PROJECT REPORT

ON
Small Business and Modern Technology

SUBMITTED TO: SUBMITTED BY:

Mrs. Kulwinder kaur Arshdeep Kaur

B.B.A.(2nd YEAR)

ROLL NO. 43

Patel Memorial National College, Rajpura

 ACKLOWLEDGEMENT

If words are considered as symbol of approval and taken of appreciation then let
the words play the heralding role of expressing my sincerest gratitude and thanks
A Project usually falls short of its expectation unless guided by the right person at
the right time. Success of a project is an outcome of sincere efforts, channeled in
the right direction, efficient supervision and the most valuable professional
guidance.
This project would not have been completed without the direct and indirect help
and guidance of such luminaries. They provide me with the necessary recourses
and atmosphere.
I am today. In the end I would like to my parents for giving me strength in times
when I thought I would never be able to complete this project. I thank them again
and again for letting me be where
I am thankful to all of my friends and batch mates for their help in
completing this project work. Finally, I am thankful to my entire family
members for their great support and encouragement.
Entrepreneurship is he act of being an entrepreneur, which can be defined as "one who
undertakes innovations, finance and business acumen in an effort to transform innovations into
economic goods".

Definition of Entrepreneurship

Entrepreneurship is more than simply starting a business. The definition of entrepreneurship is

a process through which individuals identify opportunities, allocate resources, and create value.
This creation of value is often through the identification of unmet needs or through the
identification of opportunities for change.

Entrepreneurs see problems as opportunities, then take action to identify the solutions to
those problems and the customers who will pay to have those problems solved.

Entrepreneurial success is simply a function of the ability of an entrepreneur to see these

opportunities in the marketplace, initiate change (or take advantage of change) and create value
through solutions.

What Is Business Entrepreneurship?

There are many interpretations and definitions of entrepreneurship.

According to intellectuals and business experts, the definition of entrepreneurship is simply the
combining of ideas, hard work, and adjustment to the changing business market. It also entails
meeting market demands, management.

Most importantly, it describes the key directive of any business - innovation.

Innovation is by far the primary factor that governs the very creation of a small business or
entrepreneurship. Innovations can be processes or even products.
One example of a process could be the creation of ideas through the written word. Products can
refer to anything that is created that can be sold, whether it is a new type of glue or even a
service that provides; for example, housecleaning.

Whenever we talk about a business term it is essential to analyse its meaning,

ENTREPRENEURSHIP i.e trying to identify market opportunities, arranging resources to
bring an imaginative idea to a practical situation and investing these resources in order to attain
long term gains. characteristics of entrepreneurship

CREATIVE ACTIVITY i.e it involves innovation of products and techniques by

keeping in mind the market;

DYNAMIC PROCESS i.e. keeps in mind changing external environment;

PURPOSEFUL ACTIVITY i.e. purposed to earn profits or bring a difference to the

market ;

INVOLVES RISK i.e entrepreneurial decisions are vast and can not be reverted easily
and involve great deal of investments.

The entrepreneur as a person who undertakes a commercial venture organizes it, raises
capital to finance it or a major portion of the risk.

Characteristics of an entrepreneur include

ability to bear risk,

technical knowledge about production techniques and marketing,

ability to gather financial and motivational resources

ability to build a sound organization.

TYPES of ENTREPRENEURS

INNOVATIVE i.e introduction of something new to the nation (e.g: Dhirubhai Ambani,
Indian entrepreneur);

IMITATING i.e. one who adopts a method of production or technology already adopted
by someone else and may not be able to afford resources for entrepreneurial research;

FABIAN i.e those who are cautious in adopting any changes and are shy and lazy to
adopt new methods
 DRONE i.e. those who resist changes and continue to use old or traditional methods of
production.

ENTREPRENEUR

An Entrepreneur is an individual who efficiently and effectively combines the four factors of
production. Those factors are land (natural resources), labor (human input into production using
available resources), capital (any type of equipment used in production i.e. machinery) and
Enterprise (intelligence, knowledge, and creativity.)

Entrepreneurship is often difficult and tricky, as many new ventures fail. is often . Most
commonly, the term entrepreneur applies to someone who creates value by offering a product or
service. Entrepreneurs often have strong beliefs about a market opportunity and organize their
resources effectively to accomplish an outcome that changes existing interactions.

Business entrepreneurs are viewed as fundamentally important in the capitalistic society. Some
distinguish business entrepreneurs as either "political entrepreneurs" or "market entrepreneurs,"
while social entrepreneurs' principal objectives include the creation of a social and/or
environmental benefit.

The Enterprise can be set up in a designated industrial areas, where infrastructure facilities are
available and is near to the market identified. It can also be set up in any other area depending
upon nature of activity and local municipal rules.

Entrepreneurship is the practice of starting new organizations or revitalizing mature

organizations, particularly new businesses generally in response to identified opportunities.
Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail.
Entrepreneurial activities are substantially different depending on the type of organization that is
being started. Entrepreneurship ranges in scale from solo projects (even involving the
entrepreneur only part-time) to major undertakings creating many job opportunities. Many "high-
profile" entrepreneurial ventures seek venture capital or angel funding in order to raise capital to
build the business. Angel investors generally seek returns of 20-30% and more extensive
involvement in the business. Many kinds of organizations now exist to support would-be
entrepreneurs, including specialized government agencies, business incubators, science parks,
and some NGOs.

