Challenge statement
Challenge type: If you are working on multiple challenges, please indicate if this is your "big bet" or "exploratory" challenge.
Please note: we ask you to only submit a maximum of 3 challenges - 1x Big Bet, 2x Exploratory. Each challenge must be submitted individually.
EXPLORATORY
Challenge statement: What is your challenge? (Please answer in specific terms: "Our challenge is that...”.)
Our challenge is that the growth of the South.
African economy relies heavily on the growth and success of the country’s SMME sector. This strategy has been outlined by the South African government through its National Development Plan (NDP) and its Reconstruction and Recovery plan. With unemployment among youth at shockingly high levels, SMMEs are seen as a means of increasing employment and overcoming poverty in the country. However, the SMME sector in South Africa is plagued with many challenges resulting in five out of seven (70%) of businesses failing within their first year compared with a global average of 20%.
South Africa’s Department of Science and Innovation’s (DSI’s) revised Strategy of 2020-2025 states that Science, Technology and Innovation (STI) approaches can serve as drivers of sustainable economic growth, economic competitiveness, socio-economic development and environmental sustainability. South Africa’s NDP, adopted in 2012, further recognises the role of STI in accelerating economic transformation in South Africa and improving the country’s global competitiveness.
The challenge being addressed is; how can we create an enabling and supportive environment for innovative SMMEs to thrive and grow, by taking a STI approach to address the issues they already face.
Background: What is the history of your challenge? What is causing or driving it? Who is involved? How does the current situation look like? What undesired effects does it produce?
The South African economy has remained vulnerable for a prolonged period following depressed investment, subdued growth, and rising public debt. This was compounded by the 2020 COVID19 pandemic, civil unrest of 2021, years of electricity and water rationing, and severe floods in 2021. The economic downturn resulted in severe job losses, disproportionally affected the youth, women, and the poor, taking South Africa’s unemployment rate to a record high of 34.9%. Youth endure the worst of unemployment, with an unemployment rate higher than the national average. The World Bank estimates that extreme poverty, measured by the US $ 1.90 per person per day poverty line, increased from 19.7% in 2019 to 21.7% in 2020 while national poverty, measured by the upper bound poverty line of ZAR 992 per person per day in 2015 prices, increased from 56.5% to 58.6%. Inequality is also high and persistent, and the consumption-based Gini index was 0.63 in 2015, up from around 0.60 in 1994.
According to South Africa’s National Development Plan (NDP), by 2030, 90% of the 11 million jobs that will be created will be done so through the main engine for growth, the SMME (Small, Medium and Micro Enterprises) sector. South Africa, however, has one of the highest failure rates for SMMEs, with five out of seven (70%) businesses failing within the first year compared with a global average of 20%. According to several academic studies, improving access to new markets and finance, improving small business competitiveness and enrolling professionals into the business sector can uplift the SMME sector. Many of these recommendations are achievable by adopting a Science, Technology and Innovation (STI) approach. The South African Economic Reconstruction and Recovery Plan sets out a plan to improve the country’s economy and includes interventions covering support for SMMEs and mainstreaming STI into the economy. According to the Recovery Plan, SMMEs and STI have an important role to play in facilitating economic transformation and recovery and can be leveraged to revitalise existing industries, create new sources of growth, and support the development of a capable state.
The Department of Science and Innovation’s (DSI) revised Strategy of 2020-2025 states that STI approaches are important drivers of sustainable economic growth, economic competitiveness, socio-economic development and environmental sustainability. South Africa’s NDP, adopted in 2012, further recognises the role of STI in accelerating economic transformation in South Africa and improving the country’s global competitiveness.
This project aims to support these national recommendations and aims to stimulate socioeconomic progress by advancing the SMME sector through innovation. Together with key partner, the DSI, the project seeks to achieve the following:
- Provision of product and business development support for innovative youth and women entrepreneurs
- Identify new enterprise opportunities for small businesses through research and development (R&D) and market assessments, and opportunities to replace imported goods.
- Conduct awareness and behaviour change campaigns to shift consumer behaviour towards buying local goods and educate SMMEs on the importance of adopting sustainable practices.
- Establish a more conducive and enabling environment for youth and women owned SMMEs
Quantitative evidence: What (official) data sources do you have on this challenge that better exemplifies the importance and urgency of this frontier challenge? You can add text, a link, or a picture.
