A LACK of business skills is one of the biggest obstacles that any South African has to overcome when starting a business today. But the problem is made worse in that many business advisors, the very people that should be training up and mentoring business owners, are remain unskilled themselves.
Many lack basic financial literacy. On top of this there are no real grading structures in place to access mentors.
Ferdi Preller, director of the Small Business Advisory Bureau based at the University of the North West, said it was a “racket out there”.
The bureau has been assessing and training business advisors since 1970 and has been assisting South African Breweries, Business Partners, Khula and the Small Enterprise Development Agency to rate mentors.
He has assessed over 500 mentors and says many lacked basic financial and computer literacy.
He said many organisations the bureau assisted were saying there had been “no impact” from mentors. It was when the bureau investigated further that they discovered many did not know how to make key financial calculations or know the meaning of key financial terms.
More than 60% of these failed to score higher than 60% on basic financial literacy. He said 90% of the mentors he assessed were “computer illiterate”.
He said business mentoring was currently a “free for all”.
“The guy who passed matric is being registered with government (as a mentor) because he has a tax clearance certificate and is VAT registered and now he’s getting paid R5 000.”
Preller’s grading system looks at various variables such as how much business experience a mentor has, their industry experience, their qualifications and references.
He said mentors should be encouraged to practice within in their scope of expertiese.
Both SAB and Khula have dispensed with a number of its mentors after implementing a new grading process. Khula has subsequently taken on new mentors.
SAB’s accreditation process involves prospective mentors taking tests on numeracy, financial management, computer literacy and basic legal skills. Mentors are then given a rating and accorded with junior or senior mentoring status.
Gerry Barnby, national manager of Sizanani Advisory Services, said because of the lack of a professional body, “high quality, professional” were difficult to find.
Sizanani was set up by the Banking Association which links business owners attempting to take out a loan with business consultants who help them put together business plans. The organisation which now has close to 100 business mentors across the country was often slated for its poor mentors.
Sizanani was engaging with the Institute of Bankers to start a professional body for business advisors who are presently working with banks assisting small and medium businesses.
He said the organisation had placed a moratorium on recruiting any new business advisors and even bringing in new business clients, while the organisation repositions itself.
Johan Geldenhuys, an advisor to Seda says the agency has tough accreditation system and was often forced to remove mentors and service providers who failed to perform from their database.
Geldenhuys said though Seda did not readily supply training to its mentors, the Voka SA Plato group mentorship scheme in co-operation with the Government of Flanders in Belgium was currently training 10 mentors in three provinces.
He said the agency was trying to do away with matrix-style business plans where a mentor simply relied on a matrix.
But he said the agency also recognised that certain banks, like First National Bank, insisted on a specific format for the business plan, which might be seen to be a template or matrix.
He the trialing of a system whereby paid service providers were only paid in full once a client was granted financial support from the banks, was already yielding “promising results”.
“We believe that there is an obligation on the service provider to assist with a business plan that will actually assist the client to get access to funding,” she said.
Last year business owners complained that consultants doing work for Umsobomvu Youth Fund were taking too long to complete interventions in their business – in some cases up to nine months to help draft a business plan.
The fund hands out vouchers which enable young entrepreneurs to access 42 business services. The vouchers expire if the services procured by them are not wound up within three months.
But Mapitso Nchapha, Operations manager for the voucher programme said this problem no longer existed. “I think it has been greatly approved,” she said.
Nchapha said the fund was also considering partial payments to those service providers assisting with business plans, with the full amount only being paid once the client received a loan from the financial institution.
Business Partners is currently carrying out a reassessment of its mentors.
Paul Malherbe, CEO of Business Partner's Mentorship and Consulting Services, says the organisation recently piloted a business diagnostic tool on 30 entrepreneurs. The tool is a basic health check on the business client to pick up any warning signs.
In 2006 Business Partners introduced a new accreditation process for mentors entering its programme which has been running since 2000, after it was flooded with prospective applications from consultants. The organisation has over 388 mentors.
Malherbe believes most of the problems to do with bad quality mentors should be rectified by the introduction of a grading system.
Business Partners is currently in talks with the University of the North West to set up a grading matrix similar to the one Khula has implemented.
“There are a lot of problems (with mentors) but the nature of the industry is that those mentors who have been fly by nights have been weeded out,” he says.
He has when it comes to gettting a mentor a business owner should get the specifics of the intervention in cost and time from the mentor and lay this down in writing to avoid any later misunderstanding between themselves and the mentor.
He says Business Partners looks to take on mentors with suitable business experience.
Coaching and Mentoring South Africa (Comensa) is set to launch new professional standards for coaching and mentoring in South Africa in October. Comensa was launched in 2006.
The organisation has over 400 paid-up members who are coaches and mentors.
Coaching differs from mentoring as coaches get a client to ask the right questions and to think more about how they want to develop themselves and their businesses. This contrasts with mentoring where the emphasis is more on practical interventions to assist a business owner.
Comensa’s objectives are to develop work ethics, promote good conduct and positioning of coaches and mentors in the workplace.
Dale Williams, the national president of Comensa, says he believes it will still take some time to implement the standards which will also be applied to those that train coaches.
He advises business owners to ask a coach or mentor for an explanation for what it is they do, what qualification they have and for references.
Owen Fielding a Khula mentor who runs TEC Solutions, says many mentors haven’t had experience in running their own business which can affect their ability to advise clients correctly.
Fielding has been a mentor for 10 years, has run several businesses and currently runs a plumbing franchise.
He says having experience running your own business helps you to be “street smart” and explain to clients “nitty gritty” details of marketing and how to cope under the present how interest rates.
He advises business owners to steer away from advisors with less than two years of experience running a business and to choose a mentor who has technical experience in the sector in which your business operates.
The fund offers 42 types vouchers valued at between R700 and R23 000 to young entrepreneurs who can then redeem these for certain business consulting services such as assistance in drawing up a business plan or development of marketing material such as business profiles and brochures, as well as websites. The voucher scheme programme was started in 2003.
Mapitso Nchapha, Operations manager for the voucher programme said the fund carried out annual audits of its service providers and terminated the services of those that failed to deliver. The fund presently has 381 service providers.
Following work performed for each client – service provider have to submit a report to Umsobomvu before the fund can approve payment to the service provider.
The fund also carries out regular feedback sessions with service providers to improve quality of the services they offer.
Last year the fund’s CEO Malose Kekana said the question of "collusion" between allocating agents and service providers on the voucher scheme programme “could not be ruled out”.
Molotsi explained this as a running concern for the fund. “As with any financial or procurement transaction, the risk of collusion between the parties may occur to give unfair advantage to particular service providers.”
She said the fund has an anonymous anti-corruption fraud line - 'tips anonymous" to report such cases and says that in the past these have been dealt with when reported.
This article originally appeared in Business Report on 26 June 2008.
Stephen Timm is a