‘Buying IT’S a MY A closer look at

franchise construction,
changed retail and
my life’
December 6 2009
manufacturing www.itsmybusiness.co.za
Page 4 Pages 9, 10 & 11

IT’S MY

DECEMBER 6 2009 www.itsmybusiness.co.za

EVE’S PARADISE
A JOURNEY FROM SOFT SKILLS TO SOLID EARTH PAGES 6 & 7
2 DECEMBER 6 2009: IT’S MY BUSINESS / Sunday
Do it yourself, but
When money is tight, homeowners tend to repair their properties
rather than move house. Hendri Pelser went to find out if
hardware stores can make you money in this economic climate
T
HE do-it-yourself and
hardware retail sector
was not spared by the re-
cession.
But, because of the nature of
this industry, some of its sub-
sectors are still performing rel-
atively well, with homeowners
tending to repair and upgrade
their houses instead of buying
during slower economic times.
The question for existing and
prospective entrepreneurs is
whether there is an opportunity to
make money in the sector.
The answer is not clear cut: the
short-term expectations are not
great and everyone is waiting for
the upswing to gain momentum.
But entrepreneurs with access
to capital can invest now and
cream it later.
The DIY and hardware retail
sector can be split into three
broad categories — 1) general DIY
and hardware, 2) building sup-
plies and 3) industrial supplies.
While the first sub-sector has
been relatively insulated, the
other two have taken a pounding.
The industry can also be
divided further. Some stores get
their goods independently
through wholesalers; others join
buying groups to pool their buy-
ing power and secure discounts
and franchises.
Glass, hardware and paint
make up 7% to 8% of all retail trade
in the country. According to
Statistics SA, the sector experi-
enced a 23.1% year-on-year de-
cline in sales (at constant prices)
in June. The biggest reason was
the decline in building and man-
ufacturing activity.
But there is definitely still mon-
ey to be made if one looks at the
growth experienced by some in-
dustry players such as Build it.
This buying group generated
more than R4-billion in sales dur-
ing their last financial year.
Evan Walker, a retail analyst at
RMB Asset Management, says the
market will consolidate over the
next three years and he warns
independents against making
hasty decisions.
“I just see the bigger players
becoming bigger at the expense of
independent retailers. If you are
Investment and return
EACH franchise or buying
group has its own formula on
how much money is needed to
open a DIY, hardware or
building supply store.
There are some rules of
thumb.
A general store can range
in size between 100m² and
450m².
Extra space is needed if you
want to sell building supplies.
A turnkey operation of
about 400m² in the DIY or
Times
HEAT OF THE MOMENT: DIY entrepreneurs are advised to stay cool, even when the sparks start to fly
looking to open, I think you should
look at a franchise model. I would
be very nervous as an en-
trepreneur to venture out on my
own over the next five years.”
Economist Tony Twine of
Econometrix says the economy
will only really pick up once the
rest of the world has normalised.
“We are probably likely to have
one more false start (in early 2010)
before sustainable growth re-
turns,” he says.
Although both Tony and Evan
paint a negative picture of the
operating environment, they are
definitely not saying that one
should not invest in a business.
“You want to invest when times
are tough and not when you are in
the middle of a boom,” Tony says.
“The smart guys with capital
will be able to get in now and clean
paint area will cost
R2-million to R4-million.
The stock component
generally makes up about
50% to 70% of this amount.
Paint is usually more
expensive than DIY goods.
Franchises and buying
groups secure products for
between 10% and 20% less
than independent buyers,
depending on the type of
stock.
Your return on investment
up in three years’ time. You will
still be able to get in later but your
margins will probably be lower.”
Seasonality and product range
should also be considered and due
to the nature of the sector, cash
flow is vitally important as capital
becomes tied up in stock.
Linda Smith, the owner of LFS
Hardware in Eldorado Park, has
been in the game since 1996.
Although she started off as an
independent, Linda joined a buy-
ing group three years ago.
“The buying group serves me
better because I still have indi-
viduality and I can interact with
my suppliers directly. At the same
time, I have the muscle of bulk
buying power. As an independent
it is very difficult. We used to buy
from the same suppliers but did
not get the same bulk prices the
also depends on what is sold.
Plus Ten Hardware
Distribution director Norman
Jackson says that building
materials generally generate
an 18% to 24% gross profit
(GP) margin, whereas DIY
and hardware can bring in a
GP of between 33% and 38%.
Industrial supplies have a
GP of 26% to 30%.
Some franchises though,
report slightly lower profit
margins.
buying group can negotiate. They
put you on a cash basis and often
the approach is ‘if you don’t like it
then tough’.”
Linda says it took her about two
years to get her stock mix right
and adds that people should never
neglect cash flow in this retail
space. She believes diversification
is important and while the store
stocks DIY and hardware goods,
the business also acts as a cement
and building supplies wholesaler
to competitors in the area.
“Even if you only make a 5%
profit, this is fine because if you
sell enough volume, you will get a
rebate,” she says.
Build it’s retail operations man-
ager, Hans Koekemoer, expects
the market to remain tough for
the next six months but adds that
growth will continue thereafter.
DIY Depot shares this senti-
ment; director Dani Machet says
sales will improve once banks
start to relax lending criteria and
the housing sector picks up.
Fellow director Mark Reeves
adds to this, saying that in rural
and peri-urban areas, the market
is still quite healthy and even
growing at the moment.
Mica CEO Clifford Buchler says
good entrepreneurs in urban ar-
eas can also make money in the
DIY space right now, as con-
sumers will rely on a store owner
for advice when maintaining or
renovating their homes without
the help of contractors.
Chris Argyrou, Warrior Paints
& Hardware’s marketing and
sales director, says that despite
the economic climate, it is up to
each entrepreneur to go out and
secure market share: “We all have
Picture: MARIANNE SCHWANKHART
to up our game”.
