A.1. The current market for Business Development Services
The supply of Business Development Services in Angola today is largely limited to a few firms which support the oil and diamond industries, public sector institutes which work with small and medium size enterprises, and a large network of individual consultants of varying quality. There are few services available for smaller Angolan enterprises.
A1.1 SUPPLY OF SERVICES
A1.1.1 Private sector providers
Most of the large, international consultancy firms are present in Angola. There are also 15 medium-size (around 10 consultants) national consultancy companies. These firms target exclusively large clients.
There are very few specialized business service providers, which work with small and medium sized firms, mostly located in Luanda. There are estimated to be between 2,000 and 5,000 individual consultants in Angola, working together with public institutions and through Chambers of Commerce. The most common service offered is a preparation of a business plan, usually as part of a proposal to receive financing, for which is charged on average US$500. Representatives of the private sector suggested in interviews with the UNDP mission that the services offered by these individuals were in general of a low quality due to their outdated expertise, and lack of business-friendly attitude.
A1.1.2 Public sector providers
The most relevant institutions for the micro, small and medium enterprise sector are INAPEM and INEFOP.
INAPEM is the National Institute to Support Small and Medium Enterprises, responsible to the Ministry of Finance. It has a network of some 1,500 Trainers and Advisors working around the country. In recent years, it has incorporated some business services and courses following technical advice from SEBRAE/Brazil. In the "Novo Horizonte" programme, this institute works in partnership with the national development fund FDES, supporting the preparation of business plans to submit for financing by the fund.
INEFOP is the National Institute for Employment and Vocational Training, responsible to the Ministry of Public Administration, Employment and Social Security. It is the body governing vocational training and employment in Angola, with an impressive network of technical staff and training-centres covering all the 18 provinces. INEFOP governs directly a network of 24 vocational training centres (VTC), 4 integrated employment and vocational training centres and 46 employment centres.. The Institute offers a complete range of vocational based-courses and is currently trying to focus on job-creation by through a new series of courses and services to support entrepreneurs, including BDS for retired public servants, young entrepreneurs and rural business activities. INEFOP’s methodologies are mainly based upon the experiences of ILO and SEBRAE (a Brazilian quasi-government BDS supplier).
A1.1.3 Business incubators
A Business Incubator (BI) may be simply defined as a structure or environment, which accommodates and supports enterprise development, innovation and technology transfer. In Angola, there exists good quality infrastructure with the potential to become a BI, offering a stimulating environment and practical support for new business projects and existing micro, small and medium enterprises. While there is currently no functioning incubator in the country, a local University, and the public institute INEFOP have expressed interest in the concept and appear to be committed to opening such a facility.
A1.2 DEMAND FOR SERVICES
There is very little information regarding the demand for BDS services among the Angolan enterprises and until now there has been no research on the principal barriers to the growth of the micro, small and medium enterprise sector. There would appear to be a lack of a local culture of investing in business development services. Many entrepreneurs do not recognize the value that professionals such as accountants, lawyers and consultants can bring to an enterprise, as they have had no experience in contracting them.
The principal representative institution is the Chamber of Commerce and Industry, which acts as a Confederation of Chambers and Associations (including the associations of Rural Producers of Angola, the associations of Industries of Angola, the Chamber of Young Entrepreneurs, and the Federation of Women Entrepreneurs). The first formal dialogue between the Government and the private sector is planned for the second semester of 2003, and is counting on the support of the Confederation of Chambers of Southern -African Countries (based in Johannesburg). As there is no current national policy or strategy for the development of the micro, small and medium enterprise sector in Angola it would be important institute dialog between stakeholders and works towards the building of a consensus regarding the key issues that affect the sector.
A.2. The Problems to be addressed
The micro, small and medium enterprises in Angola lack services which could support their development and growth. The services that are available are concentrated in Luanda, and focussed on larger clients.
Angolan micro and small enterprises have problems accessing business development services because the design and structure of such services do not sufficiently take into account their needs and local realities.