• Website: https://www.parliament.gov.za/news/r500-billion-stimulus-package-one-largest-economic-response-packages-developing-world-tito-mboweni
• Website: https://www.statssa.gov.za/?p=15214
• Website: https://documents1.worldbank.org/curated/en/509771468337915456/pdf/WPS5391.pdf
• The Real Economy Bulletin: Second Quarter 2022, by the Trade & Industrial Policy Strategies (TIPS), 2022
• Website: https://www.engineeringnews.co.za/article/unemployment-rate-hits-new-record-high-at-349-2021-11-30
• Website: https://www.statssa.gov.za/publications/P0211/P02112ndQuarter2022.pdf
• Website: https://www.gov.za/sites/default/files/gcis_document/202010/south-african-economic-reconstruction-and-recovery-plan.pdf
Qualitative evidence: What weak signals have you recently spotted that characterizes its urgency? Please provide qualitative information that better exemplifies the importance and urgency of this frontier challenge. You can add text, a link, or a picture.
• Website: https://www.linkedin.com/pulse/key-smme-growth-south-africa-bartley-joseph/
• https://www.mckinsey.com/featured-insights/middle-east-and-africa/how-south-african-smes-can-survive-and-thrive-post-covid-19
• Website: https://insight.kellogg.northwestern.edu/article/measuring-innovation-patents-productivity#:~:text=The%20link%20between%20innovation%20and%20productivity%20held%20across%20sectors%20of,benefits%20of%20productivity%20boosts%2C%20too.
Value proposition: What added value or unique value proposition is your Accelerator Lab bringing to solving this challenge? Why is it your Lab that needs to work on this challenge and not other actors within UNDP, other stakeholders in the country respectively? Why is it worth investing resources to this challenge?
The project’s value proposition lies in its efforts to bolster existing support programmes for youth owned innovative SMMEs and youth entrepreneurs participating within the knowledge economy and sustainability sectors in order to avoid duplication of efforts and misuse of funds. The project will focus on youth from South Africa’s institutes of higher learning, such as universities and Technical and Vocational Education and Training (TVET) Colleges. Research will be commissioned to examine the existing support ecosystem for youth entrepreneurs to identify any gaps/areas of weakness which this project can fulfil. The project aims to enhance what already works within the ecosystem, and to plug any gaps that may be identified. The project has a unique focus on Innovative SMMEs, versus all kinds of SMMEs. The focus allows the project to identify key issues and solutions for this particular sector noting that a lot of work on supporting generic SMMEs has already been done.
This project aims to implement activities to bolster the SMME sector in South Africa by adopting a Science, Technology and Innovation (STI) approach, which is not commonly done in the country. Combined with training initiatives to impart the skills necessary to participate in the STI and knowledge economy, STI has strong potential to support a sustained economic recovery for South Africa, which is pivotal to tackle high levels of poverty, unemployment, inequality, and socioeconomic instability. Further value lies in the partnership of the AccLab and the Department of Science and Innovation, both bringing strong partnerships and innovation skills to the table.
Short “tweet” summary: We would like to tweet what you are working on, can you summarize your challenge in a maximum of 280 characters?
In partnership with the Department of Science and Innovation, AccLab South Africa is creating a thriving innovative SMME sector by establishing an ecosystem of support that is based on a science, technology and innovation approach.
Learning questions
Learning question: What is your learning question for this challenge? What do you need to know or understand to work on your challenge statement?
1. What capacity/skills do youth and women entrepreneurs require within the knowledge economy and in sustainable business practices in order to become thriving innovative SMMEs.
2. What new enterprise opportunities and market trends are there, which can be converted into small business opportunities.
3. What other support do innovative small businesses require to ensure an enabling environment is established to help them thrive.
To what stage(s) in the learning cycle does your learning question relate?
Sense, Explore, Test, Grow
Usage of methods: Relating to your choice above, how will you use your methods & tools for this learning question? What value do these add in answering your learning question?
1. What capacity/skills do youth and women entrepreneurs require within the knowledge economy and in sustainable business practices in order to become thriving innovative SMMEs - will involve systems thinking, collective intelligence,
2. What new enterprise opportunities and market trends are there, which can be converted into small business opportunities. will involve co-creation and pilots.
3. What other support do innovative small businesses require to ensure an enabling environment is established to help them thrive. Will involve human centered design, system thinking, collective intelligence and co-creation.
Existing data gaps: Relating to your choice above, what existing gaps in data or information do these new sources of data addressing? What value do these add in answering your learning question?
The new sources of data will help fill the following gaps:
1. What capacity/skills do youth and women entrepreneurs require within the knowledge economy and in sustainable business practices in order to become thriving innovative SMMEs - will involve systems thinking, collective intelligence,
2. What new enterprise opportunities and market trends are there, which can be converted into small business opportunities. will involve co-creation and pilots.
3. What other support do innovative small businesses require to ensure an enabling environment is established to help them thrive. Will involve human centered design, system thinking, collective intelligence and co-creation.
8Decent work and economic growth
9Industry, innovation and infrastructure
11Sustainable cities and communities
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