Jack’s Paint & Hardware op-
erations director, Chris Russell,
echoes this, saying the current
climate will force operators to be-
come more streamlined and that
this will translate into better prof-
its during the good times.
Plus Ten Hardware Distribu-
tion director Norman Jackson
adds: “There is so much oppor-
tunity in South Africa. The pro-
cess of buying groups and even
franchises has only just begun —
Consumers will
rely on a store
owner for advice
when maintaining
or renovating
their homes
there are hundreds and hundreds
of opportunities left.
“It is important to understand
what you are investing in. In the
old days, if you enjoyed fixing
things, you could use your pen-
sion money to open a hardware
store. These days it is much more
complicated and you need a de-
cent back-office system. You also
need to understand that product
knowledge and service are the
differentiating factors.
“If you are willing to play the
game, there are opportunities
available.”
don’t be in a rush
Flying to new horizons
B
USINESSMAN Alan
Knott-Craig once flew to
London to meet his then
boss for just half an hour.
The 16-odd hours on the airplane
were well spent, he says, for at the
meeting the budget was signed
and sealed and they could get to
work — immediately.
“It would have taken months if
we had done it any other way.
There is no more productive way
of doing business than meeting
people face to face.
“I spent at least 90% of my
working day meeting and talking
to people,” says the retired Vo-
dacom CEO.
Alan is by no means the only
executive to understand the im-
portance of face-to-face meetings.
“There is an understanding in
the current climate that we have
all had to pull back on travel,” a
Saudi Arabian executive was re-
cently quoted as saying. “But as
the economy improves, we will
start to see damage to the busi-
ness if we are not out there. Bot-
tom line: when I am with the client
less, I’m bringing in less rev-
enue.”
It is with this in mind that
British Airways has launched its
business opportunity grants, a
R29-million initiative aimed at en-
couraging local small-to-medium-
sized South African businesses to
travel in an effort to see their
Travel may broaden the mind, but it also clinches the
deal. British Airways is encouraging small and medium
enterprises to fly high. Liesl Venter reports
businesses grow.
“The economic downturn has
seen business travel budgets in-
ternationally slashed by more
than 56% over the past year and
South Africa has been no excep-
tion, with airlines seeing consid-
erable contraction in corporate
bookings,” says Sue Botes, British
Airways commercial manager.
“This is a really tough envi-
ronment in which to do business
and we’re hoping that, through
this initiative, SMEs will have an
opportunity they would not have
had otherwise. By invigorating
their business travel, new oppor-
tunities can open up and they can
truly experience the benefit of
doing face-to-face business.”
British Airways will award 50
small-to-medium enterprises a
year’s worth of travel to any
British Airways international des-
tination through the programme,
which has been successfully
launched in the US and Europe.
In a survey by Harvard Busi-
ness Review Analytical Services,
95% of respondents say face-to-
DECEMBER 6 2009: IT’S MY BUSINESS / Sunday
face meetings are key to success
in building long-term relation-
ships, while about 87% said they
are essential when sealing a deal.
But for most SMEs, travelling to
meet business partners (especial-
ly internationally) is just a
dream.
“It is very difficult to be top of
other people’s agenda if you are
not present,” says one of the 2 300
respondents in the Harvard study.
“Face-to-face meetings speed up
alignment and decision-making.”
Nkhensani Nkosi, founder of
Stoned Cherrie, is an advocate of
the BA opportunity grants ini-
tiative.
“This initiative gives SMEs the
opportunity to develop into new
markets in this challenging eco-
nomic environment,” she says.
Alan says the BA initiative is an
ideal opportunity for a small busi-
ness to make its mark.
“To lose opportunities just be-
cause times are tough and you
don’t want to spend money on
travel does not make business
sense. Through this initiative
there is no reason not to travel
and meet existing and potential
clients. This is the ideal oppor-
tunity to grow a business.”
According to the Harvard study
there is no doubt that “meeting
technology” is on the rise, but
business executives still believe
that face-to-face meetings are es-
sential for success, offering ben-
efits that cannot be replaced by
technology.
“The value of face-to-face meet-
ings is incomparable and it is
encouraging to see initiatives that
support SMEs through these dif-
ficult times, giving them a chance
to expand into new markets,” says
Alan.
SMEs from any industry em-
ploying 250 people or less are
eligible to enter, says Sue.
“Entries can be made online at
www.ba.com/safrica-grants. The
closing date for entries is Febru-
ary 19 2010. After that a panel of
judges will look at each appli-
cation. The 50 winning SMEs will
then be chosen and the winners
announced on March 19. The tick-
Times 3
HAMMERING
AWAY: DIY
shop owners
Freddie and
Linda Smith
Picture: KATHERINE
MUICK-MERE
ets awarded to each of the win-
ners will be valid for a year.”
In the applications, a case for
the unmet business travel needs
of the SME will have to be made
and applicants will have to outline
their objectives for 2010 and how
being awarded a grant would ben-
efit their business.
Whether it is a sit-down ap-
pointment with a potential client,
buyer, investor or a check-in on an
office that has not been visited
because of budget cuts; the ini-
tiative allows the SME freedom to
use the tickets to suit their needs.
“The programme is designed to
help budget-conscious businesses
get where they need to go, phys-
ically and financially,” says Sue.
“The 10 return business tickets
can be used entirely at the SME’s
discretion.”
British Airways will cover the
cost of the fares, but winning
companies will be responsible for
paying taxes, fees and charges.
According to Sue, “it does not
matter what industry they are in,
be it a laundromat owner or an IT
business”.
She says Alan, along with a
panel of British Airways exec-
utives and people not connected
to the airline, will judge the en-
tries. “It will come down to the
business plan submitted and how
business travel can benefit the
SME.”
4 DECEMBER 6 2009: IT’S MY BUSINESS / Sunday Times

