Africa’s top 5 SMMEs
Published: 26-NOV-04
The top five small businesses in Africa have overcome the pressures of high costs of imported materials, entrenched global competition, negative perceptions of Africa, access to technology, currency and credit risks and even a shop
burning down to not only survive and succeed, but also to make contributions to Africa’s pressing social agenda. By Shaun Benton
The continent’s top-rated SMME, according to the
Africa Centre for Investment Analysis at Stellenbosch
University’s 2004 Africa SMME of the Year
awards, is a black empowerment company in South
Africa that exports 80% of its output of high-tech protective
fabrics.
BreatheTex, a small Port Elizabeth-based fi rm with 49 employees
and a yearly turnover of about US$6m, is one of only
four companies in the world that manufactures protective waterproof,
breathable fabrics to military specifi cations that allow
moisture to evaporate from the inside.
Second prize went to Enviro
Environmental Civil Engineering
Consulting Centre, an Egyptian engineering consulting fi rm
with 160 staff members, 10 of whom hold doctoral degrees.
Also known as Enviro Civec and managed by Dr Diaa Salah
El Dien El Monayeri, it overcame technological and communications
diffi culties with the use of computer technology and
electronic archives to turn over about US$1,5m a year. With
its relatively small but highly educated staff, it concentrates on
construction projects requiring environmental specialisation and
in the design of public infrastructure and wastewater facilities.
Magana Flowers Kenya Limited, a Kenyan company of about
340 employees that grows roses for the European market, took
third place, while Malealea Trading, a tourist lodge and ponytrekking
firm based in Lesotho took fourth place, having scored
for its encouragement of local ownership of assets.
Fifth place was taken by a Johannesburg-based South African
firm, Aerospace Monitoring and
Systems, a high technology electronics engineering company that designs, develops, manufactures and supports aircraft monitoring, data recording and health/usage information systems for a niche of the global
aerospace and defence markets.
Jako Volschenk, the awards co-ordinator and a researcher at the Africa Centre for Investment Analysis, said attracting fi nance is a major obstacle for SMMEs in Africa, but “the biggest challenge for SMMEs in Africa is actually markets”. On top of the difficulties faced in penetrating global markets, African markets are not big enough or rich enough to sustain and expand small businesses.
Another major problem in Africa and one that the Nepad
programme is acutely aware of is infrastructure. One is physical
such as roads and the other, bearing optimism for short term
solutions, is communications, which is very expensive in Africa
and a major factor hampering development. The Internet, which
is a crucial, cheaper tool, holds much
hope for overcoming the
lack of other communications technology.
The challenge for African economists and governments is to
improve infrastructure and the regulation of enterprise market,
to make it easier to establish companies. Heavy bureaucracy is
a major handicap and one of the reasons why South Africa’s
SMME sector is stronger is because it is a lot more liberated
from intense regulation, Volschenk said.
And then there is the matter of intellectual property rights
and respect for the rule of law. “Governments should provide
for easy registration [of companies] and then the rule of law will
look after the rest.”
Winning SMME BreatheTex needed raw materials that they
couldn’t source in South Africa so they supported local companies
by working closely with them in research and development
and then eventually sourced the materials locally.
This not only reduced the firm’s vulnerability to the currency
markets but also strengthened local
textile mills and printers
which began to thrive off BreatheTex’s success.
This was an ideal example, said Volschenk, of the economic
‘flying geese model’, where, after the fi rst goose has taken to
flight, the others are in turn pulled up in its slipstream.
The company, headed by George Yerolemou, has recently
achieved international recognition through winning the secondlargest
tender ever awarded in the industry, which was a tender
to supply its protective waterproof fabric to a European army,
according to its marketing manager, Cheryl Wasserman.
The “flying geese” model underlines an important principle
for Africa’s development: that of mutual upliftment, understanding
that sustainable development of an economy cannot happen
in a vacuum.
The Africa Centre for Investment Analysis, whose research on
resource mobilisation - sourcing money for sustainable development
in Africa and finding ways to use it to maximum effect- contributes to the Nepad
programme, evaluated the SMMEs with an economic performance weighting of 70% and then 30% for social commitment.
