We strongly adhere to the belief that sustainable growth and development can be achieved by the involvement and participation of critical stakeholders and the beneficiaries of services. The audit therefore involved provincial SMME directorates, SMME service providers, metropolitan substructures and SMMEs per sector.

Three adapted versions of the NPI’s Toolkits were used for the audit:

• Attitudinal Diagnostic Survey, which measures the perceptions of respondents about, for example, conditions of employment, work content, communication, leadership, relations
• Square Wheels, which uses illustrations to diagnose organisational problems that hinder productivity
• Constraints Management, which assesses core constraints in organisations and how management deals with these constraints.

Each of these toolkits used different methodologies and yielded a number of interrelated results. The objective was to identify a range of unproductive areas that prevented organisations from performing better to reach their goals. These may be classified into the following categories:

• Policy issues, these included government policies and procedures that affect and benefit their sectors
• Physical/Operational issues, these included machinery, technology, tools, equipment, general business skills and specific technical skills
• Behavioural issues, these included communication, teamwork, trust, work ethics and a productive culture.

The following sectors were represented at our Gauteng audit workshops:

• Services
• Manufacturing
• Construction
• Retail
• Agriculture
• Arts and crafts.

1. OVERALL FINDINGS

• Finance remains a major barrier to SMME entry into the mainstream economy. SMMEs are expected to self-finance the initial stages of establishing their businesses. Only after they have survived the critical early stages and shown signs of being profitable do commercial banks express interest in financing them. However, very few businesses make it through this initial stage. Most actually end up worse off, because - out of desperation - they incurred debts in the form of personal loans or from microfinanciers at exorbitant interest rates. Most get registered at credit bureaux and almost never recover.

• Most SMMEs, especially those in Sedibeng, were affected by the political riots in the late eighties. They lost their properties and were subsequently unable to meet their obligations. They have since been blacklisted and have never recovered.

• The socioeconomic environment in Gauteng is not conducive to the survival or growth of small businesses in the historically disadvantaged communities. They remain vulnerable to crime and big competitors. Their prices are unfavourable because their overheads are more costly. Whether it is goods or services, customers are spoilt for choice. Unfortunately these businesses also attract poor-quality staff in terms of skills and customer service because they pay lower wages.

• The operating environment of SMMEs is inadequate or inappropriate. Most SMMEs operate from home or hired premises. These are rarely adaptable to the requirements of the enterprise, making it difficult or impossible to operate productively or safely.

• SMMEs tend to use inappropriate equipment and technology because of insufficient funds or resistance to change - both significantly reducing their productive capacity.

• Access to appropriate information is another major factor in the poor productive capacity of SMMEs. Even information on policies - developed for their benefit - is inaccessible due to ineffective communication systems.

• Lack of trust between SMMEs and government agencies is evident. People are wary of divulging information they deem sensitive about their enterprises; they fear that such information might be used against them. This makes it difficult to develop relevant strategies to assist them.

• Training is not standardised, frequently disjointed, supplier and commercially driven, and quite irrelevant. For training to be effective, it has to be coherent and client-focused. The results must be measurable and owners should be involved in the change process.

• SMMEs operate individually, often in very small units in the same region, and they tend to compete. This inflates their overheads and renders them vulnerable to big competitors because they have no buying power to influence suppliers and therefore become nonviable.

1. CONCLUSIONS

The relevant issues and problems varied from sector to sector, although some commonalities were also identified.

Emerging businesses in the construction sector found it difficult to compete for jobs with established businesses due to their limited experience as well as inadequate operational and financial resources. These problems have been classified as the inability to purchase materials, machinery, equipment and vehicles; insufficient knowledge about completing tender documents and therefore failure to secure tenders; difficulty in accessing the 10% guarantee after securing a tender; poorly skilled labour; cash–flow problems due to the nonnegotiable cheque method of payment, and poor general business management skills (record keeping, stock control, purchasing, costing, sales and marketing, debt management, budgeting and cash–flow management).


Although the government is steadily improving the sector, the knowledge base is still inadequate and marked by insufficient understanding of policies and systems that could benefit the emerging construction sector. Business registration procedures and restrictions to trade in demarcated areas were also listed as major constraints. Communication between business owners and their employees is good, as is the commitment and motivation of employees to their employers.


Three unique constraints in the arts and crafts sector were insufficient access to markets, not enough administrative equipment like telephones, faxes and computers, and uncoordinated administrative activities. Constraints that were identified in other sectors included inadequate general skills, no access to finance, and failure to share common goals and objectives.


The service and retail sectors mentioned lack of space, materials, correct equipment, and financial resources as constraints. The business premises were seldom adequate, which limited productivity in these enterprises. Another problem was theft at small businesses because they operated in areas that were severely affected by crime and poverty. The planning and layout of the production process were frequently unstructured, which slowed down the rate at which tasks could be completed.


