Active monitoring and evaluation for entrepreneurship development

It was encouraging to notice that the OECD included entrepreneurship as one of the key recommendations for improving South Africa's long term growth rate. Their 2010 Economic Survey of South Africa recommends lowering the barriers to entrepreneurship. In particular they recommend "improved access to credit" to small business and the development of entrepreneurship and in comparison to other OECD emerging economies such action could contribute an additional 0.5% to the annual rate of GDP per capita growth rate. In their recommendations they single out "product market regulation" or introducing a higher level of competition in the South African market, which will improve entrepreneurial dynamism and spark innovation where we were found to have more restrictive regulation than Chile and Brazil. In short the recommendation is to simplify regulation and ease compliance. They recognize the "disconnect" between a very well developed and sophisticated financial system and the need for entrepreneurial finance that can offer more widespread access to entrepreneurs from the majority of the population.

Many professionals in the financial industry will tell you that access to finance is not the problem, but rather the skills to manage these financial resources are in short supply. It is also encouraging to see that Khula Enterprise Finance recently asked for an additional R1.6bn from government to roll out Khula Direct which will offer financial and development support in all nine provinces closer to where the need for such assistance is located. So at least there are some action on the ground and if we look at the basket of financial programmes on offer through institutions such as the IDC, NEF and the legislative framework around procurement and enterprise development we should have no shortage of entrepreneurial opportunities. Why is it then that the latest Global Entrepreneurship Monitor list SA on a backward trend in terms of entrepreneurial activity?

At the South African Startup Index we make it our business to talk to start-ups to get a better understanding about what is happening. Just recently I had a conversation with several business owners who started a business within the last three years and have just survived the credit crunch of 2008-2009. They all confirmed one thing that over the last 18 months it has become more difficult to do business with BIG business. One example is of a retail supplier that do business with both government and other large retailers in SA and government has not paid for more than 6 months while the corporate client expects him to carry the cost of import, delivery and packaging. Others report about long negotiation periods where they are requested to work on prototypes, produce physical examples and demonstrate their ability to deliver in good faith and on risk with no commitment of an order in sight. You do not need to be a rocket scientist to conclude that BIG business is not really in support of enterprise development and SME growth beyond what is convenient and suitable to their own cashflow terms and conditions.

We believe that this scenario leaves lots of room for improvement and the only way to achieve this is through active monitoring and evaluation. Ongoing reporting on procurement and enterprise development can offer insights into bottlenecks and problem areas and solutions can be offered that provide immediate impact. Active reporting linked to development finance solutions that monitors financial resource application in small business can also offer a more efficient and effective intervention strategies to prevent wastage and unproductive spending.

Entrepreneurship development and access to entrepreneurial opportunities can be accelerated if we introduce active monitoring and evaluation to entrepreneurs and financiers.