The Complicated relationship of Big and Small business

After listening to radio interview on Talk Radio 702, where the guest effectively suggested that big business is under no obligation to assist small business implement an idea, if the small business cannot implement the idea on their own. This was in response to a caller that said small business fears big business stealing their ideas.

My small head could not wrap itself around this idea, until I realise that the discourse was created by , my entrepreneurial hat debating with my economics one. Imaginable how this debate can be further complicated if it were to become a political one with racial undertones that characterise both sectors. It is however my intention to limit this debate to an economics one.

1. Rent seeking nature of Broad-Based Black Economic Empowerment

A simple definition of Rent-seeking is the use of resources within an organisation to grow existing wealth instead of creating new one. BBBEE compliance has forced big business to adapt their business practices and has done little to advance small business development.

Scenario 1: It is within the codes of good practice including the newly proposed amendments that two big business can complete an Enterprise Development (ED) project. A big pharmaceutical business can sponsor the training of nurses in a major private health group and attain BBBEE scoring. Thus the pharmaceutical business would adapt their marketing spent, which they would have used to keep the private health group happy as ED spent. No real development in the spirit of the codes is realised by such a transaction.

Scenario 2: The other trend in ED is to turn line functions into ownership schemes. It has become for instance a natural progression that companies with fleet or logistic units to create Owner-Driver schemes and make their ED scoring. The vice with such programmes is the existence of the career transporter that is now being out foxed out of the market by this creation of an economy of scale created by big business. The logistic budget still winds up as salaries and career transport entrepreneur is not growing any more. The spirit of the codes was that the career transport entrepreneur could approach big business to sponsor the buying of a truck for example and they would seek out new opportunities to grow outside that relationship with the big business doing the sponsoring.

Thus at an economic development level BBBEE is not well poised to drive South African economic growth and development. This effectively abdicates big business from a capitalistic responsibility to support economic growth.

2. Industrial Development

Economic diversification is the next frontier in African development. We all agree that we cannot have economies that are anchored on natural resources and we need to branch into new spaces and industries. The biggest boom in my lifetime would still be the information age of the late 70's and 80's and maybe the .com bubble of the 90's. That revolution was anchored on the ability for small business to create new technology with big business.

Scenario 3: Bill Gates was able to sit with IBM as a small business and convince the industrial giant of the time to use his Software. The growth of Microsoft was a facilitation of a healthy relationship between the two sectors. Imagine if IBM said don't worry we will take your idea and developed our own.

This would have stifled innovation, look where both companies are today and how home computing has been shaped by incremental upgrades that followed that IBM meeting. It therefore makes it unfortunate that in South Africa big business can steal ideas from small business and such a genuine fear can be dismissed with a rhetoric from the industrial revolution. Moreover after we have come to appreciate the power of knowledge sharing with the advent of Globalisation.

Scenario 4: Construction sector is driven by a grading system that ensures big businesses complete big tasks and small businesses complete smaller ones. The idea there, is that smaller entities would be subcontracted to big ones and that they would gradually grow up the ranks and the industry would grow. Given the success of 2010 for the sector it would be easy to assume that companies that have climbed up the ladder have increased. But that's not the case, big businesses has kept the development of the sector in check such that only a few companies can sit and form cartels that decide the extend at which the sector can profit.

Do we have a need to diversify the economy and create new Jobs? Yes we do and with that need, big business needs to become a role player.

3. Knowledge Economy

In a knowledge economy, the product produced is an educated population especially in technical skills to become the driving force of the economy.

Scenario 5: Our production of Java skilled people is catching up to demand all be it slowly but we are producing young entrepreneurs capable of producing the next app to revolutionise the communication space. Effectively if a big business was to set-up a testing facility for this young people to test their ideas it would be against the statement above. But if our government meets its obligation to produce an educated public, why would it be a far fetched idea that big business should drive economic gain as employers or business development agents.

The public is quick to place this demand on State Owned Enterprises (SOE) and it unthinkable to expect the same from the private sector. Supplier development colleges in Transnet are to be supplemented by other programmes by the private sector.

Big business have created opportunities for small ones in South Africa before, SAB kick start as an example, but I can't help but wonder what would be the greater extended of growth if they all played ball.