Taking control of your

life, and making money
Changing careers can be daunting, but nothing is as liberating as taking charge
of your destiny. Liesl Venter found out how buying a franchise changed a life

D
R ELMARIE King, 42,
has never regretted
buying a franchise. She
says it is probably the
best career decision she has
made.
“It may sound corny, but I
really took my destiny into my
own hands. It changed my life.”
Elmarie was looking for a
change when the chance to buy a
Kumon centre came up.
Kumon is an educational
method which uses maths and
English skills to develop chil-
dren’s potential. The aim is to
encourage them to love learning
by improving self-esteem, while
encouraging self-discipline and a
good daily study habit.
“I was trained as a social work-
er and had spent years working
for the Wits Deaf Association
where I had gone through the
ranks until I became a director.
My husband and I had also trav-
elled a bit and had worked in the
UK for several years, and on my
return I had found work in Pre-
toria. It was, however, time for a
change.”
Going back to school seemed
like the perfect solution so she
did an IT course at the University
of Johannesburg, convinced the
world of programming was beck-
oning.
“I realised very quickly that it
was not for me. I had worked with
people my entire career and
needed that interaction.”
A newspaper advertisement
brought the much-needed
change. “It was just a small ad-
vertisement about a franchise
opportunity. I started exploring a
variety of options, and finally
came across Kumon. I applied, HAPPY IN HER WORK: Kumon franchise owner Elmarie King at Horison Primary with pupils Amogelang Nathane, Remoneilwe Mngomezulu, Charese
was accepted and the rest, as Jordaan, Bernice Jordaan and Lesedi Nathane Picture: KATHERINE MUICK-MERE
they say, is history.”
Today she owns two Kumon
centres in the Johannesburg
area — one in Robertsham and with, or even finances. Like many franchise she bought a second, search what they want to buy you are buying it. It must be
the other in Horison.
other people it was not easy for this time in Horison. “Both the before they take the plunge. something you love and some-
“Initially I thought I was mak-
me to make the decision, but once centres I took over were very “I could never own a fast-food thing you can manage. Buying a
ing a huge mistake — I did not
I had made it, it changed my life small and all my efforts initially restaurant. I chose a franchise franchise for the sake of buying a
know anything about owning a
franchise, or about maths. What I for the better.” went into growing them.” that suited my lifestyle, my per- franchise is a recipe for disaster.
did know, however, was that I She had to go through a se- Finding a centre is not always sonality and my pocket. It works Find out what is available and
needed time as I had enrolled for lection process before being able easy. “It becomes very compet- because I am passionate about it, what suits your needs. Research
my PhD at Joburg University. to buy a Kumon franchise. “But itive when you move into areas but also because it allows me the every aspect of the business be-
Buying a maths centre seemed the difficult part was only be- where there are already existing freedom to be with my child. I fore you put your money down.
ideal as it would allow me to have ginning as I had to find an area centres, so much research has to wanted that freedom — someone ý Work your way up through the
my mornings free to do my re- where there was no centre or buy take place. Like with any busi- else might have other needs.” ranks. Education, in the class-
search for my degree, and to out an existing centre. Knowing what you want out of room or in the everyday working
work in the afternoons.” “Like any other franchise you your franchise is important. world, can never be underesti-
She took the leap of faith and
bought the centre, not realising
can’t have two of the same on one
corner — it will not work. I then
‘I feel as if “I now have more control over
my life. If I want to grow my
mated. The fact that I had worked
for years as a social worker made
how much this career change
would come to benefit her.
had to wait for a centre to become
available as I had taken the de-
I am making a business I can, if I want to down-
scale I can do that too. It is not
me a better franchise owner as I
had life experience.
“Owning a franchise meant I
could spend time with my daugh-
cision to buy an existing centre to
start off with.”
difference to the about what the boss wants, but
about what you want.
ý Don’t cut corners. Being a suc-
cessful franchise owner is about
ter Courteney (who is now three).
If there was a crisis she could
One finally became available in
Robertsham and Elmarie
children’s lives’ “I work just as hard as when I
was employed full-time. The only
knowing that nothing happens
without hard work. There is no
come to work with me without grabbed the opportunity with difference is this is mine and I easy-win situation — it takes
any issues. It is the ideal solution both hands. have the freedom to manage it time and effort to get to the top.
for a working mother.” “I had done the training course ness you must plan and be ready the way I want to and need to. If a ý Don’t let finances get you
Asked about walking out of and had all the material. I did not for what you are taking on. It is franchise does not do that for down. Not all franchises cost the
a full-time job into buying a fran- consider myself a maths expert, also about establishing whether you, I think it can be just as same so find one that suits your
chise, she admits it was daunt- but I fell in love with this job there is a need for the pro- frustrating as having a full-time pocket. There are affordable op-
ing. immediately. The children, and gramme and if there is interest job.” tions available.
“I think there are various rea- the accomplishments, make all not just from parents but also Elmarie’s top tips to potential ý Think and dream big. Any-
sons why people make career the difference. I feel as if I am from schools.” franchise owners: thing is possibly if you put your
changes — be it boredom, or contributing to their lives.” Elmarie advises would-be ý Do your homework! Know mind to it. I never thought of
dislike of the people you work A year after buying her first franchise owners to carefully re- what you are buying and where myself as a mathematician.
6 DECEMBER 6 2009: IT’S MY BUSINESS / Sunday
Eve’s garden of Eden
A true entrepreneur is
resourceful, can solve
problems and identify
opportunities, as
Hendri Pelser found out
