WPI USAFRICA Business Conference

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WPI US-AFRICA Business Conference Capacity
Building for African Small Medium
Enterprises EXPERIENCES,CHALLENGES AND
OPPORTUNITIES March 9,2008
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SOUTH AFRICAN INTERNATIONAL
BUSINESS LINKAGES United States Agency for
International Development Corporate Council on
Africa (CCA) ECI Africa (Pty) Ltd
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• SAIBL OPERATIONS
• Facilitates and leverages
• business linkages between South African
  black-owned/partnered SMEs and large corporations
  
• access to US SADC export markets
• access to business development services
• access to finance for SMEs

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• SAIBL 1998 2008
• Assisted over 500 black-owned/partnered SMEs
• Total reported turnover of 1.44 billion)
• Total reported exports of 130 million
• Total reported net new jobs of 17,323

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AFRICAN ECONOMIC LANDSCAPE

• Dominant public sector
• Dominant role by large corporations in private
  sector commanding heights
• Globalization a reality
• Increasing recognition role of emerging
  indigenous small medium enterprises

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CHALLENGES OPPORTUNITIES

• Creating and growing business partnerships
  between private and public corporations and local
  small and medium enterprises
• Business Linkages

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BUSINESS LINKAGES ENVIRONMENT
Significant procurement available to BEE SME
companies from private and public corporations
Support incentives for SME procurement (BBBEE
codes)
Small and Medium Enteprise Development
A growing number of competitive BEE SME companies
Effective entrepreneur and SME development
support programs
Policy and Regulatory Frameworks
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KEY FACTORS IN SME PERFORMANCE
Enabling business environment and conditions
(policies, legal, skills, infrastructure, etc)
Access to market information, and opportunities
(local and export)
Small and Medium Enteprise Development
Access to and cost of finance (risk finance,
loans working capital)
Access to and affordability of business
development support services
Changes in knowledge attitudes and behaviour
Transparency, confidence, energy, vision
Improved strategies, processes, investment
capacity performance
Increase in sales, profits and employment
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Linkage Framework

• Corporate expectations
• Quality
• Cost
• Delivery time spec

SME Supply Of Goods Services
Linkage Program
Large Company Demand for Goods and Services

• SME expectations
• Information
• Skills
• Finance s/up w/capital

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FIGURE1 SAIBL BUSINESS LINKAGES MODEL
SUPPLY SIDE
DEMAND SIDE
Existing SME Suppliers
New SME Supplier Companies
Company diagnostic/ audit of SMEs
Linkage team meets senior management to secure
commitment for SME outsourcing
Prepare compliance/ deficiency report

• -Business strategy
• Sourcing finance
• -Working capital
• MIS,
• -Quality assurance,
• -Certification (ISO)
• -Production improvements,
• - Tender document preparation
• -Mentorship, coaching, training

Draw up a program with SMEs to build capacity and
competencies to take advantage of procurement
business
Assisted by local Business Dev. Service
Providers
Linkage team meets procurement managers to
quantify non-core core business available to
SMEs e.g services, components, etc
Team works with procurement managers/engineers on
pre-qualification, qualification tendering
requirements
Periodic Reviews To Monitor Progress
Needs Additional Assistance
No Progress Drop from list
Requirements established and agreed and made
available to SMEs
Local SMEs competent to bid and deliver on
standards required by large corporations
INCREASED BUSINESS LINKAGES
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SAIBL DIAGNOSTIC CAPACITY BUILDING AREAS
Business Management Skills
Mentorship and Training
Business Planning and Sourcing Finance
Financial Working Capital Management
Business Linkages Matchmaking
Tender preparation
Management Information Systems Accounting
Marketing and Sales
Quality Management Assurance

Production and Capacity Improvements
Certification (ISO)
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CONSTRAINTS FOR CORPORATES

• Corporate policy
• Local autonomy
• Risk aversion
• Scale
• Capability competence of local SMEs

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THE CASE FOR BUSINESS LINKAGES

• Deepening broadening local economy
• Create jobs and income
• Improve capability of local companies
• Improve supplier base
• Attract inward investment
• Provides sustainable market solutions