Unlocking South Africa's talent

In my internal discourse, when I looked at the question of unlocking talent, my brain thought of an economy known for its skilled workforce. The Republic of Korea is known for its ingenuity and its trend setting brands like Samsung, KIA and Hyundai. South Korea over the past four decades has demonstrated incredible growth and global integration to become a high-tech industrialized economy. Interesting that in the 1960s, GDP per capita was comparable with levels in the poorer countries of Africa and that in 1980 its economy was the same size as that of South Africa.

In 2004, South Korea joined the trillion dollar club of world economies, and currently is among the world's 20 largest economies. The South Korean system was initially, characterised by close government and business ties, including directed credit and import restrictions. The government promoted the import of raw materials and technology at the expense of consumer goods, and encouraged savings and investment over consumption. 

The table above shows very interesting comparisons between South Korea and South Africa. Both countries have almost equal population sizes, with South Africa having more land. Given the size of the economies South Korea has more Gross National Income per population size at US $20,870 compared to South Africa’s US $6,960. The structures of the two economies are different but the fundamental contrast between the two economies is on the number of post high school tertiary institutions. South Korea has 100 times more institutions than South Africa even with South Africa’s bigger land availability.   

Government has a role to play in the creation of information, intelligence or education necessary for the creation of industrialists. This is called a, "Knowledge Economy". Knowledge Economy is an economy in which growth is dependent on the quantity, quality, and accessibility of the information available. If SA were to become a Knowledge Economy, the biggest reform in education would not be the quality of education but access to institutions of learning from high school to under graduate level. 

The number of matriculants willing to learn towards a degree should not be affected by the limited number of studying opportunities in current institutions. I respect that the National Development Plan (NDP) has recognized the need to build Universities in Northern Cape and Mpumalanga but I believe we still have room to build 30 more specialized institutions outside the Quality Council for Trades & Occupations (QTCO) scope. We need specialized institution to train new graduates in high speed rail, a specialized, Japanese study field which will drive the NDP's transport integration proposals; we need Post graduate institution in Nuclear energy or alternative Hydrogen option to add to the Eskom’s grid; if Fracking takes over the Karoo, then we need to establish a Karoo based Fracking institution up to PHD levels, after all this is the technology that the American President says it’s going to stop the US dependency on foreign oil.    


Just a thought!

Help me Vote!

Defining the political landscape of any economy and finding a way for economic expression has become important for all voters to understand. After 19 years of political freedom, the debate of a maturing country is answering the question of what is the power of franchise and how do I take the responsibility seriously? 

The truth is my grandfather never voted in the country his birth and for years I have gone to the poles, in commemoration to his memory and to the memory of those that died for the freedom that we are taking so for granted today.   This over time I have realized is a noble motivational but not in the design of the electoral process. We do not vote to affirm the memory of those that have died before the privilege but we are exercising an endowment much like the force in the famous Star wars movies, to change the direction of a country.   

The economy has many stakeholders or role players. The famous ones are labour, business and government. I would like to add the politicians and the voter to the stakeholder map and discuss how we can move Mzansi forward.  

The past four years have been very favourable to the labour movement and the tragedy of Marikana has highlighted the importance of organised labour movements in the economic progress of a country. In South Africa it has become clear that the cause for the poor will be fought on the distribution on wealth front. That is if business makes money then the labour force should follow suit and get a significant portion of the money. The fundamental challenges with this assertion is the size of the margins that are being contested. 

During the year where platinum demand world wide was reduced due to many factors including commodity prices, economic uncertainty and a market place that provided better investment options, the tool adopted by business to sustain the sector was to lower production and increase the commodity price and grow margins on low volumes. This means the sector can make profits with less volumes and would naturally retrench employees. This will be studied in MBA programmes as a clever rationalization of an ailing industry and the survival of a mature mining country.

Naturally the labour movement will deem this unfair and unwarranted. Their argument are will be more sentimental than business school approach. The employees that are being off loaded have been part of the success of the given mines in the past, especially when the markets ware favourable. They risked their health, left their homelands at the expense of their families and it's unfair for a mine to let go of them without due consideration to the souls that have helped them in the past.  

