Speech by The Deputy Minister of Telecommunications and Postal Services, Hon Prof Hlengiwe Mkhize, during The Franchise Convention, Summer Place, Hyde Park
"Empowering women through the franchise model"
Let me first start by thanking the organisers of this event for the time and resources they have used up in putting together this event. They conduct this event every year and we commend them for their tireless efforts.
This event couldn't have happened at a better time as this month we are celebrating the Freedom Month under the theme: “Celebrating the Beginning of the Third Decade of our Freedom through Accelerating Radical Economic Transformation”. This is the month that saw the first democratic elections in 1994 that gave birth to freedom and constitutional democracy in South Africa. We have come a long way in addressing the economic, social and cultural challenges created under apartheid. The year 2015 ushers the beginning of the third decade of democracy and freedom. Siyaquba!
This year’s Freedom Month falls on the 60th anniversary of the historic adoption of the Freedom Charter, which boldly proclaimed: "The People Shall Share in the Country`s Wealth!". This amongst other things implied that the industry and trade shall be controlled to assist the wellbeing of the people.
I have been requested to talk to you today about "Empowering Women Through The Franchise Model". We are all aware that franchising falls within the most important sector of our economy, the Services Sector. This sector is the most important in that it contributes over 70% to the country's Gross Domestic Product (GDP) and accounts for over 72% of employment in the country. The World Bank has estimated the economic growth in South Africa to grow by 2% this year compared to last year's 1.5%. This can be achieved if sectors such as the Services Sector continues performing well. In as much as we are working hard to industrialise, we should not disadvantage the services sectors since they contribute greatly to employment and GDP.
We noted a recent survey by FASA on the franchise industry which has shown that there are over 30 000 franchised outlets, of which 26% are black owned and 28% are owned by women. Where franchising contributes to a great extent is in job creation providing close to 400 000 jobs, most of whom are black employees with only 23% being white. This is already a very positive step in the right direction and the franchise industry employment figures show that the industry is representative of the country’s racial demographics.
But there is much more that can be done to promote women in business. The dynamism of women entrepreneurs is a positive force that is growing at a tremendous rate and should be encouraged at every opportunity. We already see this within our township communities with women running spaza shops, providing services such as child care, hairdressing services etc.
Women play an important role in franchising worldwide as it is a business method that is often family inclusive, structured within a strong support network. It holds a special attraction for women in that it provides the necessary safety net that a normal start-up business does not provide. Women are particularly good at working within a system.
There has recently been a resurgence of “female” franchises, such as beauty salons, slimming salons, nail bars as well as franchises in the education, accessory and arts and crafts area that are attracting the female entrepreneur. A great success story is the Sorbet Health and Beauty Franchise in South Africa and Education Franchise Master Maths.
It is said that women are often better at managing small businesses because they are more organised - after all they also have experience in managing their families, and managing their businesses is an extension of that. They are creative, good at people management, team work and negotiation.
Internationally women are taking the lead in starting up successful small businesses and South Africa is no exception. Statistics in the United States, for example, indicate that women are starting businesses at twice the rate of men and that women’s enterprises outstrip overall business performance in revenue and employment growth.
The country continues to be faced with the triple challenges of unemployment, inequality and poverty. The effect of the challenge of unemployment is in most cases underestimated. With an estimated population of 54 million, the country's official unemployment rate is estimated at 24.3% with a Labour Force Participation Rate of only 57.3%.
In a new report issued by the International Labour Organisation (ILO), South Africa is projected to have the 8th highest unemployment rate in the world in 2015. The country ranks even more poorly in terms of youth unemployment, ranked 6th globally, with a rate of 52.5%. The country's share of 1.9% to the global youth unemployment with a share of only 0.77% of the population of the planet is an indication that urgent intervention is needed especially coming from the business fraternity such as the Franchising Association of South Africa (FASA). Franchising should serve as a small business incubation for young entrepreneurs whereby these businesses will be skilled and trained in areas such as financial management to leave them as a well-oiled machinery of the economy.
