Wezie Zondani has been able to double her construction company’s turnover thanks to the help she got through a Small Enterprise Development Agency (Seda) business incubator.
Zondani, who runs Umtata based Max-Wezie Contractors with her husband Max, says during the four years the company was based at the Seda Construction Incubator in Umtata she and staff benefited from free training, in areas such as staff succession planning and management of construction processes.
When the company graduated from the programme at the end of 2013 it had been able to move from a Grade 4 to Grade 7 Construction Industry Development Board grading.
“I recommend others join the incubator,” says Zondani. “The team there was really willing to assist us.”
Today the company employs more than 200 people, including 70 permanent staff and is involved in completing two R70-million ($5m) contracts for the Development Bank of SA to build two schools and another R100m contract to deliver 1,000 RDP homes in the Eastern Cape.
Her company is one of thousands that Seda has helped incubate since the inception of its incubation programme a decade ago.
Over that period it has grown its network to 56 incubators from the eight the agency inherited in 2006 from the Department of Science and Technology’s then Godisa programme.
100 incubators target
The agency wants to scale this up to 100 incubators by 2020, by getting existing incubators to open branches across the country and by partnering with other organisations to launch new incubators. In September newly appointed Seda chief executive Mandisa Tshikwatamba said the agency plans to roll out nine incubators this financial year.
But Nosipho Nkhonkwane (pictured above), the executive manager of the Seda Technology Programme, says it will be difficult to meet the target, unless the programme is granted a higher allocation from the fiscus.
She says that there’s a limit to how many incubators Seda can add without stretching existing resources too thin on areas such as the rental it subsidises for beneficiaries. Seda spent about R118m supporting its network in 2015/16.
While Seda exited from two incubators – the Zenzele Technology Demonstration Centre and the Seed Container Park (Secopa) because of non-performance – this was balanced by a number of new incubators it added in the last financial year.
These include those from the Department of Trade and Industry’s rapid incubation programme, which aims to promote a culture of entrepreneurship among student graduates at Technical Vocational Education Training (TVET) colleges.
The number does not include another TVET incubation programme – the Centres of Entrepreneurship – which was earlier this year transferred to the agency from the Department of Small Business Development, following a review initiated by the department last year of its support programmes. There are 10 such centres at present.
Nkhonkwane says these centres aim to encourage students to start their own business, by providing them with help to prototype their products or services, before they take this to a rapid incubator for further development.
Almost 2,500 assisted
In the last financial year 2,492 entrepreneurs and small businesses received assistance from Seda. Among these were 1,650 small businesses (including 497 new businesses that were created in the incubators) assisted by the agency’s incubators.
These firms generated a combined turnover of R608m – at about R370,000 per business and created 2 231 new jobs, or just over one per entrepreneur assisted. Over a third of these jobs were in construction and about a quarter in the agro-processing sector.
Many of those entrepreneurs and firms that received assistance got help through virtual incubation, where assistance is provided remotely or by clients visiting the incubator. This makes it less costly for the state to fund than traditional incubation which depends on subsidising rental for tenants.
Seda meanwhile is moving to improve the overall quality of incubation. Recently it signed a three-year contract with consultancy GrowthWheel to draft a growth plan for those businesses the agency assists, to ensure they have things such as the necessary business processes and customers relations in place.
Nkhonkwane says the agency has also set up an incubation governance management programme to improve the skills of incubation practitioners and is looking at appointing a university to offer up course to a Masters-degree level.
In addition the agency wants to revive the Southern African Business and Technology Incubation Association (Sabtia) which had fallen into disuse, by funding a dedicated office for the organisation. This, believes Nkhonkwane will help the agency to better connect to incubators.
On top of this an incubation policy working paper drafted by the agency in the last financial year aims to provide clearer guidelines on how incubation should be conducted.
The agency has also begun working on an automated monitoring system for incubators to track the performance of firms in incubation as well as graduates for up to three years after they leave the incubator. The 177 businesses that graduated from the programme in the last financial year had a combined turnover of R434m.
Seda now also offers business acceleration, through the National Gazelles programme, where 40 high-growth firms are chosen after a rigorous selection process and assisted for three years.
The first 40 gazelles were announced in July by the Minister of Small Business Development Lindiwe Zulu. A second call for applicants opened in October and will run to November 22.
New innovation focus
Added to this Seda is now on a new drive to source innovative entrepreneurs and to improve the expertise of staff in its incubators network.
The agency earlier this year signed an agreement with the Technology Innovation Agency to tap some of the entrepreneurs the agency supports and the seed funding it offers those with new ideas. The agreement also includes the possibility of jointly setting up a university-based high technology incubator.
Up until now Seda has focused largely on lower-value products and services from sectors such as furniture, construction and agriculture, than on assisting entrepreneurs to develop innovative new products.
While Nkhonkwane argues that the country needs various types of incubators to address the different challenges it faces, she concedes that helping innovative high-tech companies is “where a lot of the jobs” can be created.
Last year Seda signed a three-year agreement with Savant, a high technology incubator based in Cape Town.
The agreement involves Seda provide funding of R3m per year, says Savant director Nick Allen. This will help the incubator, started 10 years ago, to support about 24 new businesses, in addition to its current portfolio of 11 businesses, which range from food technology to self-balancing batteries and concentrated solar power, he says.
Chip maker assisted
Savant recently helped local innovator Mike Melnyczuk of Form Foods to license a vegetable chip making technology to a local company, Veggie Crisp, which today supplies mainly Woolworths.
The company, which employs about 50 people at its factory near Franschhoek, was named the most outstanding incubator client at the SA Business Incubation Conference in March.
The company’s director Richard Allen (who is the brother of Nick) said the company is looking to trial new technology in November which when operational should help increase revenue from R18 million a year to R28 million.
Seda’s move to back more innovative technologies and bolster the quality of its incubation could help it make a greater impact on the small business sector.
A shorter version of this story originally appeared in Business Day (go here for the original version). Follow Small Business Insight on Twitter at @Smallbinsight.
Stephen Timm is a