In comes Government, an under pressure stake-holder,  who is under pressure improve his employees effectiveness. Their primary view of the mining scenario will be that we cannot allow business to add more people in to the growing list of the unemployed and that of the social grant system. Their argument will be political, and it will carry a more potent opposition view. Business has thrived through the exploitation of the land and that the tax and mining laws have helped business produce high earners. They will further say that, they own the mining rights licensing processes and any damage in relations will have future reparations. 

Government has two tiers the public bureaucratic employees and the politicians that form our parliament. Parliament  oversees the government through cabinet with ministers and the different formations like portfolio committees. In light of our mining analogy  parliament will have the power to summon the ministry of mining and ask them all the various strategic choices that have been explored in the process. Opposition parties will ask hard questions and score points on the direction they moved discussions. The ruling party will insist that their party is fighting the cause for the poor and that all is being done to ensure continued development of the country.

This has a name, its called vote maximisation. Where politicians are proving to the voters they deserve the vote and that they are taking responsibility to the mandate given. This is why most people and commentators believe that politicians will say and do anything to ensure that they are always able to keep the vote. The church in Limpopo proves it every voting year with the wisest, intellectual and charming of our leaders finding a reason to do campaigns there and even do the famous dance.   

There are real life issues to solve in this world and politicians are after my vote to place them face to face with these challenges. They are asking to me to entrust to them the future of this country and for them to manage a multiple level process to solving the mining  challenge without casualty of lives or international reputations. I have the power to make such a decision and I cannot do it because I feel sorry for my grand father who died not vote. 

I demand that in the next election in 2014, the following is important for me to cast an informed vote:   

1. I need to see a televised three part debate between party representatives not leaders but reps in line with our voting system on the economy, community development and foreign policy with the African focus. The economy because I need  to know what the agenda is in trying to grow it. Community development because I need to know we have a programme to reverse social ails like poverty, Crime and health challenges. Lastly I care about what we are doing in other countries, but I think we are over postponing the African redevelopment by making it about the minerals in the continent. The influx of African migrants into this country to do service based jobs is a sign that something is happening and we're not in the know of it 

2. Provincial debates 

3. Report on pocket of excellence on the achievement of the current government 

4. A fact checking website, I hate being lied to. I don't like it when the media does it and when politicians do. Some academic institutions or media house should setup a site to verify facts for the public. 

5. Eliminate ambiguity, please let me know what the idea is but add some meat to it 

6. Take me serious, especially if I don't wear your badge. The idea that badge wearers are more important is alienating and festers corruption sentiments 

7. A standard format for manifestos so that I can compare them to each other. JSE makes companies produce annual reports to a certain standard, I think political parties should be forced to do the same with their manifestos. Let me cast my vote not on sentiment but help me make an informed decision.   

That's my 2 cents worth...

Industrialisation and Knowledge Economy as an option for SA

For a considerable period I have observed carefully what Government is doing to stimulate the economy and encourage a growth trajectory that we all desire as a nation. I have learned to appreciate other projects, while I have also questioned the creation and subsequent failure of certain policy positions. 

In the generation, where entrepreneurship has become the fundamental means of production and the hope for Job creation, I am still appreciative of how the industrialization process of the economy in South Africa can shape our sociology and commerce as a country like it did in the apartheid years.  Industrialization programmes are less entrepreneurial and historically have thrived on the creation of Government sponsored monopolies. 

To illustrate my point, consider the following two approaches to an industrialization process.

In 2012 Passenger Rail Agency of South Africa (PRASA) advertised their procurement of rolling stock as part of the infrastructure development programme by government (an industrialization process). Even before the advert was placed in the newspapers, it was clear that only a handful of business could deliver the fleet locally and that the fleet would be sourced from an international company. Many lobby groups holding to sense of loss used their gender or race as a bargaining chip to be involved in this procurement process, much to their dissatisfaction and disappointment. Most of those aspiring to participate in the programme, were entrepreneurs, who had little technical know how and limited supplier networks.

