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Small Business Development Portfolio Architecture. 14 F EBRUARY 2018. Outline. Objectives of the Portfolio Architecture Design architecture of the Portfolio Pre Start-up Phase Start-up Phase Growth Phase Mature Phase Decline Phase Integrated Cooperatives Development Model
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Small Business Development Portfolio Architecture 14 FEBRUARY 2018
Outline • Objectives of the Portfolio Architecture • Design architecture of the Portfolio • Pre Start-up Phase • Start-up Phase • Growth Phase • Mature Phase • Decline Phase • Integrated Cooperatives Development Model • Sector Specific Programmes • Small Business Ecosystem • Proposed Way Forward • Conclusion
Objectives of the Portfolio Architecture • Foster alignment between small business policy and broader government economic policy • NDP, IPAP, MTSF • Provide a platform for integrated planning between DSBD and its entities (Sefa and Seda) • Develop and implement an integrated platform for programme design, implementation and monitoring and evaluation • Build strategic partnership with the private sector and other SMME stakeholders.
Design Architecture of the Portfolio • Portfolio design is premised: • The integration of financial and non-financial support service at local level • Facilitation of business support services through local business support service centres/ entrepreneurial support centres (one stop service for entrepreneurs) • Support service be facilitated across the business development phase, sector specific
Design Architecture of the Portfolio… • The crowding-in of the private sector resources and skills • National Monitoring and Evaluation System • Building accountability • Measuring effectiveness and efficiency • Communicating and reporting to stakeholders • The structure will allow, at a broad level, comparison with globally recognised models.
While it’s possible to make an argument for integrating cooperatives into the same value chain as SMMEs, what’s clear is that a new approach to cooperatives is required. • We favour the creation of a stand-alone structure for cooperatives in order to achieve this. • This function would take ownership for cooperatives at a strategy level and would draw on subject matter expertise from policy, legislation, programme design and monitoring and evaluation functions within the department.
The Cooperatives Development Agency, although it is a department structure, should be established and incubated within SEDA. • This will enable a focussed effort in the department that will remove distractions from other areas of the business and also capacitate the cooperatives unit to improve delivery against the mandate. • The following Integrated Cooperatives Development Model needs to be implemented by the Portfolio:
SBD Portfolio Architecture based on the existing eco-system for Small Businesses and Cooperatives Business Growth Cycle The eco-system for small and cooperative enterprises can be mapped out effectively through the lenses of the business growth cycle. Role players in the space can easily be segmented and the support they provide. This allows the gap in the sector to be identified and addressed in a targeted systematic format.
GEM Model of business phases and entrepreneurship characteristics
SBD Portfolio Architecture based on the current eco-system for Small Businesses and Cooperatives Business Growth Cycle
Seda (non-financial support services) Key ecosystem functions Private sector (e.g. financial institutions) DSBD (Policy, legislation, strategy, M&E, etc) Other departments (National, provincial and local) NGOs and CBOs (Training, info dissemination) Sefa (financial support services) Donors (technical and financial support) Enterprise Business Chambers (Advocacy) Academic institutions (education) Think-tanks (Knowledge and research) Services SETA (Venture Creation Programme) International Markets 25
Proposed Way Forward Small Enterprises • It is proposed that the architecture must determine the number and/ or percentage of small enterprises that should be functioning optimally in order for the small and expanding firms to realise the desired job creation target. • To this end and in line with Goldman Sach’s recommendation, the architecture must ensure that about 300 000 small enterprises are fully functional to contribute to inclusive growth.
Proposed Way Forward… Business Growth Cycle • Once this determination has been made, the SBD Portfolio should develop a comprehensive business services and products architecture that will ensure a wide-ranging support to the small business sector in different business growth cycles. • The business growth cycle includes; decline phase, maturity phase, growth phase, start-up phase, pre-start-up phase. • It is highly recommended that export ready enterprises should also be included on the list of small enterprises for which a concerted effort should be made to provide tailor-made support.
Proposed Way Forward… Priority Industries • It is recommended that specific industries be considered for prioritisation by the SBD Portfolio. • These could include the priority industries that were approved by the Department as the sectors that the department could focus on in order to drive the development of small enterprises in the country.
Proposed Way Forward… • The industries are: namely, trade; business services; construction; transport, storage and communications; and personal services. • The industries could be clustered as follows: trade and business services; construction, transport and storage; personal services; creative industries & communications; and National Industrial Policy Framework (NIPF) / Industrial Policy Action Plan (IPAP) Integration Projects. • These are the sectors affirmed by the Bureau of Economic Research (2017) as the main sectors where small enterprises operate (see diagram in next slide).
Proposed Way Forward… Support Instruments • Once the above-mentioned processes have been finalised, a decision must be taken in respect of the targeted financial and non-financial support instruments that will be implemented in order to support small enterprises throughout the value-chain in the business growth cycles and priority industries.
Proposed Way Forward… Key Role Players • Strategic partners such as Development Finance Institutions must assume the role of supporting small enterprises with financial and non-financial support that the DSBD, SEDA and SEFA are unable to provide. • These role players include, inter alia, NEF, IDC, Innovation Hub, SETAs, etc.
Proposed way forward It is recommended that the department pursue significant changes to its programme activity, including the transfer of eleven programmes to SEDA and/or SEFA and the restructuring of four more.
Proposed way forward… Within SEFA and SEDA, a number of further enhancements to programmes are recommended as well as the transfer of policy, legislation and monitoring and evaluation related responsibilities to DSBD SEFA and SEDA’s policy, legislation and monitoring and evaluation responsibilities are often not specified as APP programmes and a full organisational review will be required to pinpoint where these capabilities lie.
The SBD financial and non-financial business services and products architecture must deliver a programme formulation, planning and implementation methodology that will shape the type of comprehensive support instruments that will move small enterprises from the periphery right to the epicentre of economic development in the country.
