Growing SA’s economy through SMEs

Black Umbrellas, an enterprise development organisation, is nurturing local entrepreneurship

Seapei.jpg

Partnering with the private sector, government and civil society, Black Umbrellas addresses the low levels of entrepreneurship and high failure rates of 100% black-owned emerging businesses on the African continent.

The programme focuses on promoting entrepreneurship as a desirable economic path and nurturing 100% black-owned businesses in the critical first three years of their existence through the provision of nationwide incubators. At the helm is CEO Seapei Mafoyane, a woman who is passionate about building black business to the best that it can be.

Born and raised in Mafikeng, she finished high school at the International School of South Africa and proceeded to the University of Natal—now the University of KwaZulu-Natal—in Pietermaritzburg where she attained her undergraduate Bachelor of Science Degree in microbiology and genetics.

After graduating, she moved to Johannesburg where her first job was at Discovery Vitality, a time she remembers fondly. “I had the time of my life there. It was an incredible place to learn, grow and be entrepreneurial,” she says.

Initially, she was concerned that an absence of skills in finance and the financial markets would prevent her from being a well-rounded leader; however, an opportunity soon arose when Standard Bank put out a call to action seeking young graduates in fields outside of banking and finance.

“I joined Standard Bank in 2007 as part of a management development programme, which was headed by the CEO of Credit Africa at the time and a fantastic leader, Mr Terry Moodley, who remains one of my mentors. And for four years, I headed up a customer portfolio within Personal and Business Banking (PBB) South Africa,” explains Mafoyane.

Towards the end of this period, she started studying for her MBA and after a year at SA Breweries as a Business Capability Leader, the opportunity arose to join Black Umbrellas, where she has spent the last seven years.

“When I started at Black Umbrellas, I came into a relatively small environment. At the time, there were just over 20 staff members and four business incubators. My role as COO was to consolidate and diagnose what the challenges were and ensure that there was operational effectiveness.

“It was probably my toughest time at the organisation as it was basically learning while on the job. It was a combination of gaining a detailed understanding of the business, ensuring that we weren’t shutting down anywhere and that we were effective, growing the brand—because at the time, a lot of people knew about Shanduka Group, the commercial company, but failed to see the link between it and Black Umbrellas—and communicating effectively what business incubation is, which a lot of people still struggle with in South Africa at the moment.

“And it all had to happen very quickly as the work that Black Umbrellas does is donor based—so, our growth over the seven years was determined by where the opportunity comes from and, fortunately, in my first six months, we had an opportunity to open four more incubators in the space of one year,” she explains.

Black Umbrellas has a ninth incubator, which will open its doors in Soweto by the end of August this year, and the organisation hopes to establish a tenth one in the Free State by the end of this year.

“This will deliver squarely 10 incubators as set out by our board for our 10-year commitment 10 years ago when the organisation was first established,” says Mafoyane.

As to why SMEs fail, she says that while, on the one hand, the support landscape in South Africa is trying to drive growth, on the other, it tends to be inhibitive.

“Small business tax is not simple by any stretch of the imagination. I think we’ve come quite a long way from when I first started at Black Umbrellas in terms of setting up and starting a business, so the CIPC process is a little better, but a lot of the other legislative frameworks aren’t very supportive.

“A lot of time and paperwork are required to be able to administer yourself properly as a small and medium enterprise, and the turnaround times also tend to be long and a little bit laborious. So, for me, it’s the intent of our government in making sure that they develop SMEs that will support our economy, as well as the legislative environment that supports those efforts—these two aspects need to converge,” Mafoyane explains.

In addition to time-consuming legislative frameworks, she says that hindrances to the sustainability of SMEs include policy instability, high interest rates that do not support the growth of SMEs and the lack of education in basic skills and entrepreneurship.

“I certainly have seen an incredible change in SME growth when they are given the right tools. I would never have believed that SMEs have the potential that they do, but they flourish once given the type of basic opportunity that a programme like ours provides.

“Last year, SEED released a report looking at the state of entrepreneurship in South Africa, revealing that, of the businesses that are post-revenue, only 5% have a turnover of greater than R5 million.

“At Black Umbrellas, the number of businesses with a turnover between R1 million and R5 million have increased substantially from 13% in 2017 to 26% in the second quarter of 2019. Our best performing SME last year had a turnover of R170 million,” Mafoyane enthuses.

Throughout its years, Black Umbrellas has won two International Business Innovation Association (InBIA) awards. InBIA is American-based and it’s an organisation that represents 2 200 incubators across 62 countries globally. The association seeks to promote the growth of new business and educate the business and investor community about the benefits of incubators.

“It is really important in terms of the work that we do, that we benchmark ourselves, not just against our peers locally but against what other incubators are doing globally. They are the unit that helps us know what the global standards for incubators are. What they do annually is, they offer their members this consolidated view of who is doing what across this geography and that’s the basis upon which we participated, first in 2015 when we won our first award and then again in 2019.

“The international accolade is a really great acknowledgement to say the work we do here is the best of the best across the world, and I think it’s an important mechanism. And it’s an incredible recognition for our staff who work tirelessly in developing these SMEs so our donors and funders can support the work we do. We no longer have any doubt in our minds about what can be achieved, even in a small incubator at the bottom of Africa—you can produce businesses whose success measures up at a global level,” she says.

Mafoyane says that while great work is being done in the SME sector, some important questions need to be answered.

“The SME market as an incubation market is fairly unregulated. How do we ensure that everyone is not starting an incubator because it’s an easy mechanism for raising grant funding? How do we ensure that all of the incubators that exist in South Africa are measured for impact, to ensure that these achievements that we’re seeing through our business incubator are growing in multiples? Because as beautiful as they are, if I am only touching 300 small businesses a year in a country of 60 million people, it’s going to take an extremely long time to start seeing the impact.

“So, the more of us who are doing the work that we do and the more focus there is in the enterprise and supply development space on measured impact, the better it will be for everyone concerned,” Mafoyane concludes.

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