Business Highs and Lows
What it takes to get to the top of the entrepreneurial ladder?
Renee Horne – Johannesburg 2 May 2011
As with everything in life, getting to the top of the entrepreneurial ladder is about seizing opportunities and finding that gap. Indeed given this unpredictable economic climate, where funding seems to be supreme, just talking to the right people could be the opportunity your business needs to grow and help your marketing strategy, which could mean the difference between a step up or a tumble down the entrepreneurial ladder. Maureen Mosekwa, of Thuthuwedzo Guest House, can tell you the business highs and lows she had to endure with her bed and breakfast (B and B) business in Soweto, a formerly disadvantaged area in Johannesburg, “It has been difficult due to not having any business support at the time. I had to finance the business myself when I started. Bearing in mind I had to use my own home and now you must buy extra things in order to comply with the Department of Tourism”. So why was Mosekwa not quick to borrow money from the bank, “At that time I did not consider banks because there was a programme done by the Department of Trade and Industry (DTI) giving business people grants” As part of the “Africa Business Voice Series”, this week the World Entrepreneur Society (WES) interviews Mosekwa about what it means to be an entrepreneur and the harsh lessons that she had to learn when setting up her business.
Red Tape
Mosekwa’s business is five years old and employs three people, “At first it was difficult to find the right staff and to know how many one would need. I was also overwhelmed that I was the boss of my own business”. Since the new democratic dispensation in 1994, Mosekwa, like many other formerly disadvantaged Blacks, can now pursue their dreams of becoming entrepreneurs. This can be helped by using the scheme known as Black Economic Empowerment (BEE), where the government provides assistance to start-up companies. BEE is a racial redress policy aimed at addressing the economic disparities that existed from apartheid South Africa. However, all is not well with the government’s BEE policy; “We applied for the programme with other business associates, who are in the same industry. We gave them all the information. Come 2007, when we enquired with Department of Trade and Industry (DTI), they could not find our documents and really at that time we were not looking for loans, we wanted to take advantage of the grants for entrepreneurs, so it was really difficult using my own personal finance”. Since then Mosekwa has not received a response from the DTI. “The red tape restricts a lot of SMME’s, entrepreneurs and people who want to start business. It becomes practically difficult for them in this industry and in general terms, in this country because a lot of entrepreneurs are having to go through a lot of red tape because they cannot access finance with the banks. We are not saying that government should just give out money but they should have programmes whereby they monitor the red tape of SMMEs and assist them in some way”. However, Dr. Thami Mazwai, who heads the Centre for Small Business Development at the University of Johannesburg and past convenor of the National Small Business Advisory Council disagrees, “When it comes to red tape, South Africa (SA) is doing very well. The World Bank Monitors red tape and SA is among the countries where there is little red tape. Obviously there is going to be red tape, people have got to pay tax, they have got to be registered, people have got to have certain requirements to comply with government policy. So the red tape is a reality of life.
How bureaucracy can help entrepreneurs
The question is how you make it as easy as possible for the entrepreneurs? I believe that government has done quite a lot in smoothing out the red tape for instance, the whole question of one stop business shops that is the way you reduce red tape in which people do not have to go from one building to another building but they got their services or can get their services under one roof. You cannot do away with red tape; let's be very clear about that, but it is a question about how do you make it less burdensome on people.” Unfortunately, Mazwai’s argument appears to be less definite and is still confusing for entrepreneurs, most of whom know how bureaucratic it is to approach government for aid.
Trial and Error
Mosekwa, talking about her B and B argues; “I ran the business based on projections of making over R500,000 (close to £45,000) per annum; unfortunately, I was wrong. The first 2 years were hectic, but I actually was losing money. To be quite honest with you, I think the projections that I worked on were on 100% occupancy and with time you learn with business that you cannot work on 100% projections, although, of course I would have loved to see my business fully occupied with guests every day”.
Is Better Marketing a solution?
So, what was your marketing like? “I had a lot of support from TEP (Tourism Enterprise Partnership). We got support from the Johannesburg Tourism itself, also support from SA Venues in which they gave me a year’s free subscription which worked well for me and then in the second and third year I subscribed with them”. Was it difficult for you to find all this marketing information and opportunities? “Information was always there especially for marketing and material. I must say for marketing support, Johannesburg Tourism really played a role there in helping us. GEP (Gauteng Enterprise Propeller) paid 80% of my marketing material and I only paid 20% and I easily covered the 20%”. Do you think government giving you marketing tools but not actual finance for your business was beneficial? “At the end of the day, you still need to comply with the Department of Tourism. You need to be graded, you need to furnish your house and I must say it was difficult at that time. People are not used to supporting B&Bs in the township because there was this stigma that big business won’t go to the township during that period between 2006 to 2009. I would say that things had been changed after 2009, like the exposure we got with the World Cup 2010”. Indeed, businesses were popping up all over the show in preparation for the World Cup, but how did Mosekwa’s B and B do? “It was not quite what I had expected. FIFA dictated the prices like the FIFA matches. They cancelled some of the rooms at the last minute which had really affected our businesses as well. So we really did not make the money that we expected to make”.
Who Should Assist Entrepreneurs?
So did Mosekwa succeed with her township B and B? “It’s doing well – I would not say very well, but it’s doing well. I’m happy with the progress now; it did take a bit of time from 2006 to 2011, almost 5 years, but it’s getting there. I get a lot of support from corporate companies and have partnerships with travel agencies. I must say corporate companies do support us”. So the South African government has ploughed millions into to its BEE policy, and one would think that government would be the first to lend a helping hand. But, “It’s more the private sector that supports us. You see with government they also want to dictate prices. Government institutions want to dictate prices to you. With the private sector they are quite happy to help and we get a lot of business from private sector”.
Are there more questions than answers?
So do budding entrepreneurs need assistance, or does it take their own fortitude to get started? Who should foot the bill for start-up companies, the entrepreneur, government or business? What workable initiatives are government and business involved in? “I think there are good government programmes but I don’t think they are being managed well. I think they work with consultants who merely don’t understand our businesses and don’t understand what SMME’s go through. I think they need to work on their programmes and put capable people in charge that know what they are doing. Because most of the time with the government agencies you give forms then nothing is being followed up. At the end of their financial year they still have some budget left and the entrepreneurs have not been helped. They have not used up all the monies that they were supposed to use on entrepreneurs. I think there needs to be skilled and capable people to manage the programmes”. But Mosekwa was quick to mention, that some people do get lucrative funds and contracts from government but it is by way of nepotism in most cases. So after the highs and lows of an entrepreneur, what is Mosekwa’s message to those budding entrepreneurs? “They should not give up. They should get the skills and they should be passionate with whatever business. They need to attend networking sessions in order for them to get the knowledge”. However, when there are more lows than highs on the entrepreneurial path, sometimes it takes stories like Mosekwa’s B and B to illustrate that determination is crucial to a lucrative business. Join us next week, when we give you more reports from the “Africa Business Voice Series”, also why not tell us your story of the entrepreneurial highs and lows where you are?