E
VE Ntseoane is tinkering
in the farm workshop. It
has taken two days to dis-
mantle the tractor and as
she fiddles with the engine block
it is difficult to see even a spot of
grease on her shirt.
“The crankshaft went,” she
says, then smiles. “Three years
ago I did not even know what a
crankshaft was!”
Dressed in her working boots
and jeans, the owner of Eve’s Eden
Farming Enterprise near
Fochville in North West walks
briskly towards her new chicken
coops — there is much to be done
and little time in which to do it.
Eve has been tending her 539ha
“garden” for three years. Getting
her hands dirty every day is a
dream come true.
She gave up corporate life al-
most a decade ago when she left
Eskom as a communications pro-
fessional to start a catering com-
pany. Catering seemed like a good
idea as she has always been in love
with producing food. After eight
years of preparing food for others,
however, Eve had to face the truth
that catering was not her calling.
At the same time, competition had
increased and her margins were
under pressure.
“My uncle was a farmer and I
used to work for him during
school holidays. I always had this
passion for producing from the
soil,” she says.
She decided to follow in his
footsteps and become a farmer.
Eve might have all the passion
farming requires, but land does
not come cheap. Eve started re-
searching government support
initiatives.
She approached the former De-
partment of Land Affairs for a
grant and persuaded it to fork
over some cash for a farm.
“I had to identify the land and
the department had to decide if it
Times
was viable,” she says.
She had made up her mind to
focus on maize and sunflowers.
She eventually found a working
farm, received a grant and gave up
city life.
But she knew her abilities and
knowledge were lacking. She had
started attending courses offered
by Grain South Africa even before
applying for the grant.
Eve also approached the De-
partment of Trade and Industry
for export training, as well as the
Italian Trade Commission in
South Africa.
“I went looking for every pos-
sible person who could help me,”
she says.
She also spent some time with
the farm’s previous owner to en-
sure that she understood her new
land intimately.
“I spoke to the farmer and he
showed me his books. I liked the
soil type and knew that this farm
would allow me to diversify.
“I had to learn what a
crankshaft looked like, and where
you poured oil into the tractor.
“I was a person with soft skills
and I was entering a different
world.”
Eve might be a farmer, but an
entrepreneur hides beneath her
straw hat.
Maize and sunflowers were on-
ly the beginning and she recently
secured another grant to built
chicken coops.
She is now securing contracts
to supply an abattoir.
A flock of goats will be joining
the farmyard soon, and Eve has
earmarked their milk for cheese.
Her diversification strategies
are testament to her en-
trepreneurial abilities and she ex-
plains that adaptation and flex-
ibility are the keys to success in
business.
In the farming world this might
mean having to get up early on a
ENGINE: Three years ago Eve Ntseoane did not know what a crankshaft was. As a learner farmer she has had to get to grips with the innards of tractors, among other things
Saturday morning to plough a
field if it happened to have rained
the previous night. In the busi-
ness world it means looking for
opportunities and positioning
yourself to make the most of every
prospect.
As a result, she has appointed a
marketer and a food scientist to
investigate the possibility of turn-
ing her crops into starch.
“Starch is used as a thickener in
almost every type of food pro-
duction, and I intend to export
DOWN ON THE
FARM: Beneath
the straw hat,
the brain of an
entrepreneur is
ticking away
what I produce — I want to set up
a factory on the farm.
“My initial focus was on pri-
mary production but as a business
person you need to be innovative
and think out of the box.
“You need to grow your busi-
ness to create and sustain
wealth.”
Eve says she believes that her
humble farm will one day be the
headquarters of a large and suc-
cessful business, and she is pre-
pared to do everything in her
power to make this vision a
reality.
“Business does not need an
apologetic leader — you have to be
on your toes the whole time and
push, otherwise you will not sur-
vive,” she says.
“I came into this business
knowing I would not make money
in the first year. It is like climbing
a ladder — you have to start at the
bottom step and work your way
up.
“You need to surround yourself
with people who are in a similar
position and who can help you.
“Then, you should not be
ashamed of admitting your fail-
ures because somebody else
might just have the advice you
need. You learn from hardship.”
Being a black female farmer in a
white male-dominated world was
not easy, but Eve says her time as
a corporate communications pro-
fessional came in handy.
Initially, she faced opposition
and resistance not only from other
farmers, but from her own staff as
well.
‘I went Some of the male farm workers
looking were not pleased about taking
orders from a woman; Eve says
for some of the farmers in the area did
not exactly know how to treat her.
every Some service providers tried to
pull the wool over her inexpe-
possible rienced eyes.
Nevertheless, her people skills
person came in handy and she took care
of every situation as it arose.
who Some of the farm hands left and
could Eve approached her mentors from
Grain South Africa for advice on
help seeds, chemicals and farm man-
agement.
me’ “I have a group of good workers
now who share the vision. We
work as a team and they under-
stand that, if something goes
Pictures: HENDRI PELSER
wrong on the farm, it affects all of
us.
“At first, the other farmers in
the area closed up. I did not know
Afrikaans when I came here and
took it upon myself to learn the
language. I now have good re-
lationships with my counterparts
and they help me when I’m in
need.”
Eve recently visited Italy dur-
ing a trip sponsored by the coun-
try’s trade commission to inves-
tigate clustering and the local
SME sector.
This experience and the en-
counters lived through when she
moved to the farm have led her to
the conclusion that the SME sec-
tor in South Africa needs to
change. In South Africa, people
work in silos. But we are all de-
pendent on each other.
“We need to understand that if
one (small) business fails, others
will fail. For example, if I don’t
receive the right types of seeds
from a supplier then I won’t pro-
duce enough crops to sustain the
farm. If I fail, they lose a customer.