Rewind back to 1927 when a white paper was tabled in parliament to investigate the establishment of an oil-from-coal industry in South Africa. It was realized then that South Africa did not have any crude oil reserves and that the country's balance of payments had to be protected against increasing crude oil imports. The government facilitated the creation of intelligence and negotiated with international supplier, leading to the eventual creation of Sasol in 1950. This added to national pride of the time and reassured the public of Afrikaner ingenuity. Much like German’s precision engineering is admired world-wide; Sasol became admired, while Sasolburg was the Silicon Valley of its time.

The inference I would like to draw from the two examples is not that, South African government should build trains or that they should facilitate the creation of another Spoornet, which most likely is capable of also delivering the trains. I am also well aware of the fact that we are living in  WTO and IMF days and that we are now signatories of organisation that make us Global players, where any government sponsored process is measured against several ratings.

The comparison I would like to bring is in three folds:

1. Government has a role to play in the creation of information, intelligence or education necessary for the creation of industrialists, especially black ones, without the benefit of international travelling and vocational exposure. This is called a, "Knowledge Economy". Knowledge Economy is an economy in which growth is dependent on the quantity, quality, and accessibility of the information available.

Essentially this is the first major challenge I have with the South African Industrial Policy Action Plan (IPAP). We are currently living in an economy that requires 800 000 services based expertise, while it also has about 900 000 or so unemployed graduates. Literary we have trained the population in areas the economy cannot employ.  IPAP identifies crucial sectors of growth in the economy as follows: 

Manufacturing

•         Metal fabrication, capital equipment and transport equipment

•         'Green' and energy-saving industries

•         Automotive, components and medium and heavy commercial vehicles

•         Plastics, pharmaceuticals and chemicals

•         Clothing, textiles, leather and footwear

•         Cultural industries: crafts and film

•         Advanced manufacturing.

•         Primary production/ manufacturing nexus

•         Agro-processing

•         Downstream minerals beneficiation

•         Bio-fuels

•         Forestry, paper and pulp, and furniture.

Services

•         Tourism

•         Business Process Services.

The exclusion of the services sector in the IPAP is an oversight given how the sector accounts for more than 70% of global output. India has benefited from the globalization of services and has shown how economies can be turned around by embracing the IT and Contact centre services. The main focus of the IPAP is on growing the manufacturing sector. The possibility of utilizing the services sector as the lead sector in economic development was not considered seriously. Especially when we consider that Services includes, engineering consulting and many high skilled expertise. 

If SA were to become a Knowledge Economy, the biggest reform in education would not be the quality of education but access to institutions of learning from high school to under graduate level. The number of matriculants willing to learn towards a degree should not be affected by the limited number of studying opportunities in current institutes. I respect that the National Development Plan (NDP) has recognized the need to build Universities in Northern Cape and Mpumalanga but I believe we still have room to build 30 more specialized institutions outside the Quality Council for Trades & Occupations (QTCO) scope. We need a specialized institution to train new graduates in high speed rail, a specialized, Japanese study field which will drive the NDP's transport integration proposals; we need Post graduate institution in Nuclear energy or alternative Hydrogen option to add to the Eskom grid; if Fracking takes over the Karoo, then we need to establish a Karoo based Fracking institution up to PHD levels, after all this is the technology that the American President is saying it’s going to stop the US dependency on foreign oil.   

2.  The relationship between a vision developed by a bureaucratic process should be harmonised with the interests of existing private sector interest groups and labour. Industrial policy should aim at discovering the competitive advantages in the economy in close collaboration with the private sector instead of prescribing what they should be. The success of Sasol was a crucial ingredient to also the Private sector and thus there was support from both sides. The current us and them sentiment have divided us as a country. The private sector has turned its attention away from government and labour now believes that business is the new mask of the old oppressor and there is growing distrust. This sociology is wrong and should be changed. The first and most important social contract in South Africa, I believe should be between the three parties. Violent strikes have no place in this democracy.   

3. The rent-seeking behaviour of the policy is also worrying. The implementation of the policy is dependent on the creation of rents, whether in the form of direct benefits such as subsidies or indirect benefits such as concessionary finance; it encourages rent-seeking behaviour and corruption. The way to counter these tendencies is to put in place definite performance requirements for the recipients of government assistance, with penalties if they are not complied with. Given the advent of introducing Black Business into the process, Government should make contingencies to build capacity within previously excluded groups to achieve such performance levels. Industrialisation cannot be another platform to create a tower of failed white elephant in the name of appropriation. 

