What is this newsletter about: This monthly publication is issued by the most extensive business support network in South Africa, the Business Referral and Information Network (seda). It contains information useful to business owners (See content list on the left) and business advisors (See content list on the right). If you want to comment on anything in this newsletter, please scroll down to our easy-to-use feedback tool at the bottom of this newsletter. For more information on seda, go to www.seda.org.za. Feel free to pass on this newsletter to other interested parties. You'll find the subscribe-unsubscribe function at the end. Content Menu Business Owners Export support programme still going strong Business owners will have to wait for Vat threshold change Women contractors eradicating backlog of classrooms Manufacturing Advice Centres to maintain focus outside Gauteng When Black Economic Empowerment deals go wrong Big fines for those who trade in counterfeit goods Crucial Competition Commission appeal to be heard in August Business Advisors seda affiliate uses database for market research A home in the lonely world of business consulting Business Partners as a source of work for business advisors IBA getting ready for the big financing wave Multi-million rand business support project to launch in August Should advisor bodies do marketing for their members? Major review under way at Sizanani Business Owners Section Export support programme still going strong BUSINESS owners who wouldn't dream of being able to afford an overseas business trip are being given the opportunity through one of the dti's most long-standing support programmes - the Export Marketing and Investment Assistance (Emia) scheme. Meisie Mosimane, owner of a clothing and linen manufacturing company with a focus on traditional designs, recently flew to Spain for six days for the opening of a three-week exhibition where her products, together with those of more than 100 other local firms were displayed in the European country's biggest shopping chain. "My main interest is to show other countries that there are people like me that can do it," she says. The display, which ran in 72 branches of the chainstore El Corte Ingles, promoted local products such as beverages, kitchenware, home décor and furniture. Mosimane, whose clothing boutique is called Sister Bucks, also previously took part in a dti-sponsored trade mission to the US several years ago. She says her selection for the Spain trip was probably motivated by her participation in the earlier mission. The Emia programme allows her to claim back 80% of the R11 000 she spent on this trip. She says she expects to wait only two months after submitting the necessary reports, completing the forms, which total 20 pages and filing her invoices, before she claims her refund. But she says just because you file an application for a subsidy, doesn't mean you'll be guaranteed of getting it approved. She discovered this when once when she applied for a subsidy to cover an overseas expo and was turned down. Not all of the one hundred businesses flew over to Spain, but Mosimane says she was keen to go over to gauge the response her goods received in the country. She says an initiative like this is a good step for any business owner to take because of the variety of products sold. The sheer size of the stores, which she says are sometimes eight storeys high, are evidence of the opportunities available. She says in nearly all of the five stores she visited her products were displayed on a special South African-branded stand. However, she believes the use of separate stands detracted from the products themselves, because Spanish customers tended to regard the South African goods as inferior. She says in at least one store her products were mixed in among the local Spanish goods, which she says proved to be working better. Mosimane also sells her clothing in several boutiques in the United States and regularly attends the Black Arts Festival in Atlanta ever year. She has been running her business for over 20 years and often designs and sells traditional wear to prominent government ministers and politicians. She employs 15 tailors. Contact the dti customer care line on 0861 843 384 or visit www.dti.gov.za/exporting. Contact Mosimane on (011) 336 0887. ---»Pg. Top Business owners will have to wait for Vat threshold change RECOMMENDATIONS to increase the Value Added Tax (Vat) threshold from R300 000 to R500 000 could take more than a year to implement. Currently, the law says that all businesses with a turnover of more than R300 000 per year must register for Vat. It has been proposed that this figure be put up to R500 000. The proposed new Vat threshold will probably be dealt with in the Minister of Finance's Budget speech next year. Till then, the current threshold of R300 000 applies. Rodney Govender, spokesperson for the Law Administration division of Sars, says "no new Vat threshold has come into effect and will probably come up for discussion at the 2006 Budget Review." A task team, headed by Sars' assistant general manager Pinkie Baloyi, recommended that the threshold increase to R500 000 in order to lighten the burden of Vat paperwork on less established businesses. Research by Upstart Business Strategies valued the cost of VAT paperwork at R8 441 per year for a business. A broader study of the cost of compliance published by the Small Business Project (SBP) estimated the total cost of compliance for all business regulation in South Africa at R79 billion a year. Businesses surveyed suggested that the main ways to avoid regulation would be to not employ more staff or to remain below the Vat threshold. ---»Pg. Top Women contractors eradicating backlog of classrooms WOMEN who own construction businesses in KwaZuluNatal are benefitting from a special fast-tracking programme of the province to build 14 600 classrooms. The special programme was launched by the provincial education department in frustration