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We can all help create and preserve jobs

30th November 2021

Bongi (not his real name) is an enterprising young businessman. He runs vehicles between Johannesburg and Zimbabwe, owns two hundred head of cattle, and has dabbled in commodity trading online. Or he did – at the moment he is a gardener.

In the last two years, he has had dreadful family and business setbacks, leaving him emotionally battered and in debt. But he will bounce back with the support of acquaintances who fortunately have resources.

There is another gardener, let’s call him Thulani, who is doing a great job of raising his children after losing his wife. An older man, he is honest and reliable. But I can’t see him ever-rising economically beyond gardening.

Bongi and Thulani illustrate that different people may need different kinds of business support.

I have found it useful to distinguish four categories of business, each with a different kind of owner with different needs: fast-growth, steady-growth, stable and subsistence. Of course, they overlap and merge into each other.

Founders of fast-growth firms aim to grow as fast as possible, taking high risks, in order to sell after a few years. Promising firms attract investments from venture capitalists who throw money at a portfolio of such companies, expecting that a few will succeed fabulously. These are the stars of the entrepreneurial universe and are important for the economy. They generally find their own help, but they do need a congenial entrepreneurial ecosystem. Neither Bongi nor Thulani nor at least 99% of the rest of us belong here.

Steady-growth owners are in it for the long term. They want to grow their firms to earn more and eventually to bequeath a more valuable asset to their children. They will take moderate, considered risks, but not bet the firm. I think Bongi could do this with training and some capital. A bank would not lend to him yet, so he would need an angel investor.

Owners of stable small firms do not want to grow, because they want to do the work themselves rather than manage others. They might be professionals or artisans who love their trade. They need equipment to set up, and often a bank would be happy to provide it. They often need help with accounting and marketing.

According to the International Labour Organisation, four out of every five jobs in Africa is informal, like Thulani’s. These businesses usually comprise just the owner, sometimes with a few family members or friends who help out, often part-time.

They are too small and risky to interest banks. Their financial needs are modest, but it is difficult to save enough to replace equipment. So they often turn to short-term lenders at very high rates. They need small loans or grants at a reasonable rate to get one step ahead. And most need a friendly, knowledgeable mentor to guide them through basic business concepts like tracking revenue, costs and profit, pricing, saving, and finding new markets. Maybe 10% have the potential, like Mbongi, to move into growing businesses and begin creating jobs for others.

What will create the most jobs? Fast-growth firms can, but they are scarce and the jobs can be unstable. Steady-growth firms are probably our best bet for creating decent, sustainable work. Subsistence firms offer the best way to preserve jobs because that’s where most jobs are, although it is not always decent work.

So job creation efforts should offer Bongi capital and practical business training, and Thulani informal mentoring and small loans. Customised, personal learning works better than general curricula, but that takes personal attention. Maybe job creation efforts should equip those of us who know people like Thulani and Bongi (all the readers of Business Day) to recognise and support them.

 

Jonathan Cook is a counselling psychologist and chairman of the African Management Institute. He is also the host of AMI’s weekly Rise reflection series focused on supporting you in your business and your personal wellness.

This article was originally published on BusinessLive on 22nd November 2021 and is republished with permission.


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