Spaza's worth R7bn

Spaza Shop

JOHANNESBURG – In an industry that turns over more than R7bn annually, spaza shop township micro-entrepreneurs have a potential which cannot be ignored. Emerging as micro-convenience stores during apartheid there are now an estimated 10 000 spaza-shops spread across South Africa according to the South African Cities Studies conference paper published in 2011.

The Absa SME Index indicates that business ownership is on the rise but a majority of businesses in South Africa, two thirds, employ only one person. On average spaza shops employ between one and four people. The potential for sustainable job creation is evident. However, spaza shops exist in the informal economy meaning they exist outside of the institutional and regulatory frameworks.

Spaza shops range from survivalist endeavours to complete mini-supermarkets. Christo Botes, executive director at Business Partners says that the challenge with survivalist entrepreneurs is that they have no vision and often do not have the skills or training to move their business to the next level.

This is the current challenge being faced by local spaza shop owners in townships who are being forced to close down or are bought out by foreign spaza shop owners. The different approach to business adopted by foreign spaza shop owners has allowed them to compete against local spaza shops.

via R7bn worth of untapped township potential – MyBusiness | Moneyweb.

Small-business ministry coming

Greenhouse tomatoes

The development of small businesses — which industry players say is retarded by unnecessary red tape and lack of access to finance — is seen as key to reducing the country’s unemployment.

Official statistics put South Africa’s unemployment at about 25%. If people who have given up looking for work are included goes up to more than 40%.

via Small-business ministry ‘a step closer’ | Business | BDlive.

South African women entrepreneurs

Entrepreneurs

The 2012 Sanlam / Business Partners Entrepreneur of the Year competition has seen a  5% increase in the number of female finalists  which is a critical sign that speaks to general health of the South African economy, say organizers of the competition.

The resonates well with  the GEM research report on South Africa which showed that the total early-stage Entrepreneurial Activity (TEA) for South African females improved by 161.3% from 2001 – 2010, growing from 3.1% to 8.1%.

In a statement the organizers said female entrepreneurial activity has been proven to be a major catalyst in triggering economic growth in developing countries.

via South African women venture into entrepreneurship | UJUH.

Mvelaserve to expand in Africa

The Johannesburg Stock Exchange building.

Mvelaserve, which reported an 80 percent drop in net profit for the half year to December 2011, would be pursuing new business by expanding two subsidiaries into African countries over next six months according to Jorge Ferreira, Mvelaserve chief executive.Ferreira said on the sidelines of the group’s results presentation that Protea Coin Group which saw revenue jump 16 percent to R1.1 billion for the period under review and an increase of six percent in operating profit, would expand its security services to Ghana where three mining clients were setting up operations.

He said SA Water Services, a water treatment business which had made an operating loss of R1.5 million for the period and had a new management team, aimed to service all towns in Ghana.Ferreira said Mvelaserve aimed to expand into other markets in South Africa, “The returns are good [in Ghana]. We are still looking at the retail [environment] also.”

The group had also identified additional opportunities to sell security and cleaning services to new client American Towers for which Mvelaserve is providing maintenance of cellphone masts.

Mvelaserve, which was unbundled out of Mvelaphanda Holdings in 2010 and listed on the JSE in the same year, provides outsourced business support services that include food manufacture, cleaning and information and communications technology across Southern Africa.

Its clients span major sectors such as banking and healthcare and include Telkom, Shoprite and Transnet.

Ferreira said the group aimed to increase its contribution from business with government from “very low” to between 20 percent and 30 percent over the longer term.Investors who attended the results presentation at yesterday were however were not pleased with the company’s performance during the period under review.Although group revenue climbed 14 percent to R2.5 bn net profit for the six months declined to R17.2 million compared to R87.2 m for the same period last year due to poor performance of its cleaning subsidiary and reduced margins in Total Facilities Management Care TFMC.Profitability was also impacted by start-up costs for acquisitions made during the second half of last year.

In August last year it bought 51.6 percent of pothole repair firm Velocity Road Rehabilitation for R10m and in November acquired LTP Mast and Infrastructure Services for R14m.The company had restructured its cleaning and catering business during the period and secured contracts with mining company Kumba and SAB.

“It is difficult to grow this business in South Africa. It takes a year to negotiate contracts. Once they understand the concept I believe they can add value to the business,” Ferreira said.Mvelaserve fell 4.7 percent to R11.25 by 11.44 am, the largest drop since March 13 and trading at the lowest price since the beginning of the month.Investors demanded to know why trade payables had hiked 58 percent far more than revenue, why Royal Mnandi, a catering company was left to be a “problem child” for the past three reporting periods and why Mvelaserve had not realised sooner the accounting concerns that included double invoicing of clients and unprofitable contracts at Royal Mnandi.Ferreira said accountant at Rothschild was dismissed and debtors now reported weekly to Ernst Roth, Mvelaserve chief financial officer.