Most of these franchises operate in the food and beverages sub-sector of the services sector, they rely heavily on manufacturing. Food and retail subsectors make up more than 40% of the franchises available in South Africa. Franchises must support government's national priorities. This sub-sector is an important integral part of the manufacturing sector. One of the nine points strategy "Revitalising agriculture and the agro-processing value chain" must enjoy real support from the franchising business. Beverages account for just over 4% of all manufacturing sales while food is responsible for 13.5%.
The popularity of the food and beverages subsector presents a new opportunity for ICT related opportunities such as Business Process Outsourcing (BPO). As more people are getting familiar with online and telephone ordering services, opportunities are then opened up for real entrepreneurs to open call centres where all order calls will be handled.
Franchising as part of the services sector creates an opportunity for start-up businesses. The challenge that most of our people, particularly women, find themselves faced with is the issue of start-up funding and the creation of a business plan or proving that the business is viable.
As we will be rolling out broadband infrastructure this year we expect people to take up the digital opportunity that will be presented by the availability of broadband. In 2013, Cabinet approved the national Broadband Policy- SA Connect. SA Connect clearly identifies four areas of interventions, called strategies in the policy, which have to be implemented for us to see the realities of broadband access in the country. These are: digital readiness, digital development, digital future and digital opportunity. In terms of Broadband Policy, we aim to reach 100% broadband adoption by 2020 at a speed averaging 10 Megabits per second (Mbps) for government institutions, and 80% of schools and health facilities at 100Mbps and for citizens at a speed of 5Mbps. This year we will put our focus on implementation, starting off at the eight districts which are used as pilot sites for the National Health Insurance (NHI). These are: OR. Tambo (EC), Gert Sibande (MP), Pixley ka Seme (NC),Thabo Mofutsanyane (FS), Umgungundlovu & Umzinyathi (KZN), Dr Kenneth Kaunda (NW) and Pixley ka Seme (NC).
With a view to encourage participation in the mainstream economy and also to ensure there are no barriers to entry, government has the National Empowerment Fund (NEF) and the Small Enterprise Financing Agency (Sefa). These are tools aimed at servicing small, medium and micro enterprises. On the other hand the Small Enterprise Development Agency (SEDA) is there to assist start-up enterprises in administration issues such as developing a business plan.
Franchising can be the low-risk, high-reward route to owning your own business. It allows you to be your own boss, to build your business as far as your talent and ambition allows, and best of all, it allows you to reap the profits personally. It also gives you the back-up of an established franchisor with a known brand and a proven business system, a roadmap to success that’s been travelled many times before by others. While a high proportion of independent start-up companies quickly fall by the wayside, figures show that franchisees have a significantly higher success rate.
The other important area where franchising can make a difference is in social franchising – a public/private partnership that can assist with service delivery projects. In short it is the application of the franchising philosophy and methodology within NGO’s to achieve business like results and higher efficiencies and easier multi branch roll outs. One such project that has been piloted for nurses in North-West is showing fantastic results and they hope to expand the project to other service delivery units.
My challenge to the franchise sector and particularly franchisors is to drive black franchisee recruitment, especially from this pool of ‘young township entrepreneurs’, identify them and train and develop them with the aim of making them franchisees.
As well as creating business models that can be forgiving on the upfront cash component requirements and rather look at the franchisee franchisor relationship more as a long term journey.
This is an effort that Governmental agencies are already working on and it is a focus of the newly formed Small Business Ministry.
But the potential for economic development through these enterprising women is enormous and with a strong franchisor/franchisee relationship and sound franchise business support, we could see a new wave of franchisee opportunities that could potentially contribute greatly to our country’s economic development.
My challenge is also to the banking sector to provide entry level as well as continuous education and funding models, to mentor and develop rather than just fund for profit.
What are the consequences to us as a nation and to the franchising industry if we do nothing? Continuing poverty, a very unsatisfied growing mass electorate dependent on grants and handouts which will not be sustainable going forward.
I leave you with this message: The franchising industry cannot be idle and believe that poverty is not a problem for every business in South Africa - franchisors and franchisees alike must act and contribute, however small, to solving this problem and help create prosperity for everyone.
Thank you.
