South Africa’s Department of Trade and Industry (DTI) has launched the Business Incubator Establishment Handbook, designed to help improve the quality of applications for the establishment of business incubators in the country.
Minister Rob Davies said the handbook was linked to the Incubation Support Programme (ISP) launched in 2012, which offered a matching grant facility available to players in the private sector involved in the establishment of business incubators.
Since its inception, 48 applications have been made for the programme with a value of ZAR806 million (US$67.5 million), with a total investment value of ZAR1.1 billion (US$92 million). Yet claims paid so far total only ZAR85.8 million (UDS$7.2 million), and the number of approvals has been falling steadily since 2012.
Davies said of the 225 applications received to date, 134 were ineligible due to a lack of understanding of the incubation concept.
“People were making applications for things that were not business incubators, in some cases they failed to find an industry partner, among others,” he said.
“What we’ve seen is that applicants are not understanding what incubation is about. This is the reason for the launch of the booklet, to try and inform the market and particularly people that are interested in making use of this facility what it is that we expect when we support an incubation programme.”
The department has set a target of establishing 250 incubators and is currently sitting at 105.
“Twenty five percent of these are fully funded by the private sector and 75 per cent are partly funded by government through the ISP and SEDA technology programme,” Davies said.
He said South Africa’s experience was that business incubation was an important tool for creating real businesses with the capacity and ability to be involved in the economy and survive in a very highly competitive environment where many startups disappear in a short period of time.
“The problem we saw in South Africa is that there are too few of them and that the rollout through an institution like the Small Enterprise Development Agency (SEDA) was not going to hit the numbers and what we said was that the DTI would be available to provide financial support to players in the private sector who also wanted to become active in the space,” he said.
“We continue o be responsible for the programme, although we work closely with the Department of Small Business Development. One of the reasons for this is that incubators are particularly important in the industry as this is a tool which can create industrialists.”