CHARACTERISTICS OF AN ENTREPRENEUR
Entrepreneurs have many of the same character traits as leaders, similar to the early great man
theories of leadership; Entrepreneurs are often contrasted with managers and administrators who
are said to be more methodical and less prone to risk-taking. Such person-centric models of
entrepreneurship have shown to be of questionable validity, not least as many real-life
entrepreneurs operate in teams rather than as single individuals

The Entrepreneur has an enthusiastic vision.

The Entrepreneur's vision is an interlocked collection of specific ideas.

The overall blueprint to realize the vision is clear.

The Entrepreneur promotes the vision with enthusiastic passion.

The Entrepreneur develops strategies to change the vision into reality.

The Entrepreneur takes the initial responsibility to cause a vision to become a success.

Entrepreneurs take prudent risks.

An Entrepreneur is usually a positive thinker and a decision maker.

ADVANTAGES OF ENTREPRENEURSHIP

Every successful entrepreneur brings about benefits not only for himself/ herself but for the
municipality, region or country as a whole. The benefits that can be derived from entrepreneurial
activities are as follows:

1 Enormous personal financial gain.

2 Self-employment, offering more job satisfaction and flexibility of the work force.

3 Development of more industries, especially in rural areas or regions disadvantaged by

economic changes, for example due to globalization effects.

4 Encouragement of the processing of local materials into finished goods for domestic
consumption as well as for export.

5 Income generation and increased economic growth.

6 Promotion of the use of modern technology in small-scale manufacturing to enhance

higher productivity.

7 Encouragement of more researches/ studies and development of modern machines and

equipment for domestic consumption.
 8 Development of entrepreneurial qualities and attitudes among potential entrepreneurs to
bring about significant changes in the rural areas.

9 Freedom from the dependency on the jobs offered by others.

10 The ability to have great accomplishments.

CONTRIBUTIONS OF ENTREPRENEURS

1) Develop new markets.

Under the modern concept of marketing, markets are people who are willing and able to satisfy
their needs. In Economics, this is called effective demand. Entrepreneurs are resourceful and
creative. They can create customers or buyers. This makes entrepreneurs different from ordinary
businessmen who only perform traditional functions of management like planning, organization,
and coordination.

2) Discover New Sources Of Materials.

Entrepreneurs are never satisfied with traditional or existing sources of materials. Due to their
innovative nature, they persist on discovering new sources of materials to improve their
enterprises. In business, those who can develop new sources of materials enjoy a comparative
advantage in terms of supply, cost and quality.

3) Mobilize Capital Resources.

Entrepreneurs are the organizers and coordinators of the major factors of production, such as
land labor and capital. They properly mix these factors of production to create goods and service.
Capital resources, from a layman's view, refer to money. However, in economics, capital
resources represent machines, buildings, and other physical productive resources. Entrepreneurs
have initiative and self-confidence in accumulating and mobilizing capital resources for new
business or business expansion.

4) Introduce new technologies.

Aside from being innovators and reasonable risk-takers, entrepreneurs take advantage of
business opportunities, and transform these into profits. So, they introduce something new or
something different. Such entrepreneurial spirit has greatly contributed to the modernization of
economies. Every year, there are new technologies and new products. All of these are intended to
satisfy human needs in a more convenient and pleasant way.

5) Create Employment.
The biggest employer is the private business sector. Millions of jobs are provided by the
factories, service industries, agricultural enterprises, and the numerous small-scale businesses.

PROMOTION OF ENTREPRENEURSHIP

Entrepreneurship was potential to support economic growth and social cohesion, it is the policy
goal of many governments to develop a culture of entrepreneurial thinking. This can be done in a
number of ways: by integrating entrepreneurship into education systems, legislating to encourage
risk-taking, and national campaigns

Many of these initiatives have been brought together under the umbrella of Global
Entrepreneurship Week, a worldwide celebration and promotion of youth entrepreneurship,
which started in 2008.

FINANCIAL ASSISTANCE

Financial assistance is available from institutions such as Nationalised Banks, Small Industries
Development Bank of India, Regional Rural Banks, National Small Industries Corporation, State
Financial Corporations etc. depending upon the project requirement and promoters background.
Financial assistance has two components. Loan for fixed capital is used to acquire Plant and
Machinery, land and building. Working capital loan is used to meet day to day operational cost of
the production. State Financial Corporation and National Small Industries Corporation generally
provide working capital. However under a package assistance, State Financial Corporations also
provide a composite loan covering plant and machinery and working capital.

THE ROLE OF GOVERNMENT IN SUPPORTING ENTREPRENEURSHIP

Small and Medium-sized Enterprises (SMEs) in market economies are the engine of economic
development. Owing to their private ownership, entrepreneurial spirit, their flexibility and
adaptability as well as their potential to react to challenges and changing environments, SMEs
contribute to sustainable growth and employment generation in a significant manner.