We need to become a business
community.”
DECEMBER 6 2009: IT’S MY BUSINESS / Sunday
For 12 entrepreneurs, a lifeline is closer
than they realise, writes Liesl Venter
V Help
UVU Bengane did not
know where to go
when her small print-
ing business burnt
down. Her jar, as she says, was
empty. She was at the point of
giving up when she was intro-
duced to business incubator
Raizcorp.
“That changed not just my
outlook on my business, but who
I was,” she says.
“They took me under their
wing and through their learn-
ership I came to be not just a
better entrepreneur but possibly
a better person. I know what my
values are, my needs and where
I am going. I am the driver of my
own destiny.”
Today Siya Phambili Copy &
Print is a thriving small business
in the northern Johannesburg
suburb of Bryanston, with large
clients including Dimension Da-
ta and Eskom.
Vuvu’s story is not out of the
ordinary, says Gavin Friedman,
head of enterprise development
sales at Raizcorp.
“About 96% of businesses fail
within the first 10 years, even
more so in South Africa where
we have fewer entrepreneurs
per capita than, for example,
Uganda.
“Wavering funds, blacklisting
and low self-esteem become a
reality for these entrepreneurs
who try but don’t succeed.”
To truly advance the growth
of entrepreneurship in the coun-
try, it was clear that a solution
was needed, especially for the
corporate sector, which is
obliged to be involved in en-
terprise development, a compo-
nent of the broad-based black
economic empowerment codes
of good practice.
“But throwing money at a
problem is not a solution,” says
Raizcorp CEO Allon Raiz.
“Enterprise development as a
national strategy will become
misguided and ineffective if it is
driven by volumes and not the
quality of entrepreneurs.”
It is for this reason that Raiz-
corp, a for-profit, unfunded busi-
ness incubator, prefers to refer
to itself as a “prosperator”.
“For us it is about offering an
innovative and holistic solution
to South Africa’s challenges for
growing the small business sec-
tor,” says Allon.
“We are about creating pros-
perous entrepreneurs and grow-
ing profitable businesses.”
‘This programme
develops and
hones life skills
as well as
business skills’
Enterprise development is de-
fined by the government as the
assistance given to en-
trepreneurs or would-be en-
trepreneurs by a company to
help the entrepreneur’s busi-
ness become sustainable. It is no
longer just a nice-to-have.
“It is a reality if we want to
grow South Africa’s en-
trepreneurs. The problem is that
as a strategy it is misunder-
stood. Corporates know how to
do their business, they don’t
know how to inspire en-
trepreneurs, how to develop
has
arrived
them, how to encourage them.
We do,” says Gavin.
It is for this reason that Ned-
bank found itself knocking on
Raizcorp’s door.
Mark Rose, head of business
development for Nedbank Busi-
ness Banking, says the bank
started the process of enterprise
development long before the De-
partment of Trade and Indus-
try’s BEE codes became a re-
ality.
“It is not something we must
do, but something we want to do.
There is no doubt that the SME
market plays a pivotal role in
growing the South African econ-
omy. We want to be part of
that.”
By donating about R3-million,
Nedbank will help 12 emerging
entrepreneurs build their busi-
nesses.
“There was immediate syn-
ergy between us and Raizcorp,”
says Mark.
“We did not just want to give
money and walk away. We want
to see the development of these
entrepreneurs and be involved
in their progress. The Raizcorp
model allows us that.”
The 12 entrepreneurs have
still to be identified by Raizcorp.
Applicants will have to undergo
a strict selection process.
“We screen our applicants
carefully,” says Gavin. “It is not
a quick application, interview
and then you are in.
“We make sure that the right
people join the programme. It is
an intensive find-and-filter se-
lection process. It starts with an
online expression of interest,
which leads to the first interview
after which all applicants have to
participate in an entrepreneuri-
al assessment, complete an au-
dit and due diligence documents,
attend another interview and
then present their business to
the final review panel.”
Those accepted undergo a
year-long learning programme
during which the entrepreneurs
are given access to infrastruc-
ture such as boardrooms, re-
ception area, telephones and
ready-to-use offices.
“Professional staff is also part
of the deal as they will have
access to book-keepers, lawyers,
receptionists, accountants and
trainers.
“The learning component of
this programme develops and
hones life skills as well as busi-
ness skills.
“Being an entrepreneur
means far more than building a
profitable business.”
As each entrepreneur is al-
Times 7
located a full-time team of
guides who focus on strategy,
finance, marketing, personal de-
velopment and sales, en-
trepreneurs are also given
much-needed sales training.
“Sales is the lifeblood of any
business,” says Gavin.
“Improving these skills is core
to being successful. The en-
trepreneurial journey is a lonely
one — we provide a community
where entrepreneurs can inter-
act and draw strength and in-
spiration from each other.”
Mark believes this is part of
the success of Raizcorp, which
supports more than 200 busi-
nesses around the country.
“We are very excited about
this partnership as we know this
model will afford Nedbank the
opportunity to offer end-to-end
nurturing and development of
various companies and provide
a host of services, including
training, infrastructure, service
providers and capacity-building
for each of the beneficiary en-
terprises — all under one roof,”
says Mark.
‘We are looking
for people with
heart, who truly
want to be
successful’
The Raizcorp model, says
Gavin, “is an eight-step process
which requires commitment,
dedication and hard work”.
“We are happy to partner with
Nedbank because, unlike many
other organisations, they truly
understand the importance of
enterprise development — that
it is the one element that can
turn the face of the South
African economy around.”
For Nedbank and Raizcorp,
enterprise development is much
more than a mandate from the
government.
“It is easy to call yourself an
incubator, get money from a
bank and liberally throw money
at people who call themselves
entrepreneurs,” says Gavin.
“This partnership is not like
that. Nedbank and we are look-
ing for people with heart, who
truly want to be successful busi-
ness owners, and are willing to
put in the work.
“This is about developing
South Africa’s future.”
8 DECEMBER 6 2009: IT’S MY BUSINESS / Sunday Times

