Specialized Training Uplifts SMME Entrepreneurs

• By leveraging their expertise in cultivating business leaders, business schools can help the owners of small enterprises survive and grow.
• When low-income entrepreneurs learn basic business skills, they improve their business survival rates and develop a sense of resiliency.
• Programs aimed at small entrepreneurs create positive economic and societal feedback loops that strengthen families, communities, and the overall economy.

 
South Africa has tremendous economic potential and abundant human and natural capital. However, it faces substantial challenges to its growth. For instance, it is the country with the highest inequality rating, as determined by the World Bank, and it also struggles with subpar economic growth and high unemployment rates.

Much effort has been put into developing small, medium, and micro enterprises (SMMEs), which have been found to be major contributors to economic and equitable growth across the world. In South Africa, SMMEs comprise more than 98 percent of the country’s companies. According to statistics gathered pre-COVID, these companies are responsible for approximately 35 percent of the gross domestic product and employ 59 percent of the country’s workforce. These businesses are, to a large degree, the “engine room” of the South African economy. However, the rate of enterprise creation lags behind rates in comparable economies.

For many of those who start small businesses, the motivation is survival. Unable to find employment, many entrepreneurs start trading on a small scale to generate income. More than two-thirds of South African SMMEs are informal, and two-thirds are run by own-account workers who frequently are operating their businesses out of their homes, blending personal and business finances. But many of these businesses are struggling.

The Need for Business Skills

According to the South African Department of Small Business Development, 70 percent to 80 percent of the country’s small businesses fail in the first five years. The lack of basic business skills is a major contributor to the failure rate; only 38 percent of SMME owners in South Africa claim to have the skills needed to run a business.

One reason is that—despite significant funding and countless training programs—entrepreneurship education in South Africa is largely ineffective. The purpose, style, and level of instruction vary widely among available programs, making it difficult for entrepreneurs to discern which programs are legitimate, relevant, and accessible. Not only that, fewer than 23 percent of South African SMME owners have achieved a tertiary level of education, so they can’t always find business training at a level that is appropriate for them.

While university-based business programs offer more consistency in quality, such programs often are out of reach for South African entrepreneurs who cannot meet cost and academic requirements. Business schools have a unique opportunity to strengthen economic growth in their countries by offering alternative programs that are designed to be accessible to and inclusive of SMME entrepreneurs. Through these programs, schools can find creative and innovative ways to share their skills, knowledge, and resources with nontraditional students.

A Specialized Program

This is the goal of the Small Business Academy (SBA) at Stellenbosch Business School in Cape Town, which is operated by the school’s Social Impact division. The SBA has offered basic business skills development to SMME entrepreneurs since 2013. It leverages the school’s expertise in business and leadership education to help SMME entrepreneurs gain the knowledge that will enable them to survive, strengthen their businesses, and grow.

The SBA currently runs four sites across South Africa in the Western Cape, Eastern Cape, and Northern Cape provinces, with plans for further expansion. To deliver training to each location, business school faculty travel as far as 940 kilometers (587 miles).

Business schools have a unique opportunity to strengthen economic growth in their countries by offering programs that are accessible to and inclusive of SMME entrepreneurs.

The program targets low-income entrepreneurs from historically disadvantaged populations in South Africa who already are operating small businesses. Each graduate of the SBA earns an accredited certificate from Stellenbosch University at an equivalent level of one year of tertiary education (a designation known as NQF 5). The prospect of acquiring a formal qualification from an accredited business school has been a strong draw for applicants.

The program fee—about 125 EUR (137 USD)—is relatively low, but many entrepreneurs find even that amount challenging. Therefore, the SBA partners with corporations, economic development agencies, and statutory bodies to receive operational and financial support. The SBA currently provides subsidies of approximately 1,700 EUR (1,866 USD) to cover the cost of each student.