For the awards, judges looked at financial health, innovation, global market penetration and contributions to the continent’s social agenda. The ‘social agenda’ criterion’s heavy weighting can be seen as more indicative of a strategy for overcoming the contextual pressures facing businesses rising out of the contagion of continental wide poverty than with corporate social responsibility
programmes.
Magana Flowers Kenya Limited is run by a medical doctor, Dr Mogana Mungai, and takes its social agenda to charitable heights through the supply of free medical services to employees who are also given patches of land on which to grow vegetables.
Distance to market and access to market information has been a key problem for the company. It overcame this through sharing an interest with other organisations in updates on the world flower market and regular
participation in flower shows. Access to the expensive technology being used in its target
markets has also been difficult for the company. While up to date on the latest information on irrigation systems and the savings derived from it, for example, the company had not previously been able to afford it.
Database software also proved expensive, but through business assistance scheme and related organisations, the company has now installed suitable software.
Then the human factor: the company depends greatly on human
resources and strives to maintain the health of its workers
and that of communities in which they live, well aware of the
potential devastation in Africa from epidemics such as the human
immunodeficiency virus.
It facilitated typhoid and hepatitis B vaccinations for its employees and their children and arranges seminars on family planning and HIV/AIDS control for employees, more than 60% of whom are women. According to company’s business
profile, there are about 600 to 700 families that are directly and indirectly
dependent on the company’s farm, which is 100% export oriented.
Staff at the flower-growing company have an equipped social
centre and sporting facilities with uniforms. The firm promotes
youth participation in the economy and receives Kenyan university
internerships for three or four months at a time.
It prides itself on environmental contributions and has planted thousands of trees since its inception in 1995. This helps prevent erosion and no doubt also provide a cooler environment for the fragile roses, which are grown to the qualitative standards set by giant supermarket chains such as Carrefour in France and The
Netherlands, a key client.
From a humble beginning of a rose plantation area of two hectares in 1995 the farm today has grown to 15.5 hectares of flowers and seven hectares of vegetables, and average yearly cash accruals are now between US$350 000 and US$400
000.
Malealea Trading, a tourist lodge and pony-trekking firm
based in the mountainous kingdom of Lesotho, is owned by a
Lesotho-born couple, Mick and Di Jones. The couple started out running a trading store, but when that burnt down they had to decide between moving on or buying and rebuilding. They chose the latter and have since built up the lodge to 104 beds. The firm works closely with the community and has won the Imvelo award for responsible tourism twice.
Through a development trust and with donations from tourists
and the help of NGOs and other funders such as embassies,
the firm has assisted with a string of developments: community
gardens, classrooms for students (who are also paid for involvement
in music and dance groups to entertain tourists), early
childhood education, a craft co-operative, a local museum, fencing
of a wetlands conservation area to protect a central water
source, a sports facility, a wind turbine and solar panels and
the
construction of a dam.
Malealea Trading has since been featured in numerous newspapers,
books, magazines and television productions worldwide.
It employs 30 people at its lodge, 35 horse guides, 80 horse
owners, 25 hiking guides and turns over an average of US$525
000 a year.
“The company scored huge points,” said Volschenk. “It is
unusual for a company to be involved in society in the way they
are.”
Aerospace Monitoring and Systems gathers raw data on
aircraft from sensor outputs, translates the data into information
about the health and usage of the aircraft and then integrates the
information into the client’s off-board management information
system.
Its technology is developed in-house and includes electronics
qualified for operation in harsh on-aircraft environments, safety
critical software and information technology software for the
ground-based management information systems.
Run by managing director Christo Weder, it was
founded in
1984 by a group of system engineers and has 79 employees,
turning over US$10m through exports to a customer base that
includes Bae Systems (UK and Australia), Thales (France),
EADS (Germany), the Indian Ministry of Defence, Hindustan
Aeronautical (India), Pilatus (Switzerland) and Denel (South
Africa).
“The major obstacle encountered in the international aerospace
market,” the company said, “was to convince prospective
customers … that a small South African-based company is
capable of supplying high quality, reliable products qualified to
international standards and that we will be around for more than
20 years to support our products throughout their life.”
This was overcome by building a track record and establishing
reference clients.
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