Crafting into the future

The stitchings, weavings and carvings passed down and developed
by generations are finding new inspiration in the hands
of two Joburg-based women. Liesl Venter finds out more

S
EDICA Davids and Chan-
tal Collet are, by their
own definition, innova-
tors, strategists and cata-
lysts, but they are also creators.
“We both needed to express
our creative energy through a
business,” says Sedica. “We had
been toying with the idea of set-
ting up a business that specif-
ically harnessed the creative en-
ergy of professionals through
mentoring and advising, and al-
so by sharing our strong start-up
tendencies with others.
“The result was Create Africa
Trading (CAT CC), which I think
is best described as a catalyst
company.”
One of the few women-owned
research, project-management
and merchandising businesses
in the creative industries sector,
the company has gone from
strength to strength since its
launch in 2006.
Chantal, an experienced cul-
tural industries practitioner,
brought a host of skills to the
table, as she had been involved in
cultural research projects, arts
management and skills develop-
ment and training.
Sedica, with a long history in
organisational development and
education, is an expert in human-
resource management, research
and policy development.
“South Africa’s growing eco-
nomic environment presents ma-
jor opportunities for en-
trepreneurs and innovative
thinkers,” says Sedica. “But we
need indigenous and innovative
solutions to the challenges we
face. Researching craft, we re-
alised it had the potential to CRAFTING SUCCESS: Nina Sedumedi, owner of Innocent Spirits, with Sedica Davids of Create Africa Trading Picture: KATHERINE MUICK-MERE
create jobs where the need is the
greatest. CAT CC is about el-
evating, motivating and support-
ing this sector, which is poten- participants are mentored in a Sedica and Chantal agree that University of Johannesburg and
tially massive.” number of areas, from how to just being able to craft is not was convinced I would be a huge
The Gauteng Creative Map- price and cost their product to good enough. success. After all, I was one of the
ping Project, a 2008 study com-
missioned by the Gauteng de-
ensuring that their product is
authentic and unique.”
Research into the crafting in-
How to the
“This programme is about
finding the secret to success for
individual craft en-
few who managed to finish the
course. I found myself sewing
curtains and doing clothing al-
partment of sport, arts, culture
and recreation, revealed that
creative industries contribute
dustry has shown that, while cre-
ativity is alive and well, business
get ahead trepreneur — what makes the
product authentic and unique,
terations just to pay the bills.”
Designing and making chil-
over R33-billion to the province’s skills and access to markets are Tips for emerging interweaving the personal story dren’s clothes in her spare time,
economy every year, and create often lacking. entrepreneurs: into the product and finding she was still dreaming of a big
direct employment for more than “Crafters get into the pro- ý Find out where you ways of selling it successfully.” break when a car crash cata-
60 000 people. gramme through their local mu- can get support — the Ensuring that crafters leave pulted her into action. Calling her
CAT CC, which undertook re- nicipality, which has a database government has the programmes with enough company Innocent Spirits, she
search for the Craft Audit of of existing craft enterprises in pledged support to the skills to start a business is part started making fairy outfits for
Gauteng and were involved in their areas. The programme ad- craft industry through a and parcel of the Heroes’ Corner girls and animal suits for boys.
the drafting of the Gauteng craft ministrator ensures that appli- variety of programmes programme, in which buyers are “When I joined the Heroes’
strategy, have been in partner- cations are forwarded to a prod- such as the Product De- introduced into the programme. Corner programme, my world
ship with the department since uct developer, who goes through velopment/Enhance- “Both programmes are aimed changed. I have learnt skills that
2008, implementing the two-year the applications, looking at the ment programme — at creating an entrepreneurial I desperately needed to make a
Product Development Pro- different products, and makes a knock on as many doors environment for the crafters, in success of my business. More
gramme. selection of the candidates.” as you must but get in- which they work towards def- than that, I found a mentor who
The project, created and driv- Sedica says the candidates are volved with support inite goals. Every individual is gave me precious advice and
en by the department, comprises then provided with a five-day programmes; also matched to a mentor and, much-needed criticism.”
Programme 1, Urban Spirit and contact period at the Craft De- ý Gain experience — through that process, we not on- She was also put in touch with
Programme 2, Heroes’ Corner. sign Centre Gauteng in Sandton. work for an established ly develop their skill as en- buyers leading to her signing the
It is a pilot project aimed at “It is part about mentorship crafter before tackling trepreneurs, but also build con- deal to sell clothing and her spe-
craft entrepreneurs who are eco- and quality product develop- the industry as an in- fidence and provide them with ciality, African fairies.
nomically disadvantaged but cul- ment using identity, heritage dividual entrepreneur the necessary information to be- “Just being able to do some-
turally and conceptually very ad- and authenticity in line with ý Understand your area come successful small business thing is not enough — you have
vantaged. market trends, and about grow- of craft – know where enterprises.” to get out of your cocoon and go
Crafting just for the sake of ing your business, taking aspects and who your market is, Nina Sedumedi, 31, a designer out and enrich yourself by doing
crafting has no point. “For many such as market demand, trends, your expenses, your from Soweto, is among the suc- the programmes, learning the
crafters, it is their survival,” says costing, pricing and other busi- pricing — develop it cess stories of the Heroes’ Cor- skills and developing your craft.
Sedica. “Our programme is ness elements into account. accordingly; ner programme. Having just The best advice given to her
aimed at emerging craft en- “In the Heroes’ Corner pro- ý Research your craft signed a contract with a major was to find her originality and
trepreneurs who are already gramme we are looking at young — authenticity is what buyer that will see her African uniqueness. “There is no point
part of an existing enterprise graduate craft entrepreneurs or is going to define you; fairies sold at retailers and air- giving the world what it already
(Urban Spirit) within one of the those with relevant experience ý Be unique, be you. ports across the country, she has. My fairies were born during
five municipal regions in Gaut- and put them in touch with buy- says it was the programme that my mentorship programme, as I
eng. We look at their product ers at the start of the contact made all the difference. realised I needed something that
and, through the programme, sessions.” “I studied fashion design at the was different and unique.”
 DECEMBER 6 2009: IT’S MY BUSINESS / Sunday Times 9

WHAT TO EXPECT NEXT YEAR: RETAIL

FOOD IS YOUR FRIEND: Retailers are advised to make sure they attract customers by selling at good prices, and making sure the customers know this

