Hot spicy steak grilling on a summer barbecue over the hot coals garnished. Fire Cooking food. close-up

SMME’s & Government Funding?

I watched an insert on one of the SABC News channels recently and it left me with such mixed emotions, I felt compelled to comment on this tragic comedy taking place.

In the insert the presenter interviewed a 24-year-old entrepreneur, the young man in question is the owner of a Shisanyama (informal butcher and grill) in Gauteng. During the interview the young businessman expressed his opinion that the Government had failed small business by not supporting them and that they (the Government) did not make enough funds available to encourage entrepreneurship.

Roasting meat on the grill. Cooking fast food on the street.

His opinion is one that is shared by many other young entrepreneurs in South Africa. The sad reality is that they will be out of business before Government help and handouts arrive, if they based their success on government support. The help Government is advertising comes at a price, and nothing the Government gives is ever free. Do you really want to except help in exchange for control of your business, your vote, etc. In this blog post I will explain these comments in more detail.

I need to clarify why the case of the young Shisanyama owner is particularly striking. The Shisanyama sector while being extremely competitive does not have a high cost of entry, if done correctly. Your start-up costs are Stock (meats & drinks), venue, wood, and braai (barbeque) equipment. I will break down this list a bit further to justify my views regarding the cost of entry.

  1. Stock (Meats & Drinks)

The cost of start-up stock can be limited by buying daily supplies at first and building up capital from sales. Sales in this sector are mainly cash or card, cashflow management is vital to facilitate debt-free growth. Purchases can be made in cash and replenished as sales occur, there is no need for huge stock volumes at start-up.

Pork chops fry on bbq grill with hot flames and juicy meat, gas bbq with very hot element shallow depth of field

2. Venue

This is a tricky one. Many young entrepreneurs do not own property nor are they able to rent expensive retail space to establish their businesses. However, with a bit of creativity this can be solved through collaborations with other businesses in the area they would like to operate. Carwashes, and other service businesses could provide the opportunity for symbiotic relationships where both benefit from the extra feet through the door. Creativity is key in reducing costs.

3. Wood and Braai (Barbeque) Equipment

Wood is a major consumable in this business and can be quite pricey in certain areas of the country. As any regular braaier will tell you the quality of your wood determines the quality of your finished product. So, while sourcing wood could be a major expense it is also a consumable which is income generating, it is not being burnt for ambience or lighting. Decent braaiing equipment is costly however you do not have to own everything you use right at the start, surely someone you know would borrow you a braai drum or you might have a friend who has half of an oil drum you could use. There are ways to save costs here too. You do not need the latest and greatest and the most expensive gear to get going.

The young entrepreneur in the above example could achieve so much more if he shifted his focus, instead of waiting for Government to magically swoop in and dish out cash, he would be better off using alternative funding methods where funds are available much quicker with less costs. Many of the card payment facilitators now offer SMME’s small loans based on their debit/credit card transactions, these machines can be purchased cheaply and offer small businesses an alternative means of receiving payments.

After expressing my own opinions on why I think the dependency on Government funding is overrated, I will continue to explain other ways to work around the perceived barriers to entry for South African entrepreneurs. There are other Government backed SMME funders in the market, however the one thing they all have in common is the red-tape and time it takes to access the capital they dangle in front of young entrepreneurs. I know this because I at one stage also tried to access those same funds. The time and effort and in some cases, costs incurred in trying to comply with the requirements of these development organisations can be a severe stumbling block to an emerging business. The same funds the entrepreneur spends on trying to access funds could be used to generate income.

Another example of how successful a Shisanyama can be is based in the border town of Komatipoort on the N4 heading towards Mozambique. On a dusty sidewalk opposite one of the bigger butchery wholesale stores, an elderly lady starts sweeping her “store”. After thorough preparation she starts her fire and goes off to buy her supply of meat from the butcher across the road. She has no delivery costs. She also buys what she needs for the day in one transaction gaining her the extra discount for bulk buying. This lady has mastered the art of Gorilla marketing, many of the butcher’s clientele would walk out the door, smell the meat being expertly braaied and automatically, as if being led by an invisible line, wander over to this lady’s stand.

This elderly lady started her business using her meagre pension to purchase her first supplies and now generates enough income to support her whole household. What would have happened if she had waited for Government funding? In conclusion, small businesses need to distance themselves from Government dependency and start looking at feasible alternatives. There are alternatives, and not all of them involve borrowing money, sometimes we need to look backwards to move forward. Are there other businesses in your area that you could trade your services for? Will the local welder make you a braai-grid in exchange for a decent lunch, or two?


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