Young South African entrepreneurs are part of the answer to an increasingly pressurised job market. However, with South Africa lacking a nurturing environment of entrepreneurship, launching and running a successful business can be minefield.
Dan Clarence, co-owner of the newly launched Cash Converters in Melville, can attest to this. After a disappointing and costly experience in attempting to launch his own business in Cape Town, Clarence jumped at the chance of opening a franchise with his partner, Mathew Devine. What appealed to him most, he says, was the structure and guidance offered by the franchise model.
“With the business I launched in Cape Town with my brother, I made so many mistakes as an entrepreneur, spent money where we shouldn’t have and we weren’t clear on the regulations,” remembers Clarence. “Our experience with Cash Converters so far has been completely different. There are so many things you don’t know about launching a business, but the Cash Converters model ensures we’re guided every step of the way.”
A recent Business Day article revealed that Multinational human resources consulting firm, Manpower Group, recently undertook an employment outlook survey that revealed that many of South Africa’s employers plan to maintain employment levels this year rather than hire new staff. This is alarming for the many unemployed South Africans as well as young graduates entering the job market. Unemployment in South Africa rose to 26% from 24% in the fourth quarter of last year.
“Despite the gloomy outlook, we know that as many as 90 percent of new jobs are expected to come from the SME sector in the next 20 years,” says Richard Mukheibir, CEO of Cash Converters, the largest second hand franchise in the world. “This means young entrepreneurs need to be encouraged and mentored in order to grow the culture of entrepreneurship in South Africa. The franchising sector offers great potential because it’s a model that encourages entrepreneurship, but with guidance.”
With South Africa’s economic growth slowed to just 1.3% in the first quarter of this year, the Cash Converters model delivers significant returns and a viable product that the community will welcome. Devine says this is what convinced him that buying a Cash Converters franchise was a good investment. He was first introduced to the Cash Converters when he was working as an account director at the brand’s digital agency, Seven Different Kinds of Smoke.
“The more I understood about the business, the various products, the structures in place, the more I realised just how successful this franchise can be,” he says. “Because I was working on the account, I got the ‘raw, honest version’ of what the brand can offer and I knew this is what we needed to do.”
At that point, Clarence’s business in Cape Town was winding down and it didn’t take much convincing. The two, who both turned 30 this year, started selling assets and looking for ways to raise the funds to purchase the business. Mukheibir and the Cash Converters team helped them put together a business plan and approach the banks for the remaining finance. The franchise agreement was signed on 24 December and the new store was opened this month (June 2015).
“The products make sense in today’s economy,” explains Devine. “The retail section of our store attracts savvy consumers, people who know they can make some money out of goods they don’t want anymore and those who know that previously owned goods at Cash Converters are often almost as good as new. The Cash Advance and PayDay Advance products act as a buffer if our retail sales fluctuate. All of our products speak to the student and residential market surrounding our store in Melville.”
The biggest challenge for this entrepreneurial duo was raising the funds for the business, however, even that pressure was cushioned by the guidance offered through the franchising model. “We’ve received so much mentorship not only from the team but also from the rest of the franchisees who we’ve met through training. We’ve had assistance with everything from getting the finance to employing staff,” says Clarence.
The two have employed 9 people, already making a positive impact to South Africa’s unemployment figures.
Mukheibir says this is just one example of how important entrepreneurship is to our country. “Improved access to support structures, workshops, business incubators, mentorship and training programmes will help turn our economy around. It is without a doubt that entrepreneurs are the lifeblood of South Africa’s pressurised economy. We can’t simply wait for the government to create the change we need. Those with an entrepreneurial spirit must take the initiative to create new opportunities, a chance to give their very best to the country,” he concludes.