HARSH ENVIRONMENT FOR NEW ENTERPRISES
New initiatives are hampered by the difficult conditions common to many rural and urban areas in Angola, such as inadequate basic infrastructure (roads, communications etc) and services (water, electricity etc), as well as the lack of skilled labour.
A.3 Past initiatives and lessons learnt
The most successful BDS Centres, especially those which operate within challenging environments, contain the following elements:
Market-oriented: The centre should identify the services demanded by clients, and tailor the portfolio of products accordingly.
Sustainability: The centre should be managed in the same way as a private company. It is important to prepare a Business Plan which establishes clear directives for the Centre, identify sources of funding, build strategic alliances, have strong management, recruit motivated and high professional staff, deliver high quality services, and assess the results according to benchmarked criteria.
Friendly follow-up support under one roof: The centre should offer a comprehensive range of core services relevant to the evolving needs of the clients, that builds a long-term relationship between the centre and the entrepreneurs.
The actions taken by the Angolan government to promote a dynamic entrepreneurship culture are still at the infant stage, however, the initiative given to INAPEM and INEFOP should be taken as a positive signal, and these institutions could be identified as potential partners for the project.
A.4. Development Objective (Relevant Outcome)
The Business Development Services component of the Angola Enterprise Program expects to identify and overcome the main barriers to development and growth, faced by formal and informal micro, small and medium enterprises in Angola today. Through the provision of incubators, and business development services, the program will support the launching of new initiatives and the expansion of businesses throughout the country
A.5 National Institutional and Legal Framework
As the Government approach to the micro, small and medium enterprise sector has always been ad hoc, it has resulted in a profusion of institutions without a coherent strategy nor means of effective co-ordination. The of Finance, Public Administration, Employment and Social Security, Fisheries, Assistance and Social Reintegration, Industry, and Family and Promotion of Women are, responsible for the following institutions:
the National Institute to Support Small and Medium Enterprises (INAPEM), which focuses on training (and formerly financing) small and medium enterprises;
the National Institute for Employment and Vocational Training (INEFOP), which provides support to small productive activities through training and the provision of kits;
the Institute for Artisanal Fisheries (IPA);
the Institute for the Socio-Economic Reintegration of War Veterans (IRSEM), which supports demobilized soldiers and other vulnerable groups;
special credit funds, which include the Fund for Economic and Social Development (FDES), the Fund for the Support of National Businessmen (FAEN) and the Fund for the Development of the Fishing Industry (FADEPA) (see Section 4.3).
These national institutions are responsible for implementing policies primarily relating to training, material support and institutional support for businesses in the respective sectors. The Funds were created to provide financial support to enterprises, mainly through loans. It should be noted that most of the institutions and funds mentioned above are mainly directed to supporting small and medium sized enterprises. It is more at the administrative levels (licensing and taxation) that the micro-enterprise sector is directly affected.
At the regional level decree no. 27/00 of 19 May 2000 established in each province a Department for Micro-enterprises, within the Provincial Directorate of Industry, Commerce, Tourism and Hotels. Unfortunately it appears that these departments are still not functioning in all provinces and their role is not yet clear, (article 24 of the decree mentions that the department should study methods and techniques for increasing industrial and food production and ensure the rehabilitation of the industrial sector at the provincial level).
At the municipal and community levels, the respective administrations limit themselves to matters concerning the regulation, taxation and control of micro-enterprise activities, rather than providing services to support the development of the sector.
A.6. Intended Beneficiaries
The project has two groups of stakeholders: Direct beneficiaries: micro, small and medium enterprises, the investors in these businesses, the owners, and their employees. The suppliers of services to these institutions should benefit from the growth of the sector and the better prospects for their clients.
As indirect beneficiaries, the clients of the enterprises will enjoy access to more, better quality and lower-priced goods and services, while it is hoped that the citizens of Angola will benefit from a growing more diversified economy.
