4.5. Strategies used to improve the competitiveness of SMMEs 102
4.5.2. Facilitating access to skills and capacity building for SMMEs 107
It is expected that OSS will create a one-stop solution for all SMMEs leading to enhanced co- ordination and therefore less duplication of effort, ensuring that the investment in the SMME sector is more efficient. As the information and support required is centrally housed, according to the EM (2007b), it would certainly contribute to ensuring higher levels of compliance to laws and regulations by SMMEs. SMMEs stand to benefit greatly with having a wide range of stakeholders accommodated within a single venue. The SMME strategy (EM, 2007b) identified the establishment of an OSS as a critical method of building and improving the capacity of SMMEs. The strategy suggested that the OSS should be created for a wide spectrum of SMMEs from the survivalist to the well established and that consideration can also be given to sector specific support for those industries that have a significant base within the boundaries of the Municipality. The Strategy further suggested that this facility should be a proud semblance of the SMME sector that offers world-class service and assists in improving the image and understanding of this highly under-rated sector (EM, 2007b).
According to the SMME strategy the EM (2007b) developed, this increased and focused support increases the chances of the SMMEs survival and leads to sustainable business practice. It should, however, be stated that the incubation period should be for a limited number of years in accordance with a development plan that closely monitors the progress of the operation and thus also determines an appropriate exit strategy.
According to Harper (2004: 1), the barriers and disincentives to participation in small business in structured training have been well documented and include both demand and supply side factors and involves the well accepted preference of small business for training that was “short, sharp, specific, convenient, low cost and immediately relevant to the practical requirements of the business”. According to Harris (2005: 1), “when it comes to skills development, small businesses often ride in the rear of the bus, overlooked by many training suppliers playing the numbers game but that picture is changing”. The next section on facilitating access to skills will look specifically at training programmes and improving technology in small business which in turn contributes towards improving the capacity building of SMMEs.
The main objective of training programmes, according to Finnegan (1999), is to help SMMEs to acquire new technical and business skills or to improve their current skills. He adds that another objective of training is to help SMMEs identify and find solutions to problems and to identify where to obtain specialised assistance. The increasing growth of interest in the economic contribution of small business and enterprises, according to Henry, Hill and Leitch (2004), has been accompanied by an increased level and variety of public and private sector initiatives at various levels to stimulate and support the development of the sector. Henry et al., (2004) argued that even though much research evidence has been accumulated about how the small business sector operates, there are still significant areas that have not been subject to the same level of debate and analysis. There are significant concerns around training for the small business sector.
This also includes the debate about whether or not entrepreneurs can be trained for the purposes of business creation and entrepreneurship and the inherent problems in evaluating the effectiveness of such programmes (Henry et al., 2004). Despite this argument it is evident that both the public and private sectors have developed a number of training programmes. However, according to Finnegan (1999), evaluation of such training programmes the public sector provided, point to weaknesses in terms of efficiency and impact. Finnegan (1999) further argues that training is often too generalised and does not respond to the specific needs of trainees. He further argues that such training is also supply-driven and delivered in a controlling fashion with the qualifications of trainers being highly inadequate.
Based on lessons learnt from international programmes, Finnegan (1999) pointed out that training should always be business-oriented and designed on the basis of the clients needs, not merely an extension of the education system. This training, he adds should be directed at assisting SMMEs and their employees towards acquiring skills for running their businesses profitably. Training should be based on a good understanding of the SMME markets and its needs and therefore should be designed in line with such needs. A further lesson Finnegan (1999) pointed out is that training should not be delivered according to conventional approaches, such as classroom lectures. However, it should simulate real SMME situations and actively involve the trainees and should be concrete and problem-oriented. He further points out that if training is to be conducted in line with business principles, then monitoring and feedback from the clients is critical. In order to ensure commitment on the part of the clients, Finnegan (1999) asserted that it is vital that some fee is charged.
In terms of SMME training there is general agreement in the literature that the training approach should be participative and practical. Specifically, in a study Bob et al. (2005b) conducted the literature review of work various authors (Fernald and Solomon, 1997; Taylor et al., 2001) conducted, revealed the use of the following approaches to training perceived as being useful for improving skills:
• Hands on experience
• On-the-job training
• Short courses
• Workshops and seminars
• In-house seminars
• Professional certification
• Technical manuals
• E-learning
• Field trips
• Mentoring
• Peer training
• Team-based training
In order to ensure that the SMME has the freedom to choose the service provider, according to Sakai (2002), countries like Paraguay make use of the voucher system. This system consists of providing SMMEs with vouchers thus allowing them freedom of choice in the selection of a training institution (public or private) to purchase the training they need without having to pay for it. Through institutions like the Umsobomvu Youth Fund (UYF, 2001), the voucher programme has also been introduced in South Africa. The advantages of the voucher programme, Sakai (2002) identified, are that it helps to select entrepreneurs for training and that secondly, it can stimulate a higher quality of training since the SMME has the opportunity to select whichever training institution they wish. This in turn ensures that trainers themselves will ensure a higher quality of training in order to attract SMMEs to their programmes.
International literature, according to Sakai (2002), also suggested promoting the organisation of group training, the advantages of which includes the fact this approach facilitates training that is adapted to the clients’ needs at an affordable cost. He points out that organising training groups from the same sub-sector (for example, 20-50 participants), will significantly reduce the cost per trainee. He further points out that it makes it possible for the group to negotiate the type of training it requires.