Skills are inadequate, especially in terms of management and leadership, time management and effective planning. Employees were generally committed and sufficiently motivated, although internal problems for example not receiving market-related salaries, mistrust, and not knowing where the business is headed) did sometimes cause feelings of despondency among employees. The service quality was satisfactory, but considerable improvement is possible. Many companies had no standard quality control system in place, which had a negative impact on consistent customer services. As many of these enterprises were quite new and/or short of funds, remuneration was unsatisfactory. Some employees worked without receiving pay. Consumer growth was generally poor due to poor management skills or because businesses were new and their products were not aggressively marketed.


It also came out very clearly that small-business people did not do any networking. Everyone operated in their own corner and had to deal with and manage all sorts of problems alone. All this naturally demanded a lot of time and resources. Small-business owners tended to see each other as adversaries and never tried to find new ways of cooperating in order to secure bigger markets.


Working conditions in the agricultural sector do not encourage productivity because of insufficient money and/or access to arable and productive land. The equipment many small-scale farmers used was outdated, often inappropriate, and expensive to run and maintain. This sector is affected common problems such as poverty and inadequate infrastructure.


Teamwork is apparent, but personal problems and no cooperation create difficulties. Quality control systems are poor and many small-scale farmers need extensive training in this field. There are many competitors in the same field, which means that higher standards have to be achieved to ensure survival. Relations tend to get very tense in a competitive market. Communication is good, open and constructive. Company policies have been defined but are not always clear, causing frequent misunderstandings and conflict among employees. Customers are happy with the products and services they receive, but there is room for improvement. Education and training is needed in marketing, purchasing, stock control, record keeping and business plans.


Skills are not transferred from owners to workers in the manufacturing sector. Most workers cannot accept business transactions without the owner. Their equipment is very old and should actually be replaced. Staff development and training are limited, and new equipment cannot be used since they demand particular skills and technology.


Communication between employers and employees and among employees is poor. Employers make decisions without involving their workers, and the objectives of companies are not clearly defined.


The sector finds it difficult to market its products because of inadequate marketing skills and lack of transport.

Relations between older and young employ
ees is not good because they do things differently and are impatient with each other.


2. RECOMMENDATIONS
1. POLICY ISSUES

• Form a coherent national SMME Development Forum (NSDF), including government, SMME service providers, SMMEs per sector, funders and other stakeholders to coordinate the development of SMMEs.

• This forum (NSDF) should have statutory powers to enable it to handle all aspects of SMME development.

• The government, in consultation with the NSDF, should formulate clear, unambiguous policies and action plans to address constraints pertaining to access to finance. Clear monitoring and evaluation systems had to be introduced for the agreed upon quantitative and qualitative outputs.

• The government should formulate clear, unambiguous policies and action plans to address constraints pertaining to access to land and appropriate technology.

• The government should allocate resources to ensure proper implementation and monitoring of strategies.

• Coaches should be trained to form SMME cooperatives in sectors.

• SMMEs should establish business cooperatives, with strong government support, to improve the competitive advantage of small businesses.

• The government should use targeted channels to communicate clear information on government policies, systems and procedures that affected and/or benefited every sector.

• Form partnership between small and big business forum to share experiences and resources.

• The government, local communities and businesses should develop systems and mechanisms to address violence and crime.

• SMMEs should introduce reward systems to motivate exceptional performers.

• SMMEs should develop organisational policies, procedures and systems.

• Service providers’ training and qualifications should be standardised and accredited by the appropriate SETAs to ensure the introduction of minimum acceptable standards for the services provided by SMME service providers.

1. PHYSICAL/OPERATIONAL ISSUES

• Training should focus on production planning and layout, optimal use of materials and available resources, and technical skills development.

• Information and communication technology training should be emphasised.

• Funding should be channelled for obtaining appropriate equipment and technology.

• Local governments should facilitate the acquisition and use of suitable business premises.

• Business premises should ensure healthy, safe and clean environments.

• Provide training in general business skills, for example record keeping, stock control, purchasing, costing, sales and marketing, management of departments, budgeting and cash flow management, quality assurance, and tendering procedures.

• Set specific guidelines and a basis for quality assurance.

• SMMEs should develop networks with all their suppliers and customers in the value chain.

1. BEHAVIOURAL ISSUES

• Submit clear job descriptions and/or roles

• Conduct team and trust-building exercises

• Improve internal and/or external communication

• Provide training on work ethics, a productive culture, customer relations and life skills

• Develop goals and objectives to be shared by all employees

• Embrace a consultative and participative style of management.

1. STRATEGIC WAY FORWARD FOR THE NPI

• Develop turnaround strategies with linkage partners

• Train productivity experts identified from service providers to work as SMME advisers/coaches

• These coaches should work with particular SMMEs and community-based enterprises until they are ready to join the mainstream economy

• Productivity coaches have to establish a national forum to create a strong support system and a basis for identifying best practices

• The national forum has to act as the mouthpiece for SMMEs

• Develop pilot models for small and big business joint ventures to be replicated nationally

• The programme should target at least 40% enterprises led by women

• Train the students from technikons and universities to act as productivity cadets