Promoting Innovation
Definition of Innovation:
- Process by which an idea or invention is translated into a good or service for which people will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. – BusinessDictionary.Com
Ideas that never were
In the past ten years I have twice come across good ideas which never became a reality. Primarily the stumbling block was the fear that others would “steal the idea” and the originators would remain penniless. Here below the two stories:
Cellphone advertising
In 1998 I was distracted by the continuously updating message on my cellular phone that read “De Beers1”. This was the name of the cellular network mast closest to my present position. Then it struck me, what if the mast was called “Drink Coca-Cola”? And then further, what if I could send advertisements to multiple cellular subscribers?
I discussed the idea with some close friends and we decided to start a company that would register a patent and capitalise on the ideas of advertising over mobile cellular networks. Easier said then done!
After two years of work we were granted a patent by the Ministry of Trade and Industry in February 2008. By the way, almost all the work was done by ourselves as we could not even find a patent lawyer in Namibia.
We were elated and made an appointment with the only cellular operator in Namibia at the time. Great was our disappointment when they rejected the use of our idea out of hand.
Living with AIDS
In 1992, a friend of mine Q.T., confided in me that he had contracted HIV. At the time, I knew little about AIDS and had only once known someone that had died of the disease, and he had been homosexual. Like most people of the time, I considered this to be a disease confined to another section of the population. Here now was a friend who had “chased girls” with me on various occasions and we knew each other from childhood. We silently agreed never to discuss his looming death, and continued to see each other on occasion.
In 1997, I was pleasantly surprised when Q.T. visited my home with some rather startling information. His CD4+ T count had stabilised. In other words, he was not so susceptible to opportunistic infections such as TB, etc. and could expect to live a fairly normal life. He told me he had been to see “Johnny” a herbalist originally from Italy but now residing in Rehoboth. He had received a mixture of herbs and he had been taking them regularly for the past two years. This powder mixture was the only medication he had been taking and I could see he looked much healthier since the last time I saw him.
He arranged for the herbalist to visit me the following weekend. It turns out the herbalist was actually an Italian called Giovanni (or “Uncle Johnny) and he had been mixing herbs and plants for the past twenty years. I received some of the “magic potion” but he would not tell me what it contained. I proposed we draw up a confidentiality agreement, but he would trust no-one with his secret.
Shortly thereafter he passed away without me knowing his “secret recipe.” As for Q.T., we still see each other regularly and he recently had a baby daughter – not infected with the disease.
Innovation Incubators
I propose we create innovations laboratories with confidentiality agreements built into the system. An entrepreneur can sign up with the service and receive a confidentiality agreement. The entrepreneur can then submit a written copy of the idea together with the agreement to an Independent organisation such as the Namibia Chamber of Commerce and Industry (NCCI), or even a bank, for safekeeping. In this way, if an employee of the laboratories attempts to use the idea, the entrepreneur will have a legal tool to prove it is their original idea.
These Innovation Labs must be able to assist the innovator with protecting their idea through patents or copyrights, and the eventual implementation of their idea through negotiation with existing companies that can make this into a good or service for which people pay.
Small and Medium-sized Enterprises
It is a fact that many countries of the world have become economically stable due to the growth of the SME sector. (This is commonly referred to as the “Mittelstand” in Germany.) In Namibia the Government also supports the SME sector through the Ministry of Trade and Industry as well as through various financing schemes.
Studying the SME sector
Since 1991, I have been interested in small business, and what this specifically means. The term Small-and medium-enterprise (SME) was often used in our economic discussions within the NCCI and it referred mostly to black upcoming business at the time. The definition adapted was less than 5 employees and turnover not exceeding N$ 250,000.
The development of an economic database model of Namibia led to a private business census being done in 1998. The results were all electronically stored and the business model, NamBizDotCom, was born. A website was created with over 10,000 businesses and their contact details – including street address and contact person. The information was all provided free of charge.
Over the next few years various institutions have used the data to do their own surveys and published results. Another census was undertaken in 2003 and it was decided to work together with the Namibia Economic and Policy Research Unit (NEPRU) to provide an SME Impact Assessment for the Joint Consultative Committee (JCC). NamBizDotCom was responsible for the sampling of the survey.
