CHAPTER FOUR: LED IN SOUTH AFRICA
CHAPTER 9: SUMMARY OF RESULTS, RECOMMENDATIONS AND CONCLUSION
9.6 RE-ENGINEERING LED TO ALLEVIATE POVERTY
9.6.4 Fostering Education and Training
Entrepreneurship training is recommended in order to encourage entrepreneurs to think out of the box, to come up with new of ways of thinking and running an enterprise. It is clear from the research findings that the entrepreneurs need to be equipped with business skills to enable them to run their enterprises profitably. This form of skills is referred herein as entrepreneurial training which parallels Schumpeter‘s entrepreneurial skills where small businesses are equipped with skills to promote invention, innovation and diffusion of ideas (Schumpeter 1976; EDA 2005). Such training would therefore assist small enterprises to grow. This growth would be in terms of income, market share and assets within the value chain. Moreover, from a pro-poor point, it also enables entrepreneurs to transform from being survivalist enterprises to growth enterprises.
There is a difference between growth entrepreneurs (8%) and survivalist (50%) and lifestyle entrepreneurs in the case examined in KwaMashu. Growth SME‘s are interested in innovation, value addition in the value chain so that they prosper whilst survivalist are concerned with daily struggle, on the other hand for lifestyle entrepreneurs it is their way of life (Nadvi 1999; EDA 2005;
Nadvi and Barrientos 2004). Growth SME‘s are thus interested in seeing the business move from stage one to stage four whilst survivalist and lifestyle SME‘s are not aggressive in seeing their enterprise grow. It is argued that through entrepreneurial training, INK can produce growth oriented SMES with the vigour for innovation where they can create more income within the value chain (see figure 34 diagram below). Innovation is not just about idea generation; it is also about idea commercialization (Schumpeter 1976; EDA 2005; Porter 2005).
Innovation is key in growing an enterprise providing an enabling environment which include entrepreneurship training; research and development; networks and linkages which allow for information flow. Currently in INK such a setup is lacking, for example within the value chain of arts and craft entrepreneurs. However there have been attempts by the Business Support Unit and INK ABM in entrepreneurship training and organizing various SME fairs which promote networks and linkages. The innovative environment yields outputs such as idea generation and commercialization (Porter 2005, Schumpeter 1976).
Figure 33: Innovation Flow Chart
S o
Source: Adapted from Council of Competitiveness (2004)
Idea generation is not enough but commercialization is since it will yield growth in terms of income and profit (Smith 2005). Developing skills is also essential in breaking the current ―copying and paste syndrome” where businesses operate almost in the same trade, selling same items without any variations. Such a situation floods the market, reduces the market and ultimately income, meaning one would remain poor.
From the figure 34 it is clear that innovation is key in growing an enterprise provided there is an enabling environment. This would include entrepreneurship training, research and development, networks and linkages which allow for information flow. Currently in KwaMashu such a setup is lacking within the value chain of SME‘s. However there have been attempts by the Business
Innovative environment
Innovation
Entrepreneurship training;
Research and development; Networks and Linkages; Industrial clusters; Universities, A friendly regulatory environment; Good business culture and Infrastructure
Idea generation; Idea Development and testing;
Commercialization
Productivity High GDP and GDP per capita; Exports; Enterprise profitability
Prosperity
Economic growth; Jobs, High wages, High Income; Poverty alleviation
INPUTS
OUTPUTS
Support Unit and INK ABM in entrepreneurship training and holding of SME fairs which promote networks and linkages. The innovative environment yield outputs such as idea generation and commercialization (Porter 2005, Schumpeter 1976). Innovation is not just about idea generation; it is also about idea commercialization (Schumpeter 1976; EDA 2005; Porter 2005) since it is through commercialization that will yield growth in terms of income and profit (Smith 2005). It is also important to note that idea generation and commercialization need not only be undertaken by well trained SME‘s, however universities have a role to play where LED can be knowledge based or University led LED.
Universities, academics together with SME‘s have a critical role in the value chain particularly in commercialization ideas. Instead of the current motto which persists of ―publish or perish‖, universities in South Africa can urge their academics to take another track (Kempner 2005 cited by EDA 2005). In this track they can form a start-up company or support the starting of a company to commercialize a commodity in INK with ideas that they have come up with (Smith 2005; Loague 2005). To this end the University of Kwa-Zulu Natal in Durban has setup an innovation center to address the issue of commercialization of ideas in addition to the traditional role of knowledge generation. By so doing, they will be empowering the value chain with knowledge. In Africa this is crucial since most ideas tend to be developed elsewhere thus African academics together with SME‘s can create a knowledge based value chain (Todaro 2000). However to promote an environment of commercializing of ideas there needs to be an enabling environment and seed capital which is lacking since it has been a low priority in developing countries(ibid).
There is vast amount of research on LED and poverty in Kwa-Zulu Natal and Durban in the form of reports which have some new ideas (LMRF 2007). The challenge therefore is turning this research into action oriented research which can be utilized to grow the economy of KwaMashu, Durban and South Africa at large. The end point should not be only creating a shopping list of findings and solutions but transforming them into applicable ideas or programs. Such research has been behind the growth of Massachusetts in USA, then why not our own ‗local Massachusetts‘ based on local knowledge and findings?