at the long time it took the national Department of Public Works to build schools in the province. Business owners Shanett Govender and Thandeka Nene are two of the beneficiaries of the programme. Govender, who comes from a building family has been a contractor and running her business, Bonakele Construction, for five years. She is contracted to build 8 classrooms in three different schools in Bergville. "The best part of my job is being able to be part of something so powerful and contributing to the children's education. I love seeing the finished product," she says. And Nene, co-owner of Ntshantsha Construction, agrees. She will be building 13 classrooms in the Bergville area as part of her R3,3 million worth contract with the Department of Education. Building in the area is tough. There are no proper roads for her and her team of 33 to get to the site. The building material is carried by a donkey, and only 5 000 bricks are kept on site, because of the incidences of the theft. Nene, a former teacher of ten years, is in partnership with her sister. Call Bonakele Construction on (032) 945 0194. Ntshantsha Construction on ( 033) 396 5214. ---»Pg. Top Manufacturing Advice Centres to maintain focus outside Gauteng THE Western Cape Manufacturing Advice Centre (Capemac) will remain focused on manufacturing businesses only, says the organisation's head, Mel Butterworth. He was approached for comment after the Gauteng Manufacturing Advice Centres had expanded their support to include service and retail businesses also. The manufacturing advice centres are widely regarded as the best business support programme in South Africa. It helps manufacturing businesses with business development, marketing, export readiness, ISO accreditation and streamlining of production. The programme makes use of highly qualified industrial experts, whose services are heavily subsidised to make it affordable for business owners. CapeMac is based at N1 City in Goodwood. Butterworth said Capemac has so far not received any word of a change of focus for his organisation, which remains under the auspices of the national government's Small Enterprise Development Agency. Capemac also receives funding from the City of Cape Town and the Western Cape Provincial Government. Butterworth expressed interest in closer co-operation with the local Red Door programme, a local business support centre programme. Three Red Door centres have so far opened in Cape Town. They are located in Khayelitsha, Mitchells Plain and Atlantis. Contact Capemac at 021 596 1300. ---»Pg. Top When Black Economic Empowerment deals go wrong THE merger between black and white businesses in South Africa is by no means a painless affair. Even in ordinary business mergers, things very often go wrong. But with the pressure on white businesses to bring in black partners, and the opportunities for black entrepreneurs in partnering with white established businesses, mergers are taking place between people with very different backgrounds, positions of power and expectations. Things can very easily go wrong, and they do, as the case of Michael Mahlangu illustrates. As with so many black economic empowerment deals on the owner-manager level, Mahlangu started off as a employee of an IT company. Mahlangu says after working seven years as a computer salesman, his white employer approached him and asked him if he wanted to start a new BEE company with him. They registered the firm in August 2004 together and started trading in January this year. Mahlangu says he first became concerned when his former boss handed control of his 50% stake in the company to his sister, leaving Mahlangu to effectively run the business on his own. It seemed to Mahlangu that he was doing all the work, marketing and promoting the company while his partner didn't even make good on his promises to deposit his half of the initial capital needed to get off the ground, into the business. After attending a tender advice seminar at Business Opportunity Centre (BOC) he decided to ask his former boss and his sister to pull out of the company. His former boss agreed, but only on condition that he becomes Mahlangu's sole supplier of computer hardware. Along with this, he demanded a five percent cut on every contract Mahlangu won. In turn, he agreed to supply Mahlangu with the hardware on credit. But instead of getting better, things only got worse from there. A while later he completed a R98 000 contract to fit a computer centre for the Gauteng Department of Social Development. His former boss advised Mahlangu that they take the cheque together to the bank. This annoyed him, especially because as sole owner of the company he now had full signing power. His former partner had no right to accompany him. His irritation boiled over when a short while afterwards his former boss phoned Mahlangu to tell him that the cheque had been cleared and he could now pay him his five percent. The bank had disclosed the movements of Mahlangu's account to an outsider, breaking all the rules of banking client confidentiality. But worst of all was that his former partner had reacted angrily when he had questioned the bank's action. "He said 'if I can't trust him with my bank account, I can't trust you with my stock'," says Mahlangu, who believes his former boss wanted to have control over his bank account. At that point they decided to part ways and since then Mahlangu has found new suppliers. He now runs a computer company called World of Computer Technology in Johannesburg. Contact Mahlangu on (011) 393 1548. ---»Pg. Top Big fines for those who trade in counterfeit goods NEARLY every retailer has had visits from people bearing branded goods, such as cigarettes or brand-name clothes at such low prices that everyone knows that they are either stolen, or fake. The temptation is great to buy them off the shady visitor - you can sell it at the normal price and make a fat profit. But apart from the risk getting a reputation as someone who sells