The full study can be found at www.nepru.org.na.
SME Assessment Study recommendations
The following recommendations were made in the study and are still valid today:
a) new definition for SME’s needed;
b) Namibia-wide Business Census;
c) Review of Regulator environment; and
d) Incentives for Go Formal.
New definition for SMEs
The SME sector in Namibia, as presently defined by the Government, includes mostly informal businesses. It would be useful to re-define this definition to be comparable to what is referred to as SME in other economies. This will increase the number of businesses that can be assisted by programmes supporting SMEs. Currently only an official definition for small businesses exists. The definitions we propose here combine regulatory requirements and employment criteria. The aim is to define sizes of businesses in a way that is independent from inflation and is comparable to international standards. The definitions proposed distinguish between primary, secondary and tertiary sectors. (The table of definitions is included in the KISS essays at the end of the book)
The employment criteria for the primary and secondary sector are identical, only the regulatory requirements are different, whereas for the tertiary sector the employment criteria also differ. The advantage of having official definitions for all business sizes is that these can then be used for all kind of surveys, allowing data to be raised that is comparable. This will lead to a better understanding of developments in the different sectors. It will also help to target promotion and support programmes more accurately.
Namibia-wide Business Census
All estimates derived in this or any other report on the SME sector are inaccurate at best since the scientific basis for more accurate estimations is missing. This scientific basis would be a full business census. Equally to the population census a business census will allow the government to design better policies and target more accurately issues of relevance to national, regional and local development.
Small businesses are met by quite a number of regulatory requirements. They have to register with local authorities, the Social Security Commission, the Ministry of Finance once the turnover has reached a certain threshold, and other ministries for specific business licenses (taxi, mining, fishing, liquor licenses etc.).
However these requirements are not consistently enforced throughout Namibia. Clear guidelines for all Namibian businesses and operational support to implement them on regional and local level would be of benefit for small businesses. This would need to include more of a service approach to registration. Informal businesses should be given incentives to grow and to become formal and should not be forced to do so. Measures that can be recommended would be:
- Guidelines including all regulatory requirements;
- Support programmes to help small informal businesses to meet regulatory requirements;
- Training regional and local government staff to support small businesses from a regulatory perspective.
An important issue that needs to be kept in mind is that regulatory requirements translate into costs not only for the small business and the re-enforcing institutions (government and/or municipalities) but also for the economy in general with all its implications on poverty and growth.
Our enumerators noticed that in two towns, namely Gobabis and Ongwediva, the municipal officials were excessively stringent in preventing SMEs such as hawkers and meat-sellers. This seems to be caused on accord of pressure by rate payers on the municipal officials. Forcing kapana vendors (meat sellers) to sell from business premises with toilets will have a negative impact on the prices they have to charge and make the food hence less affordable for the poor. Increasing health standards raises the costs for products, not just the costs for the re-enforcing institution. The degree of consumer protection through health standards needs to increase in accordance with the regional and local economic development.
In general a practical and even handed approach should be adopted to re-enforcing regulatory requirements keeping local and regional poverty and unemployment levels in mind. The cost of registering with local authorities should be outweighed by benefits the small business owner receives for registering, for example.[i]
NamBizDotCom Surveys
The company has been working with business owners since 1999. The last full census was undertaken at the end of 2003 and the details were used to print 10,000 copies of the “NamBiz 2004 Business Directory”. The businesses were also requested to provide us with further information to assist in developing the services we wish to provide. The findings of this exercise are listed below.
Business skills
More than half the entrepreneurs had a basic education between Grade 10-12. The following areas also had a higher than average level of education:
- Information and Communication Technology (computer sales and repairs, cellular telephones, etc);
- Hospitality and Tourism; and
- Body Care.
Even though most entrepreneurs professed to have knowledge on accounting and basic bookkeeping, many did not make use of a double-entry bookkeeping system. In fact, most entrepreneurs stated assistance with bookkeeping and filing was probably their biggest need.