SMEs have strategic importance for each national economy due a wide range of reasons.
Logically, the government shows such an interest in supporting entrepreneurship and SMEs.
There is no simpler way to create new job positions, increasing GDP and rising standard of
population than supporting entrepreneurship and encouraging and supporting people who dare to
start their own business. Every surviving and successful business means new jobs and growth of
GDP.

Therefore, designing a comprehensive, coherent and consistent approach of Council of Ministers

and entity governments to entrepreneurship and SMEs in the form of government support
strategy to entrepreneurship and SMEs is an absolute priority. A comprehensive government
approach to entrepreneurship and SMEs would provide for a full coordination of activities of
numerous governmental institutions (chambers of commerce, employment bureaus, etc.) and
NGOs dealing with entrepreneurship and SMEs. With no pretension of defining the role of
government in supporting entrepreneurship and SMEs, we believe that apart from designing a
comprehensive entrepreneurship and SMEs strategy, the development of national SME support
institutions and networks is one of key condition for success. There are no doubts that
governments should create different types of support institutions:

i) To provide information on regulations, standards, taxation, customs duties,

marketing issues;

ii) To advise on business planning, marketing and accountancy, quality control and
assurance;

iii) To create incubator units providing the space and infrastructure for business
beginners and innovative companies, and helping them to solve technological problems, and to
search for know-how and promote innovation; and

iv) To help in looking for partners. In order to stimulate entrepreneurship and improve
the business environment for small enterprises.

Training

Basic training differs from product to product but will necessary involve sharpening of
entrepreneurial skills. Need based technical training is provided by the Govt. & State Govt.
technical Institutions.

There are a number of Government organisations as well as NGOs who conduct EDPs and
MDPs. These EDPs and MDPs and are conducted by MSME's, NIESBUD, NSIC, IIE, NISIET,
Entrepreneurship Development Institutes and other state government developmental agencies.

Marketing Assistance

There are Governmental and non-governmental specialised agencies which provide marketing
assistance. Besides promotion of MSME products through exhibitions, NSIC directly market the
MSME produce in the domestic and overseas market. NSIC also manages a single point
registration scheme for manufacturers for Govt. purchase. Units registered under this scheme get
the benefits of free tender documents and exemption from earnest money deposit and
performance guarantee.

Promotional Schemes

Government accords the highest preference to development of MSME by framing and

implementing suitable policies and promotional schemes. Besides providing developed land and
sheds to the entrepreneurs on actual cost basis with appropriate infrastructure, special schemes
have been designed for specific purposes like quality upgradation, common facilities,
entrepreneurship development and consultancy services at nominal charges.

Government of India has been executing the incentive scheme for providing reimbursement of
charges for acquiring ISO 9000 certification to the extent of 75% of the cost subject to a
maximum of Rs. 75,000/- in each case. ISO 9000 is a mechanism to facilitate adoption of
consistent management practices and production technique as decided by the entrepreneur
himself. This facilitates achievement of desired level of quality while keeping check on
production process and management of the enterprise.

Concession on Excise Duty

MSME units with a turnover of Rs. 1 crore or less per year have been exempted from payment
of Excise Duty. Moreover there is a general scheme of excise exemption for MSME brought out
by the Ministry of Finance which covers most of the items. Under this, units having turnover of
less than Rs. 3 crores are eligible for concessional rate of Excise Duty. Moreover, there is an
exemption from Excise Duty for MSME units producing branded goods in rural areas

Credit Facility To MSME

Credit to micro, small and medium scale sector has been covered under priority sector lending
by banks. Small Industries Development Bank of India (SIDBI) has been established as the apex
institution for financing the MSME. Specific schemes have been designed for implementation
through SIDBI, SFCs, Scheduled Banks, SIDCs and NSIC etc. Loans upto Rs. 5 lakhs are made
available by the banks without insisting on collaterals. Further Credit Guarantee Fund for micro,
small and medium enterprises has been set up to provide guarantee for loans to MSME up to Rs.
25 lakhs extended by Commercial Banks and some Regional Rural Bank.
Policies And Schemes For Promotion Of MSME Implemented By State
Governments

All the State Governments provide technical and other support services to small units through
their Directorates of Industries, and District Industries Centres. Although the details of the
scheme vary from state to state, the following are the common areas of support.

1 Development and management of industrial estates

2 Suspension/deferment of Sales Tax

3 Power subsidies

4 Capital investment subsidies for new units set up in a particular district

5 Seed Capital/Margin Money Assistance Scheme

6 Priority in allotment of power connection, water connection.

7 Consultancy and technical support

Advantages of Profit Planning

Profit planning offers many advantages to your business. The modest investment in time
required to develop and implement the plan will pay liberal dividends later. Among the
benefits that your business can enjoy from profit planning are the following:

* Performance evaluation. The profit plan provides a continuing standard against which sales
performance and cost control can quickly be evaluated.

* Awareness of responsibilities. With the profit plan, personnel are readily aware of their
responsibilities for meeting sales objectives, controlling costs, and the like.

* Cost consciousness. Since cost excesses can quickly be identified and planned,
expenditures can be compared with budgets even before they are incurred, cost
 consciousness is increased, reducing unnecessary costs and overspending.

* Disciplined approach to problem-solving. The profit plan permits early detection of

potential problems so that their nature and extent are known. With this information, alternate
corrective actions can be more easily and accurately evaluated.