low-quality, fake produce, the state has stepped up its policing of counterfeit and illicit trade. Recently, business owner Ferhard Mohamed was found guilty by the Pretoria Specialised Commercial Crimes Court for trading in counterfeit goods. He was sentenced R90 000 or 18 months imprisonment, with a further 18 months suspended for 5 years. Department of Trade and Industry inspectors acted on a complaint by Adidas SA, Levi Strauss, Ferrari and Nissan SA against Mohamed, who ran City Wholesalers at the Asian Bazaar in Pretoria. They seized more than 440 products. It was not the first time Mohamed had been found in possession of counterfeit goods. During a previous raid, 1 800 items were confiscated. The Court considered this to be aggravating circumstances in handing down the sentence. The law says any business owner found in possession of fake goods is liable to be fined up to R5 000 per item confiscated. Earlier this year, the South African Revenue Service's anti-smuggling unit seized a facility in Fordsburg, Johannesburg, allegedly used to produce counterfeit DVDs and CDs. Stock with a street value of R50 million was found. Officials seized two sets of large machines used to copy DVDs and CDs along with covers and labels used for packaging the materials. The factory is suspected of being one of the main suppliers of counterfeit CDs and DVDs. Customs officials also confiscated DVDs and CDs in Germiston valued at R8 million. Court cases are pending. Counterfeit trade has a severe impact on honest business owners. Prakash Soni, ownermanager of Casanova Fashion Boutique in Durban, says counterfeiters should not get off easily because they infringe on the sales of legitimate businesses. Soni's boutique stocks international labels like Armani and Hugo Boss. He says most counterfeit goods were sold on flea markets and "counterfeiters very seldom dared to enter his shop". Helen Rose-Innes, part-owner of African Music Store in Cape Town, says they are occasionally approached by street sellers but could not determine whether the goods were stolen or counterfeit. Rose-Innes says in the music industry the safest route was to buy the products directly from the producers. Lana van Zyl, director of Company and Intellectual Property Investigations for the DTI, warns that anyone who buys counterfeit goods is actively supporting a criminal offence and will be punished with the full extent of the law. ---»Pg. Top Crucial Competition Commission appeal to be heard in August BUSINESS owners will have to wait till August at the earliest to see whether the promising breakthrough at the dti's Competition Commission is indeed an historical step forward for smaller businesses. Jim Foot, the first owner-managed business to win against a large company at the Commission, is fighting Sasol's appeal against his victory in August. Foot manufactures treated poles for the wine industry and local farmers. He buys the chemical creosote from Sasol, who was charging him 18% more than his competitors. He was too small to qualify for bulk discounts, Sasol said. But the Competition Act says that a dominant company – one with more than 35% market share – may not give bulk discounts unless the delivery of a small order costs more than delivering a large order. In the case of Nationwide Poles vs Sasol, the Competition Commission found that the cost of delivering creosote to Foot’s 25-worker operation was the same as making large deliveries, and that Sasol was being anti-competitive. The Commission ordered Sasol to pay Foot, who represented himself, the same legal fees that he would have incurred had he used a lawyer. Foot says the appeal will take just three or four days which is some concilation as he has already spent a year out of his business to fight the case. He hopes to enlist the services of an amicus, a lawyer appointed by court, who is likely to offer his services free of charge. The case will be heard at the Competition authorities' own appeal body. When seda Business Brief spoke to Foot, he was waiting for the Commission to send on to him the records of the case. He says he is confident that the appeal body will not overturn the Commission's ruling. “I believe we've got a good case and I'd rather be arguing my case than be them arguing their case,” he says. However, he added that in a court of law you never know what the end result will be until the case has been heard. ---»Pg. Top Business Advisor Section seda affiliate uses database for market research A FAILED attempt at business and the realisation that the country has a lack of local business support, lead Khathu Mashau to set up his own Limpopo consultancy which, in just six years, has grown to become a force to be reckoned with. Mashau runs Polokwane-based KNM Consulting. As a Business Referral and Information Network (seda) affiliate he has access to Eezidex, a registered database for all businesses in South Africa. The database comes in handy when the consultancy needs to assist a business owner with market research or drafting a business plan. After attributing his failure to set up his own business to a lack of skills and market exposure, Mashau decided to start KNM six years ago and enrolled in a Damelin Certificate in Business Advice “I started from scratch where I didn't know what consulting was about, but just wanted to assist other businesses,” he explains. Today, he offers clients business training and mentoring and, with his knowledge of small firms, he assists local government and the private sector to draft economic development strategies and feasibility studies. He has already used the seda website to find and complete a masters programme in feasibility studies and investment analysis, which was held in Botswana and Norway. After requesting to become an affiliate and carrying out a site inspection of his business, seda welcomed him into the network in 2001. He says he doesn't correspond much with seda, except when there are major changes on their website, like recently when