Business Needs
Less than 5% of the businesses felt that the SME assistance programmes were providing the assistance they need. The following areas of support were indicated as most necessary by the businesses surveyed:
- Finance (65%)
- Marketing (60%)
- General Management (40%)
- Purchasing (35%)
- Sites and Premises (35%)
- Technology Transfer (25%)
It is clear from the answers that most entrepreneurs still see the level of investment or ability to procure financing as their major stumbling block.
It was interesting to note from the answers to the type of bank account an SME’s has that more than 50% make use of a private savings account and almost 20% make use of their own private cheque account to run the business. Less than one-third of all businesses had access to a separate business cheque account.
The businesses were also asked how they felt about their current business performance and almost half of the entrepreneurs felt their business was performing “fair”. More than a third felt their business was doing “good”, around 10 percent felt their business was doing bad and less than 5% felt it was “very good” or “very bad”. What was interesting for the enumerators was that when asked how they expect their business to perform over the next six months, a third felt their business was “fair” and more than 60% felt it would be “good” to “very good”. This was also similar to the response on whether they would a) employ more staff; and b) increase their invest expenditure over the next six months.
It became clear that most entrepreneurs were positive about the future and their ability to grow their business.
The most significant need identified by SME”s was assistance with bookkeeping. A proposal is presently being prepared for a business package supplied to SME’s that will include:
- Registration for Local Authority, Social Security Commission, Value-Added Tax and Taxation.
- VAT and PAYE booklets
- Receipt and Invoice books – returned once a month and entered into a computer for monthly, quarterly and annual statements.
This is part of a proposal for Small Business Assistance Centres.
Existing programmes and their effectiveness
Most entrepreneurs were aware of some of the measures being established by the Government such as the Small Business Credit Guarantee Scheme, National Youth Credit Scheme or SME Bank. Nevertheless, most entrepreneurs indicated that they received very little assistance from any organisations. It was especially difficult for most owners to participate in meetings or attend seminars and workshops.
The vocational training schools and COSDEC (Community Owned, Managed and Administered Skills Development Centre) are often cited as “good” training institutions by entrepreneurs but they are not able to provide sufficient assistance once a business is established.
Practically all persons surveyed felt that the programmes from government were not reaching their intended target market.
Conclusion
The SME sector in Namibia, as presently defined by the Government, includes mostly informal businesses. These will probably not grow beyond their present size and will also not contribute significantly to become the “engine of growth” as so often quoted.
Therefore, it is necessary to re-define this definition to be comparable to what is referred to as SME in other economies. Thus, we will increase the number of business that can be assisted by the programmes being proposed by Government.
Lastly, the biggest problem experienced by the enumerators was the lack of trust that the business community exhibits when questioned on their activities. This might be from fear of the authorities, but is more likely the natural response by an entrepreneur when questioned on their activities.
Entrepreneurship Myths
Many people consider an entrepreneur to be either crazy or lucky, or perhaps a little bit of both? Many times however a business person becomes one through necessity. The following myths have bee reported all over the world on what most people think about entrepreneurs:
- 1. The risk taking myth - "Most successful entrepreneurs take wild, uncalculated risks in starting their companies". Trust me, most entrepreneur choose the one most likely to succeed after due consideration of all the options.
- 2. The hi-tech invention myth - "Most successful entrepreneurs start their companies with a breakthrough invention - usually technological in nature". Of all the entrepreneurs I have visited in Namibia, only one started a business built on a new idea. Most started a business by noticing a market and then customising their offering to meet the demand.
- 3. The expert myth - "Most successful entrepreneurs have strong track records and years of experience in their industries". Many of the business people have ended up in areas of business that had very little, if anything, to do with their profession and often even less to do with their field of study after school.
- 4. The strategic vision myth - "Most successful entrepreneurs have a well-considered business plan and have researched and developed their ideas before taking action". I wish this was true. Unfortunately, most entrepreneurs (in the beginning) fly by the seat of their pants.
- 5. The venture capital myth - "Most successful entrepreneurs start their companies with millions in venture capital to develop their idea, buy supplies, and hire employees". The most often quoted problem for SME’s must be “their lack of access to capital”. Of all the entrepreneurs interviewed during the past 20 years, all agree. However, almost none of them started their business with outside capital. They raised small amounts of money among friends and relatives to start their business.