* Thinking about the future. Too often, small businesses neglect to plan ahead: thinking about
where they are today, where they will be next year, or the year after. As a result, opportunities
are overlooked and crises occur that could have been avoided. Development of the profit plan
requires thinking about the future so that many problems can be avoided before they arise.

* Financial planning. The profit plan serves as a basis for financial planning. With the
information developed from the profit plan, you can anticipate the need for increased
investment in receivables, inventory, or facilities as well as any need for additional capital.

Role of entrepreneurship in economic dvelopment

Need for Entrepreneurship Development

Economic development essentially means a process of upward change whereby the real

pr capita income of a country increases over a period of time .Entrepreneurship has an

important role to play in the development of a country. It is one of the most important

inputs in economic development. The number and competense of entrepreneurs affect

the economic growth of the country.

The economic history of the presently advanced countries like USA, Russia and japan

supports the fact that economic development is the outcome for which entrepreneurship

is an inevitable cause. The crucial and significant role played by the entrepreneurs in

the economic development of advanced countries has made the people of developing and

under developed countries consious of the importance of entrepreneuship for economic

development. It is now a widely accepted fact that active and enthusiastic entrepreneurs

can only explore the potentials of the countries availability of resourses such as labour,

capital and technology.

The role of entrepreneurs is not identical in the various economies. Depending on the

material resources, industry climate and responsiveness of the political system, it varies

from economy to economy. The contribution of entrepreneurs may be more in

favourable opportunity conditions than in economies with relatively less favourable

opportunity conditions.

Entrpreneurship and Economic Development

Entrepreneurship helps in the process of economic development in the following ways :

1) Employment Generation :

Growing unemployment particularly educated unemployment is the problem of the

nation. The available employment opportunities can cater only 5 to 10 % of the

unemployed. Entrepreneurs generate employment both directly and indirectly. Directly,

self employment as an entrepreneur and indirectly by starting many industrial units

they offer jobs to millions. Thus entrepreneurship is the best way to fight the evil of

unemployment.

2) National Income :

National Income consits of the goods and services produced in the country and

imported. The goods and services produced are for consumption within the country as

well as to meet the demand of exports. The domestic demand increases with increase in

population and increase in standard of living. The export demand also increases to meet

the needs of growing imports due to various reasons. An increasing number of

entrepreneurers are required to meet this increasing demand for goods and services.

Thus entrepreneurship increases the national income.

3) Balanced Regional Development :

The growth of Industry and business leads to a lot of Public benefits like transport

facilities, health, education, entertainment etc. When the industries are concentrated in

selected cities, development gets limited to these cities. A rapid development . When the
new entrepreneurers grow at a faster rate, in view of increasing competition in and

around cities, they are forced to set up their enterprises in the smaller towns away from

big cities. This helps in the development of backward regions.

4) Dispersal of economic power :

Industrial development normally may lesd to concentration of economic powers in a few

hands. This concentration of power in a few hands has its own evils in the form of

monopolies. Developing a large number of entrepreneurers helps in dispersing the

economic power amongst the population. Thus it helps in weakening the harmful effects

of monopoly.

5) Better standards of living :

Entrepreneurers play a vital role in achieving a higher rate of economic growth.

Entrepreneurers are able to produce goods at lower cost and supply quality goods at

lower price to the community according to their requirements.When the price of of the

commodies decreases the consumers get the power to buy more goods for their

satisfaction. In this way they can increase the standard of living of the people.
6) Creating innovation :

An entrepreneur is a person who always look for changes. apart from combining the

factors of production, he also introduces new ideas and new combination of factors. He

always try to introduce newer and newer technique of production of goods and services.

An entrepreneur brings economic development through innovation.

Entrepreneurship also helps in increasing productivity and capital formation of a

nation. In short, the development of the entrepreneurship is inevitable in the economic

development of the country. The Role played by the entrepreneurship development can

be expressed in the following words :

" Economic development is the effect for which entrepreneurship is a cause "

Small Business Development

What is in this guide?

This guide provides government policy on Small Business Development. It has the following
sections:
 1 Why develop small business?

2 Description of Small, Micro and Medium Enterprises (SMMEs)

3 Intended outcomes of the small business strategy

4 Support for the development and growth of SMMEs

5 Promotion of SMMEs by government

6 Business management support services

7 Access to loans for starting or expanding SMMEs

8 SMMEs established by women

9 The Youth entrepreneurship programme

1 Why develop small business?

Unemployment is one of the most important challenges facing the poor people in our country.
This has been made worse by the fact that over the last two decades, the formal economy
(especially mining) has been shedding jobs and many workers were retrenched. Furthermore,
every year hundreds of thousands of new job seekers (the vast majority of them youth) join the
army of unemployed.

It is accepted worldwide that the development and growth of small, micro and medium
enterprises (SMMEs) can play an important role in turning this situation around. Policies and
programmes to support the development of SMMEs are therefore an important part of the
democratic governments programmes to create a better life.

A strategy was outlined in a White paper by the Department of Trade and Industry (the lead
department for SMME development) entitled: A National Strategy for the Development of
Small Business in South Africa (May 1995). A year later, the National Small Business Act was
passed by Parliament, which provided for the institutions to implement this strategy.