Economic structures influence social and growth patterns

The Figure above indicates that economic structures impact on economic opportunities and results. The literature is growing its inventory of stories about the ways structured relationships catalyse or constrain opportunities for individuals and firms. Many of these stories centre on the ability of individuals to gain employment through family and business ties.

Research into supply relationships suggests that firms look to engage with other firms they know or have been referred to—even if this means accepting higher cost arrangements. A firm’s opportunities to supply the market are catalysed when they either have an existing presence or know people on the inside.

Industrialisation Policy Action Plan (IPAP) as an attempt to move into a more aggressive growth trajectory. The engagement of an international panel of experts has shown general agreement with Government’s IPAP that such a trajectory would involve adjusting production profiles. IPAP favours a more dynamic tradable, soaking up, the vast pool of unemployed—including discouraged new entrants to the labour pool, and generally opening the economy to emerging firms.

Broad Based Black Economic Empowerment (BBBEE) is a structured way of introducing new entrants, historically disadvantaged, with a need to break into the tightest network of historically built relationships. The biggest structural factor defining how business works, centers on past experience in big, formal business. Very few managers and directors in South Africa’s big businesses have traditionally reached their positions without years of work in the conglomerates, banks or other financial institutions. It has been rare to find a manager or director coming from smaller and medium sized business into these large firms, even though most small and medium businesses have also traditionally been dominated by white people.

Specialized in-house sub networks are evident in various industries where firms allocate management positions only to individuals with experience in the specific firm or its subsidiaries. Similar in-house networking is evident in the composition of many boards. The prominence of in-house relational connection is also evident in the way large firms have organized production and commercial processes.

Large South African firms have typically looked in-house for many services—from production through to retail finance. Owning key suppliers, financiers and retailers in a sector assured preferential relationships for these large firms—tight, controlled network relationships that minimized risk exposure. These relationships allowed capital concentration necessary for heavy industry development and fostered stability and standardization. Where the relationships were not established via direct ownership ties, they involved financing and preferential contracting mechanism.

Smaller downstream enterprises have faced major entry hurdles as a result of these preferential relationship structures, however in industries as variant as furniture, textiles, tourism and in the core metals and engineering sector. Large firms started unbundling in the 1990s and focused on core activities, but in so doing simply traded their horizontal conglomeration for a more intense vertical presence in many industries. A large proportion of mergers have been vertical, increasing control of dominant firms through production chains.

One could expect this kind of vertical consolidation to exacerbate already-low levels of industrial competition in South Africa. There is a need for an organisation or government to establish and connect non-integrated downstream suppliers to deal with controlling conglomerates that make their life especially difficult. The dominance of large enterprises creates many constraints on SMME development in various industry.

Large businesses have been able to establish favourable relationships at many levels, resulting in “closed” markets and “old boy networks” that have successfully kept out new, perhaps more efficient and competitive market entrants. This is major reason why SMMEs in South Africa contribute less to GDP and employment than they do in many other countries.

Large firms constitute less than 5 percent of South Africa’s corporations but account for 60 percent of the country’s GDP, while constituting more than 95 percent of corporate entities between 1990 and 2000, SMMEs employed only 55 percent of the country’s labour and generated only about 40 percent of total remuneration.

These highly concentrated structures have not only limited competition and access by smaller business, they are also the reasons for South Africa’s weak competitiveness. The declining entrepreneurship and competitiveness is reflected in the country’s drop from 19th to 25th place (out of 35) in recent versions of the Global Entrepreneurship Monitor (GEM) indicating that “the country has failed to create a competitive climate in which emerging businesses can grow and thrive.

Youth Entrepreneurship – How to make it work

Entrepreneurship is being promoted in South as a possible source of job creation, empowerment and economic dynamism, and this has seen a migration in policy and the voice of opposition parties increasing attention on the subject. However, despite this attention, there has been no systematic attempt to look at it from an angle of a South African young person with his inherent challenges. 

We tend to incorporate the youth into the general adult population when it comes to some of the policy decision that drive enterprise development and we ignore their efforts to forge a livelihood through enterprise activities. We have stopped very short of understanding the potential benefits of youth entrepreneurship as a means of improving youth livelihoods.

