What is holding back black entrepreneurs?

Johannesburg – There is a phenomenon in organisations where people of colour cannot make progress in their careers because employment equity is difficult to implement. The situation is similar in business, where black entrepreneurs cannot make progress because of limited opportunities.

This forms part of the deep hole syndrome. In any organisation, what you find is white people hold top executive positions, and black people dominate positions below executive level, explained Tabea Kabinde, managing director of We Find Talent. Kabinde was part of a panel discussion on creating entrepreneurship opportunities in a challenging environment, at the Finance Indaba held in Johannesburg.

“The further you look down the hole, the darker it becomes,” said Kabinde.  People at the top, are usually willing to create opportunities for people who are like them. This is why transformation is so difficult to achieve, there are not enough black people in executive levels who can help their counterparts also occupy top positions in organisations.

Black Economic Empowerment (BEE), supply and enterprise development legislation offers opportunities to designated groups to be empowered. Economic empowerment works when it is based on the principle of positive reinforcements, said Kabinde. This means it should offer rewards and incentives. If it is punitive then it creates a negative energy.

If economic empowerment creates a positive energy and value, then it can change the livelihood of people. Supply chain development and enterprise development works in that it empowers more people through the jobs which are created through entrepreneurship, she said.

The power of enabling legislation

CEO of SekelaXabiso, Lindani Dhlamini explained that enabling legislation contributed to the company’s success. SekelaXabiso is a black-owned, professional services firm. It was formed by two black women 13 years ago, Dhlamini was one of them. “At the time legislation said that opportunities should be given to young people who are women,” she said.

SekelaXabiso employs over 200 people, with offices nationally and plans to expand into the rest of the continent.

Besides legislation, Dhlamini said that other contributors to the company’s success was access to funding. “Funding is a stumbling block for most entrepreneurs… We need financial institutions that will back a person by looking at their passion, see their drive and take a risk on that entrepreneur.”

Pictured: Thandeka Zondi, director of business development and strategy at SekelaXabiso, Lindani Dhlamini, CEO of SekelaXabiso, Litha Kutta, head of enterprise supplier development and preferential procurement at Telkom and Tabea Kabinde, managing director of We Find Talent. They were participating in a panel discussion at the Finance Indaba held in Johannesburg recently. (Photo: Lameez Omarjee)

Secondly, entrepreneurs need access to markets. “If there is no one to buy a product, you might as well close shop and find a job,” she said. Due to legislation, certain sectors have been instrumental in forming these markets. The public sector has created opportunities for black firms to compete with international firms, she said. This is made possible through partnerships between emerging firms and established firms on big projects.

Entrepreneurs should also have passion, tenacity, commitment and the ability to deliver to deliver on their promises to people, she said.

Barriers to funding

Litha Kutta, head of enterprise supplier development and preferential procurement at Telkom, shared on the challenges to access funding. “Often, the person giving funding does not match the colour of the person that requires funding,” he said.

“The rules of the game are not determined by the people who need funding,” he added. Enterprise development funding requirements are no different to the templates corporate banks use. “Money is choked by a system between the entrepreneur and the corporate and being used by the middle. We need to find a way to meet the middle.”

We must be willing to teach black people how to run operations so that their businesses can be selected in procurement processes.  

Patience is another important factor for black businesses. “One mistake in one financial year and you are out,” said Kutta. Businesses need to be carried until they turn profitable.

Further to move forward, companies should be able to control their own money. Management fees in development funds take away money that is meant for beneficiaries, he explained. “All these things are discouraging for black entrepreneurs.”