Nedbank’s Small Business Index: SA’s true unemployment stats

Statistics are inevitably flawed for reasons that range from the way the information is gathered to the way they are interpreted. Taking aim at one of South Africa’s most worrying figures – the nation’s staggeringly high unemployment rate – is business consultant Kathy Berman, who attended a session on the quarterly Nedbank Small Business Index. As she points out, there are many people who might be classified as unemployed but are in fact running their own businesses. You only need to look around your suburb to see that many people who might be classified as unemployed are very busy trying to make money. That brings us to another important point Kathy makes here – and will resonate with many parents who are pondering what to advise their children about their future careers. As we are, it seems, a nation of entrepreneurs, we should be encouraging young people to work hard, get good grades and then get out there to create jobs. This is a better alternative to giving them the impression that successful school work is likely to be rewarded with a comfortable salaried position that includes space for golf games in business hours. – JC

By Kathy Berman*

So: How do we get the 24.1% officially unemployed people off the street and into businesses as business owners with a vision? This seems to be the vexing issue facing talk-shop after talk-shop on ‘Entrepreneurialism in South Africa’.

And, if the managers of local funds – developmental and commercial – are to be believed, leaves funder after funder, and consultant after consultant, with unused funds at the end of each financial cycle. And, for the fund management team: with fabulous jobs rolled over another year. But what is happening to the unemployed, and the SME economy?

Well this is the nub of the issue, forms a small part of the findings of latest quarterly Nedbank Small Business Index (NBSI) – launched on Monday night 17 March at the Gordon Institute of Business Science. While the panelists at the launch referred to at least two other indexes around the SME sector, judging by the cogent comments of aspirant entrepreneurs in the audience, the insights are probably not pertinent enough to the conditions “on the ground” – as we love to phrase it in this country.

The NSBI survey outline, presented by Nedbank’s Chief Economist, Dennis Dykes – and which can be sourced on www.simplybiz.co.za –  had some relatively predictable insights – these are just two:

1. Perceptions by small (under R 20 million) businesses of Big Business support for SMEs was rated 5,2 out of 10 – up from 4,9 in previous quarter, while perceptions of Government support for small business was rated by respondents at 2,2 in this quarter, down from 2,5.
2. A relatively exciting insight was that of the 31% of businesses who indicate they would expand globally, the majority are looking to trading within Africa.

On the GIBS panel were Dykes, Nazeem Martin, Managing Director of Business Partners, who also conducts a quarterly survey; Gordon Malebo, Business Development Head of NAFCOC; and a young entrepreneur, Tebogo Nkosi who has the true spirit of entrepreurialism coursing through her veins.

So, back to the discussion: Do local indexes that purport to do so measure true entrepreneurialism? What is local entrepreneurialism?

Yes I know a pile of academic and policy papers exist defining same. But, here I get anecdotal: If you drive through the suburbs [lower, middle and “upper” class ‘ burbs], mixed development is rife.

From the corner crèche in Alex to the local hairdresser in Glenhazel to the quasi-commercial buildings lining “little” Sandton drive, money is changing hands. People are at work – but might not be on record as being in business. They might in fact be recorded in national statistical indexes as ‘unemployed’.

As I put it to the affable Dennis Dykes after: “For decades, the mamas in the townships have been providing for their families trading sweets and oranges on street corners… even bootlegging; Today approximately 1 million civil servants from the old regime have been displaced as the Public Sector gradually transformed – and are now engaged in self-sustaining entrepreneurial activity (consulting back to the Public Service or trading from home).

In informal settlements, self-built shacks and containers act as crèches, hair-extension salons, tuckshops, cellphone service providers. So people are working and earning: Are we really capturing the correct data … ever?”

Dykes’ retort is a good one: “This could apply to any other society as well”. Yes …but…even if we are in line with global measures, can we not just, with the change of a definition or two (unemployed, self-employed and  entrepreneurs) turn the entire focus around?

In short, if we start saying we ARE an entrepreneurial, dynamic and innovative society, aren’t we able to change the national “brainprint”. YES We are all entrepreneurs! Now lets get out and add value.

And Mr/Ms. Financier, while the entrepreneurs add value, would you be able to support us with loans that are structured to meet our developmental needs, in addition to your liquidity ratio requirements?

Well: over to Mr. Martin to present the inherent contradiction preventing us from embedding true entrepreneurialism in our brains – a  contradictory culture of employment – and the expectations associated therewith

He continued: “If I was leaving university, I would prefer a big corner office, a flashy car, days off for golf. We need to encourage school leavers to establish businesses.”