Most entrepreneurs do however have vision, lots of stamina and a spirit of not giving up. Interestingly, many entrepreneurs end up being successful at something other than the area they started in.
Entrepreneurial Development in Namibia
The difficulty in entrepreneurial development strategies is often found in the dilemma of whether an entrepreneur is born or made?
For most development agencies and political leaders, the answer we hope, is that we can train anybody to be an entrepreneur. The other argument is that some people are born with entrepreneurial traits and behaviours. However, they must develop these traits and also learn skills such as management skills.
Either way, all people can be assisted by developing certain skills to assist them in business. In example of a programme such as this was done in Namibia in the early 2000’s under the Enterprise Namibia Foundation.
Enterprise Namibia Foundation
“EMPRETEC is an integrated capacity-building programme of the United Nations Conference on Trade and Development (UNCTAD) in the area of SMEs and entrepreneurial skills promotion. It is dedicated to helping promising entrepreneurs put their ideas into action and fledgling businesses to grow. EMPRETEC's core product, the Entrepreneurship Training Workshop (ETW), is based on a unique Harvard originated methodology focused on a behavioural approach to entrepreneurship.”[ii]
The ENP did not continue to function after the donor funding period ended. The successes of the programme often included a network of entrepreneurs who met each other during the training and were able to continue doing business with each other afterwards. This support programme did not materialise in Namibia and was one of the main contributing factors leading to its demise.
Namibia should look at the EMPRETEC model and redesign it for the Junior Secondary School level. It can then be run as a two week summer camp where only a few students per school attend the same training course with other pupils from across the country. This way a network of pupils across the diverse areas of Namibia will be created. (This is very similar to the “veldskool” held in the past.”
What are the Entrepreneurial Skills?
An entrepreneur should posses the following skills:
- Management skills
- Communication skills
- Ability to work as part of a team and on their own
- Be able to plan, lead, organise and control
- Be able to read financial statements
- Be able to do research, for example market research, customer surveys
- Disciplined, especially with money
- Self-motivated
- Able to multi-task
- Ability to network and make contacts
- Adaptable
- Be competitive
- Willing to take calculated risks
- Perseverance
In fact these skills are the same all managers should have that work within larger companies. Regardless of the field of study, for example mathematics, science, economics etc. taken at Secondary School, a young person still needs to add these skills to their arsenal. To this end we need a one-year vocational diploma similar to the International Diploma of the University of Cambridge. The course will also include:
- being able to draw up a business plan for a new venture
- being able to market and sell a new product or idea
- financial skills, such as book-keeping and calculating tax
- awareness of intellectual property and possibly patent law
Each subject can be taught in over a period of 40 hours and should include an accredited Diploma.
Strategy for SME Development
I propose two approaches for SME and Entrepreneurial Development in Namibia. The first, a push- strategy, requires government and private sector partners to identify existing entrepreneurs and provide targeted assistance. In the second, a pull-strategy is suggested which consists of country-wide “one-stop shops” for entrepreneurs.
Entrepreneur Identification Programme
The Entrepreneur Identification Programme (EIP) is a Private Public Partnership. In other words a company that wishes to identify potential clients for its products or services, wishes to target SME’s, for example the Financial Advisors of the insurance industry. Together with the Ministry of Trade and Industry (or a designated consultant), a roadshow is designed to identified areas within the country.
A step-by-step approach is followed in each area:
Step 1: Identify all businesses and entrepreneurs in the geographical area (census)
Step 2: Invite registration by owners / managers in the EIP.
Step 3: Provide workshops of 40 hours each (that is 5 days times 8 hours) in each of the following areas:
- Business Organisation (legal framework plus overview of business)
- Business Communication (Including business English and IT skills)
- Finance (non-financial managers – that is understanding of financial statements not preparation such as bookkeeping)
- Marketing (including market research, customer surveys, etc.)
- Human Resources (managing the workforce)
Step 4: Entrepreneurial skills testing and certification
Step 5: Mentoring programme (preparation of business proposal and deliverables)
Step 6: Financing mechanism put in place, i.e. share participation by pension funds, loans from development bank, preferential shares with specified dividends for a set period, etc.