2 Description of Small, Micro and Medium Enterprises (SMMEs)

The National Small Business Act divides SMMEs into the following categories:

Category of Description
SMME

Survivalist Operates in the informal sector of the economy.

enterprises Mainly undertaken by unemployed persons.
 Income generated below the poverty line, providing
minimum means to keep the unemployed and their
families alive.
Little capital invested, not much assets.
Not much training.
Opportunities for growing the business very small.

Micro Between one to five employees, usually the owner and

enterprises family.
Informal - no license, formal business premises, labour
legislation
Turnover below the VAT registration level of R300 000
per year.
Basic business skills and training
Potential to make the transition to a viable formal small
business.

Very small Part of the formal economy, use technology

enterprise Less than 10 paid employees
Include self-employed artisans (electricians, plumbers)
and professionals.

Small enterprise Less than 100 employees

More established than very small enterprises, formal and
registered, fixed business premises.
Owner managed, but more complex management structure

Medium Up to 200 employees

enterprise Still mainly owner managed, but decentralised
management structure with division of labour
Operates from fixed premises with all formal
requirements.

Note: Women represent approximately 56 percent of the survivalist company

category, 38 percent of micro-enterprises with no employees, and 15 percent
of micro-enterprises with 1-4 employees.
Small business can also be divided between established formal SMMEs (mainly white and some
Indian ownership) in predominantly urban settings and emerging SMME economy (mainly
African and Coloured) situated in townships, informal settlements and rural areas. According to
the White paper, by far the largest sector is the survivalist enterprise sector. This means that most
people are active in the informal sector where they have little institutional support.

The governments national small business strategy seeks to address the following common
problems faced by SMMEs:

An unfavorable legal environment

Lack of access to markets and procurement

Lack of access to finance and credit

Low skills levels

Lack of access to information

Shortage of effective supportive institutions

4 Intended outcomes of the small business strategy

The White paper and Act sets out the objectives of our SMME development policy as:

Alleviating poverty, by making it possible for poor people to generate income to meet
basic needs;

Reducing poverty through employment creation;

Redistribution of wealth, income and opportunities; and

Contributing to economic growth, by improving innovation and thus competitiveness.

The national small business development strategy also seeks to strengthen cohesion amongst
small enterprises and to level the playing field between big and small business.

5 Support for the development and growth of SMMES

The Act provided the foundation for the establishment of the institutions listed in the table below,
and the transformation of others, to support small businesses.

In addition to the listed institutions, there are also NGOs, donors and private sector organisations
(e.g. the programme by the Banking Council of SA) who support SMMEs. The Black Economic
Empowerment Commission, an initiative of black business, also highlighted the importance of
SMME development for broad based black empowerment.
Institution Services Target

Centre for This is a Chief directorate in the

Small Business DTI, responsible for policy and
Promotion coordination of support
programmes for SMMEs. It also
mobilises funds and supervises
the establishment of new
institutions.

Ntsika Provides non-financial support Targets survivalist, micro

Enterprise such as mentoring programmes, and very small enterprises.
Promotion business advice, help with Majority of the LBSCs
Agency government tenders and focus on start-up business,
technology support to small targeting unemployed,
enterprises, through: women and youth.

Local business service

centres (LBSC)

Tender Advice Centres

(TACs)

Khula Provides access tofinance Mainly targets very small,

through: small and medium
enterprises, with two small
Khula Credit Guarantee programmes for the
Scheme provide survivalist and micro
guarantee products to sector.
banks.

Other institutions and

NGOs, referred to as
Retail Finance
Intermediaries (RFIs)
which borrow from
Khula to make loans to
SMMEs

Khula-Start: access to
micro credit in rural
 areas

NAMAC Two key programmes

Manufacturing advisory The MACs are mainly for

centres (MACs), small and medium, more
providing support for formal businesses.
small scale
manufacturing BRAIN for the entire
businesses.
spectrum of SMMEs.
Business Referral and
Information Network
(BRAIN) information
and a help line.

Provincial To provide a one-stop

SMME desks information centre to SMMEs
and developing enabling
government policy to support
SMMEs in each province.
Activities of the SMME desks
include (though not in all
provinces):

Keeping data bases of

SMMEs in the province

Developing SMME
orientated procurement
and sub-contracting
policies for provincial
government

Targeted support
programmes for HDIs,
women, contractors,
tourism entrepreneurs,
small/micro
manufacturers, etc

Land Bank Finance agricultural businesses From small to large scale

 farmers.

Industrial Supports and funds various Predominantly large scale

Development industrial development projects, but some small to
Corporation programmes. medium enterprises. Has a
specific BEE mandate.

National Funded by government, it Large, but also small and

Empowerment provides funding for black medium enterprises.
Corporation economic empowerment
ventures

6 Promotion of SMMEs by government

The second National Small Business Conference organised by the DTI in 1998 focused on the
role of local government in SMME support. Local councils do procurement and sometimes form
partnerships with business to deliver services. The Local Economic Development approach
encourages local government to also play their role in promoting small businesses. The
Department of Provincial and Local Government administers a fund of about R42 million, to
which municipalities can apply for their LED projects. Many of the approved projects relate to
small business activities.