PART I.B. STRATEGY
Several Ministries have various competencies related to the development of the micro, small and medium enterprise sector, but a specific Ministry dedicated to coordinating the sector development has yet to be established. Formally it appears that the primary responsibility for the private sector development lies with INEFOP and INAPEM, nevertheless there continue to be a variety of Ministries involved: the Ministry of Commerce, the Ministry of Industry, the Ministry of Family and Promotion of the Woman, the Ministry of Tourism, and the Ministry of External Affairs. Recently, a law creating the Agency for Private Investments (former Institute for Foreign Investments) has been approved, which will offer various financial and non-financial services for small and medium size firms.
The Angolan government has implemented several measures in recent years, intended to support the private sector development. The budgets of INAPEM and INEFOP have been increased, and a "Guichet Único da Empresa", ‘One–stop Window for the Company’ has been established in order to simplify the complex registration procedures which can take many months to complete. However business activities continue being constrained by bureaucratic procedures and new business opportunities are being lost.
Through investments in the creation of technical support centres that will gradually become self-sustainable business services providers, the BDS component envisages the building of Angolan capacity to develop and support indigenous entrepreneurs and innovative micro, small and medium enterprises.
The program places special emphasis on supporting women entrepreneurs, considering their important participation in the local business sector. Also the BDS component will foster linkages between large and small enterprises. Foreign investment should be prioritised as an effective mechanism to upgrade domestic enterprises, provide access to international markets and facilitate international technology transfer. In this way business linkages have been shown to be an important way for developing countries to diffuse valuable knowledge rapidly throughout their economies and increase the dynamism and competitiveness of the domestic enterprise sector. In all cases the potential “clients” will pass through a selection process based on their capacity for developing their entrepreneurial behaviour. Their commitment with their respective business and/or initiative will also be considered in the selection process.
The strategy for the provision of relevant business development services to the Angolan micro, small and medium enterprises is to implant pilot service providers, and invest in the expansion of those providers who demonstrate the most success.
As part of preparatory phase, a market study will be conducted to evaluate the demand for services, analyze the capacity of providers and investigate (due diligence) potential partners. Also, a feasibility study for Business Incubators will be contracted.
Pilot business service centres and incubators will then be launched in a number of provinces, utilising a variety of methodologies, and delivery mechanisms.
After 18 months the pilots will be assessed. Successful experiences will be extended and expanded throughout the country according to available resources.
The BDS component seeks to replicate successful Incubator models in other countries, but which are adapted to the needs of Angolan micro, small and medium enterprises. BDS centres and BIs should be organized as part of a network, working together to strengthen Angolan enterprises, and contributing towards the reduction of unemployment and poverty.
The pilots will be structured in accordance with the results of the market study. The centres to be supported by the BDS component of the Angola Enterprise Program are the following:
B.2.1 Business development services – Business centres
B.2.1.1 UNCTAD/SEBRAE Pilots:
Two Business Centres, focussing on small and medium size enterprises, will be launched, 1 in Luanda and 1 in a Province to be determined by the market study. UNCTAD will provide the benefit of their experience with more than 50 business service centres around the world, supported by technical assistance from SEBRAE/Brazil, who has already worked with the Angolan government in this area. The pilots will initially focus on ‘Training of Trainers’, with the participation of experienced Angolan professionals, employees of the centres, and international consultants. UNCTAD will monitor and guide the activities of the BDS component until sustainable local capacity has been established.
B.2.1.2 The Expansion Phase:
After the pilot phase new BDS centres will be installed - one per year - in selected geographic areas creating a national network of public and private BDS providers that will be able to offer updated expertise. These Business Centres will act simultaneously providing services for entrepreneurs as well as delivering "on-the-job" training for BDS providers. It is anticipated that in the first three years, these business centres will train a total of 3,200 entrepreneurs, and advise and certify 50 BDS providers on updated methodologies, through the use of established training techniques and counselling tools. In accordance with available funding, by the 5th year the centres are expected to have trained 7,200 entrepreneurs, while 120 new or renewed BDS providers will be certified in updated methodologies.
