Rapporteur Report

Plenary Session 1

1.0 Title of Discussion

Business Incubators as a Tool for Promoting Small and Medium Enterprises

2.0 Presenter

Dr. Kachesa Bbenkele (South Africa)

3.0 Moderator

Dr. Jonathan Chileshe

4.0 Rapporteurs

4.1 Shahrin Hj Mohd Tamit

4.2 Siti Rozana DP Hj Mohd Yunos

5.0 Presentation and Discussion

5.1 Abstract/Overview

At the very outset, SMMEs face several obstacles and that business incubators play an important role in developing the full potential of SMMEs. The use of business incubators was noted and that it can be beneficial for SMMEs. It was emphasized that business incubators are a useful tool to alleviate the problems faced by the SMMEs. Above all the government is the essential ingredient for the success of business incubators in promoting and facilitating the development of SMMEs.

5.2 Main Points and Issues Discussed

5.2.1 The problems faced by SMMEs: (1) The political environment as a problem i.e. misallocation of resources; (2) Market access i.e. not enough information to make full use of the market; (3) SMME access to finance i.e. start up and bridging finance is costly for SMMEs; (4) Lack of business skills and (5) Technology acquisition i.e. there is a need to acquire the right technologies to offer appropriate products and services to clients.

5.2.2 Role of business incubators: To minimize the problems stated above and to provide comprehensive assistance and the conducive environment.

5.2.3 Types of business incubators: Targeted population, international incubator, industrial subcontracting incubator, single business incubators, university incubators, hub incubator, virtual incubator and regional/rural incubators.

5.2.4 Benefits of using incubators: A business incubator aims at (1) Increasing the rate of new business formation; (2) Increasing the rate of survival and success of new enterprises (i.e. reducing the failure rate); (3) Increasing the rate of development of new enterprises; (4) Increasing the efficiency of the dissolution process (i.e. using assets elsewhere in the economy). This is done through, entrepreneurial development, training in various skills, shared use of equipment and facilities, technology transfer, lower operational costs, networking and business linkages.

5.2.5 Challenges for business incubators: (1)Artificial environment created that will not allow the SMMEs to experience the reality after graduating; (2) Permanent squatters i.e. the comfort zone makes it difficult for some SMMEs to move out; (3) Show casing SMMEs i.e. this is mainly for attraction of funds; (4) Low support from governments i.e. even if support was to be gained eventually, it takes time and only partially; (5) Poor management of incubators i.e. prepare essential fundamentals before establishing an incubator and (6) Cultural problems i.e. realization of how the social process will change and the effect on the entrepreneurs.

6.0 Suggestions and Conclusions

· Government support is needed in getting good quality incubator managers and if possible leveraging this with bilateral assistance programmes.

· Management have to be keen witted with a zeal to provide efficient services to tenants, and that add value by providing a range of superior services to support the new enterprises.

· Enterprise development would require screening the appropriate candidates as one of the criteria of application to become an entrepreneur

· Location – an incubator should be situated nearby where the necessary technology and infrastructure can be offered.

· This paper highlights business incubators as an instrument for promoting SMEs and the challenges and solutions that need to be addressed. Great emphasis was made on the role of the government to ensure that these incubators will achieve their objectives.

7.0 Question and Answer Session

7.1 Q: What are the alternatives if the country lacks the government support in initiating an incubation center due to lack of resources? (Nigeria)

A: Resources are not enough in the government and it is not just finance, it is also support through goodwill in running the programmes. The incubators have to be innovative and link themselves with the large corporations. Once the large corporations see that the incubators have low operational costs to develop technologies or raw outputs, it will be attracted to work with the incubators.

7.2 It is no doubt that access to finance is a problem, but the real problem would be financial management once funding has been obtained. The linkage to MNCs is a dangerous learning process because it is the same as putting all your eggs into one basket. Normally, SMEs that can define their main niche will be more capable in getting the funding. It was also noted that the idea of having in-house training will be beneficial to SMEs. (Indonesia)

A: People do not have access to financing, let alone to manage the finance.

7.3 Q: What is the effect of globalisation on SMEs and how can incubators be effective? (Ethiopia)

A: SMEs have to continuously evaluate themselves where they are in terms of technology. The government should assist the SMEs to keep abreast with the technology trends so that they can compete in the markets. Empower the SMEs for them to assimilate technologies that can be seen as more advanced than the developed countries.

7.4 Q: What is the performance of the incubatees after 3 years leaving the incubators? (Thailand)

A: It has been reported, 3500 incubators in the world, 87% of graduates have developed and grown their businesses. Private and non-profit incubators, the latter has higher rent to pay, whereas the former only have to pay minimal rent but those that manage the incubators are involved in an equity scheme to create a sense of ownership and control.

7.5 Q: How should incubators be set up? (Pakistan)

A: Government should form a dedicated unit to support the business incubators and the unit has the responsibility to recommend the essential policies that are required by the SMEs to the higher authorities.

Funding – the government has a lot to contribute in terms of money. An incubator would look at the government to provide the financial support.

Location – to be identified by the government as the incubators would not be able to readily identify the best location in which to set up.

7.6 Q: How should training be conducted? (Bangladesh)

A: Education will continuously and rigorously take place within the incubation center. The supervisors of the incubators will ensure that the graduates will continuously implement the skills that they have developed in the incubation period. The idea is to empower the entrepreneur through education so that they are able to identify opportunities and modern technologies.

7.7 Q: Is political commitment the main ingredient to the success of business incubators? (Yemen)

A: Entrepreneurial spirit must exist for incubation to work but people would normally wait for the governments to help them.