, South Africa’s unemployment rate is extremely high and the opportunity cost of leaving formal employment to pursue an entrepreneurial opportunity is therefore high.

60% of the Western Cape businesses have medium and high growth perceptions compared to 38% in Gauteng and 26% for the rest of South Africa.

The TEA rate captures individuals that have actually acted on their intentions. The TEA rate includes both nascent and new entrepreneurs.

Nascent entrepreneurs are individuals who are actively involved in setting up a business or who already own a business but whose business has not paid any wages or salaries for 0 to 3 months.

New entrepreneurs are individuals who are owners/managers of an active business that has been in existence for 3 to 42 months.

Gauteng has a TEA rate of 15.4%, the rest of South Africa has a TEA rate of 9.5% and the Western Cape has a TEA rate of 7.0%.

One explanation for the lower TEA rate in the Western Cape is the population demographics within the Western Cape, in relation to the population demographic in Gauteng and the rest of South Africa (as regions).

Fifty percent of the Western Cape population is coloured and this race grouping has the lowest TEA rate.

Gauteng and the rest of South Africa (other than the Northern Cape) have a lower percentage of coloured people in their population demographics.

Entrepreneurs in Gauteng are 3.2 times more likely to be opportunity-driven than necessity-driven.

In KwaZulu-Natal, the Eastern Cape and Limpopo, the informal sector accounts for a larger share of total employment compared to most of the other provinces.

This would explain why entrepreneurs in the rest of South Africa are only 1.7 times more likely to be opportunity-driven than necessity-driven entrepreneurs.

Western Cape entrepreneurs are 6.7 times more likely to be opportunity-driven than necessity-driven compared to 3.2 times in Gauteng and 1.7 times in the rest of South Africa.

This is positive with respect to employment creation, as GEM has shown that opportunity-driven businesses have a more positive impact on job creation.

The Western Cape has the highest rate of intended high-growth businesses that are intending to generate 20+ jobs over the next five years.

Entrepreneurs in the Western Cape (71.9%) perceive themselves, on average, to be slightly more innovative with respect to the extent to which their product or service is new to some or all customers and where few or no other businesses offer the same product than Gauteng (69.9%) and the rest of South Africa (66.7%).

This is a positive sign, as a high degree of innovation orientation within businesses is expected to have a positive impact on economic development.

When asked to respond to the following question, “Where you live, working for the government is the best way to earn a good living”, over half of Gauteng (53%) and Western Cape (58%) respondents agreed and just less than three-quarters (70%) of the rest of South Africa agreed that working for the government is the best way to earn a living.

A further concern is high levels of government corruption which creates the belief that ‘who you know’ is more important than ‘what you do’.

Finding entrepreneurial opportunities and indicating an intention to develop the opportunity into a business will be hampered by the belief that your success is more dependent on ‘who you know’ than ‘what you do’.

Added to this perception is increasing dependence on state welfare, with 16 million people in South Africa receiving social grants, of which 11.3 million receive child support grants.

Of the 58 million people in South Africa, the public sector currently employs 22.8% percent of the working population, 27.5% (16 million) are receiving social grants and 36.7% (6.9 million people) are unemployed (expanded definition).

The development of an entrepreneurial culture in South Africa is likely to be eroded by the perception that working for the government is the best way to earn a living, by the number of discouraged work seekers and the number of people on social grants.

GEM has shown that knowing an entrepreneur has a positive impact on the decision to start a business. However, in many communities, knowing people who are discouraged work seekers or are a recipient of a social grant is significantly more likely than knowing an entrepreneur.

The State of Entrepreneurship in South Africa: Black vis-a-vis White Entrepreneurs

Early GEM research (GEM South African Report, 2005 and 2010) indicated that there is a strong relationship between population groups and entrepreneurial activity.

Whites and Indians were more likely to start a business than were coloureds and black Africans. However, subsequent research (GEM South African Report, 2008) showed that this difference did not exist when all races had received post-secondary education.

This clearly illustrates the importance of both good secondary and, in particular, tertiary education.

Very encouraging is that the percentage of black Africans who are involved in opportunity-driven entrepreneurship has been increasing steadily, from 22.9% in 2005 to 58.3% in 2013.