they introduced log-ins for affiliates. Then the organisation usually organises training for affiliates in the area to attend. His expects to see more additions to seda following the merger of Ntsika and Namac, with possibly a more “beefed up” database. Mashau says because KNM looks at quality rather than volume, they see only between four and five clients a week. Many of these are referred to KNM from the Limpopo SMME Agency or the Limpopo Manufacturing Advice Centre. But he questions the stance of support agencies towards business consultancies. He says last year he was even faced with the possibility of retrenching staff because he was getting fewer referrals from agencies. He believes the agencies are reluctant to support him now that he is has grown to become a more reputable business. Mashau has started forming alliances with other business support agencies in nearby provinces in order to complement the services he currently offers. He employs eight staff members, four of whom are business consultants. Contact KNM on (015) 295 4026. ---»Pg. Top A home in the lonely world of business consulting ED HATTON, a marketing consultant who runs his own firm, says being a Business Partners mentor has supplied him with 85% of his business and forced him to learn more. Advising business owners on market research, sales assistance and marketing, Hatton was one of the first to join the small business finance house Business Partner's mentors programme when it started in September 2000 after he responded to an advertisement. Hatton owns The Marketing Director, a consultancy he's been running since 1990 after working in the field of information technology (IT) in marketing and sales. Because of his background, a large chunk of his clients come from the IT industry, but he also assists other sectors such as manufacturing firms. Usually he works simultaneously with around five clients. He doesn't pay any annual membership fee to belong to the mentors programme, but a certain percentage of his invoiced amount is deducted by Business Partners for administration. The size of the fee is negotiated between consultant and the finance organisation. Hatton and Business Partners declined to divulge the size of his particular fee, as well as the general range of the percentages that Business Partners takes on their mentors' fees. Hatton says being a mentor with Business Partners also gives him a sounding board in the otherwise lonely world of business consulting, he says. Apart from the regular monthly reports, he has to submit to Business Partners, he also meets once a quarter with the head mentor for feedback sessions. Through Business Partners' network of mentors, he also has access to a wide range of mentors, specialising in everything from financial management to production. ---»Pg. Top Business Partners as a source of work for business advisors PAUL Malherbe, chief operating officer of Mentoring and Consulting Services, says Business Partners sources most of its mentors from retired business executives. The programme currently has 456 mentors signed up, well over half of whom are situated in Gauteng and the Western Cape. He says the finance organisation prefers to deal with consultants who have experience in running a business rather than take up young business graduates. Says Malherbe: “The experienced guy asks one or two questions and immediately gains rapport with the business owner”. If there's a demand from business owners, Business Partners will even headhunt specific specialists, such as recently when they tracked down an auto industry consultant who deals with chassis modification. Malherbe says Business Partners don't have any strict criteria when it comes to rating or evaluating potential business consultants, but do carry out an assessment interview. Here they look at a consultant’s experience in a particular industry. They also quiz the newcomer on their industry-specific knowledge and, if needs be, they will also grant them an assignment to check on their experience. While the business owner pays Business Partners directly, the finance organisation will only pass on payment to the consultant when the client has expressed their satisfaction with the intervention. Malherbe says Business Partners carries the full risk because consultants are reimbursed regardless of whether the finance organisation has been paid by the client or not. Consultants bill their clients their normal rate, from which Business Partners will subtract an administration fee. The size of the fee is negotiated between consultant and the finance organisation. Malherbe declined to give an indication of the range of the fees. When it comes to industry-sectors, 25% of the consultants service the manufacturing and construction sector, 20% service the wholesale and retail sector and a further 30% look at the IT, finance, legal and properties sector. The rest are divided amongst sectors such as mining, transport and agriculture. A quarter of all consultants' clients are beginner business owners, who typically request assistance drawing up a business plan. Most of the clients running businesses request mentoring around developing an accounting system, drawing up a marketing strategy and assistance with streamlining their production and operations. Contact Business Partners on (011) 480 8700 and Hatton on (011) 894 7618. ---»Pg. Top IBA getting ready for the big financing wave THE Institute for Business Advisors (IBA) is positioning itself so that its members can cope with the increase in workflow expected from the Financial Services Charter, says Shawn Cunningham, newly appointed board member of the IBA. According to the Charter, the banks have to lend R6 billion to emerging business owners over the next few years. This has led to a major rethink and reprioritisation in the banks of small business lending. Increasingly, banks are looking for the services of business advisors to help their new loan clients survive in business. Cunningham says the challenge