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.

Print this page Send this article to a friend

Subscribe now!
Subscribe to Business in Africa magazine now and receive full access to this website.
Find out more...

Market news on your cellphone
Get live JSE listed shares, warrants, major indices, brent crude oil, international markets, agricultural futures & daily market analysis via SMS on your mobile.
Find out more...

Eskom leaders forum
African business and public sector leaders define and construct a prosperous future for the continent.
Find out more...

Online travel bookings
Planning to travel? Book accommodation in Africa & South Africa here.
Book now...

 Have your say
Chat on the Business in Africa forums with other readers about the issues of the day, affecting Africa.
Post your comment...

Calculate the latest currency rates for Africa and world currencies
Find out more...

Have your magazine delivered via the Web, anywhere in the world, directly to your PC!
Find out more...

Contact us | About us | Newsletter | Subscription centre | Advertising

All material copyright Business in Africa. All rights reserved. Material may not be published or reproduced in any form without prior written permission. Read these terms & conditions. Read our privacy statement and security statement. Powered by Mail & Guardian Online &