Collaborative mechanisms to support small business in the townships

Developing efficient, collaborative mechanisms among all key role players in the motor body repairers industry, including ESD funders, so as to ensure not a single cent is wasted of the available funding was one of the key messages from the South African Motor Body Repairer’s Association’s (SAMBRA) National Director, Richard Green, at this year’s SAMBRA Enterprise Supplier and Development Conference held in partnership with Siyakha.

SAMBRA, a proud association of the Retail Motor Industry Organisation (RMI), representing over a 1000 motor body repairers’ in the country, is pushing hard to find support from government and alternative funding and training organisations for emerging micro enterprises entering the sector.

Dineshan Moodley, Executive: Industry Development (AIDC), one of the key note speakers at the conference, discussed the AIDC’s mandate as a government agency to support the automotive industry at large. It operates a number of township ‘hubs’. Currently, only 5-10% of vehicles residing in townships are insured, placing this market outside the traditional insured-repair market.

“Although townships have the highest rates of unemployment in the country, they also experience net outflows of capital to more developed areas. The answer to this challenge starts with keeping money already in the township circulating around the township,” says Moodley.

“We had to start from scratch with hubs, as there was no model and we are currently rolling out quite a number, with requests for many more.  The model, piloted on one site, was to create a hub out of converted municipal offices in collaboration with SAMBRA so as to have the correct equipment such as world-class spray-painting booths and chassis straightening equipment exactly to spec for a SAMBRA-accredited business,” explained Moodley.

This was achieved by gathering intelligence on foot and locating every SME within a 5km radius. “The hub is not a competitor to existing SMEs and doesn’t target customers – it’s a facility for SMEs to use to grow their business. MBR SMEs are invited in to use the facilities, and while there they are evaluated, and thereafter can either continue to operate in their existing premises or to bring in job-cards for a specific aspect of repairs, such as spray-painting a door, to the hub. The hub has technical experts such as master artisans to supervise the work to ensure the quality is constantly improved. A spray-painting booth, for instance, is not otherwise available in that radius, and use of this enables the SMEs to grow their business.”

Training and mentoring is critical. Moodley says because some technicians were often inadequately trained, they were using incorrect tools such as the wrong sandpaper or thinners, body fillers and hand tools. “Use of the correct tools makes a significant difference to the quality of the repair job. We try to instil best practice. We also give opportunity not just to SMMEs, but the unemployed. We periodically take in 20 to 40 unemployed youth through ward councillor structures, and put them onto a training programme, inducting them into the industry. The aim is that as MBR SMEs grow, the unemployed youth can grow with them. Not all take to it – sometimes a contingent of 20 can drop to three but those three are committed to growing their business and will attract another three into the system.”

“We visit their business premises to advise them on how to upgrade their business on site, and offer support by bringing in suppliers of small finance. The SMMEs contribute to the running costs of the hub, as the model is a partnership concept. Use of vacant municipal buildings and refurbishing them is a means of capping costs,” says Moodley.

Another innovative business support concept highlighted at the SAMBRA conference was “Business in a Box” by Sumitomo Rubber SA.

Itumeleng Mojafi, Associate Manager: Business Development Sumitomo Rubber South Africa, described a unique ESD programme the company has initiated which has more than 120 branded tyre containers in South Africa: “Sumitomo Rubber SA recognised the role SMME’s play as a solution to South Africa’s unemployment crisis and responded with the Dunlop Container initiative, as a solution, informal tyre trading containers in townships and rural areas have been transformed into Dunlop Containers which provide opportunities for unemployed youth, women and entrepreneurs to be trained and mentored in tyre sales and repair.”

“There’s a safety, entrepreneurial and employment motive to this – second-hand tyres being sold are the cause of a high number of fatalities on our roads. Second-hand tyres are sold because these small entrepreneurs often couldn’t open an account with a supplier such as ourselves. We reduced the red-tape and opened accounts for them, offering credit facilities and training.”

Finally on the issue of funding Tsholofelo Moemi, Regional Manager: Gauteng, SEFA (Small Enterprise Finance Agency), explained that SEFA gives direct loan facilities to SMMEs. In an example of potential collaboration, sefa finds it more effective to provide structured finance and working with industry specific role players like SAMBRA. sefa’s main delivery model is to provide funding directly and not through a middleman, as well as offering other non-financial support services. Products include bridging finance per contract or even individual job as well as a revolving facility which caters for multiple contracts or job cards, whereby the facility would be reviewed after a year based on performance. Asset and working capital finance is also available.

Green said the key point is that funding and training often need to go hand in hand so that is why the collaborative approach works so well. “We all have the same agenda. We want to grow the market and support the emerging entrants. Collaboration amongst all role players is essential. SAMBRA is equally committed to providing free training for these young businesses.