Tough 2010 looming

Working smarter will be the key to survival, reports Hendri Pelser

V
ALUE for money is go-
ing to be the name of
the game in 2010 for
small and medium en-
terprises in the retail environ-
ment.
The days of credit-card shop-
ping sprees are over for most
South Africans. Expectations are
that consumers will remain un-
der pressure next year as the
threat of electricity price in-
creases and possible new taxes
loom. Half of all SMEs will be
affected as the SME Survey
shows that 34% of small busi-
nesses focus on consumers and a
further 17% target either retail-
ers or wholesalers.
The Bureau for Economic Re-
search says retail confidence hit
an eight-year low towards the
end of 2009 as profitability came
under pressure. While elements
of this picture will remain some-
what static in the new year, im-
provements are expected and it
seems the worst may be over.
Evan Walker, a retail analyst
at RMB Asset Management, says
it is difficult to paint a clear
picture of 2010 because of the
Eskom and taxation unknowns.
While minister of finance
Pravin Gordhan has hinted at a
possible increase in income tax,
Evan says the new National
Health Insurance Bill might in-
clude a contribution from the
working population.
“This will affect consumers
again because it is effectively
another form of tax. If this hap-
pens, retail will be hurt badly…
and it will constrain long-term
growth in the sector.”
Possible Eskom tariff increas-
es will also affect consumers di-
rectly: “There is a lot of un-
certainty on the horizon and re-
tailers should be conservative
for the next year at least. It is
difficult to see negative growth
next year. The average con-
sumer can still hold out, but
there will not be any massive
growth.”
This is echoed by Mike Schüs-
sler of Economists.co.za — he
says the good news is that pos-
sible cellphone tariff reductions
and a decrease in household debt
may lead to retail growth. His
provincial barometers also show
that trade growth is slowly start-
ing to take place in some
provinces.
Initially, at least, Mike expects
discretionary spending on small
items to increase. He advises
SMEs to stock items that offer
consumers value for money. It
will take a while before retailers
selling big-ticket items will see
any significant growth.
Expectations are
that consumers
will remain
under pressure
“If all these (unknown) things
come to fruition, buying patterns
will change and you will have to
adapt your product range to be in
line with the available disposable
income out there,” Evan says.
“Most SME retailers will need
to look to offer more value prod-
ucts — people will be spending.”
He adds that stock manage-
ment is going to be critical next
year and says inventory levels
need to be watched carefully.
“They should cut costs wherever
they can and they should avoid
getting too indebted … I think
SMEs will continue to take more
and more pressure simply be-
cause they don’t have the bar-
gaining power.”
Mike advises SMEs selling big-
ticket items to have smaller
items on display to promote any
form of cash flow.
Price increases will remain
under pressure and Mike be-
lieves the only way to get the feet
through the door is by offering
good prices and by making sure
that consumers are aware of
this.
Food and beverage sales tend
to remain fairly stable and Evan
says food inflation has been de-
creasing steadily. This means re-
tailers will have a better time of
it initially as profitability is not
under as much pressure.
Abel Coelho of the Glenharvie
Supermarket near Westonaria is
an independent retailer and he is
optimistic about 2010. “The re-
cession did not really affect us as
we sell basic foodstuffs. Every-
body needs food.”
On the other side of the spec-
trum is Amith Kara from Orig-
inal Penguin in Nelson Mandela
Square and his high-end clothing
brands are now subject to a 5%
increase in import tariffs.
The effects of these increases
will come to the fore when win-
ter clothing hits the shelves, but
Amith says the strong rand will
largely offset this.
“The rand is much stronger, so
it is almost 30% cheaper to buy
clothing. This gives us better
selling prices and, thus, better
turnover… at one stage, we were
buying at R11 to the dollar.”
Amith has ensured that his
margins allow room to manoeu-
vre: “If things go south, we ad-
just our pricing — we will simply
drop our margins and increase
volumes because you can see an
immediate effect in the feet com-
ing through the door. I think that
the World Cup should give us a
better first part of the year.
Thereafter, it is up to traders to
offer the right products.”
10 DECEMBER 6 2009: IT’S MY BUSINESS / Sunday Times
WHAT TO EXPECT NEXT YEAR: MANUFACTURING
BOTTLE IT: Volumes of consumer-related goods are expected to surge in the first half of next year
Upturn predicted
Sector’s prospects are looking better in 2010, reports Hendri Pelser
N
OT long ago South
Africa had virtually
reached its manufac-
turing capacity.
The global downturn quickly
took the wind out of many SME
manufacturers’ sails but, accord-
ing to economist Mike Schüssler,
2010 has the potential to nurture
a recovery in the sector.
Still, it is going to be a long
road and SMEs will have to be on
their toes.
“Manufacturing growth, to a
large extent, is going to depend
on the world’s economic recov-
ery. It won’t be heaven but it
won’t be the hell 2009 was,” says
Mike. “Overall, I am not too con-
cerned about manufacturing
next year.”
Manufacturing is dependent
on a number of other sectors and
Mike says SMEs that are focused
on producing consumer-related
goods can expect a pick-up in
volumes initially, with a down-
turn in the second half.
He says inflationary forces
and the effects of a possible elec-
tricity price increase will take
time to hit consumers, hence the
expected decrease in manufac-
turing activity towards the end
of the year. Food and beverage-
related manufacturing will
remain stable.
The mining sector is already
seeing a recovery based on high
commodity prices. SMEs supply-
ing the industry should have a
good year.
Overall, Mike expects manu-
facturing to perform better, but
says significant growth will re-
ally return only in 2011.
Export-orientated manufac-
turers should do better if the
rand devalues, but Mike says
SMEs focusing on Africa still
have many opportunities to pur-
sue.
He adds that Gauteng, as SA’s
manufacturing powerhouse, will
see the first effects of an upturn
and decision-makers should look
at their industrial areas for signs
of increasing activity.
Sanisha Packirisamy, an eco-
nomic analyst at RMB Asset
Management, says because man-
ufacturing was one of the
hardest-hit sectors this year, it
should see signs of recovery
early because it is coming off an
extremely low base.
She adds that demand will
increase in general next year,
based on expected overall eco-
nomic growth, which will drive
higher production levels.
“If you believe the world will
recover next year, we should
start seeing export volumes
recovering. This year, export
volumes declined by about 13%
and we see this becoming a 4%
year-on-year growth (in 2010).”
‘We expect
building activity
to start picking
up again’
Sechaba Kitleli is chairman of
Reunko Steel Suppliers in
Alberton, which manufactures
balls and brackets for the mining
industry. Instead of sitting back
and waiting for large mining
houses to find their products
among a myriad of suppliers,
Reunko’s management were
proactive and recently conclud-
ed an equity deal with Anglo
American’s development fund,
Anglo Zimele.
“We convinced them of the
value we offer because of our
products, technical ability and
ownership equity. I think we are
going to take off in 2010,”
Sechaba says.
Nevertheless, there will be
pressure on input costs, includ-
ing steel. “Our clients under-
stand that there will always be a
price increase for our product.
Constant communication lets
them know what is happening.
“I have faith that we are going
to ride the tide if we have the
understanding of our clients.”
Neil de Wet of Doors
Unlimited in Pretoria is also
optimistic about 2010.
The wooden door and window
manufacturer experienced a 40%
drop in volumes in 2009 as hous-
ing construction came to a
virtual standstill.
“Now that banks are relaxing
their lending criteria and be-
cause the interest rate is lower,
we expect building activity to
start picking up again,” says
Neil.
Picture: BUSINESS DAY
“As a result, I expect volumes
to increase. We also focus on the
renovation market, which is
relatively stable for us.”
Neil expects the upturn to
have taken root by the second
quarter of 2010.
But he is worried about input
costs, especially the electricity
their three-phase machinery
uses: “A price increase will hurt
a lot. It might just be cheaper to
run a generator than to use elec-
tricity from the main line.
“Obviously, we will have to
pass on any increased input
costs to the customer. They
might not like this, but they will
not have much of a choice be-
cause all manufacturers use
electricity.”
Neil is in a significantly better
position than many competitors
because he imports the wood the
business uses.
This means his pricing re-
mains more competitive and
there is room to absorb in-
creased input costs.
“Some you win, some you lose.
You need to manage the possible
negative implications on your
business as they arise.”
 DECEMBER 6 2009: IT’S MY BUSINESS / Sunday Times 11

WHAT TO EXPECT NEXT YEAR: CONSTRUCTION

Building industry
still under pressure
Finding a niche in the market is the secret for SMEs, writes Hendri Pelser