“It was just total negligence. I dont think it can be fraud,” he said. – Asha Speckman

via Mvelaserve to expand in Africa – Companies | IOL Business | IOL.co.za.

5 Biggest Challenges Facing Your Small Business

Small Business Summit 2011 Pre Event Photo 1

Starting a business is a big achievement for many entrepreneurs, but maintaining one is the larger challenge. There are many standard challenges that face every business whether they are large or small. These include things like hiring the right people, building a brand and so on. However, there are some that are unique to small businesses – ones most large companies have grown out of long ago. We’ll look at the 5 biggest challenges in this article.

Client Dependence

If a single client makes up more than half of your income, you are more of an independent contractor than a business owner. Diversifying the client base is vital to growing a business, but it can be difficult – especially when the client in question pays well and on time. For many small businesses, having a client willing to pay on time for a product or service is a godsend.

Unfortunately, this can result in a longer term handicap because, even if you have employees and so on, you may be still acting as a sub-contractor for a larger business. This arrangement allows the client to avoid the risks of adding payroll in an area where the work may dry up at any time. All of that risk is transferred from the company to you and your employees. This can work out fine provided that your main clients have a consistent need for your product or service. However, it is generally better for a business to have a diversified client base to pick up the slack when any single client quits paying.

Money Management

Having enough cash to cover the bills is a must for any business, but it is also a must for every individual. Whether it is your business or your life, one will likely emerge as a capital drain that puts pressure on the other. In order to head off this problem, small businesses owners must either be heavily capitalized or be able to pick up extra income to shore up cash reserves when needed. This is why many small businesses start out with the founders working a job and building a business simultaneously. While this split focus can make it difficult to grow a business, running out of cash makes growing a business impossible.

Money management becomes even more important when cash is flowing into the business and to the owner. Although handling business accounting and taxes may be within the capabilities of most business owners, professional help is usually a good idea. The complexity of a business’ books go up with each client and employee, so getting an assist on the book keeping can prevent it from becoming a reason not to expand.

Fatigue

The hours, the work and the constant pressure to perform wears on even the most passionate individuals. Many business owners, even successful ones, get stuck working much longer hours than their employees. Moreover, they fear that their business will stall in their absence, so they avoid taking any long breaks away from work to recharge. When fatigue sets in, the weariness with the hours and the results can lead to rash decisions about the business, including the desire to abandon it completely. Finding a pace that keeps the business humming without grinding down the owner is a challenge that comes early (and often) in the evolution of a small business.

Founder Dependence

If you get hit by a car, is your business still producing income the next day? A business that can’t operate without its founder is a business with a deadline. Many businesses suffer from founder dependence, and this dependence is often caused by the founder being unable to let go of certain decisions and responsibilities as the business grows. Meeting this challenge is easy in theory – a business owner merely has to give over more control to their employees or partners. In practice, however, this is a big stumbling block for founders because it usually involves compromising (at least initially) on the quality of work being done until the person doing the work learns the ropes.

Balancing Quality and Growth

Even when a business is not founder dependent, there comes a time when the issues from growth seems to match or even outweigh the benefits. Whether a service or a product, at some point a business must sacrifice in order to scale – this may mean not being able to personally manage every client relationship or not inspecting every widget.

Unfortunately, it is usually that level of personal engagement and that attention to detail that makes a business semi-successful. Therefore, many small business owners often find themselves tied to these habits to the detriment of the company’s growth. There is a large middle ground between shoddy work and an unhealthy obsession with quality, so it is up to the business owner to navigate the company’s processes towards a compromise that allows scale without hurting the brand.

The Bottom Line

These are challenges, but not death sentences. One of the worst things a would-be-business owner can do is to go into a small business without considering the challenges ahead. We’ve looked at some things that can help make these challenges easier, but there is no avoiding them. An important step in overcoming a challenge is knowing the size of that challenge. Besides, a competitive drive is often one of the reasons people start their own business and every challenge represents another opportunity to compete.

via 5 Biggest Challenges Facing Your Small Business.

6000 clothing shops not paying tax

There are up to 6000 informal, foreign-owned clothing retail stores flourishing in SA, many selling cheap Chinese imports and blatantly flouting SA taxes and labour regulations. All the while these stores are stealing market share from SA’s formal low-cost clothing retailers.

This is the contention of a study by Econex, an economics consultancy in Stellenbosch.

via Retail – Informal sector-Tax-free profits