Step 7: Constant monitoring (every three months)
As the business grows, it will require more and more services, such as short-term insurance, bookkeeping, etc. The business advisor from the Private Partner Company now has a group of clients that can be serviced. The relationship between the advisor and the entrepreneurs becomes a network of services in the geographical area.
One-Stop Shops
Small Business Assistance Centres (SBAC) can be packaged together with the envisaged local community centre in each constituency. A national training programme needs to be developed and continuously revised to ensure the local SBAC is aware of all business legislation, both local and national.
The SBAC will assist the SME to organise funding for infrastructure, capital goods such as machinery and equipment, land working capital, etc. They assist in the preparation of business plans, applications and any other documentation the SME might need to start, or expand, its operations.
Each of us goes through various phases during our lives. In the same way, a person who has the desire to start a business will go through phases in the business cycle. It is the responsibility of these SBAC advisers to identify the stage the business is in and provide the appropriate assistance.
Super's Theory
Donald Super (1957) recognised the changes that people go through as they mature. Career patterns are determined by socioeconomic factors, mental and physical abilities, personal characteristics and the opportunities to which persons are exposed. People seek career satisfaction through work roles in which they can express themselves and implement and develop their self-concepts. Career maturity, a main concept in Super's theory, is manifested in the successful accomplishment of age and stage developmental tasks across the life span.
Self-concept is an underlying factor in Super's model: "...vocational self-concept develops through physical and mental growth, observations of work, identification with working adults, general environment, and general experiences....As experiences become broader in relation to awareness of world of work, the more sophisticated vocational self-concept is formed"--- (Zunker, 1994, p.30).
Super's contribution was the formalization of stages and developmental tasks over the life span:
Growth: Birth to 15:
Form self-concept, develop capacity, attitudes, interests, and needs, and form a general understanding of the world of work.
Exploratory 15-24
"Try out" through classes, work experience, hobbies. Collect relevant information. Tentative choice and related skill development.
Establishment 25-44
Entry skill building and stabilisation through work experience.
Maintenance 45-64
Continual adjustment process to improve position.
Decline 65+
Reduced output, prepare for retirement.
* * * * * * * * * * * *
In our behavioural approach to entrepreneurship we can see a similar development such as “Super’s Theory” in the life cycle of the entrepreneur. The Small Business Assistance Centre (SBAC) must be able to assist in each of these phases through specific assistance packages.
Growth
The entrepreneur (or group of entrepreneurs), have formed an idea of the business they wish to start. At this stage they need to have a library of ideas at their disposal. For example “101 Business Ideas”, list of small-scale factories in India, etc.
Exploratory
The entrepreneur needs expertise. The Small Business Adviser is able to direct them to identified experts in marketing, finance and legal matters. This can possibly be done with a coupon system – and it can be incorporated in the training of lawyers and accountants to provide a certain number of free consultation hours during their apprenticeship.
Establishment
The business is legally registered with all the relevant authorities (national, local, chamber of commerce, social security, taxes, etc.). At this point a reputable accounting firm is also appointed.
At this point the entrepreneur also needs to formalise their business skills. They can participate in the EIP, or get credits from local colleges for the coursework basics of Business Administration, Finance, Human Resources, Marketing and Communication.
Maintenance
The company expands and create more job opportunities. The business now has direct contacts with the Ministry of Trade and Industry and is actively looking for export opportunities.
Decline
The entrepreneur (now owner), is assisted with transition planning within the business. Most owners wish to have family members continue the “tradition” but this is not always feasible today. Government, for the sake of employees and export earnings provide some assistance in this regard.
Industrial Development
The Directorate of Industrial Development “spearheads the promotion and development of industrialisation, SMEs, and entrepreneurship with the aim of promoting growth and diversity of the economy, reducing poverty and income disparities, and unemployment. Its functions include amongst others industrial planning and appraisal, policy and strategy formulation and monitoring the implementation of such plans and programmes.”[iii]
In almost all investment material about Namibia the following quote will be found:
“Namibia’s manufacturing sector is relatively small and contributes approximately 13% to GDP. Recent progress made in manufacturing has been due to the expansion of fish processing and the constant output of the meat processing industry. Considering the open nature of the Namibian economy, with almost all consumer goods being imported and most primary resources being exported largely unprocessed, there is clearly tremendous scope for import-substitution manufacturing as well as value-addition to Namibia’s rich natural resources. To stimulate the expansion and diversification of the manufacturing sector for economic growth, the Government has put attractive packages of incentives for manufacturers and exporters of manufactured goods in place.”