To date, more than 400 participants have completed the SBA’s nine-month development course. In addition to studying business essentials such as management, marketing, finance, and resourcing, entrepreneurs learn how to write and present business plans and how to use Word, Excel, and PowerPoint. They also receive personalized support from mentors throughout the program.

Practical Skills Development

SBA coordinators decided to focus the program on basic business skills that SMME entrepreneurs indicated they needed most. While participants were interested in developing leadership abilities and entrepreneurial mindsets, their immediate concerns were knowing how to track money and how to reach customers.

Class content accommodates a wide range of education and skill levels, and it also builds on skills and knowledge as the program progresses. By the time participants write their business plans, they already have drafted their visions and missions; assessed their strengths, weaknesses, opportunities and threats; and conducted risk analyses. They also have evaluated market opportunities, identified competitors, set pricing, built financial strategies, and produced financial reports. Most students have never performed these fundamental business functions before taking the course.

Classes and assignments are designed so entrepreneurs can immediately apply learning, a strategy that offers dual benefits: Participants absorb material more readily, and they improve business operations more rapidly.

Even so, the program is intensive and can be overwhelming for students. This highlights the value of pairing them with mentors, who give feedback on assignments, help the entrepreneurs process lessons, and offer general support and encouragement through business challenges.

The mentors, who are all volunteers, are staff and alumni from SBA and Stellenbosch Business School. These mentors have shared that they find the experience engaging and inspiring because it connects them to local communities and gives them the sense that they are chipping away at societal inequities. Stellenbosch Business School faculty who teach courses in the program report a similar sense of satisfaction.

Building Stronger Enterprises

A study of the SBA’s first 10 years shows that it is succeeding in its goal of helping entrepreneurs improve and expand their businesses. Ninety-eight percent of alumni respondents said their businesses grew stronger as a result of what they learned in the program.

In addition, their businesses are surviving longer: Eighty-one percent of participants are still operating the SMMEs they operated when they were attending the SBA, which is a significant improvement over the national business survival rate of 25 percent. And participants are creating jobs: More than 90 percent of SBA alumni enterprises employ at least one full-time person.

Eighty-one percent of participants are still operating the SMMEs they operated when they were attending the SBA, which is a significant improvement over the national business survival rate of 25 percent.

Another positive impact of the SBA is that it stimulates participants’ sense of entrepreneurial self-efficacy (ESE), the belief that they have the capacity to operate businesses. Entrepreneurs with a higher ESE are more willing to try again if enterprises fail. They also become more self-confident and independent, instead of feeling dependent on external systems. Business owners with a high sense of ESE are more likely to contribute to raising South Africa’s rate of entrepreneurism.

Small Steps, Big Returns

Generating positive societal impact is at the heart of Stellenbosch Business School’s vision to create value for a better world. The SBA is not a charity project—it is a vigorous, academically accredited program that is strategically aligned with the business school’s mandate to support stronger businesses and address societal inequalities.

The SBA is an example of how business schools can create positive societal impact by sharing their business acumen with previously disadvantaged entrepreneurs. Such efforts can create big impacts from relatively modest programming.

Business schools already have what is needed to launch such programs: the experts who can teach business skills, the curricula that can be adapted to many different learners, the strong reputations that attract candidates, and the accreditation credentials that assure consistency in quality. By thoughtfully crafting programs that will appeal to SMME entrepreneurs with a wide range of knowledge, skills, and life experiences, business schools can contribute toward growing the economy and building a more inclusive society.

Such programs create a positive economic and societal feedback loop that is enticing. When low-income SMME entrepreneurs improve their business skills, their enterprises grow stronger, which uplifts their families, strengthens their communities, and potentially creates new jobs. And those new jobs uplift more people and contribute to a stronger economy that offers even more opportunities for people to be economically active.

Most SMME entrepreneurs have been underserved in many aspects of their lives. Programs like the SBA provide them with chances to unlock their potential and believe that they can succeed. As one SBA alumnus put it: “My future is now in my hands because I know my capabilities.”