The promotion of SMMEs has become an objective across government. Many departments have
specific strategies in place, for example developing SMMEs in the tourism sector, or developing
small and emerging contractors by Housing and Public Works, Land and Agriculture, Arts and
Culture and so forth. The promotion of SMMEs is also an important part of the different spatial
development initiatives and the Urban Renewal and Rural Development strategies.

As part of the National Skills Development Strategy, the Sector Education and Training
Authorities (SETAs) are also supposed to develop programmes that help develop small
businesses in their respective sectors.

There are a number of other parastatals which also support small businesses, though mainly at
the upper end of the spectrum. These include:

Independent Development Corporation (IDC): tourism development, venture capital, low

interest empowerment and emerging entrepreneur schemes.

South African Bureau of Standards (SABS): through its missing links programme provide
quality assistance and awareness to SMMEs.

Centre for Science and Industrial Research (CSIR): product improvement and
manufacturing assistance to SMMEs through their National Manufacturing Centre.
 The Manufacturing Strategy (2001) of the DTI identified a range of sectors with potential for
growth of SMMEs. These included tourism, agro-processing, business services, cultural
industries, etc, with sectoral strategies to achieve this objective for each of these sectors.
7 Business management support services
The institutions and organisations mentioned above also provide a wide range of business
management support services to entrepreneurs and small enterprises, such as:

Developing business plans

Doing market research

Managing a small business

Legal requirements of small businesses

Marketing

Business development

Advice on government tender processes, etc.

BRAIN, the business referral and information network, established by the DTI provides a
national helpline and has a data base of services and organisations in each province which
provide these services.

Lack of access to finances continues to be the major problem faced by people who want to start
their own businesses, or to expand their businesses to become more profitable. Commercial
banks generally do not regard the majority of people as bankable or creditworthy. An important
part of the national small business strategy is therefore to create an enabling environment for
entrepreneurs and small businesses to access finances. Although a number of institutions have
been set up, we still have a very long way to go.

In the Medium Term Expenditure Framework, government has committed to establish an Apex
Fund which will lend directly to micro enterprises, and has voted R10 billion to recapitalise the
existing institutions like Khula and Ntsika.

Nation Contractors Finance Corporation

al Institutions providing finances to SMMEs

Business Partners (formerly the SBDC)

Commercial Banks

Community Projects Funds - CPF-SP

Development Bank of South Africa

Industrial Development Corporation - (IDC)

International Tourism Marketing Assistance Scheme - (ITMAS)

Khula Credit Guarantee Scheme

Khula Micro Credit Outlets

Khula Retail Financial Intermediaries (RFIs)

Khula Thuso Mentorship Scheme

Land Bank

Sizanani Scheme

Zimele

E Cape
Business Finance Promotion Agency (Khula RFI)

Community Entrepreneurial and Business Initiative

Eastern Cape Development Corporation

FNB Momentum Umsobomvu Progress Fund

Marang Financial Services

Free
Free State Development Corporation
State
Remmogo Business Finance

Gauten
African Contractors
g
Anglo Platinum Corporation

Artpac Lending Services

Basani Business Development Services

FNB Momentum UYF Progress Fund

Khethani Business Finance

Land Bank Marketing Department

http://www.brain.org.za/FINANCING/financingprovgaut.html -
landbank#landbankMarang Financial Services

Sankofa Financial Services

The Nations Trust

Tusk Construction Support

KZN
FINCA

FNB Momentum UYF Progress Fund

Ithala Development Finance Corporation

Khethani Business Finance (Khula RFI)

KwaZulu-Natal Development Foundation

Marang Financial Services

Limpo
African Contractors
po
Anglo Platinum Corporation

Artpac Lending Services

Basani Business Development Services

FNB Momentum UYF Progress Fund

Khethani Business Finance

Land Bank Marketing Department

http://www.brain.org.za/FINANCING/financingprovgaut.html -
landbank#landbankMarang Financial Services

Sankofa Financial Services

The Nations Trust
Tusk Construction Support

Mpum Beehive Entrepreneurial Development Centre

alanga Ekukhanyeni Finance Facility (Khula Micro Credit Outlet)
Emerging Entrepreneurs Finance Service Centre
Marang Financial Services
Middleburg Micro Credit Outlet
Mpumalanga Economic Empowerment Corporation - (M.E.E.C)
Siyakhula Micro Business Finance (Khula Micro Credit Outlet)

Northe Remmogo Business Finance (Khula RFI)

rn
Cape

W FNB Momentum UYF Progress Fund

Cape Khethani Business Finance (Khula RFI)
Landelike Ontwikkelings Maatskapy
Nations Trust (Khula RFI)

New Business Finance

 9 SMMES established by women
The national small business strategy, since its inception sought to target women. However,
women continue to make up the bulk of the survivalist sector of SMMEs and of the poor. During
the last decade, a number of organizations and institutions were established by and for women
entrepreneurs. These include:

South African SAWEN identifies the origin of women entrepreneurs'

Women problems as:
Entrepreneurs
Network (SAWEN) Gender - despite the fact that women-owned
launched July 2001 enterprises are contributing an increasing
share to national revenue, they are generally
perceived to lack the capacity of their male
equivalents.