Then the list of potential manufacturing projects will be listed and you will find the following listed there too; Cement Plant, Tomato Paste, and Cotton Ginnery. I first came across this list when I started working for the NCCI in 1991. It was a list of projects developed by the First National Development Corporation in circa 1986.
The Namibian Industrial Development Plan is stagnant and needs a drastic re-think. It is time to take another look at our industrial development policy and recognise the world, and Namibia, has changed drastically.
Build Operate Transfer
The Namibian Government has been responsible for finding financing and operating infrastructure and development projects.
Some of these projects can be wholly or partially implemented by the private sector. They can include airports, canals, dams, drainage, education and health facilities, government buildings, highways, housing, hydropower projects, industrial estates or townships, information technology networks and database infrastructure, irrigation, land reclamation projects, markets, ports, power plants, railroads and railways, sewerage, slaughterhouses, solid waste management, telecommunications, tourism projects, transport systems, warehouses, water supply,
These projects can be undertaken under a legal framework that can include provision for the following: Build-Operate-Transfer (BOT), Build-Transfer (BT), Build-Own-Operate (BOO) and Build-Transfer-Operate (BTO). The law can also provide for projects that rehabilitate infrastructure under one of the above.
For each project, the private sector project promoter must obtain the financing, whether foreign or local, themselves.
Examples can be
a) Broadband, high speed Internet cables throughout the country;
b) a water canal system around a housing development at the coast near Mowe Bay or any other coastal town;
c) Central Register for Government; and
d) International-standard Hotel Training school.
Manufacturing Incentives
The present manufacturing capacity should not be neglected through any difference in strategy. In fact, we need to make the present tax regime for manufacturing companies straight forward.
The definition for manufacturers should be:
“.. a business that includes all steps necessary to convert raw materials or parts into finished goods for the consumer market.”
If a business in Namibia meets these criteria, they should have a uniform tax rate of 10% on net profit. Additional growth incentives (in the form of refunds) can be granted for activities undertaken to expand to external markets.
New Strategy for Industrial Development
During the last century it was an accepted fact that economic evolution was linear and went from agricultural to industrial to the service economy. We need a new way of thinking in Namibia. We can move from an agricultural economy to the Information and Knowledge Industry
During the past decade several countries have implemented such a policy of leaping forward and skipping the industrial stage. Hong Kong, India, Israel, Switzerland, and Singapore are some examples of countries that got involved in this revolution. Some of these countries are over-populated, or a desert, so we have no excuse for this not being able to work in our country.
Best of all, Namibia can accommodate this type of industry as they are affordable, accessible, easy to understand and to implement and highly profitable.
The “World is Flat” as a book written by Thomas L. Friedman, and provides a very good overview of how the information age has changed the world. In this, and other modern literature, we realise that in our global village “it matters less where you are, but rather what you think. A global premium is placed on innovation, creativity, improvisation and the entrepreneurial spirit.
These - new mental commodities - are abundantly and equally available to all the countries in the world: poor and rich, off-centre and on-centre, developed, developing and less developed.”[iv]
Many of us still believe that we need huge amount of resources from donors or investors to become part of the developed world. WRONG.
We need people with skills and knowledge to work in the modern world of information and technology. We need to encourage our learning institutions to become “universities of science and technology” just as the Polytechnic is transforming itself.
[i] Small Business Impact Assessment 2003 - Dr. Christoph Stork, Moureen Matomola, Milton Louw
[ii] http://www.unctadxi.org/templates/Page____7362.aspx - accessed 18 April 2009
[iii] MTI website accessed 20 April 2009
[iv] Cyclopedia Of Economics, 2nd EDITION, Sam Vaknin, Ph.D.