Franchising presented a good opportunity for South Africans to spur economic growth to meet government’s targets of reducing employment and bridging the gap between the informal and formal economy, the Presidency said on Thursday.

Speaking at a US – Southern Africa franchising forum, in Sandton, an economic advisor to Deputy President Phumzile Mlambo-Nqcuka said that franchises were a way to bring people from the informal, or second, economy into the formal economy, which could help South Africa to meet the goals of its Accelerated and Shared Growth Initiative.

“Franchising is one of those mechanisms which can bring people from outside the mainstream economy into it,” she said.
Nonhlanhla Mjoli-Mncube pointed out that government was investing more than R420-billion to ensure that South Africa provided an attractive environment in which to do business.

“Whether you are a South African investor that wants to go into the rest of the continent as a franchisor or you are an investor wanting to come into South Africa, the road it is going to be smooth,” she urged.

“We are also spending a lot of money to improve skills in South Africa, and especially on training youth,” stated Mjoli-Mncube. South Africa’s skills shortage was perceived to be a major inhibitor to economic growth in South Africa.

Mjoli-Mncube said that the South African government had identified priority areas that it would focus on developing in the economy, and added that these were directly congruous with the needs of the sectors of franchises that were going to enter the country, or had shown interest.

“There are certain key areas that we have identified,” she stated. “And some of the franchises that are coming to South Africa, or are looking at coming to South Africa, link directly with the priority sectors that we have identified.”
These sectors included tourism – where she said there was “huge potential” - business processes and outsourcing, offshoring, biofuels, forestry, chemicals and education.

Removing barriers

Another important aspect to growing South Africa’s economy was removing barriers which could deter potential investors, and Mjoli-Mncube said that government was tackling this.

Its efforts were focused on reducing the cost of doing business in South Africa, and reevaluating regulations that were duplicated, or had any negative impact on the country’s economy.

“We are also trying to create a one stop shop,” she noted, which would be free of bureaucratic obstacles.
Mjoli-Mncube also touched on the subject of bringing skilled workers from other countries, which many workers unions oppose, as argue that foreigners were stealing local jobs.

“As much as we want to have our people employed, we have to bring in experts, but we want them to mentor the people of South Africa so that they can benefit,” she stressed.

Mjoli-Mncube said that franchising was an important element for bringing the second economy into the mainstream economy as it was “a recipe for success”.

“Franchising models are already tested and perfected, and can provide a mould for local entrepreneurs to work from,” she stated.
She also highlighted that South Africa offered good opportunities for franchisors as a growing economy, which had a “huge” appetite for products and services.

“We also have huge range of incentives for small to medium enterprises,” said Mjoli-Mncube.
The government was also looking to work with, and encouraged, companies to look to, impoverished and rural communities when procuring products, especially in the food sector and the alternative medicine sector, she added.

Mjoli-Mncube noted that South Africa was also actively tackling challenges to its economic growth, including crime and HIV-Aids.

Innovation encouraged

While Mjoli-Mncube was upbeat on the positive impact that franchises could have on South Africa, she stressed the importance of South Africans exploring innovation of products and services.

This, she said, could help local entrepreneurs to penetrate global markets, thereby assisting South Africa’s economic growth.
South Africa planned to grow its economy by 6% a year by 2014, creating jobs and reducing unemployment, especially among women and the youth.

Meanwhile, also speaking at the US – South Africa Franchise forum, Franchise Association of South Africa project coordinator Peter Mkizhe highlighted that while there had been a 48% increase in franchise turnovers in the past year, black-economic empowerment had only increased from 27% to 32%, which he said was worrying.