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a day ago
- Business
- IOL News
Why business incubations often falter
Small Business Development Minister Stella Ndabeni addresses the Joint Neeve Centre media briefing on Spaza Shop and Food Outlet registration deadline. Micro, Small, and Medium-sized Enterprises contribute 34% to the GDP and 60% to employment, according to the Small Enterprise Development Agency, says the writer. Image: GCIS MICRO-, Small, and Medium-sized Enterprises (MSMEs) Day is observed on 27 June to recognise the important role of MSMEs in economic growth and development. They represent 90% of businesses globally, while their contribution to employment is more than 50% and 40% to GDP according to the World Bank. In South Africa, MSMEs' contributions to GDP and employment are 34% and 60% respectively, according to the Small Enterprise Development Agency. Given their substantial economic role, supporting MSMEs is a strategic public investment that can unlock inclusive and sustainable growth and development. Since 1995, the South African government has implemented various policy measures to support the development and promotion of small businesses. Over time, these mechanisms have become more targeted and streamlined to enhance the impact and accessibility of support. Current support instruments include mentorship and coaching, training programmes, access to finance (through loans or grants), general business advisory services, market and trade facilitation, and business incubation and acceleration programmes. Business incubation, in particular, has gained prominence in both policy and academic discourse for its potential to accelerate the growth, innovation, and sustainability of MSMEs in South Africa. Several success factors for business incubation have been identified, including access to appropriate technology and facilities, stringent selection criteria, the quality of entrepreneurs, stakeholder support, supportive policy frameworks, competent and motivated management, and sustainable financial support. However, recent research highlights persistent performance disparities among South African business incubators. Many incubators fall short when benchmarked against best practices, pointing to ongoing challenges in service quality and effectiveness. Others struggle to survive due to chronic financial constraints. This has led to a pattern of decoupling, where organisational activities become disconnected from core developmental goals, often prioritising legitimacy over impact. Furthermore, research reveals that incubators frequently suffer from limited resources, obsolete and dated machinery and technology, as well as a shortage of skilled practitioners, including gaps in critical areas such as marketing strategy. Compounding these issues, many incubatees admitted into programmes do not meet established selection criteria, indicating systemic weaknesses in the selection process. Business incubation, as a specialised support mechanism for small business development, is clearly not delivering on its potential and not being used for its purpose. It serves clients that should not be selected for incubation; it is not well-resourced; business development skills are deficient; and strategic competence is lacking. To address these shortcomings, we need to shift our focus from providing basic support to cultivating higher-order capabilities that equip incubatees for long-term adaptability, innovation, and competitiveness. Improving the chances of small business success depends not just on acquiring basic resources, but also on developing higher-order capabilities that enable adaptability, innovation, and strategic renewal. Studies have shown that firms with dynamic capabilities, such as marketing agility and integrated management approaches, tend to proactively respond to change, leveraging technology and organisational learning to build complex systems that drive sustained performance. Unlike threshold-level resources that support daily operations and survival, higher-order resources empower firms to sense opportunities, seize them effectively, and transform continuously for long-term competitive advantage and sustainability. Additionally, in the small business context, innovation capability rests with the owner as they are the primary decision makers. Their personal, behavioural and environmental contexts are key aspects to be considered, and they should therefore be the unit of analysis when developing small businesses. To meaningfully enhance the role of MSMEs in South Africa, three strategic shifts are required with specific reference to business incubation: collaboration between academia, industry, and government for effective knowledge transfer and spillover towards sustainable development, innovation, entrepreneurship, and economic growth; utilising business incubation as a specialised MSME development mechanism; and moving from a survival mindset to one of higher-order capabilities— the ability to respond strategically to change or the ability to recognise, assimilate, and apply new knowledge. These capabilities are what allow MSMEs to innovate, compete, and thrive sustainably—not just survive from grant to grant. As scholars have noted, it is not just resources but the ability to leverage them strategically that enables long-term success. In the context of MSME development, the entrepreneur is the engine of innovation. Their individual characteristics, context, and decision-making approaches matter deeply. As such, we must build ecosystems that invest in the entrepreneur's capacity, not just their business infrastructure. If we are serious about building a more inclusive and resilient economy, then enabling MSMEs with the right capabilities and support is not optional—it is essential. As we celebrate MSMEs Day, let us also reflect on business incubation—a key mechanism for developing and promoting small businesses in South Africa and around the world. Solomon is a lecturer in the Department of Business Management at Stellenbosch University.