Size - Nearly all women-owned enterprises

belong to the lower end of the SMME
category, being either very small or micro
sized companies. Men are predominant in the
more lucrative sectors. Approximately 70
percent of informal businesses in South Africa
are owned/controlled by women.

SAWEN seeks to affiliate all women enterprise

groups, co-operatives, organisations and initiatives in
to a national umbrella body that will represent and
articulate the aspirations of all women entrepreneurs
(potential and existing) that operate within the South
African SMME sector, as well as lobby for their
support needs. It also seeks to target rural women.
Since its launch in 2001, it has established a number
of provincial chapters.

Women in Oil and Facilitates the participation of women in business

Energy in South ventures in the oil, gas and other energy sectors.
Africa (WOESA)-
launched March
2002

Technology for Aimed at enhancing the accessibility of science and

Women in Business technology to women in business, in particular
(TWIP) SMME's. It is a national programme under the
auspices of the Department of Trade and Industry
(DTI). The CSIR, as contracted by DTI, acts as an
agent for DTI to implement the TWIB programme.

South African Promotion and advancement of women in

Women in construction; of education and contribution to the
Construction betterment of the construction industry and the
launched August enhancement of the entrepreneurial development of
1999 women-owned enterprises in construction.

10 The Youth entrepreneurship programme

In 2000 government announced the establishment of the Umsobomvu Youth Fund, out of the
proceeds of the demutualisation of Old Mutual and Sanlam. The fund started operating in 2001,
with the mandate to facilitate the involvement of young people in economic activities.
Umsobomvu implements a youth enterprise programme, providing both financial and non-
financial support to youth enterprises.

The youth entrepreneurship programme has three major projects:

Enterprise funding.

Micro-finance.

Business development services.

An estimated 700 SMMEs and 3 640 micro-enterprises will benefit from these projects over the
next three years, and approximately 17 000 jobs are expected to be created.

Enterprise Recently launched FNB-Momentum-UYF Progress Fund,

funding which complements the Franchise Fund, launched in
partnership with business partners.

Micro-finance Focus on entry-level investments, and its pilot projects with

the Nations Trust and Micro Enterprise Finance are funding
micro-enterprises and co-operatives.

Business Helps young entrepreneurs to access quality business

development support from approved service providers through vouchers,
services
voucher ranging in value from R1 500 to R23 000.

Take it to the Launched recently to create locally based economic

People project opportunities for young people. The project focuses on
income-generation and self-employment for young people
living in 21 urban and rural areas identified as significant
"poverty pockets". The project aims to develop local
solutions to unemployment by investigating options for
youth development in the form of micro and small
businesses and co-operatives. It will work in conjunction
with local municipalities and donors.

Contact, Aim to reach more than 730 000 young people over the
information & next three years, offering information and counselling
counselling support regarding career development, employment and
entrepreneurship through a youth line, advisory centres and
an Internet portal. The first 12 of 33 planned advisory
centres have already opened in the provinces of Gauteng,
KwaZulu-Natal, Limpopo, Northern Cape, North West, and
Western Cape.

School to Work Is designed to transfer high-level technical skills and to

facilitate work experience for unemployed matric and
tertiary graduates. It also aims to introduce black youth into
previously inaccessible careers, such as IT and accounting.

Youth Service Focuses on unemployed youth who have no tertiary

education, enabling them to acquire the skills,
competencies and experience they require to achieve
economic independence. This is done through a structured
learning programme and accredited through a SETA.
CONCLUSIONS

Government accords the highest preference to development of MSME by framing and

implementing suitable policies and promotional schemes like policies and promotional schemes,
providing incentives for quality upgradation, concession on excise duty and provides technical
supportive services. Thus Government play supportive role in developing entrepreneurs.

In this study, the relationship between small business development, economic

growth, and poverty alleviation in West Virginia is analyzed using time-series data from
1980 to 2001. Four econometric equations in double-log form are regressed using OLS
and 2SLS. The results of these regressions show that:
1) There is a robust, positive relationship between the relative size of small business
and economic growth, even when controlling both for a number of many other
growth determinant variables and for simultaneity bias;
20
2) There is a strong inverse relationship between the relative size of small business and
the incidence of poverty;
3) There is a strong inverse relationship between the per capita Real Gross State
Product growth and the incidence of poverty;
4) The autonomous impact of the relative size of small business on poverty rate is mild
and insignificant, indicating that the strong inverse relation given in (2) is through
economic growth rather than a direct one. Thus, the anti-poverty impact of small
business development is mainly through its impact on economic growth of the
economy as given in (1). The empirical result establishes the link between small
business development, economic growth, and poverty alleviation.
The study supports the anti-poverty impacts of small business development
research findings. Besides, the empirical results and analysis show that unemployment
rate has a strong counter-cyclical impact on economic growth and cyclical effect on the
incidence of poverty. Government Transfer programs are positively related with the
incidence of poverty, which may be because they act as disincentive to work or not high
enough to put the recipient above the poverty line. This indicates that strong
macroeconomic performance is a key factor for poverty alleviation.
REFERENCES

