THOUSANDS OF BUSINESSES FAIL IN SOUTH AFRICA EACH YEAR, MANY OF THEM BELONGING TO THE POOR WHO WILL NEVER GET ANOTHER CHANCE.
But do failed businesses and fired employees deserve second chances? What can be done to make it easier for businesses to survive? Stuart Graham reports.
According to Statistics South Africa, 1396 businesses were liquidated in the first half of 2006. Although this figure was down from 1673 in the first six months of 2005, failing business are hampering South Africa’s ability to grow its economy.
Rand Merchant Bank Economist Rudolf Gouws says bankruptcies are not necessarily a bad thing.
“Some companies close and others open up in their place,” he says. This is natural for a market based economy. Keeping companies going when they are not providing products or services that people want is a waste of resources.”
He says the government could make it easier for entrepreneurs to start businesses by removing bureaucratic hurdles.
“What we can do to make it easier for businesses is remove the red tape that is in the way,” he says. “If a business applies for a licence it should be provided in days not months. Tax as a proportion of profits must be lower rather than higher. It must be made as easy as possible to start and run a business.”
Thami Bolani, a senior manager at the Small Enterprise Development Agency (SEDA), says people have often lost their businesses through no fault of their own.
He says SEDA does not turn away people who have failed. He gives an example of how the agency recently helped a businessman who used to own a transport company.
“The man owned two buses and a truck. He made mistakes and lost everything. All his property including his house was repossessed.”
The man was forced to return to his family home in Mpumalanga. He approached SEDA after hearing Bolani give business advice on a radio show.
“He came to the office and said, ‘ look, I want to get back into business. How can you assist me?’ We looked at his credit profile to see what could be repaired and we discussed a number of business ideas with him.”
The man is drawing up a business plan and Bolani hopes to see him in business again by next year.
Bolani says the reason so many business fail is because most people are not taught adequate business skills at school. Later in life, when they are able to start a business, they are unable to do it.
“There are several reasons why businesses fail, but the truth is our people do not have enough skills.”
Much of the information that can help entrepreneurs is in English or is on the Internet.
“Many of the people in this country do not have access to that information,” he says.
Another problem is access to finance, which is especially problematic for black entrepreneurs.
“Black entrepreneurs do not have access to property as collateral,” says Bolani. “This is a major contributor to the number of business failures.”
Bolani believes that mentoring from successful business people is the best way to train emergent entrepreneurs.
“You can provide training but once the person gets started you have to be there to assist him. A lot of mistakes get made. “If you do not get it right in the first six months, your chances of survival are very slim.”
Bolani says he has experienced a number of successes in his work at SEDA. One of these was franchise owner in Mpumalanga.
“The man was introduced to a number of franchise opportunities. Eventually he decided on a tyre and rubber business next to a busy taxi route.”
The man was mentored and provided with training.
“After the first two months it was apparent that the business was a success,” Bolani says.
The man is now looking at opening a bed and breakfast business for the 2010 Soccer World Cup.
Some businesses are luckier than others, when it comes to getting second chances.
Pikitup which recently went bankrupt was bailed out by its 100 percent shareholder, the City of Johannesburg.
South African Airways also benefits from having the parastatal, Transnet, as an owner. One economist estimated that Transnet had given gave SAA around R20 billion in two years.
Economists says SAA’s bailouts from Transnet have given it an unfair advantage in the airline industry and caused economic inefficiency. SAA’s rivals, such as Comair and Nationwide, are privately owned and have to fend for themselves.
But its not only entrepreneurs who need second chances.
Employees who have been fired are often cast aside by the business world.
Billionaire entrepreneur Richard Branson thinks everyone deserves a second chance.
“Give people a second chance if they screw up,” he said in an interview recently. “Even people who have stolen from us have become, when given a second chance, incredibly loyal and valued employees. I don’t know where I’d be if I hadn’t been given second chances.”
Zweli Manyathi, First National Bank’s chief executive of branches, believes that people should always be given another chance, depending on what they did wrong.
“Would I employ someone who has been in prison? It depends what they have been in prison for,” he says. “Some women go to prison for killing husbands who have abused them.”
He says he would never employ someone in the banking industry who had been in jail for stealing money.
“In fact, when a teller steals money from a customer we go the full extent and sue him in his individual capacity. The teller broke trust which is a critical value.”
Winemakers Ian Niewoudt and Gideon Theron, were given a second chance after they were fired by the wine and brandy company KWV for adding flavourants to a sauvignon blanc.
KWV had to dump 67000 litres of wine valued at R1 million after it was found that it had been contaminated by flavourants.
One of the men used a synthetic flavourant used in fruit drinks. The other used his own extract of green peppers to add to the wine.
Months after the incident, Niewoudt was given a job at Citrusdal Cellars and Theron at Montpellier du Tulbagh.
De Witt la Grange, the general manager at Citrusdal Cellars, told a daily business newspaper recently that his wine maker had resigned and that he had to decided to hire Niewoudt, someone he thought was a professional.
“Ian did make a mistake,” he said. “What is the chance that he would in his life become involved in something like that again? He realises 100 percent what the implications would be. He has been given a second chance and I can assure you if he makes himself guilty of something like this again, he will not get a third chance.” – Heartlines Features.