The Citizen
31-05-2025
- Business
- The Citizen
Policy issues of legal cannabis and marula industries discussed at festival
The fourth annual Insangu-Maganu Symposium, Expo and Culinary Festival took place on Friday, May 23. Cannabis entrepreneurs exhibited a wide range of products, with insangu (cannabis) and maganu (marula) taking centre stage. Exhibitors and cannabis enthusiasts came out in numbers to showcase their ideas and products. The symposium aimed to create awareness and build capacity for producers of legal cannabis and marula products – with a focus on cannabis policy issues, opportunities, challenges, markets and synergies – and highlighted the environmental, cultural, medicinal and economic values locked in these plants. ALSO READ: Security cluster conduct dagga busts in Pienaar schools Shiba Mashinini, a manufacturer of medicinal and industrial cannabis products, said that the cannabis industry can combat South Africa's poverty. 'I would like the government to engage with people that are already producing in the cannabis industry. Managing it wouldn't be difficult if the government simply involved the people who've been working with cannabis for years. But current regulations are holding us back from fully benefiting in the industry. We'd like to see the government ease up, so we can be more productive and help create jobs for our communities.' ALSO READ: Unutilised public buildings in Mpumalanga converted into shelters for GBV victims The event, the brainchild of the Lisango-Guma Cultural Village in Schagen, was supported by the the Department of Agriculture, Rural Development, Land and Environmental Affairs, the Small Enterprise Development Agency, and other stakeholders. At Caxton, we employ humans to generate daily fresh news, not AI intervention. Happy reading!
The Herald
07-05-2025
- Business
- The Herald
Small businesses need more than funding to grow and reach their potential
Small businesses and entrepreneurship are widely viewed, both locally and globally, as a key engine of economic growth and job creation, with their advantages of agility, capacity for innovation and potential for scalability. However, the high failure rate of SMMEs is well-known, and SA ranks higher than the global average. Supporting small business development as a means for inclusive economic growth has long been a central objective in our democratic era economic policy. Yet, after three decades, government itself describes the SMME sector as characterised by low survival rates and growth 'stagnant at best', with ineffective support a key factor holding back its expansion potential (2023 National Integrated Small Enterprise Development framework). In its Q1 2024 SMME update, the Small Enterprise Development Agency reported a significant decline in the number of SMMEs; and, more concerningly, declines in employment and real turnover at 4% each. These lacklustre results are despite government spending an estimated R6bn annually on direct financial support to small enterprises in the form of loans and/or grants, according to calculations by the Centre for Development & Enterprise. Despite the existence of a focused department of small business development and integrated Small Enterprise Development and Finance Agency, government initiatives to support small businesses remain fragmented across multiple departments and entities, with little coordination. Add to this the many private sector initiatives in enterprise and supplier development by individual companies and by foundations, NGOs and so on. The current state then, after 30 years of interventions and initiatives, is that there is a lot of activity and a lot of money being spent, but little in the way of tangible or measurable results. Clearly, something must change. One cannot keep doing the same things and expect different results. Much of the focus in small business development is on funding — either by government or the private sector seeking to offer funding as a solution, or in small enterprises believing that finance is all they need to succeed. There is no shortage of funding, but our experience on the Entrepreneurship Desk at the Business Chamber has shown that money is not the 'silver bullet' for small business success. Government agencies are willing to fund the development of a business plan aimed at enabling a small business to apply to banks or other government agencies for funding. Yet, bankers tell us they regularly find business owners unable to present and engage with a business plan that looks solid on paper. The bank is interested, but the business owner is let down by a plan that was developed without incorporating their practical inputs and realistic commitments. Up to 90% of SMMEs are rejected by government agencies for funding, despite having a business plan that was funded by government. A further challenge is 'training fatigue' — SMMEs often find themselves in a cycle of workshops, seminars, short courses, with generic content and no clear end goal or follow-up to assist them in implementing what they have learnt, and monitoring the results to identify further needs. We recently celebrated the Chamber's Entrepreneurship Desk's third anniversary, having grown to about 350 active member businesses, with about 79% black owned and 54% female owned. A key learning in this time has been that small businesses are held back not so much by lack of funds, but by lacking clarity on how to make a good idea or a special skill work in practice as a business. What small businesses and entrepreneurs need most is to determine their market position and strategy, understand how to make their operations most efficient and cost-effective, manage their cash flow, how to target their marketing, drive sales, and access markets. This needs training, mentoring, networking, access to information on opportunities; things that money to buy equipment or a business loan can't provide. The E-Desk's starting point is a gap analysis to identify the needs of a specific business owner, and to address those through targeted training and practical support, so they can develop a business plan that is actionable and fundable. Often the end result is that funding is not actually the need — by improving strategy and operations, the business performs better and finds they can succeed without the need for loans or grants. We take a value chain approach — identify needs, implement training and capacity development, compile an actionable business plan, facilitate linkages to opportunities and markets. Funding comes last. Seeing and hearing the success stories of E-Desk members at our anniversary event proved the success and impact of this approach. Some spoke of having expanded premises, employed staff or moved from selling their product at markets to supplying major supermarket chains. Others spoke of taking up opportunities to export, having learnt about the necessary documentation and processes; or the benefits of having access to a financial expert, gaining insights into costing and pricing, and how to leverage suppliers. The overall message of growth from these small business owners was that they had gained in confidence and expanded their business visions and horizons. If we can continue expanding practical and tactical actions that actually help small businesses to grow meaningfully, one step or one business at a time, then there is hope. Lunga Mjodo is strategic initiatives ganager at the Nelson Mandela Bay Business Chamber. The Herald