facing the IBA is to offer continuous professional development of its member so that they meet the requirements of the banks. It is no longer enough for an association of business advisors to simply offer “association” - the credibility that comes with belonging to a group. Over and above that, a proper association also has to offer value to its members, says Cunningham. The most important value that the IBA will aim to give its members is training and professional development so that members not only meet banking requirements, but that they are also able to meet the new National Qualifications Framework's standards for business advisors, which Cunningham describes as “very tough”. He did not want to give details of the IBA's plans yet, saying that the new board has just been appointed. He says business advisors face numerous other challenges which the IBA also has to help address, such as having to compete with government subsidised services and the sense of entitlement among business owners. The IBA also tries to give business opportunities and leads to its members, but Cunningham warns of the danger of members becoming dependent on the organisation for new business. Currently, the IBA has about 400 affiliates and members on its books, about 200 of whom are active business advisors. Contact (012) 349-1899 ---»Pg. Top Multi-million rand business support project to launch in August THE JOINT venture involving millions of rands that is set to provide business advisors with plenty of opportunities in the oil industry will kick off on 1 August. The South African Supplier Development Agency (Sasda) is a joint effort by the seven largest oil companies in South Africa, Sasol, Engen, Caltex, Total, BP, Shell and Petro SA, as well as the Department of Minerals and Energy, to develop black suppliers to the oil industry. Apart from identifying, listing and accrediting black suppliers, the organisation aims to develop their skills – and that is where the opportunity lies for business advisors. R6 million will be pumped into the project in its first year. . At the time of publishing this article, a CEO was about to be appointed. A board has been put in place. “At this stage people can find out more on our website. They can also register and apply to be involved in the operations of Sasda,” said Mmbulanhemi Mashanyu, the project manager at Sasda. Although parts of the website are still under construction, it is clear that the organisation has already started functioning. Of particular interest to business owners is the list of business opportunities coming up in the oil industry, listed on the “opportunities” page. Business advisors could already score goodwill points by directing their clients to the website. Contact Mashanyu on (021) 417 3213 or www.sasda.co.za ---»Pg. Top Should advisor bodies do marketing for their members? SHOULD a business advisor's support organisation do marketing on behalf of its members? Conflicting views over this question became apparent when seda Business Brief looked at the most recent developments at two business advice programmes – Sizanani Advisory Services and the Institute for Business Advisors (IBA). Shawn Cunningham, board member of the IBA, said a common complaint from IBA members is that the organisation should refer more clients to them. But Cunningham feels that this is expecting too much from a business advisors association. Business consultants and advisors should find their own clients. An organisation like the IBA does help by making deals with the likes of SABMiller for the support of their owner-driver scheme, for example. But the bulk of business advisors' clients should come from their own networking and marketing efforts, says Cunningham. But Max Oerder, Sizanani advisor for more than five years, feels that having to cope with marketing as well as actual mentoring is labourious. “(Sizanani is) really good and has been around for seven years but I don't enjoy having to do the marketing myself as well. I'd like to see Sizanani do some more marketing,” says Oerder. However, business advisor Veronica MarshSmit, who runs Phenvuka Financial Consultants says Sizanani is much more flexible and accommodating than any other scheme. She feels advisors should be prepared to go out and look for business which includes doing their own marketing. ---»Pg. Top Major review under way at Sizanani ONE of the most established business advisor schemes in South Africa, Sizanani Advisory Services, is undergoing a major review, the results of which are expected in mid-August. The review takes place against a backdrop of a major change in the banking sector. The Financial Services Charter requires banks to lend some R6 billion to small businesses over the next few years, which is expected to unleash an unprecendented wave of lending to small businesses. Sizanani was originally launched by the Banking Council South Africa in response to criticism that the banks weren't lending enough to small businesses. The idea was to set up as a business support and mentorship scheme so as to mitigate the risk of lending to emerging small businesses. It is unclear what the effect of the new focus of the banks on small businesses will have on Sizanani. Some of the banks have started their own mentorship schemes. Sizanani organisors were tight-lipped about the review. Sizanani's main aim is to help business owners apply for bank loans, and, if successful, to mentor them. This has been a major source of business for Sizanani business mentors. Business advisor Max Oerder says he gets about four clients a year for Sizanani, which focuses on businesses with projected annual turnovers of between R500 000 and R20 million that require a minimum loan of R100 000 ---»Pg. Top Newsletter Feedback Form To ensure that this newsletter is a valuable information source for our readers, we have added a short feedback section. Please take a moment to answer the questions below. 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