Entrepreneurs in the property industry crucial to South Africa’s recovery

Research by McKinsey
& Company
sites that SMMEs represent more than 98% of businesses in
South Africa, employing between 50-60% of the country’s workforce across all
sectors, and are responsible for a quarter of job growth in the private sector.

Local SMMEs have been hit hard by Covid-19. Analysis by
McKinsey & Company predicts that more than half of South African SMMEs may close
their businesses permanently before the crisis passes and the survival and
rebound of these SMMEs is critical to the country’s overall recovery.

Bonga Xulu,
Johannesburg Regional Portfolio Manager at TUHF says there are several reasons why
entrepreneurs are so important: “the first is the proven ability of small
businesses to have a positive impact on unemployment rates
”.

There are many international studies that indicate
the importance of a thriving SMME sector in creating jobs and contributing to
reducing unemployment
,” he says. “This is because they are often less
cautious about hiring people, with little or even no experience, than their
large corporate counterparts. SMMEs also tend to promote on-the-job skills
development for less experienced individuals, who are willing to grab
opportunities and make the most of them
.” 

The second reason is the SMMEs’ ability to be agile and
responsive to changing market conditions and client needs. Large enterprises
often have a lot of policies, processes and procedures that are not necessary
to manage large workforces and product or service portfolios, but these can
hamper their ability to adapt to change or to provide tailor-made solutions for
clients, particularly in a crunch Xulu says.

He indicates that SMMEs are seldom hindered in this way,
allowing them to be more innovative at a faster pace and to even disrupt the
industries in which they operate. “Amazon,
Uber and Airbnb are just some of the most well-known examples of
entrepreneurial vision. Once introduced to market each of these businesses
quickly disrupted traditional dynamics of their respective industries – and
have since grown to become multinational businesses operating across
territories
.”

Lastly, in tougher market conditions, smaller businesses offering niche and specialised services through an outsourcing model can, and should, be leverages by larger entities to effectively support their growth strategies. “By partnering with SMMEs to outsource non-core business functions, or to access niche skills that may not be available in-house, established large organisations can invest constrained resources in their own recovery and business continuity. In doing this, established companies also play a role in enterprise development by empowering up-and-coming small entities,” says Xulu.

Opportunities for budding property entrepreneurs

Urbanisation in South Africa is ongoing, as young
people continue to flock to our three major cities – Johannesburg, Cape Town
and Durban – to seek out opportunities
,” Xulu says. “This trend makes
investing in residential property in these inner cities a good opportunity for
aspiring entrepreneurs because they show consistent above average demand and
returns.

Residential rentals are increasingly in demand in the inner
cities as people seek out affordable accommodation with access to amenities and
reduced commutes to work. “Systematically developing a property portfolio –
such as starting with one’s own small apartment and adding to this as one’s
finances grow – puts budding entrepreneurs in a position to build capital that
could open doors for becoming property entrepreneurs
,” he continues.

Capital and a good track record of managing rentals on a
smaller scale is an important first step towards becoming a property
entrepreneur. “Entrepreneurs have a responsibility to start out with their
own capital, and demonstrate their dedication and ability to run a business
successfully, before they approach investors
,” Xulu believes, “and a
small property portfolio is a great way to do this
.”

From here, and with access to funding and the right support and advice, it is possible to grow a profitable, successful SMME.

Funding and advice

Entrepreneurs who want to grow in the property market
should look for funders who understand their market, not only because they are
more likely to invest with them but, perhaps more importantly, to gain access
to niche business and financial advice
,” Xulu recommends. “Because
entrepreneurs are often not financial experts – and budding property
entrepreneurs come from all walks of life – this access to niche financial and
business development advice becomes more and more important as the business
grows
.”

As an example, entrepreneurs who want to acquire a
property for refurbishment in the inner city are more likely to succeed in
their application for funding and gain access to expertise in this market from
a specialist in inner city rejuvenation than from a traditional commercial
bank. Take for instance how one approaches construction and tenanting for the
inner-city environment, which could differ greatly from how to approach these
in the suburbs.

The right finance provider will also provide the most
appropriate financial education for the entrepreneur’s area of interest,
ensuring a good working relationship between the two and ultimately increasing
the chances of successfully growing an SMME.

Despite the ongoing difficulties SMMEs face in
surviving the pandemic, there is still opportunity to thrive in a
post-Coronavirus future, however, focus needs to be given now to supporting
SMMEs – through sustainable and scalable initiatives. Without this,
positioning the country better for economic inclusion and enablement becomes
far more challenging
,” concludes Xulu.

Source: Propertywheel.co.za | https://propertywheel.co.za/2020/11/entrepreneurs-in-the-property-industry-crucial-to-south-africas-recovery/

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