In the developing world, small medium and micro enterprises (SMMEs) make up as much as 90% of the tourism sector. In South Africa, this is not the case, despite 20 years of investment into SMMEs in the sector, while another challenge is the transformation of the sector through SMMEs.
Small business is big business
A key focus at this year’s Tourism Indaba, and the focus of day two was Small Medium and Micro Enterprises (SMMEs). The day featured a Media talk on the economic importance of SMMEs. The Media Talk panel comprised Michael Mabuyakhulu, MEC for economic development and tourism in KwaZulu-Natal, Dr Salifou Siddo of TEP, Mmatsatsi Ramawela, Chief Executive Tourism Business Council of South Africa, and Lynette Ntuli, a founding director and Chief Executive of Innate Investment Solutions (Pty) Limited.
Small business is big business for government says MEC Mabuyakhulu. “In Japan and China the majority of players in the tourism industry are SMMEs and event OECD countries are starting to follow this trend.”
Also important in South Africa is the role of SMMEs in transforming the tourism landscape according to the country’s demographics. “As such it is an area that requires intervention,” says the MEC.
Areas critical to success of SMMEs
Four key areas were identified by the panel as critical to ensuring the success of SMMEs in this country. These include access to finance and markets and skills and business advice. “Any effort that seeks to get SMMEs to grow and be sustainable have to address these areas,” says Dr Siddo, who has worked with SMMEs in the industry for 16 years. During this time, his organisation has created 83,000 jobs, with a turnover of R7 billion and mentored 430 SMMEs and 24,000 entrepreneurs.
“One of the greatest areas of need is access to finance as financial institutions view tourism as a high-risk area,” he says. The MEC agrees with him, saying: “Raising funds is a challenge for many SMMEs, especially for Previously Disadvantaged Individuals (PDI) who more than often not do not have access to equity.”
Tourism is a 24/7 industry. It is important to understand the nature of the industry. Too often it is knowledge and information that is holding the entrepreneur back. “A lack of information and knowledge is holding the SMME industry back, says Ramawela. “Access to markets implies networking and knowing people. The tourism business is about people and trust. A business will exhibit at the Indaba for three years - in the first year they will meet the client, in the second they will give the client information and only in year three will the client give them business. So it is not an easy sector. This, however, is not an excuse for a lack of inclusiveness.”
Taking the topic further, Ntuli says there is no support framework for SMMEs. “Instead of approaching your business with the objective of how can I make a profit; SMMEs need to say how can I attract customers and then retain them.”
SMMEs need to be disruptors
For her SMMEs need to innovate in this space if they are to succeed. “Airbnb and Uber are two examples of innovations that have transformed industries. SMMEs need to be disruptors and need to do this through technology. Look at what new packages can be developed, for example, 20 years ago we did not speak about sports marketing. Today township marketing is very successful. Tourism is about selling experiences so think about what new experiences you can develop for visitors.”
To promote SMMEs this year, for the first time, the INDABA featured a Hidden Gems Zone that showcased the products and services of 70 SMMEs of which 14 are Lilizela Tourism winners. Lilizela is a Nguni word which means to ululate: an act of congratulations when someone has done something well and the Awards recognise product and service excellence in the tourism industry and sets the bar for excellence as well as ensuring that the country’s industry is world-class. It works to build the country’s reputation as one of the best tourism destinations in the world. The Awards are unique in that the voters are consumers and not the industry.
A networking function was also held on Sunday afternoon for SMMEs and buyers, etc. to network. The Deputy Minister of Tourism, Tokozile Xasa, addressed the function. “In a few years’ time, it will be the performance of SMMEs that the sector’s transformation and inclusivity targets will be measured, so it is imperative that we not only talk the talk but walk the walk when it comes to SMMEs.”