Enterprise Development

BBBEE

Did you know that companies with a turnover of less than R5million per annum can be classified as Exempt Micro Enterprises? This means that they automatically qualify for a level 4 status in terms of BBBEE scorecard. This entitles a company with level 4 to 100% procurement recognition. For companies that have a turnover between R5 and R35 million all they have to do is choose 4 of the 7 elements to be evaluated on and can be a level 1 even if the business is not black owned. Three areas where businesses can score points relatively easy are Enterprise Development, Preferential Procurement and Socio Economic Development. Continue reading

Andrew Layman Comments on the BSC

Mr Andrew Layman

As the manager of the Pietermaritzburg Chamber of Commerce and Industry, as it was then, I was expected to be directly involved in the governance of the Business Support Centre which had been recently established in Pietermaritzburg at the initiative of several prominent leaders within the Chamber. I did not regard this as an onerous commitment. Indeed, I saw enormous value in what the BSC stood for and what it had been established to achieve. Continue reading

Championing the BSC: Noluthando (Poswa) Mokone

The Business Support Centre does not usually bask in the reflected glory of its small business successes, but makes an exception in the case of Noluthando Poswa. Appointed as the first manager of the BSC in 1996, Noluthando helped to establish a sound foundation for the organization before embarking on a varied career in energy and mining.

 

 Getting BSC off on a sound footing

 

Noluthando Mokone, (nee Poswa) radiates a powerful matriarchal aura that no doubt stood her in good stead during the formative years of the Business Support Centre (BSC) and later, during a diverse career. Continue reading

PK VALVES- Growing a family business

Pranosh believes the only way to retain and grow your client base is by ensuring you provide the best service you can. PK Valves provides a 24hour support service to the agriculture sector and this has ensured they have continuous business from this sector and the industrial sector.

Pranosh Bhagwandeen and his wife, Keshinee registered P K Valves cc in 2001. Having worked in the industry for many years he understood the industry and his business grew. However he realized that he could extend their services from service and installation of water valves, pipes and fittings to the retail of valves, pipes etc which required storage space and an aggressive sales team. Continue reading

Building a business for the love of stee

No compromise: Steely resolve behind quality products

Achieving an SABS certification is a significant feat, and more so for an entrepreneurial venture that, until recently, was considered an emerging enterprise.  But Umzungulu Steel Products is going places, led by founder Bulelani Nxumalo, whose success is attributed to his passion and hard work, and honed by strong mentorship and enabling assistance from the Business Support Centre.

Continue reading

Case Study: Paying heed to the lessons of business

The road of entrepreneurship doesn’t end, as Bongani Khoza can confirm. Having survived the worst of the economic crisis, BR Khoza Carriers is looking forward to brightening prospects with an important advantage – he has learnt some critical lessons on running a business.

Learning from experience is the best taskmaster

Bongani Khoza is thoroughly deserving of the success he has achieved since establishing his own transporation company.

Founded with one bakkie in 2002, BR Khoza Carriers has grown into a business that now runs two LDVs and nine trucks.

“It’s been a tough road with many bumps, but I can truly say that I have learnt some very important lessons in running a company,” he said.

A key lesson is that unchecked growth can threaten the financial viability of a company, especially if hefty payments are required.

“I bought most of my horse-and-trailer rigs on the strength of transportation contracts that worked fine when the economy was doing well,” he said.

“But the economy turned and things were really bad in 2009,” he said.

Fortunately, Khoza had a support system in Hulamin and Reginald Nyandeni and was able to call on their experience and guidance.

“Reginald helped me a lot and though his mentorship, I was able to keep going,” he said.

Counting in Khoza’s favour were low overhead costs that he contained by operating his business from a home office. With wife Pearl taking care of the administrative side, and son Simphiwe helping out wherever he is needed, BR Khoza Carriers does not carry any fat.

But Khoza has never skimped on his drivers and four assistants in terms of wages and time off. But these human dynamics are not always easy, and Khoza swears by is dictum of firmness and fairness.

“I pay them well and they know that I’m serious about taking rests, and not risk a load because of fatigue,” he said.

Having survived the worst of the recession, Khoza is again cautiously eyeing growth, with an important rider – “money is not everything”.

He is also keen to diversify his business and lessen his dependency on Hulamin.

“I have about seven other customers, and I think a tanker trailer will help a lot,” he said.

He is acutely aware of the cost of finance  and prefers to pay his costs is cash.

“II won’t make the mistake of growing too big too quick,” he said,

Enterprise Development – Vital for economic stimulation and growth

A slew of proposed changes to the Broad-Based Black Economic Empowerment codes will see a higher weighting to Enterprise Development and Procurement, reason enough to investigate ED as a strategic business imperative. But the real power of ED lies in its potential to stimulate the economy and create jobs.

