Hotelier Keith Attwell has an ambitious plan. He wants to grow his small family-run business’s turnover 50-fold in the coming years. Doing so will create 2,500 jobs he says.
He’s not alone. The owner of Vaalnest Boutique Hotel on the Vaal Dam is part of a group of 40 companies seeking annual growth of 20% over the next three years (see their respective owners, above).
The firms were selected in the first round of the department of small business development & small enterprise development agency’s (Seda) National Gazelles programme to support high-growth companies. The announcement of the 40 companies was made in July by the minister of small business development, Lindiwe Zulu.
They were chosen from a shortlist of 200 by auditing firms EY, KPMG and SizweNtsalubaGobodo, drawn from 1,800 applicants. To qualify, firms must be at least two years old, with an annual turnover of between R1m and R30m ($75,000 to $2.2m) and employ at least two people.
The 40 selected companies are eligible to receive business support and finance over the next three years. Attwell is preparing an application for the R1m grant that each of the firms can tap to fund machinery and equipment and to cover software and development.
So far he has received help from Gibs Business School to improve his business plan. The business school also helped develop a customer loyalty programme for his hotel.
Following a diagnosis by consultancy Business Doctors, he added more television channels and better Wi-Fi to the hotel’s rooms. He also plans to fit new soft furnishings.
Attwell wants to grow the four-star hotel he started nine years ago from an annual turnover of R2m to R15m and his staff complement from 15 to 110 by increasing the number of rooms from 12 to 100.
He also has plans to add a conference centre, 10 community-run businesses and 150 self-catering units and says this will increase his business’s turnover to R100m and add 2,500 jobs.
All kinds of firms
The list of 40 companies on the programme includes a firm looking to set up a rose oil extraction operation, a herbal medications importer, a machine-parts manufacturer, several construction businesses and a brickworks (see the list in this post).
Firms from each of the nine provinces are represented, and from sectors aligned to the National Development Plan and Industrial Policy Action Plan.
Participants must submit their financials to an online portal every month so that each firm’s growth can be tracked, while help is available in the form of monthly masterclasses on strategic issues, weekly business webinars and a network of mentors.
Steve Sutton, master franchisee of the local Business Doctors, says the participants are at "various stages of maturity".
Some, like Max Mabuti’s Flatfoot Airconditioners, are already experiencing rapid growth. Mabuti’s East London company supplies and services airconditioning units, refrigeration and boilers to mainly government clients.
The company has grown to a R20m business with 60 employees since he started it 10 years ago. Last year he created more than 20% growth in turnover by adding new areas such as refrigeration and laundry services.
Recently he met with a Business Doctors mentor to discuss how to increase this to 30% growth. The mentor has offered to help source more private-sector clients.
'Not widely known'
Mabuti's only complaint is that the programme is not that widely known, adding that many Eastern Cape government officials haven’t heard of it.
Kevin Naidoo, who runs Gauteng-based Signs4sa.co.za, says the programme has been slow to get off the ground. However, he admits that the fault may lie with him, as his accountant has yet to submit his financials.
Since Naidoo and his business partner bought the business four years ago, they have been able to increase the turnover by more than fivefold to R16m and raise the staff count from seven to 43 employees — mainly by turning to manufacturing the signs themselves, offering larger signs, introducing LED lights and adding a rental plan option for signs.
Naidoo, a former sales director for an IT company, says he is now exploring whether to franchise the business or not.
Overall, most participants believe the programme could be a game changer. Modi Mining founder Samuel Molefi hopes the purchase of a front loader, using the grant and implementation of a quality management system from Productivity SA, will help grow his mining company’s turnover by 30% a year.
His only challenge is that he has to free up some time to attend webinars and workshops, as well as to regularly complete the portal’s dashboard. "But following them is good as it teaches you to be number-conscious," he adds.
The department of small business development has earmarked R40m in grant funding to the programme. Seda spokesman Boy Ndala says that the first applications for grants have been submitted and will be adjudicated soon.
Some participants have applied for finance from the small enterprise funding agency (Sefa), which has so far disbursed R9m to the shortlisted 200 firms on the programme.
Ndala says that a second call for applications to the programme is expected to go out this month.
Seeking corporate partners
Seda and the department are hoping that big companies will partner with government to offer funding and support. So far MTN Business has committed R7.5m over three years to support black-owned information technology (IT) businesses on the programme with training, mentoring and business tools.
Martin Feinstein, chief executive of Traction — which manages the National Gazelles programme together with Mtiya Dynamics — says four IT companies have submitted a needs analysis and a R13,000 grant for training has so been approved to one of the participants.
Feinstein says some of the hold-ups in accessing grants are down to participants across all sectors first needing to submit financials. He says about 60% of the 200 shortlisted companies are black-owned, and 35% are owned by women.
'Fair selection process'
Though the DA had raised questions on how participants would be selected, DA member Toby Chance concedes that the organisers and the department have tried to make the selection process fair and transparent.
He says while Seda has long neglected this segment of the small business sector, he questions the role of government in picking winners. But he says the small budget available probably means only 40 small businesses can be supported.
A 2013 report by Endeavor reveals that firms growing at 20% or more a year represented only 13% of SA firms, but created a quarter of the country’s net new jobs during the previous three years. This makes these firms indispensable if SA is to create the jobs it badly needs (see this earlier post).
Participants on the programme could create jobs directly and by generating spin-off businesses in the way of franchised outlets and new suppliers. However, Mtiya Dynamics CE Zukile Nomafu says it’s difficult to project how many jobs will be created.
For some, the programme could not have come at a better time. Tshepiso Mametja, the owner of Limpopo brickworks Amphiguard, says her monthly turnover could be 50% higher if she could meet the increasing demand from hardware stores and local contractors.
The question is whether, with help, Mametja and others on the programme can grow their businesses — and, most importantly, can create more jobs.
This story originally appeared in The Financial Mail (go here for the original version). Follow Small Business Insight on Twitter at @Smallbinsight.
Stephen Timm is a