According to Timmins (2005), in Lesotho, the United Nations Industrial Development Organisation (UNIDO) has trained 20 business and technical advisors to improve the skills of small entrepreneurs, particularly in the highland areas of Lesotho. Timmins (2005) indicated that this effort enhanced the entrepreneurial skills of almost 700 women, representing over 3 000 family members who were also given small grants. She further indicates that about 350 entrepreneurs obtained consultancy services and about 70 entrepreneurs upgraded their technical skills. In Guinea, according to Timmins (2005), UNIDO assisted entrepreneurs to obtain training in pre-investment analysis and technical and financial services which were provided for business advisors. Timmins (2005) argued that individually, SMEs are often unable to take advantage of economies of scale and capture market opportunities requiring large production runs, standard inputs and consistent quality standards. She further argued that they often lack training, market intelligence and the capacity for technological innovation. Networking with other SMEs can help them to overcome these problems and achieve economies of scale. Timmins (2005) discovered
that linkages with large enterprises enable them to specialise in their core businesses. She further discovered that these networks and linkages allow SMMEs to achieve previously inaccessible collective advantages.
In Kenya, Albaladejo (2002) highlighted the fact that BDS organisations planned enterprise exchange visits for SMMEs with the intention of providing them with a real opportunity to learn and exchange information and to develop commercial linkages. He also highlighted the modus operandi of such visits which were conducted in groups and accompanied by someone from the organisation. According to Albaladejo (2002), following the visit, one-on-one advisory services on product design, development and skills upgrading was provided. Albaladejo (2002) argued that this particular approach has significant benefits in that the type of benefit derived translates into practical, business-oriented solution driven approaches to problems encountered by SMMEs.
This is in stark contrast to traditional, classroom-based approaches.
Improving SMMEs access to technology is also a significant means of building their capacity, as indicated earlier in this chapter. In a number of reviews Gibbs and Tanner (1997) conducted on businesses in the UK, it was recognised that for whole economies to flourish, SMMEs need to embrace information technology and the benefits it can bring. In addition, they reported that the UK government has placed great emphasis on the adoption of Information and Communication Technology (ICT) across all sectors and has recognised the potential for ICT to contribute to the growth and competitive gains of SMMEs. According to Thomas et al. (2002), part of the problem for SMMES with take up and effective usage was cost of equipment and lack of suitable expertise to understand it. They confirmed that technical changes have resulted in impressive increases in productivity in ICT manufacturing which together with falling costs, facilitate rapid diffusion of ICT as a pervasive technology.
According to Finnegan (1999), the purpose of technology transfer and development is to improve enterprise productivity and the quality of the goods enterprises produced to help them withstand local and international competition. Finnegan (1999) indicated that policies for improving the technological capacity of the country should not simply focus on the larger enterprises only, they should encompass all enterprises whatever their size. He further indicates that technological gaps
between SMMEs and larger enterprises should be reduced. In terms of lessons learnt from international practice, Finnegan (1999) purported that the technological development of SMMEs should be viewed in the overall context of the technological development of the country. It is important also to increase the awareness of the potential profitability of the market and it has been observed that in many developing countries, there is little evidence of an active technology market. He further purported that it is necessary to increase awareness about the importance of shifting to other modes of production, based on higher content of locally produced inputs and capital goods, and relying more on local technological capacity. Finnegan (1999) also emphasised the need for encouraging and promoting a market for innovations. The technological and industrial achievements of advanced economies are largely the result of a myriad of innovations individuals and all sizes of firms developed. The need to promote an integrated approach to technology development was also emphasised since Finnegan (1999) indicated that individual enterprises find it difficult to raise their level of technology in isolation. There is a need for close collaboration between a wide range of partners who can contribute to various aspects of technological development and transfer.
According to Jaffe (2003), small businesses face special challenges that deserve specific attention. He adds that small firms face tight resource constraints and may lack the resiliency of larger firms in the face of setbacks and in his study provided small business owners with a framework for determining how the internet can help them. Jaffe (2003) asserted that the internet is essential for small business success writing and it already provides unparalleled opportunities for cost effective marketing and customer service. He states a site on the World-Wide-Web is one of the most powerful and visible means to market a company. Jaffe (2003) also pointed out that every business with a website has the potential to promote itself as an around-the-clock worldwide business. He further points out that “as a business manager in the '90s you need to make the most of what you've got and you need to put your business online and be visible. Your competitors, if not already there, are planning their appearance” (Jaffe, 2003: 7). In this way, the author issued a call-to-action for small business managers to harness the power of the internet for their businesses, or get beaten by competitors.
According to the RoS (2002), innovation should be taken to mean continuous enhancement to products, services and processes within enterprises. In recent years, survival has been the main issue for many of Serbia’s enterprises and resources have not been generally available for reinvestment in product and services development and upgrading. Existing facilities for assisting enterprises in developing and testing new products or improving current products will be identified in Serbia and assessed and a programme will be devised for the development and implementation of innovations for SMMEs (RoS, 2002).
There are a wide range of technologies that exist and that could be employed for each business type for the purposes of improving operations. An example of appropriate technology development was the marketing of the treadle pump in Bangladesh Finnegan (1999) identified.
The treadle pump was designed by a Non Government Organisation (NGO) in the early 1980s.
Although it was sold commercially, there was also significant subsidised distribution by NGOs.
The International Development Enterprises (IDE) became involved when the design had been finalised. Finnegan (1999) indicated that the IDE set about changing the existing approach to transferring the technology, arguing that this should not be a subsidised process and that the most effective way of reaching the largest number of people was a self-sufficient, private network of manufacturers and retailers. Finnegan (1999) further indicated that eventually, after resistance from the charitable instincts of some NGOs, this view prevailed. The IDE then set about a process of selecting village dealers and agreeing on terms with them (among which was a requirement that they had to set up a demonstration pump), training village well dealers and advertising through a variety of means, including village theatre and a film. The result of this effort has been that over 1 million pumps have been sold - around 4 times the initial target - and according to an external evaluation the ratio of benefits to costs is over 40:1.