Riversands Incubation Hub - pioneering small business development

Today I visited Riversands Incubation Hub near Diepsloot in north west Johannesburg at the invitation of Anne Vicente who handles its PR and marketing. She is doing a good job - today's Business Day has a feature by Lesley Stones on the hub - you can read it here. Stones is upbeat about its vision and conveys the staff's sense of excitement about its potential impact on small business development.

I won't repeat what she says in her article but add a few observations of my own and comments from Anne and the hub's CEO, Jenny Retief who spent a valuable hour with me after my tour.

Century Property Development identified a need for job creation in the communities adjoining its large expanse of land which is now home both to the Hub and Riversands Commercial Park. Century developed the Hub in partnership with the Jobs Fund and the total investment is approaching R500 million.

Opportunity - one of the DA's policy pillars.
The others are Freedom and Fairness.
Riversands doing a pretty good job with all three! 

The Hub will house up to 180 small and micro enterprises "that will provide goods and services at quality and price levels that make them an asset to any company supply chain." The businesses have to be majority black owned, be viable and have the potential to grow and fit with the Hub's sectoral plans - mainly services, light manufacturing and food. The owner has to display entrepreneurial
characteristics and a capacity to execute his or her plan, and provide an economic opportunity for the surrounding area. Finally, the business must demonstrate a favourable ratio of cost and risk to benefit.

So clearly, Riversands is not for everyone as successful applicants have to be commercially grounded. This is one of the problems of other incubators, which take on too many unproven start-ups whose failure rate is very high.

5 businesses have already taken up premises, just a month after the Hub opening, another 7 are in the process of moving in and 62 are busy with the application process. Almost all the applications came from Diepsloot.

I visited three of the businesses and they were all very happy to have moved from the cramped, unsecure and expensive places they came from. To quote Anne, "Sello Makhamate of Zila Steel has now been able to target a nearby formal housing development because of the credibility he now has since his business moved to the Hub. The business support that he receives strengthens his business acumen. He, his family and his sub-contractors are all benefitting from the move."

Sello and his business partner before moving to Riversands

Stewart, a welder working for Sello at the new premises at Riversands

Tebogo Maake, who owns Maake Media, now operates from a 200 square metre premises which he rents for R2 100 per month. This is set to increase to R6 000 in three months and around R8 000 after 12 months. He is happy to pay the rent, as before he was paying more than R1 000 a month for a small room which could not accommodate his growth plans. Moving from Diepsloot allows him to invite customers to visit his business - before, they were reluctant to come to Diepsloot because of security fears.

Tebogo Maake outside his factory/office

Big Brain is a certified accountant, not a Chartered Accountant, meaning he can do the books for clients but cannot audit them. This doesn't seem to bother him. He aims to turnover around R600 000 a year after a couple of years at Riversands. There were two trainees in his office when I visited, who help out when the workload demands it. Big Brain is expanding and now has clients as far away as Carletonville.  

Big Brain in his old office in Diepsloot

Big Brain in his new office

I asked Jenny about the commercial viability of the Hub once the Jobs Fund money runs out. Apart from the tenants' rent, which is more for recovering running costs than repaying the capital invested, the Hub intends to offer facilities for training, conferences and events using its 450-seater and two smaller auditoriums, training rooms and large outdoor event spaces. It will attract funding from firms wishing to spend enterprise development, skills development and supplier development points on their BBBEE scorecards. And it will also seek funding from foundations and other grant-making institutions with a mandate to support small business development. As a non-profit company it does not need to provide a return to its investors. 

There is also the question of the cost of each job created, which Jenny said they could only really know a few years down the line. They do have some metrics of cost/return but were keeping these close to their chests. 

Apart from the small businesses, the Hub is attracting tenants such as Nedbank's small enterprise division, the Gauteng Enterprise Propeller and the South African Institute of Chartered Accountants to provide advice and services. Sitting within the Century Commercial Park, the Hub will offer its tenants access to potential customers on their door steps, while the activities and conferences will bring decision-makers and networking opportunities which most of the small business owners could never dream of in the township. This is all about professionalising them, taking them from the informal into the formal sector.

Traders doing business next to Diepsloot

 Jenny and Anne agreed with me that the business coaches and advisers allocated to each business should have business experience and not be purely bureaucrats. This is one of the problems with government support agencies such as Seda and Sefa - they are mostly staffed by pen-pushers who have precious little experience of running a business. The Hub likens the coaches to soccer coaches - they are there to push you to your limits, not to actually play the game for you.

One thing that impressed me is the time and care taken during the selection and induction process. Each business owner must have a thorough understanding of what they are getting into before they sign the 60 page lease, the performance agreement and code of conduct. There is no long-term binding lease agreement which punishes the business owner if things don't work out - they can leave after giving just 7 days notice. I think this is a very enlightened approach.

Jenny and her team know they are breaking new ground at Riversands and hope their model can succeed and inspire similar ventures elsewhere. They did not need reminding that scalability and replicability are key to South Africa being able to ramp up small business development fast enough to create the millions of jobs we need.