Given the amount of investment into economic development programmes by South African businesses (estimated to be between R26 and R32 billion in 2019), one would hope this would translate into a flourishing entrepreneurship sector.

However, this doesn’t seem to be the case. For his GIBS MBA research project, Barries Barnard investigated a managerial perspective on the effectiveness of supplier and enterprise development programmes in entrepreneurial skills development.

Poverty is a major challenge globally, as well as in South Africa where, as in many other countries, entrepreneurship is regarded as a powerful mechanism to alleviate extreme poverty. The South African government has therefore written it into the objectives of the Broad-Based Black Economic Empowerment (B-BBEE) that “enterprises carry out supplier development and enterprise development initiatives intended to assist and accelerate the growth and sustainability of black enterprises”.

To achieve a perfect score for Supplier Development (SD) and Enterprise Development (ED) on their B-BBEE generic scorecards, enterprises must spend a minimum of 2% of their net profit after tax on SD initiatives and a minimum of 1% on ED initiatives. Therefore, many businesses operating in South Africa invest in SD and ED programmes to maintain or improve their B-BBEE status. One would expect that these programmes would effectively unlock the entrepreneurial potential within their beneficiaries and that there would be a boom in entrepreneurship in the country. Unfortunately, this does not appear to be the case.

Global Entrepreneurship Monitor (GEM) tracks entrepreneurial activity in 50 economies, including South Africa. According to GEM statistics, the business discontinuance rate in South Africa is rising, increasing from 2.9% in 2005 to 6% in 2017. Unemployment also continues to increase.

This suggests that entrepreneurial activity is deteriorating in South Africa and that the rate of deterioration is accelerating, despite growing investment into SD and ED programmes.

Do SD and ED programmes need to evolve?

Given that current SD and ED programmes in South Africa seem to have largely been ineffective in increasing entrepreneurial activity, I hoped that findings from my research might help in rethinking programmes to focus more effectively on improving entrepreneurial activity. Moreover, enhancements in SD and ED programmes could also make existing entrepreneurial businesses less likely to fail.

I also hoped to contribute towards the body of knowledge in entrepreneurial skills development, as my literature review identified certain gaps. These include the influence that training in non-cognitive skills, such as planning, communication and interpersonal skills (often termed “soft skills”), may have on small business performance and sustainability; the relationship between non-cognitive skills development, action regulation and entrepreneurship; and individual-level metrics for assessing entrepreneurial skills development.

Action regulation is a framework that explains how activities in processes are regulated in a work context, looking at the gap between thought and taking action. Recently, scholars have suggested that the way entrepreneurship is taught needs to be reimagined to help would-be entrepreneurs overcome this gap by focusing more on developing non-cognitive skills, such as personal initiative.

In other words, entrepreneurship programmes should aim to help participants understand how to move from having goals to taking actions that will help achieve those goals.

Which skills should programmes prioritise?

My primary sample of interviewees comprised 16 managers at 13 large enterprises that have been in existence for at least the last five years and which have been delivering SD or ED programmes as part of their Corporate Social Responsibility (CSR) programmes across a broad range of industries. The secondary sample consisted of four consultants from different consultancy firms, each having had at least five years of experience supporting large enterprises with the development and execution of their SD and ED programmes.

Interviewees identified the following as being the most important skills required by small business owners to grow their businesses and to become sustainable:

  • Business acumen and skills in general business management
  • Personal skills
  • An entrepreneurial mindset or skills
  • Interpersonal skills

However, while most managers indicated that small businesses owners should possess personal skills, as they consider these to be essential to the success of small businesses, the majority of the SD and ED programmes that they operate did not include components focused on the development of personal skills (specifically life skills).

In comparison, the majority of the consultants mentioned that the SD and ED programmes that they deliver on behalf of their clients do address the development of personal skills, from how to dress to professional behaviour, communication, how to promote one’s personal brand, and understanding one’s own strengths and weaknesses.

It would seem that consultant-developed programmes are more likely to incorporate personal skills training than manager-developed programmes.

Interviewees (both managers and consultants) appeared to be of the view that the development of an entrepreneurial mindset and entrepreneurial skills were less important than the development of personal skills, business acumen, and skills in general business management. Some seemed to believe that an entrepreneurial mindset comes naturally and cannot be learnt or developed. I argue that programmes should focus on developing beneficiaries’ personal initiative, improving their action regulation and developing entrepreneurial mindsets.

Most corporates seem to equate the effectiveness of their SD and ED programmes with whether or not the beneficiaries show good economic and operational performance. Some use metrics that focus on their own performance in delivering the programmes as a measure of the success of these programmes.

It seems that corporates generally don’t measure how effective their SD and ED programmes are in improving the knowledge and skills of their beneficiaries. I believe this is an important metric that should be considered.

Recommendations to increase entrepreneurial skills development

  • Incorporate psychology-based, non-cognitive skills development into SD and ED programmes: Non-cognitive skills promote action regulation, entrepreneurial propensity and entrepreneurial action, and their inclusion will help capacitate beneficiaries and enable them to have a better prospect of building successful businesses. Programmes should therefore include a focus on these skills, including planning skills and interpersonal skills.
  • Use the Balanced Scorecard as a performance measurement instrument: The balanced scorecard can be used to indirectly measure the effectiveness of SD and ED programmes by measuring the performance of beneficiaries directly. Managers can measure their beneficiaries’ financial performance, as well as leading indicators of financial performance, such as internal processes (innovation), customer perspectives (social impact) as well as learning and growth perspectives.
  • Influence institutional change: Management should be proactive, collaborating with intermediaries to effect change in institutions to address the inefficiencies and voids that impede the growth and sustainability of small businesses. Although small businesses have a role to play in promoting the formation of large and influential intermediaries to lobby for their interests, the managers of large and influential corporates could really impact effecting institutional change.
  • Establish collaborative platforms: Businesses should establish formal platforms to promote the development of social networks among entrepreneurs, as social networks allow entrepreneurs to exchange ideas and experiences, thereby stimulating entrepreneurial activity and promoting small business growth.

Implications for policymakers

The research findings revealed that the B-BBEE code requirements primarily drive compliance behaviour, as the code is inadequately structured when it comes to promoting entrepreneurial skills development.

Policymakers should revisit B-BBEE requirements and deliberately structure the code to entice corporates to improve the effectiveness of their SD and ED programmes in entrepreneurial skills development. More specifically, policymakers should include metrics that reliably measure entrepreneurial skills development as a key determinant towards a company’s B-BBEE score.

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