Support start-up funds

THIS column is probably not going to win me too many friends at SAB and I am happy to enter into some vigorous debate with it, but I think it provides some interesting small and medium enterprise (SME) sector context.

I was reading some of the comments underneath my article from last week about the Enterprise Development Fund (EDF) and there were some valid points raised about red tape, only catering for black-owned businesses and how other youth initiatives had just seen mountains of money wasted.

While I don't agree with all of them, I do believe that people are tired of seeing taxpayer money wasted on the wrong initiatives. Having said that, I maintain that a lot of the legwork which has been put in place for the EDF will make it a more sustainable ecosystem than many of its predecessors.

A second comment I would like to make is that while there are plenty of big news stories about the failures of these youth funds, go and chat to some of the entrepreneurs who have been given a chance to get their foot in the door through these programmes. It might change your position on what role they play.

In general, though, a lot of feedback was: why should we support this?

To answer that question, I am going to swap out "government" for a little organisation called SABMiller [JSE:SAB], because in theory if a corporate is involved, it immediately makes a project more credible and accountable.

The corporate angle

SAB runs an entrepreneurship competition called KickStart which has a regional and national competition. The winners get a bit of money chucked at them, some vouchers to buy "assets" and a bit of positive press for the powers that be to smile nicely for the relevant PR opportunities.

Sounding familiar?

Right, so here is the situation: two young guys win the competition, stars in their eyes etcetera and they run off and spend this money with world domination in their sights.

Profits of course are right around the corner and SAB wants to see assets as a sign that the business is tangible so the entrepreneurs buy office space, cool little beanbags and in general spend money they don't have on stuff they don't need.

Then it goes pear-shaped because the business isn't making money from the word go, and suddenly creditors are now hunting down these entrepreneurs. They are screwed in their personal capacity because their sole investment is this business; eventually the pressure gets too much, and the one bails out.

He then tries to hit the job market and finds that opportunities for educated but inexperienced males in South Africa are few. For three months, he goes around unable to find a job while clocking up further debt servicing living expenses.

The one who stays battles on gamely, taking an emotional beating day after day without earning enough to survive because the business is essentially his only real access to potential income. 

SAB looks in from time to time to check if he is still spending money and buying "stuff", but in our experience there is no effort to involve entrepreneurs in its supply chain or match them up with potential partners. Statistically, one of these two will not find a job in South Africa at the moment.

When I relate this story to people, the reply often is that at least SAB is giving one person a chance to get on their feet. Why is the same mentality not being adopted with government initiatives?

There are very few jobs in the market at the moment and if you don't throw the kitchen sink at the problem, the social issues are going to make your concerns a reality.

 - Fin24 

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