Tourism: Business loans to SMMEs

A brand new financing facility has been launched by the Small Enterprise Finance Agency (Sefa) and the Tourism Enterprise Partnership (TEP) to provide business loans to SMMEs in the tourism industry. The purpose is to encourage development in this sector. Sefa has identified tourism as one of the key drivers for job creation in South Africa and features prominently in government priority programmes.

Given the difficulties experienced by SMMEs in gaining access to finance as well as the high rates charged by commercial banks, TEP saw the opportunity to establish the Ikwezi Tourism Facility (ITF). Ikwezi is a R50m ring-fenced, revolving credit facility exclusively reserved for TEP clients and is offered to all business owners, with preference given to black, women, youth and rural owned enterprises. It provides business finance to registered SMMEs in the tourism industry, including bridging finance such as short term financing to facilitate up-front contractual obligations; capital financing, such as the acquisition of new equipment and assets; and business expansion of current assets like buildings.

Although there is a plethora of banks and other development finance institutions in South Africa, access to finance has always been a major challenge to SMMEs. The complaint from SMME operators is that, in addition to the complicated and time consuming red tape involved in the funding application process, the interest rates charged by commercial banks are often punitive and therefore unaffordable.
 
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Probation: watch out for procedures

Probation is the best way to see whether someone will be able to live and execute the vision of the business and meet the job requirements. If after the probation period it is obvious that the employee is not the right fit for the position, the services can be terminated.

During the probation period it is advisable to document what the employee has failed to do, what you have done to help and why the decision to dismiss has been taken.

During the probation a worker should have access to:

• Detailed job requirements and a letter of appointment that clearly sets out the consequences of inadequate performance;
• Evaluation, instruction, training, guidance or counselling during the probationary period. These sessions should be recorded and become part of the employee’s file;
• The reasons why someone is being terminated during the probationary period, if applicable.

If permanent staff fail to meet requirements, disciplinary action may be the only way forward. 

As this can result in dismissal, it is vital that the correct procedures are followed which include: 

• Advising the employee that the performance is lacking;
• Putting in place and documenting a performance improvement process that outlines clear targets, feedback and the development required.

If there is no improvement, it could be necessary to move on to a disciplinary process. At this stage, up to three verbal warnings can be issued to the employee, who should be given opportunities to improve at each stage. You must keep a record of these. 

Employees’ rights

If an employee is dissatisfied with a work-related matter, they have the right to lodge a grievance with their immediate manager. If the grievance is not attended to, it can be escalated through the company to the CEO. Failure to deal with the matter effectively can then result in it being referred to a bargaining council or the CCMA for resolution.

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Credit Bureaus: Removal of adverse information

Effective as of 1 April 2014, all credit bureaus will automatically have to remove any negative information on the credit records of consumers. This comes after the Minister of Trade and Industry, Rob Davies, released the regulations for the Removal of Adverse Consumer Credit Information last month. The adopted bill is likely to be signed into law within shortly. This means that consumers will have negative information wiped off their profiles in the period between 1 April 2014 and when the bill becomes law which is anticipated to be in May.

The regulations form part of the National Credit Amendment Bill (NCAB) which aims to address shortcomings in the National Credit Act (NCA) regulating the industry. Consumers with judgement relating to paid-up accounts will continue to have this information removed from their profiles on an ongoing basis. They will not have to spend money on legal fees and go to court to have a judgement rescinded.

Financing by way of credit (Photo credit: Tax Credits)

However, the removal of adverse information on consumer profiles is not to be confused with the removal of debt. It is only the negative information that will be removed and consumers will still be liable for the debt. The credit profile will still show a credit provider whether payments have been skipped when they do their risk assessments.

All lenders will now have to register and a code of conduct will be drafted for the credit industry.

Many believe the removal of adverse information from consumer credit profiles to be a controversial piece of legislation. Most probably, credit providers will become more stringent on the lending criteria.

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Mentoring vital for long term success of SMEs

Survey proves the benefits to SMEs if they receive mentoring by business enterprise specialists. The long term results are outstanding.

The SME Growth Survey 2013 has been conducted by Fetola. It involves a selection of high-performing participants drawn from the 85 organisations comprising around 2 200 individuals in all nine provinces of South Africa who were part of Fetola’s 2013 Legends Programme which the enterprise development agency started in 2007. The results and feedback from the Fetola SME Growth Survey 2013 are a testament to the added value that a well-structured business support and mentoring service brings. 

According to the survey, the added value of business incubation and mentoring support from SME specialists was strongly evident by the fact that over a 5-year period, survey participants showed growth rates ranging from 50% to as high as 200%, compared to a national average of 0-49% for those SMEs ‘going it alone’.

Interesting findings from the survey include:

• 100% of respondents cited increased sales & marketing efforts as contributing to their success;
• 75% of respondents believed that improved Customer Relationship Management (CRM) systems boosted growth;
• 83% of respondents stated that improved staff training led to a direct increase in sales performance;
• Less than half of respondents felt that increasing their ability to access tenders aided their success;
• 83% listed improved financial management systems as a contributing factor to growth;
• 92% of respondents cited improved systems and processes as a contributor to their growth.

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