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RECOMMENDED PRACTICES

• High level corporate champion
• Include in procurement managers KPAs
• Pragmatism- one building block at a time
• Enlist and work with partners
• Input-output
• SMEs as business partners, not beneficiaries

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Program Deliverables

• Stakeholder buy-in and establishment of champions
  at Board and management level.
• Streamlined and written policies practices.
• Linking accountability, performance to incentives
• Increased number of SMEs doing business with
  corporations
• Increased Rand value of business with BEE sector
  SMEs
• Improved access to capacity building support for
  SMEs.
• Improved monitoring and reporting

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The Three Step ProcessMarket and Client
Identification Includes a Rapid Assessment and
our company Diagnostic Tool, sector selection and
market research, and identifying the key players
in the marketSynchronization between Client and
Market Needs Includes preparing clients through
our rigorous training program and developing a
business and export plan, a market exposure
workshop, and developing a critical path to
market penetrationMarket Penetration and
Development Includes a group trade mission to
export market, an extensive to do list based on
feedback, a return trade mission that is more
focused on matchmaking and closing deals, and
then another follow up visit to help partner
promote clients products
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South African International Business Linkages

Case Study on Izala Wines
Impact Winery finds U.S. importer in second trip
to the United States
Marthinus Saunderson of Izala and SAIBL staff
displays Izala food and wine products at the
Fancy Food Show in New York, NY. Marthinus found
an U.S. importer by incorporating feedback from
SAIBL seminars.
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• Challenge Marthinus Saunderson of Izala
  Warehousing and Exports wanted to export his
  Lutouw wine and AfriDeli specialty food products
  to the United States. His own attempts to
  penetrate the U.S. market were not successful.
  Despite a 350-year tradition of wine making,
  South Africa is not well-known to American
  consumers for its wines. Small, Black-owned
  wineries face additional challenges trying to
  enter the U.S. market e.g. the average wine
  company trying to enter the U.S. market spend on
  average 750,000 a year to that end.
• His objectives included a greater understanding
  of U.S. marketing strategies such as restaurant
  vs. retail, packaging, price points, and the
  three tier system. Izala also prioritized the
  economic and social impact potential of
  successful market enter to the local community.
  By growing his exports, Mr. Saunderson hopes to
  increase the financial independence and job
  security of the surrounding community.

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• Initiative In 2006, Izala became a client of the
  SAIBL program which assists Black Empowered South
  African SMEs. SAIBL staff in the Western Cape
  worked with Mr. Saunderson to improve his
  company's business operations, and to develop a
  long-term business plan. After having worked with
  local staff, SAIBL contracted a U.S. wine
  consultant to improve Izala's market entry
  strategy, packaging, and labeling for the U.S.
  market.
• Late in 2006, Mr. Saunderson made his first
  market research trip to the United States where
  he and four other Black-owned wineries met with
  wine experts and conducted tasting seminars that
  evaluated their wines and packaging. After
  returning to South Africa, he incorporated the
  experts' suggestions and returned to the United
  States in 2007 to exhibit his new product ranges
  at a premier U.S. trade show.

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South African International Business Linkages

Six months later, Mr. Saunderson returned to the
United States where he participated in another
SAIBL-sponsored wine trade mission, held in
conjunction with Wines of South Africa in three
of the largest wine consumptions markets in the
United States. Along with three other BEE
wineries, Izala exhibited new vintages and a new
bottle design. Again, industry experts evaluated
his wine and packaging.
Mr. Saunderson included in his visit promotional
events and buyer meetings with retailers and
restauranteurs organized by his importer.
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South African International Business Linkages

Results After returning to South Africa, he
incorporated the experts' suggestions and
returned to the United States in 2007 to exhibit
his new product ranges at a premier U.S. trade
show, the Fancy Food Show in New York, NY. At a
prearranged meeting by SAIBL. Mr. Saunderson
met with a boutique wine and food importing
company Vin Aspen who was impressed by the
quality of the products and the empowerment
objectives of the company.
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THANK YOU
South African International Business
Linkages (SAIBL)