S
ME owners in the
construction and hous-
ing industry don’t have to
go to a theme park as
they have their own roller-coast-
er rides to contend with.
Unfortunately, the ride is not
over yet and 2010 is going to be
another demanding year for the
sector.
Property economist Erwin
Rode says SMEs should assume
that 2010 will be similar to this
year. Next year will be a year of
consolidation.
“We must remember that
building construction is a lag-
ging indicator. So as rental rates
have been under pressure this
year, one cannot expect much
improvement in building con-
struction next year,” he says,
adding that the residential prop-
erty sector will also remain un-
der pressure.
There is oversupply in the res-
idential and commercial mar-
kets so new buildings are not
really “necessary”.
Economist Mike Schüssler
echoes some of Erwin’s senti-
ments and believes commercial
property will be the first sub-
sector to perform better as man-
ufacturing recovers.
Things do not look rosy in the
civil and infrastructure con-
struction sectors, either, as the
spending cycle initiated on the
back of the Fifa World Cup is
drawing to an end.
“Government finances are un-
der pressure,” Erwin explains.
“When this happens they save
on capital projects. The potential
demand for capital projects is
huge, but money is going to be a
constraint.”
Mike says many projects still
need to come to fruition, among
them expansion plans at Eskom
and Transnet.
“Civil construction, in general,
should continue,” he says,
adding: “One must remember
that South Africa is so far behind
that there is simply no alter- LOOKING UP: A construction worker makes his way in to a site in Rosebank, Johannesburg, where business is booming Picture: SIMPHIWE NKWALI
native.”
There is some good news for
small businesses not directly afford higher rental if their Because they operate in the happen next year. Traditionally, where many SMEs can pursue
linked to the construction sector. turnovers do not increase. Free State, Northern Cape and it is quiet in the beginning of the opportunities in the year to
Erwin says businesses special- “It’s a tenant’s market and it Eastern Cape, where much still year and we use this time to come.
ising in home repair and DIY has been a long time since busi- needs to be done, his business is complete our own developments, The challenge in securing this
should do better as fewer people nesses have been in such a ticking along nicely. such as building office space. type of work is convincing po-
will move to better housing due strong bargaining position.” “We really can’t complain — “This way, we are able to keep tential clients about the benefits
to financial constraints. But tenants must not overplay our people busy and keep their of outsourcing.
Mike adds that other housing- their hands and should ask skills. “The challenge is then to en-
related service providers such as
garden services will still have
themselves if the landlord really
wants them in the shopping
‘The number of “We are a bit nervous about
next year, but we are also op-
sure that you are geared up in-
ternally and that you have the
work, but warns that consumers
will cut their spending.
centre.”
Large, showpiece projects
tenders being timistic — I’m just very happy
that we do not focus on the
staff complement with the right
skills and experience to deliver.”
At the same time, there is a
tremendous opportunity in such as stadiums or the Gautrain put out has private market.” He adds that in the pipeline
supplying and installing energy- are either complete or approach- Chris Ringas of Pipeline Per- industry there are also signif-
saving products such as solar ing completion, but infrastruc- decreased’ formance Technologies is also icant opportunities in the water
geysers or geyser insulation ture spending is not over. optimistic about 2010 as his supply sector as much of the
blankets because of possible Marcell Mellet, the managing we have a lot of work. The state company focuses on analysing, available infrastructure needs to
electricity price increases. director of Mellet Construction, and parastatals are not worried protecting and repairing be replaced.
Erwin says rental prices will says his business focuses on about interest rates,” says Mar- pipelines. “As an SME it is not always
not increase significantly next niche construction such as cell. “But, we have found that the Chris explains that the infras- easy to bypass the bigger players
year. telecoms infrastructure and gov- number of tenders being put out tructure that been created over to secure such a contract. But
“Landlords cannot increase ernment-orientated work such has decreased, which makes us a the past couple of years will need you can market yourself as a
rentals if the retailers cannot as building schools and clinics, little nervous. constant monitoring and main- specialist to these players and
afford it, and retailers cannot or upgrading existing buildings. “It is difficult to say what will tenance, and this is an area become a supplier,” Chris says.

A long way from home
Vinny Lingham left SA to
make his business work,
writes Alex Matthews
V
INNY Lingham packed
his bags for San Fran-
cisco in 2007 after
founding Yola, his
start-up that makes it easy for
people to create and run their
own websites.
“As an Internet company we
need to have access to some
unique skill sets, which are not
always found in South Africa,”
says Vinny. “Also, we want to be
closer to some of our partners —
and most hi-tech companies are
in Silicon Valley (in California).”
He studied information sys-
tems at the University of Cape
Town and did honours in e-com-
merce through Unisa. After
spending time at Dimension Da-
ta, Commerce One and Slick-
street Marketing, he launched
Clicks2Customers in 2003, scoop-
ing the Top ICT Young En-
trepreneur in Africa award three
years later.
“I think I’m a successful en-
trepreneur because I get in-
volved with businesses and in-
dustries that I have experience,
passion and insight into,” says
Vinny, who has been online
since the mid-’90s, when many
people still thought the “web”
was something a spider spun.
“The Internet is my passion,”
he says.
Clicks2Customers, which does
search engine marketing, says it
DECEMBER 6 2009: IT’S MY BUSINESS / Sunday Times 12
drives over $100-million in sales
for its clients. Vinny was CEO for
just over four years before the
start-up bug bit again. He re-
signed in 2007 to concentrate on
Yola (then named Synthasite).
“We wanted to make building
a website easy — now we even
have an 88-year-old granny us-
ing Yola!”
The user-friendly service en-
ables you to design, create and
host your own website for noth-
ing. It has over three million
users already; people love it.
While anyone can use it, Vin-
ny says it was developed with
small businesses in mind. These
are the guys who often cannot
afford the costs involved in cre-
ating and hosting a website, or
have the expertise.
“Yola is about helping en- MAKING CONNECTIONS: Vinny Lingham has created a site to help others make websites — free of charge
trepreneurs to be successful on
the web, so in some way our
brand reflects much of my per- tech companies difficult in South a community of investors and to investors. Investors want to
sonal passions too,” says Vinny, Africa. However, with the land- start-ups in the Western Cape to back people, not just ideas,” says
who was recently home for Glob- ing of the Seacom cable in July attract the best tech talent. Vinny. “Ideas are nothing with-
al Entrepreneur Week.
and with further cables on their As an entrepreneur, Vinny’s out execution of them, so you’re
“There are so many people
who are passionate about job way, bandwidth will become greatest challenge has been to more likely to get funding if
creation in South Africa and pro- much more accessible. get the money for his start-up you’re already executing your
moting entrepreneurship that I Vinny hopes to return to Cape dreams. He persisted, and this idea.”
believe, as a country, we will Town. He believes that, if South year Yola received $25-million Vinny says he believes that
succeed at building a strong en- Africa is going to compete with from the Reinet Fund, controlled while no particular skills are
trepreneurship ecosystem,” he tech titans like the US, a cluster by the Rupert family. essential for entrepreneurs,
says. approach needs to be adopted. “Entrepreneurs need to be what is important is “to have
Vinny says slow, expensive He mentions the recent launch able to concisely explain their passion for being able to control
bandwidth has made starting of Silicon Cape, which will create business and value proposition your own destiny”.