Rough guide to Enterprise Development – vital for economic stimulation and growth

 

  1. Background
  • Enterprise Development’s key objective is to facilitate in the development of sustainable businesses that will create jobs and add stimulus to the economy.
  • ED is defined as contributing to the development, sustainability, financial/non-financial and operational independence of beneficiaries, with beneficiaries being black majority owned businesses. Black in terms of the BEE Acts implies Africans, Coloureds and Indians.
  • This Enterprise Development contribution is measured as a percentage of Net Profit After Tax (NPAT) which is 3% for business entities with annual turnover in excess of R35m.
  • Key to successful implementation of ED include providing of clear mandates, targets, authority, and responsibilities towards implementation as well as systematical monitoring deliverables.
  • Undoubtedly, allocation of resources (monetary & non monetary) is pivotal to achieving sustainable ED points.
  1. Some ideas towards successful implementation of ED spend:
  • Achieve a thorough understanding of ED elements as well as Preferential Procurements (you can score bonus points for Preferential procurements when sourcing from ED beneficiaries)
  • Identify ED projects with your organization and understand how they will impact on job creations as well as how to claim ED points
  • Managing the on-going collection of ED data that will be evidence in preparation of a formal Rating or Verification.
  • Guide buyers and procurement staff to source from ED beneficiaries and the benefits thereof.
  • Exposure to the calculations for points on the Scorecard
  1. Further new developments

Recently the Cabinet has announced further amendments on the BEE Act as follows:

  • Further alignments were proposed between the New Growth Path (NGP), the Industrial Policy Action Plan (Ipap) and the BEE Act.
  • The Cabinet proposes that the BEE Act be amended with a higher weighting to the issues of enterprise development and procurement than has hitherto been the case.
  • Should the legislation be approved, enhanced recognition will also be given in the scorecard to enterprise development in the sectors identified for priority attention under Ipap and the NGP.
  • A penalty provision for noncompliance with enterprise development and procurement elements of the BBBEE scorecard is proposed, which could result in a discount from the overall score being applied.
  • The points associated with the ownership element of the scorecard could also be “broadened” to create a greater incentive for “genuine broad-based ownership”, such as employee share ownership, co-operatives and community ownership.
  • The qualifying small enterprises scorecard will also be adjusted and the thresholds for exempted micro enterprises will be reviewed.
  • The legislation also makes provision for the imposition of fines against those companies found to be fronting, as well as for criminal sanction against executives. The fines could be as high as 10% of a firm’s yearly turnover and individuals could be imprisoned for up to ten years.
  • Government would also be permitted to cancel contracts if it were found that companies had put forward false BBBEE claims
  • Amendments will for the first time introduce penalties for fronting — 10% of annual turnover for companies and a fine or imprisonment of up to 10 years for individuals.  Fronting is when companies misrepresent their black empowerment levels to win contracts, mainly from government.
  • The bill provides that the government may unilaterally cancel contracts awarded on account of false information related to a company’s BBBEE status

No compromise: Steely resolve behind quality products

Achieving an SABS certification is a significant feat, and more so for an entrepreneurial venture that, until recently, was considered an emerging enterprise.  But Umzungulu Steel Products is going places, led by founder Bulelani Nxumalo, whose success is attributed to his passion and hard work, and honed by strong mentorship and enabling assistance from the Business Support Centre.

CAPTION: Bulelani Nxumalo with the SABS certificate

Building a business for the love of steel

 

Bulelani Nxumalo loves steel. It’s a love that has grown over the years, and started while studying. The fascination for the metal took him to Gibb Steel in Gauteng, and later BSi Steel, also in Gauteng.

It was during this period, from 2004 to 2008 that he acquired his steelworking skills and also appreciated the all-pervasive influence of steel in most applications. Nxumalo left Gauteng in 2008 to return home with a dream – to start his own steel fabrication business.

It wasn’t easy, and he knocked on many doors, including that of the Business Support Centre, and Dr May Mashego Mkhize, the First Lady of KZN.

“I approached her in the hope she would be able to open doors for me,” he said.

Using borrowed tools, Nxumalo spent R480 which he received from a sponsor to make two steel hinged windows that he then  showed to various buillding material retailers.

“I got some orders, and was able to get a R15 000 loan from the Ngunezi Foundation that operates from Willowfountain,” he said.

With this money, he bought a cutting machine, welder and grinder, and operating from a modest 50 sq/m premises in Willowfountain, Umzungulu Steel Projects started to make steel windows and door frames.