Can youth entrepreneurship be promoted as a viable career option? What obstacles stand in its way? And what policy measures and strategies can be initiated to support it?
The need to encourage Youth entrepreneurship cannot be understated and below are some of the reasons why it should be encouraged:

• Employment: Enterprise has the potential to create employment opportunities for both the self-employed youth and other young people 

• Redress: it has a less centralized platform to bringing the alienated and marginalized youth into the economic mainstream 

• Socio-economic Solution: it has the potential to impact on some of the  problems and delinquency that arise from joblessness including crime and drug abuse. 

• Innovation: Youth   resilience is associated with innovation 

• Local economic development: it has the potential to revive and revitalize local community 

• Accessing fast paced economic opportunities: Young entrepreneurs may be particularly responsive to new economic opportunities and trends 

• Skills development: Enterprise helps young women and men develop new skills and experiences that can be applied to many other challenges in life. 

This article was born from attending an Entrepreneurship Week, where all efforts were around the development of youth owned enterprises. Naturally the irreplaceable value of experience and post graduate education has meant that naturally youth owned business will have the following inherent challenges. (Excuse me for generalizing, but SEDA or a similar South African institute should commission a study to verify):

• Youth businesses face problems of access to resources such as capital, especially if it is to be loaned, given the South African strict loan regiment under the National Credit Regulation (NCR). This is particularly more challenging for young people from impoverished communities, who do not have alternative sources;   

• The result is that young people will start their enterprises with lower levels of initial capital and will operate very small businesses that are more survival level (from hand to mouth as affectionately referred); 

• The biggest challenge with a low capital business includes lower market value or lower inventory book. This has played into the hands of heavily invested foreign subsidized small businesses, especially in the retail sector (a train vegetable vendor vs. a 500 product tuck shop)  ; 

• The result then becomes that youth entrepreneurs are engaged in a narrower range of activities. They tend to operate from homes or streets (lack of access to space); 

Given that in South Africa we have the National Youth Development Agency, and I hesitate to be critical of their efforts to promote youth entrepreneurship. I would like to remain true to the objective of this blog and share Ten (10) cardinal rule that can drastically improve this sector:

1.  Clear Objective. Any programme that promotes youth entrepreneurship should not attempt to combine social and economic objectives. Many youth enterprise promotion programmes fail because of a multiplicity of objectives. Someone in a position of prominence like the NYDA should identify a future sector of growth and shape the development of youth entrepreneurs to fulfill the market demands of that growth sector. Preparations for the world cup in 2010 were way advance before we realized that we had a shortage of welders (artisans) and I believe that this was an ideal opportunity to have groomed at the announcement of the bids’ success, a model for owner managed artisan youth enterprises. These businesses would be instrumental in helping Transnet and PRASA today with their Capital programmes, which are estimated in the multiple billions. Unfortunate this bus has left the port and this competence will sourced internationally. 
2. Commercial Orientation. A development agency (NYDA) has the responsibility to instill and enthuse a sense of professionalism and commercial will. It is not a welfare’ or social services, this will mandate the agency to develop a professional capability and technical competence that is critical to the success of youth enterprise support programmes.
3. Adequate funding. Available literature shows that youth enterprise support programmes in many developing countries fail due to, among other factors, inadequate funding. NYDA is a well-funded organisation and has adequate funding to help its clients. 
4. Well-trained and properly supported staff. The agency requires staff with professional capability in their operations. Given how competitive the labour market is in South Africa, this should also be established with staff retention programmes in place. Staff should be trained and properly supported in their work. Lack of technically competent staff and/or staff that lack entrepreneurial experience is a major factor that explains the failure of youth enterprise support programmes in many countries.
5. Flexible and adaptable operation style. Rigid administrative procedures are a factor in the failure of youth enterprise promotion programmes in many countries.
6. An ‘integrated’ package for youth. The Agencies support for young people should not only be limited to the resources that the youth can gain from the Agency like credit and voucher services. Such a minimalist approach has a danger of limited development with similar beneficiaries going through the system over and over with new ideas every-time. The birth of the Tenderpreneurs in the past decade is an example. The agency should provide a wide range of services to youth, including skills training and advice. This is based on the recognition that young people pass through various stages of transition and therefore tend to face problems specific to those transitions.
7. Customer-centered loans. The treatment of the youth as mere beneficiaries is the key challenge in this area and hence the reason why all loans are treated to youth owned businesses are treated the same. Firstly I believe all loans should be issued condition to a viable business plan and accepting a mentor.  Secondly, all youth entrepreneurs should be treated as clients as opposed to beneficiaries. Thirdly there should be a shift from standardized programmes that are not sensitive to the needs of individual youth and therefore have little impact on youth entrepreneurship promotion. For example, a young professional who has just graduated from University and after realising that he had no prospect in the employment sector and they started business. Statistics tells us that this is the most successful entrepreneur currently in SMME sector in South Africa (SMME's ran by Professionals). Currently as things stand this guy cannot be loaned money by the NYDA unless he had surety from someone who is employed. This is the case even when such a professional has a contract with a reliable third party and they only require bridge financing. The strength of the contract and the success of the sector of business they have venture into do not count for much in their credit rating.  
8. Proper targeting and selection. Young people are not a homogeneous, and thus the Agency needs to make an attempts to identify variations amongst young women and men in their skills, experiences, status, needs, aspirations and capacity to obtain resources – all of which influence their ability to establish and run a small business successfully. This is the blueprint that we lack in South Africa, on how we can help young people from school going age to choose Entrepreneurship as a career. The difference from reading a Robert Kiyosaki book and being nurtured in to the profession is the intelligence we are able to build as a country on the subject. The motivation of foreign Business heroes like the Donald Trumps and Richard Branson are different from that of a South African rural youth.
9. Mentoring. NYDA needs a strong and highly effective mentoring programme that is designed to provide young people with informal advice and guidance on how to properly manage their businesses. This will help youth entrepreneurs to overcome the constraints of limited business experience, contacts and skills. Through mentoring and other business support services, young people will learn to deal with the risks that they face in running their enterprises.
10. A supportive policy environment. Favourable changes in the regulatory environment can have a positive impact on the provision of business development support to the youth entrepreneurs;

Can we look at Infrastructure Development as a key economic tool

The establishment of the Presidential Infrastructure Coordinating Commission (PICC), and the subsequent lamenting of the pace of infrastructure development as lagging behind what the country needs, has placed a demand on South Africans to embrace the process as a necessary economic tool. In Economic theory, infrastructure can positively impact on economic growth, in the following five ways:

· Infrastructure as a factor of production

Infrastructure may simply be regarded as a direct input into the production process, like the creation of Power generating plants to fuel more industrial process.


· Infrastructure as a complement to other factors

Infrastructure may be regarded as a complement to other inputs into the production process, in two senses. Firstly, improvements in infrastructure may lower the cost of production. Inadequate infrastructure creates a number of costs for firms, who may have to develop contingency plans against infrastructure failure or even build infrastructure themselves. Inadequate transport infrastructure, for example, incurs potentially massive costs for firms who must seek alternative means of transporting both inputs and finished goods. Conversely, good infrastructure generally raises the productivity of other inputs in the production process.

· Infrastructure as a stimulus to factor accumulation

In particular, infrastructure, in the form of schools, roads used to access schools and electricity provided to schools, is likely to be an important factor in the human capital production function and it classified as Stimulus to factor accumulation.

· Infrastructure as a stimulus to aggregate demand

Large infrastructure projects typically involve significant expenditure during construction and potentially also during maintenance operations, increasing aggregate demand. Governments have, for example, often used large-scale infrastructure projects as stimulus policies during recessions or in order to achieve particular growth targets. E.g 2010 Soccer World Cup.

· Infrastructure as a tool of industrial policy

The last channel focuses on the potential for infrastructure spending by government to act as a tool of industrial policy. Government might attempt to activate this channel by investing in specific infrastructure projects with the intention of guiding private-sector investment decisions. A road construction project in a rural area may be intended to facilitate integration of that area into the regional economy and hence promote private sector investment and economic growth. This thinking has been a key element of the rationale behind the Maputo Corridor and the Coega Development Corporation.