This was echoed in the words of an audience member: “Our youth are told to ‘Work hard; Get good grades; and you’ll get a good job”. Surely we should be saying ‘Work hard; get good grades; and create a job’?”

Malebo, concurred “South Africans aren’t exposed to entrepreneurial activity.  We need to bring up our youth to think about business – we need to get them to sell sweets every Friday on Tuckshop Day.

But as Martin noted, there is a difference between the true entrepreneur and the family-run business which rarely increases its employees beyond five. This was confirmed by Tebogo Nkosi: A product of family entrepreneurialism, Tebogo was groomed by her father to join him in the family business from an early age.

She noted: “A true entrepreneur is driven by an ‘Authentic vision’ and is committed to sustainability”. But, she cautioned: “we are not creating entrepreneurs: The entrepreneurs we see today are living for today… Not creating for tomorrow. All they want to do is broker deal after deal …. instead of sustaining business”.

And where do aspiring entrepreneurs – with great dreams – source financing? According to Martin: “Business Partners has a lot of money available… we just do a bad job of communicating our criteria”. Malebo agrees that “ There is a whole lot of help out there – scattered all over, with no integrated focus and strategy”.

That said, Martin quickly cited another inherent contradiction: “Nobody should hold the hands of entrepreneurs: This flies against the spirit of entrepreneurship. Entrepreneurs, by their very nature, pursue the idea relentlessly and do whatever is required to make it work.”

To a point: Sometimes there are cash-flow problems. Often they need bridging finance. And while the NBSI indicates a pitifully low use of commercial banking facility accessing (7%), the experience of the entrepreneurs in the audience was very different. It seemed that these entrepreneurs  – with vision – felt that their financiers were stuck in another generation, another era.

One audience member after another lamented the methodology of funding where the ubiquitous but inscrutable business plan – and not the living successful business model – were deemed to be the Holy Grail for due diligence assessments by financiers. And so the funds remained untapped!

The entrepreneurs’ battle for a different profiling methodology by funders was made palpable by the vocal and passionate appeal by global fashion icon, David Tlali, who certainly has a Vision. He boldly challenged the assembled group of bankers and business funders: “WHEN WILL YOU START TAKING THE CREATIVE INDUSTRY SERIOUSLY?” he bellowed.

He accurately noted that the creative industries are seen as the cornerstone of the economies of New York, Hollywood. Getting flamboyant, he persisted: “Why do you look at my balance sheet and see me as a risk when I have only ever been cash positive? Why is it you will take my money, but won’t entrust me with yours? Do you get a sense of pleasure watching us fly and fall?” In response to the cautious rhetoric of the bewildered [and clearly fashion-naïve] financiers, Tlali’s challenge was taken up by Tebogo who instructed her fellow-panelists to “just go visit David, in his studio. And see what he does”.

And that is where the thinkers versus doers got their noses nicely bloodied. The wry and engaging team of financiers acknowledges that their methodology is driven by a first view of a business via a paper/digital document which complied with Business Plan templates. If they complied on a range of criteria, they were followed by field visits … and ultimately, financing.

Ah the Business Plan: Another audience member had an innovative solution: He acknowledged that, even with his tertiary education of a BComm, LLB, HDip Tax, he was hopeless at writing a business plan. Rather, it was time to adopt the methodology now being promoted by Harvard and various innovative economies globally: The Customer Discovery and Entrepreneurial Validation process where investors finance a successful business based on different hurdles, different proofs of concept etc. –  not primarily a well-written plan.

And somehow the bleak outlook for the aspirant committed self-employed future entrepreneur began to lift, as the room began to shake off the shackles of conventional methodologies, and push back and redefine the conventional definitions.

As Martin noted pithily: “Entrepreneurs are at least as noble as doctors. Doctors save lives but so do entrepreneurs: They create jobs.” Great concept that!

So much for the financiers, and the analysts, and the definitions of employment, unemployment and entrepreneurialism. People are hard at work earning a living: On with the culture of true entrepreneurialism!

* About Kathy Berman: From a career working in television, print and radio journalism and production for global and local media during the 1980s and 1990s, Kathy threw it in for an MBA, and a career in consulting – Corporate Finance, Strategy and Communications. After a stint in Government, where she served on the Exco at SARS, Kathy formed Space Consulting where her role  as “Chief Catalyst” includes consulting and lecturing in strategy, investor and stakeholder relations, policy and communications – for public and private sector clients. An Afro-optimist, she is delighted to be back writing about the things she is passionate about: news; current affairs; entrepreneurialism; technology; development; art; culture; life and innovation.