While South Africa's National Development Plan (NDP) expects SMEs to contribute 90% of the 11 million new jobs the plan targets for 2030, those running support programmes backed by the Jobs Fund are finding that creating jobs is harder than they expected.
The fund, administered by the National Treasury and launched in 2011, funds organisations that run projects that are expected to generate a significant number of jobs.
The National Treasury and private-sector organisations have so far together committed R1.6 billion ($115 million) to 18 projects (excluding emerging farmer programmes) to help small businesses to create 69,067 permanent jobs.
Of the R1bn committed by the National Treasury R572.9 million had been disbursed by March 31. The funding is for business support, incubation, and to purchase machinery or equipment.
But meeting the jobs targets have not proved easy. Often projections on expected job figures prove to be wrong. It often depends a lot on the kind of business owner one supports.
This is a lesson that mobile vending and distribution business A2Pay has had to learn.
The company received R78m funding from the Jobs Fund in July 2013 to fund the provision of vending equipment and business equipment like printers and fax machines to franchisees in townships. It matched this with an equal funding contribution.
The agreement with the Jobs Fund is to create 5,078 jobs by August next year. Up to March 31, 1,386 jobs had been created.
A2Pay marketing manager Jon Harris said the company has in some cases battled to find good operators, partly because the equipment – valued at between R30,000 and R120,000 – is given for free to operators. A2Pay covers its costs by taking commission of between 20% and 50% on sales.
To remedy this the company has tightened its selection criteria. Operators now have to purchase the company’s biz phone appliance valued at R1,700 and must meet certain sales targets. The phone allows one to buy air time, electricity credit and to even contact brokers for financial products.
Harris said those that struggle to meet their targets are placed in incubation programme. Failing this, agreements are terminated with those respective operators.
The company is also speaking to a number of business support providers to help it to source appropriate candidates.
Harris said A2Pay looks particularly for those with business acumen, but someone who at least has a Grade 10 and has had some experience trading in the past.
Presently distributors are operating in Gauteng, North West, Limpopo, Mpumalanga and KwaZulu-Natal, Harris said.
Each operator is expected to create between two and five jobs, including those of mobile operators. Harris said while some have struggled to retain jobs, others have exceeded this target.
They include David Manyaka, who runs Quick Tuckshop with his wife. He’s been able to add six new jobs and create work for another 11 independent salesmen since acquiring All2Pay’s biz booth and biz box, collectively worth R150,000. The units contain a fax machine, a printer and a computer.
Manyaka, who has operated from his home in Bophielong, Vanderbijlpark since 2003, said his revenue is up by about 20%, mainly since he began selling the biz phone. He sells them mostly via independent salesmen to shops and local businesses.
Selection criteria key
A2Pay’s experience is similar to that of The Awethu Project which received R71m, matched by an own contribution of R68m to create 2,020 jobs by April 1, 2017 via a business incubation programme. Since April last year just 134 jobs have been created.
Gareth Taylor (pictured above), The Awethu Project’s incubation manager, admitted earlier this year that the organisation had to tighten selection criteria when sourcing candidates for its incubation project, because the initial version of the programme, part-funded by the Jobs Fund had created few jobs.
Focusing on fewer job-creating businesses might also help.
Hlonela Lupuwana managing director of Zimele, Anglo American’s enterprise development programme, admitted earlier this year that the initiative’s baseline, set for number of transactions to small businesses to create 8,000 jobs, had been over estimated.
Anglo American aims to create 8,000 jobs by March 31 next year through business support and funding offers entrepreneurs.
However since the agreement with the Jobs Fund (the fund put in R250m, which was matched by Anglo American) was initiated in April 2013, just 2,920 jobs had been created up to March 31 this year.
Lupuwana said a higher number of transactions does not necessarily translate into an increased number of jobs created.
Enablis project cancelled
Meanwhile all of the 18 Jobs Fund projects aimed at small businesses bar one are still under go. A project run by Enablis Entrepreneurial Network SA was cancelled last year.
The project, which was initiated in September 2012 and included business training to 1,000 entrepreneurs, aimed to create 12 500 jobs by March this year, but had created just 2,808 when it was closed down, with the Jobs Fund having disbursed R13.7m of the R34.2m allocated in funding to the project.
Rulleska Singh, the National Treasury’s communication specialist for the fund said
the Enablis Entrepreneurial Network closed down its SA operations on July 31 last year and were unable to implement the project due to “lack of institutional capacity”.
But at least one programme has performed well. The Cape Craft and Design Institute (CCDI) recently completed a Jobs Fund backed programme on June 30 meeting 93% of its jobs target, by creating 420 of the 451 targeted jobs by assisting 45 businesses. The programme commenced in September 2012.
The CCDI received just over R11.6m from the Jobs Fund to provide business owners in the craft and design sector with business support and funding to buy machinery and hire new employees. The organisation contributed a further R2.9m.
Winston Richards, the CCDI’s business support programme manager, said the National
Treasury had granted the organisation an extension, with a new deadline of December 31, to help create the remaining jobs.
One of those assisted by the Jobs Fund money was Mervyn Gers’ ceramics business. His business was able to create 21 jobs through the R460,000 it received from through the programme for various investments that has helped him to boost productivity. Today he employs 32 people, after starting in 2011.
Gers, who runs Meryn Gers Ceramics, praised the programme. He said he expects his revenue to double between February this year and February next year thanks to the new equipment which include a new kiln, refurbishment of three old kilns, two new computers and two air-coolers.
He produces pottery crockery, mainly for local restaurants but had begun exporting plates too after attending several trade shows recently. As required by the CCDI, he had to cover 20% of the cost of expenses, or R115,000.
With the cost per job from public funding coming at just R22,000 a job, Gers was able to put the funding to a far better use than the fund’s average of R52,000 per job among its total portfolio of all projects – small business or otherwise – that it has funded.
Perhaps key is to back the right kind of entrepreneur.
Richards notes that while some businesses had failed to meet their expected job numbers, those in the CCDI’s Jobs Fund programme that were successful and had exceeded their target had strong management teams in place.
Focusing on these businesses might help the country to create the jobs it badly needs.
This story originally appeared in Business Day (go here for the original version). Follow Small Business Insight on Twitter at @Smallbinsight and on Facebook.
Stephen Timm is a