Our plan for growth and jobs includes the establishment of effective small business incubators in partnership with the private sector. These will provide a place where start-ups can share free basic office resources in a single location.
This type of approach is called “business incubation”, like the support provided to an infant in the early stages of life.
And it’s absolutely necessary in South Africa, and in Gauteng especially, where thousands of potential entrepreneurs live. According to the 2013 Global Entrepreneurship Monitor report, less than 14% of South Africans surveyed planned to start a business in the next three years.
In fact, total entrepreneurial activity in South Africa fell to 7.3% in 2012, from 9.1% in 2011 and 8.9% in 2010.
These stats are not surprising when you consider that five out of seven small businesses started in South Africa will fold in the first year.
According to the National Business Incubation Association (US), business incubation is a business support process that accelerates the successful development of start-up and fledgling companies by providing entrepreneurs with an array of targeted resources and services.
This can include any number of methods. For example, the provision of management guidance, technical assistance and consulting tailored to young growing companies.
Incubators usually also provide clients access to appropriate rental space and flexible leases, shared basic business services and equipment, technology support services and assistance in obtaining the financing necessary for company growth.
The DA has a vision to find the best business ideas in Gauteng and to foster them by renting out government-owned buildings for just R1 a year – these premises will act as incubators for small businesses. Basic resources like internet and phone lines will be subsidised.
This idea is not entirely new to us. We have begun experimenting with incubators where we govern and are now ready to bring the idea to government in Gauteng in a big way.
Did you know that one of our successes added R800 million a year to the Western Cape’s regional economy?
The Bandwidth Barn in Woodstock, Cape Town, was launched in 2000 and supports start-up and growth-oriented SMMEs. It has played an active role in supporting ICT entrepreneurship in the Western Cape economy.
Between 2006 and 2010, the Bandwidth Barn tenants and more than 50 successful graduates added more than R800 million per year to the region’s economy, and supported almost 2,500 direct and indirect jobs. There are currently 55 tenants.
In 2012/13, various support programmes offered by the Barn provided skills development opportunities for 96 businesses. According to a study done by the Bandwidth Barn last year, only 48% of ICT start-ups survive for more than three years, in comparison 90% of the initial group of SMMEs in the Barn survive beyond this period.
Of course, in supporting small business we want to maximise the benefit these innovative start-ups will have on society. So in Gauteng, here are some principles on how we plan to select innovative businesses for support:
Pick businesses that foster innovative ideas to solve the problems faced by society or companies;
Give incentives to incubators only if they assist incubates and base incentives on the quality of business supported;
Utilise more sources of funding like: royalties, equity, consulting and corporate sponsors (in other words not only rely on state funding);
Incubators in South Africa must partner with tertiary institutions;
The state should help incubates access the market as this is one of South African incubators’ biggest challenges.
Gauteng has the potential to be a world-beating economy to the benefit of South Africa as a whole.
It’s time we started competing with developing countries who are applying these innovative ideas with great success.
Brazil increased the number of its incubators almost threefold in just ten years. This “incubation revolution” was driven by clear government policies – driven from the top – which enable the entrepreneurs to benefit from grant funding.
In Chile the state wants to utilise incubators to move away from its resource-dependent economy. In Malaysia the state deploys incubators to foster certain high-tech sectors and improve the competitiveness of SMEs.
So that is the plan behind the R1 a year office rental proposal. It may sound revolutionary to the extent that some may regard it as unbelievable, but rest assured we can do this Gauteng. In fact we can start an entrepreneur revolution in Gauteng to drive job creation and growth. DM
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