MBA Blog: Micro-enterprises in South Africa

Little explanation is required as to why Johannesburg was the most subscribed destination for London Business School’s Global Business Experiences (GBE). The prospect of working with local entrepreneurs, having a tangible impact on real world business models, and coming in close contact with some fascinating wildlife, was too hard to resist.

As the second instalment in the school’s ambitious undertaking to expose students to global experiential learning, the GBE has by far been the highlight of my MBA. The Johannesburg GBE in specific, aimed to evaluate the impact of a week-long immersion of business students on local businesses. The experience also proved to be a compelling exploration of how the economics of poverty stricken communities are rooted in innovation and bolstered by financial rigor and prudence.

As a citizen of Pakistan I am all too familiar with the debilitating nature of poverty without hope. Working at Acumen Fund before the MBA gave me a taste of the catalysing nature of entrepreneurship and its role in spurring development. The Johannesburg GBE, with its focus on social entrepreneurship was therefore an obvious choice in my selection and further revealed that entrepreneurship could make the task of facilitating economic growth exciting and optimistic.

Like many emerging economies, South Africa is a land of stark contrasts. Stratified and sprawling, Johannesburg comprises of seemingly independent bubbles of communities. The GBE gave us the unique opportunity to work in Alexandra (“Alex”), the oldest township in Johannesburg and one teeming with small businesses and micro-entrepreneurs. Our task was to serve as consulting teams to such entrepreneurs and to equip them with tools to grow their businesses and refine their business models. The GBE also exposed us to the many different breeds of entrepreneurs – those borne of the simple necessity of survival, as well as those inspired by a vision to create, to build, and to harness demand stemming from the needs of disadvantaged communities.

Being in Alex at its centenary was especially poignant. Set against a backdrop of the infamous hostels, and modern day shacks, Alex is, in Mandela’s words, 'exhilarating and precarious'. Over our time there, it became increasingly evident that it was a tight-knit community – which people desired to gain prosperity whilst staying in Alex and as opposed to finding prosperity elsewhere.

The week-long project succeeded in being a revelation of the pivotal nature of micro-businesses. A phenomenon prevalent in emerging markets, micro-businesses comprise the lifeblood of entrepreneurial business activity in South Africa. The widespread nature of such businesses is rooted in the relative scarcity of employment opportunities within the formal sector. However, micro-businesses achieve far more than simply providing entrepreneurs with a steady income.

They are emerging as an important mechanism for job creation, enhancing purchasing power and increasing per capita income. In many cases they serve as invaluable channels for accessing hitherto underpenetrated markets. Companies such as ABI gain access to markets and communities that would otherwise be unchartered territory. For many of the larger consumer goods companies, these entrepreneurs serve a multipurpose solution – as consumers, suppliers, marketers and distributors of their products and services.

The GBE week was structured around the consulting project and was complemented by visits to companies and guest speakers. It was a privilege to learn from highly innovative companies such as Ubiquity and Technoserve and also gain market and economic insights from established thought leaders such as McKinsey. Equally compelling were a series of guest speakers, many of whom recanted tales of Apartheid and described in detail, the complex socio-economic tensions existing in the community today.

The GBE has reinforced my belief that social entrepreneurship is an effective and credible mechanism for economic development, that it has the substance to surpass any “fad status” it may ill-fatedly have gained in the recent past. At the end of this experience I am also left with an immense sense of gratitude – to have been a part of an industry at the cusp of becoming a household name, to have had the opportunity to meet with such fantastic individuals and to have been on such an equally fantastic journey.