Acs, Z. J. and D. B. Audretsch, 1988, Innovation in Large and Small Firms, The
American Economic Review, 78, 678-690.
_______, 1990, Innovation and Small Firms, Cambridge: MIT Press.
_______. 1993. Small Firms and Entrepreneurship: An East-West Perspective.
Cambridge: Cambridge University Press.
Armington, C., and M. Odle, 1982, Sources of Job Growth: A New Look at the Small
Business Role, Washington DC: National Council for Urban Economic
Development, cited in R. J. Vaughan and R. Pollard, Small Business and
Economic Development, Financing Economic Development in the 1980s, edited
by N. Walzer and D. Chicoine. New York: Praeger, 1986.
Audretsch et al., 2000, Impeded Industrial Restructuring: The Growth Penality, Research
Paper, and Center for Advanced Small Business Economics, Erasmus University,
and Rotterdam, Netherlands.
Blank, R., 2000, Fighting Poverty: Lessons from Recent U.S. History, Journal of
Economic Perspectives, 14, 3-19.
Blank, R., and A. Blinder, 1986, Macroeconomics, Income Distribution and Poverty, in
Fighting Poverty: What Works and What Doesnt, S. H. Danziger and D. H.
Weinberg, eds.,Cambridge, MA: Cambridge University Press.
Blank, R., and D. Card, 1993, Poverty, Income Distribution, and Growth: Are they Still
Connected? Brookings Papers on Economic Activity 2, 258-339.
Beck, T. et al., 2003, Small and Medium Enterprises, Growth and Poverty: Cross-
Country Evidence, World Bank Policy Working Paper 3178.
Birch, David L., 1979, The Job Generation Process: Final Report to Economic
Development, Cambridge, MA: MIT Program on Neighborhood and Regional
Change.
______, 1987, Job Generation in America: How our Smallest Companies Put the Most
People to Work, New York: Free Press.
Brock, W. A., and D. S. Evans, 1989, Small Business Economics, Small Business
Economics 1, 7-20.
Brown, C., et al., 1990, Employers: Large and Small, Cambridge: Harvard University
Press.
22
Cain, G., 1998, The State of the Economy and the Problem of Poverty: Implications for
the Success or Failure of Welfare Reform, Discussion Paper 1183-98, Institute
for Research on Poverty, University of Wisconsin
Carree, M. A., et al., 2002, Economic Development and Business Ownership: An
Analysis Using Data of 23 OECD Countries in the Period 1976-1996, Small
Business Economics 3, 271-290.
Cushing, Brain, and Cyntia Rogers, 1986, Income and Poverty in Appalachia, Socio-
Economic Review of Appalachia (Papers Commissioned by the Appalachia
Regional Commission), Regional Research Institute, West Virginia University.
Cutler, D., and L. Katz, 1991, Macroeconomic Performance and the Disadvantaged,
Brookings Papers on Economic Activity 2,1-74.
Davis, S. et al., 1996, Small Business and Job Creation: Dissecting the Myth and
Reassessing the Facts, Small Business Economics 8,297-315.
Dean, J. et al., 1996, Business Networks: Growth Options Manufacturing and Service
Sector Comparisions, in Gibson, B. et al., (eds.), Proceedings of the Joint
SEAANZ and IIE Small Enterprise Conference, Newcastle Australia: IIE
University of Newcastle.
Deavers, Kenneth L., and Robert A. Hoppe, 1992, Overview of the Rural Poor in the
1980s, in Cynthia Duncan (ed.), Rural Poverty in America, Westport CT:
Greenwood Publishing Group Inc.
Dilger, Robert Jay, and Tom Stuart Witt, 1994, West Virginias Economic Future, in
Dilger Robert Jay and Tom Stuart Witt (eds.), West Virginia in the 1990s:
Opportunities for Economic Progress, Morgantown: West Virginia University
Press.
Dissart, J.C., and S.C. Deller. 2000. Quality of Life in the Planning Literature. Journal
of Planning Literature 15,1: 135-161.
Duncan, J. W., and D. P. Handler, 1994, The Misunderstood Role of Small Business,
Business Economics 29, 7-12.
Dunne, T. et al., 1989, Growth and Failure of U.S. Manufacturing Plants, Quarterly
Journal of Economics 104, 671-698.
Freeman, R., 2002, The Rising Tide Lifts..? in Danziger, S., and R. Haveman, (eds.),
Understanding Poverty, Cambridge, MA: Harvard University Press.
23
Gottschalk, P. and S. Danziger, 1985, A Framework for Evaluating the Effects of
Economic Growth and Transfers on Poverty, The American Economic Review
75(1), 153-161.
Haveman, R. and J. Schwabish, 2000, Has Macroeconomic Performance Regained its
Anti-Poverty Bite? Contemporary Economic Policy 18,415-427.
Harrison, B., 1994, The Myth of Small Firms as the Predominant Job Generators,
Economic Development Quarterly 8(1),3-18
Hausman, J., 1978, Specification Test in Econometrics, Econometrica, 46, 1251-1271.
Hayness, Ada F., 1997, Poverty in Central Appalachia: Underdevelopment and
Explotiation, New York: Garland Publishing, Inc.
Karlsson, C. et al., 1993, Regional characteristics, Business Dynamics and Economic
Development, in Karlsson, C., B. Johannisson, and D. Storey (eds.), Small
Business Dynamics: International, National and regional Perspectives, New