Launched in 2015 as the Enterprise and Supplier development unit of Telkom, the Telkom FutureMakers incubation programme has supported over 2500 small, medium, and micro-sized enterprises through incubation, investment, connectivity, and business development support services. We tapped the Telkom FutureMakers team for their insights into what’s happening in the world of SMEs in South Africa.
What are the challenges your industry faces?
Our industry requires constant innovation to ensure it remains competitive in an increasingly competitive market with reduced consumer spending. Hybrid working has also raised the demand for connectivity and digital services. However, poor economic conditions and personal income uncertainty has affected overall affordability levels for connectivity products. Telcos further require continued investments in network deployments and upgrades to ensure quality connectivity experiences for customers.
Telcos are reducing operating costs, establishing strategic partnerships to the acceleration of digital transformation and the innovative products and solutions to meet their customers changing needs. Leveraging of value-creating partnerships (including SMEs) to differentiate themselves to remain competitive.
“Telkom’s digital strategy is centred around providing API-powered services to the customer. The approach serves to enhance IT architecture, improve simplicity in service and enhance the cybersecurity posture of the application landscape. This strategy is delivered through a three-tier model focusing on skilled employees and efficient and effective processes, powered by leading-edge technology”. – Telkom Integrated Results 2023
Tech Small Medium Enterprises (SMEs) face a multitude of challenges including funding; capacity constraints, regulatory barriers; inadequate digital infrastructure; restricted access to markets; as well as limited access to local specialised technology and skills. Other general challenges include rising interest rates; lack of access to reliable electricity, internet connectivity, and other basic infrastructure to reach and maintain customer base.
“Poor economic conditions and personal income uncertainty has affected overall affordability levels for connectivity products. Telcos further require continued investments in network deployments and upgrades to ensure quality connectivity experiences for customers.
How were these challenges overcome?
Telkom has a deviated Enterprise Supplier Development (ESD) Programme that supports Small Medium Enterprises (SMEs) within the ICT Industry, therefore we provide financial and non-financial support to Small, Micro & Medium Enterprises (SMMEs). Training, mentoring, and digital skills are offered to our beneficiaries, amongst others.
What are some of the challenges SMEs within your supply chain have faced?
A lack of access to funding and at times lack of experience compared to large competitor organisations. SMEs thus often face challenges on their capacity and ability to deliver their service on large projects.
Have you increased your dependency on outsourcing?
In tough economic conditions, outsourcing some services enables substantial savings by lowering capital investments including operational and labour costs. Telkom’s flagship, the ESD Programmes i.e., Consumer Dealers Programmes, as well as Independent Field Technicians Programmes are products of such outsourcing initiatives where former employees were supported and encouraged to start their own businesses. Today, many of those independent SMEs are now thriving as suppliers to the business and Telkom continues to develop and support them financially and non-financially through the FutureMakers Programme.
Have you encouraged staff to start their own businesses as suppliers to your company?
Yes, some of our programmes were born out of retrenched staff and currently 80% of participants are ex-employees.
What is your secret to building a reliable upstream supply chain / supplier network?
Our intentional intrigued to support innovative SMEs and designated groups – e.g., 51% black owned, black women owned, black youth, people living with disabilities has supported us in growing our partner network of SMEs. The FutureMakers Programme is designed to ensure that its focus areas and the selected SMEs are strategically aligned, supporting the business to achieve its key objectives and that there is buy-in and ownership at the business unit level. This ensures return on investment and long-term sustainability of its SME development initiatives. FutureMakers also partners with Business Units to secure technical mentorship of the SMEs in the programme, to ensure security of supply and required customer service levels are maintained.
Do SMEs struggle to fund operations?
SMEs often reflect on limited access to funding e.g., collateral, assets, guarantees, and not being able to afford finance charges, etc. SMEs also lack access to necessary funds to spend on Research & Development (R&D) due to the large capital outlay required for Innovation and R&D. As strategic partners to Telkom in delivering new innovative value propositions, SMEs’ delay in producing market-ready products and services due to lack of funding etc, directly impacts our ability stay competitive and relevant and offer cutting edge solutions. In a competitive market, keeping competent staff is also difficult as they must compete with large cooperates on this.
How has the lack of their funding hindered the growth of your own business?
It has set back most companies, others closed, resulting in loss of employment and this drives inequality and perpetuates poverty in our communities.
Do you have a policy to play an active role in supporting SMEs?
Yes, we have an ESD Policy that speaks to SMEs within ICT Industry, and this is entrenched in the Telkom Supply Chain. This policy provides a framework enabling us to ensure good partnerships while ensuring our alignment with respect to the Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice element of ESD and forms the basis for a programme of entrepreneurial development programmes, investment, and preferential procurement for the advancement of the previously disadvantaged communities including Black-owned Qualifying Small Enterprises (QSEs), Black-owned Exempted Micro Enterprises (EMEs), Black Women-owned Entities, and Black Designated Suppliers. The policy is aligned to Telkom’s Group Procurement Policy, Telkom Group Procurement Manual, B-BBEE Codes of Good Practice, and the Information Communication and Technology (ICT) Sector Codes.
Any other comments about SMEs?
The successful operation of companies in most industries is becoming increasingly dependent on their ability to adopt and utilise ICT system, however ICT adoption often requires knowledge of business and IT, investment in IT, infrastructure, plans to invest and training in new Technologies and other aspects.
“SMEs’ delay in producing market-ready products and services due to lack of funding etc, directly impacts our ability stay competitive and relevant and offer cutting edge solutions. In a competitive market, keeping competent staff is also difficult as they must compete with large cooperates on this.”