Nxumalo approached the Human Settlement department in 2009 and was made aware of a proposed rural housing project in Vulindlela, on the outskirts of Pietermaritzburg, for the construction of 25 000 houses over a five-year period.

Micro business servicing corporate sector

BSC  General manager Di Gaskin attended the 2nd International Enterprise Promotion Convention in Harrogate, UK

Procurement spend represents one of the most effective ways to promote the SMME sector in South Africa. Using the example of JSE-listed Hulamin, Gaskin presented a compelling case for supporting a micro-business within a corporate strategic paradigm. The value of Hulamin’s engagement is evident in the success of NIP Pallets that had blossomed from two employees and zero turn-over to an enterprise with a turnover of R1.5 million and a staff of 45.

Making small business work for a large corporate

The objective was simple – to develop a black enterprise to the point where it participated in the corporate value chain of Hulamin, an aluminium semi-fabricator.

The context was Hulamin ‘s determination to re-direct its procurement spend from predominantly white-owned businesses to emerging black-owned enterprises. This was done by identifying certain commercial opportunities, and fast track micro-enterprises to fulfill these tasks.

To this end, Hulamin established a micro-business, NIP Pallets, in 2002. The enterprise was contracted to manufacture wooden pallets to transport Hulamin’s products.

Suffice to say that with the appropriate support and assistance, NIP Pallets has shown impressive growth – from two employees and zero turn-over to an enterprise with a turnover of R1.5 million and a staff of 45.

Important pointers

To monitor the initiative, Hulamin set procurement-spend targets, and appointed champions to drive the process internally.

Hulamin also enlisted the support of the BSC to mentor, advise, ensure regulatory compliance and promote commercial sustainability.

Hulamin kick-started the process by sourcing raw materials, negotiating favourable terms on behalf of the enterprise, and commit to early payment terms.

Several lessons were learnt:

  • Critical to differentiate between opportunity and survivalist entrepreneurs
  • Micro-enterprises must comply with regulatory provisions
  • Large corporations in South Africa need to commit to interventions to facilitate a micro-enterprise’s entry into the mainstream economy
  • Interventions and empowerment procedures must be documented to avoid internal misunderstandings
  • All business arrangements, including mentorships and training, must be formalized in a legally binding contract between a  large corporate and micro-business
  • Financial education  is key to a successful empowerment endeavour

Case study: Manufacturing empowerment in action

The success story of NIP Pallets is as much due to the hard work and motivation of Mongi Mnogomezulu and Stephen Sibetha as it is to the equally challenging task of keeping to the basics of running a business.

Its success is built on the importance of business support and  the need for a well-managed cash flow. By getting the basics right, NIP Pallets has crossed its own Rubicon and has evolved into playing a vital down-streaming role in the community.

Creating jobs is a matter of doing good business

Business partners Mongi Mnogomezulu and Stephen Sibetha is evidence of the job creation potential wielded by small business in the manufacturing sector.

Given the opportunity to manufacture pallets for aluminium semi-fabricator Hulamin, they founded NIP Pallets in 2003. The name of the business is taken from the number plate of Bulwer where Sibetha hails from and that reflects the southern Drakensberg village’s strong timber influence.

NIP Pallets has shown astonishing growth over the past eight years – from a zero turn-over and two staff, the enterprise now employs 54 people and generates a turn-over of about R18 million.

It manufactures a range of products, including pallets, crates and skids of which 90% is destined for Hulamin and its export operations.

Of particular interest is the 10% customer split that Mnogomezulu and Sibetha is keen to develop. In this regard, plans to broaden the product range to include door frames and windows – once the construction industry picks up – highlights their entrepreneurial flair.

NIP Pallets keeps to a heavy production schedule and produce 200 pallets a day, according to Mnogomezulu.

“We tried a third shift, but that caused too many supervision problems and we find that a hard-working double shift works best for us,” he said.

In keeping with its own empowerment objectives, NIP Pallets is also playing an important downstream entrepreneurial role.  Pieces of scrap wood are being converted into a range of applications, including dog kennels, benches and small tables by an entrepreneur, while wood shavings and saw dust is sold to emerging farmers as chicken litter.

“We also donate unworkable scaps of wood to the community for fore wood,” Sibetha said.

Key to their success is a deep understanding of packaging for the manufacturing sector and a close watch on cash flow.

“We are mindful of having a large inventory and make sure we have enough material to see us through the festive season as we don’t shut down,” Mnogomezulu said.

In this regard, the procurement of raw materials is a key concern that, in the context of saw mill closures and industry shortages, means price pressures.

But they are not daunted by the challenges ahead and have set their sights on buying premises rather than having to pay rent.