1. The Impact of Improving SMMEs' Networking Capacity
CROSS-COUNTRY WORKSHOP FOR IMPACT EVALUATIONS IN FINANCE AND PRIVATE SECTOR DEVELOPMENT
Dakar, February 1-4, 2010
RSA
The Impact of Improving SMMEs' Networking Capacity
Lusapho Njenge
Small Enterprise Development Agency 1

2. Background
Title
Major constraint for SMMEs is the difficulty to expand their customer base
Particularly acute in RSA due to the legacy of institutionalized segregation, closed business networks, limited business interactions between groups
Andrews (2007): selection of suppliers in RSA is done primarily through internal referrals and CEO's social networks
.....despite preferential procurement policies (Black Economic Empowerment) 2

3. Possible Reasons Title
To search for SMMEs and to screen them can be too costly...
As a result, large firms end up outsourcing to large firms
Better information because of overlapping social networks, easier to signal credibility and quality of service 3

4. Priorities for Learning: Interventions
Title
How to link SMMEs to the private sector
How to reduce the cost of searching for, and screening SMME suppliers, particularly for groups with lower networking capacity (gender, race, youth) 4

5. Evaluation Questions Title
Does improved information on SMMEs increase their share in the supply chain?
Does the impact of information vary by the SMMEs owner's gender, age group or race?
Women, young, and black-owned SMMEs
tend to have lower networking capacity 5

6. Evaluation Design Title Intervention
Creation of an online (and sms-accessible) MARKETPLACE to link SMMEs to larger firms
Intervention 1: Reduction of search costs
Searchable Directory of SMMEs (contact info, size, location, sector)
Intervention 2: Reduction of search costs + Reduction of screening costs
Performance Rating System, mapping of existing business relationships 6

7. Features of the Marketplace
Title
DIRECTORY of SMMEs
Searchable engine by size, location, type of SMME
BUSINESS NETWORKS MAPPING
Maps of existing business relationships for each SMME
PERFORMANCE RATING SCHEME
Client firms rate performance of SMMEs, make referrals,
provide feedback 7

8. Gender, Race and Youth Title RACE and YOUTH
Directory of SMMEs is balanced on race and age of owner
Generate comparable groups, within each of these
categories, in terms of size, sector and length of
establishment
GENDER
Start by NOT providing gender of the SMME owner on the
marketplace
6 Months later, phase it in
10 Months later, remove it (broken link) 8

9. Sampling Title Pilot of the Marketplace
KwaZulu Natal province, good distribution of
SMMEs across gender and race
Sample Size
Random assignment
1,500 SMMEs (treatment group)
1,500 SMMEs (comparison group)
Client firms log on and get randomly assigned to
Intervention 1 or Intervention 2
Block Randomization
within race and age group of owner 9

10. Data Title LISTING of FIRMS Business Registries Business Chambers
Seda Database
SURVEY of SMMEs and LARGE FIRMS
Baseline and Follow up survey
3,000 SMMEs
500 randomly selected large firms
Data collected
Relationship with suppliers, type of contracts, performance
indicators, share of supply chain secured by SMMEs 10

11. Data Title MARKETPLACE
Track all interactions between clients and suppliers
-clients have to click through to get the contact info, request a quote, obtain a more detailed description of each SMME
Obtain direct feedback from participants via periodic mini- surveys when firms log on 11

12. Timeline for Impact Evaluation
Title
TASK
DATE
Listing of Firms in KZN (Sampling Frame)
April 2010
Outsource Marketplace Development
July 2010
Baseline Survey
Pre-test Marketplace and Promotional Campaign
August 2010
Launch Marketplace
September 2010
Gender Switch (Remove Disclosure of Gender of SMME Owner)
March 2011
Follow up Survey
September 2011 12