An operational plan including a tailored portfolio of courses for local MSMEs and BDS providers has been designed and it is reflected in Annex I of this section.
B.2.1.3 CEFE pilot:
For micro and informal enterprises the CEFE methodology, will be used, as experiences in other countries has demonstrated its effectiveness in training entrepreneurs with low levels of literacy. An Angolan NGO will be selected by the market study, according to its capacity and understanding of the micro-enterprise sector. International consultants will be utilised to train the NGO in the effective use of this methodology.
B.2.1.4 Expansion Phase:
After 18 months, the results of this pilot will be evaluated. Should it be considered a success, special attention will be given to a Training of Trainers strategy, working in conjunction with local NGOs, in order to guarantee a rapid expansion of CEFE licensed teachers throughout the country.
The corresponding operational plan will be prepared by an international supplier - to be identified - in coordination with the selected local counterparts.
B.2.2 Business incubators
In Angola, there are a sufficient number of individuals with entrepreneurial vocation and innovating projects with a commercial potential that would justify supporting new ventures. Based upon the results of the feasibility studies, two Business Incubators will be established.
B.2.2.1 The "University Model" Pilot
In this pilot, the incubator is installed, planned, led, directed and monitored by a university. Its objectives usually include technology transfer to industry and commerce, revenue generation from consultancy, research and development, and the fostering of spin-off companies. Management functions may be sub-contracted. It is usually owned by the university and is based in or close to the campus.
The BDS component will invest in the creation of a Business/University Incubator for supporting spin-off companies created by graduates. The UCAN-Catholic University in Luanda has expressed interest in being a candidate for such investment, but it is expected that the feasibility study will select the optimum location for the first pilot
B.2.2.2 The "Partnership Model"
In this pilot, a public institution is a partner with other institutions, agencies or local groups, including local government, community organizations, commercial developers and professional bodies. Many legal structures are possible (e.g. NGO, Foundation, etc.). The overall objective of the partnership model is the local and regional economic development and the fostering of enterprises.
The tenants will have to pay for their private space and also cost-share for common spaces (offices, meeting room, etc.). The price of the rental fees should be increased each year as to guarantee a "healthy" environment, where tenants that enter the Incubator will "graduate" as successful entrepreneurs and leave room for new tenants. Experience shows that 80% of tenants, when the selection process has been applied, begin to generate income within the second year of incubation. A key aspect that is to be considered in the proposed market-study, is the price of the initial rent. This should be a realistic price for the target market.
Incubator management and staff will provide general support to all tenants. In addition, the management and outside consultants will provide advisory services: training, technical, managerial, accounting and marketing. Costs for such specific services will need to be recovered from tenants. One method of doing this would be to charge a Services Recovery Fee of 2% on gross sales per year. This has the advantage of simplifying book-keeping and ensuring that start-up companies without a saleable product/service are not charged, and only those who have an income-flow pay.
Costs of electricity, water, telephone, etc., will be paid by tenants. Expenditures incurred by the management for all common facilities and shared areas will be charged to the Incubator budget. Obviously, the feasibility study should include an "objective" Business Plan. The Incubator management and informal network of advisors can also provide technical and other services to entrepreneurs outside the Incubator, who are starting or operating on their own premises. Therefore, practice can be gradually built up on the basis of demonstrated excellence and results.
The goal of each incubator is to have supported 30 enterprises by the third year of operation, working towards full cost recovery. The corresponding budget incorporates a budget line - Incubator's work capital. This is to cover the maximum level of accumulated deficits based on expected standard rates of new enterprises entrants each year, successful enterprises exiting and enterprises that drop-out, all of which has an impact on the financial income to cover the fix costs such as staff (Manager, Secretary, part-time Business Counselor) and facilities (telephone, electricity, water, etc.).
B.2.3. Assumptions on inputs and management
The project depends upon the motivation and commitment of the national counterparts, in order to implement and manage the BDS component in a successful manner. It is expected that these counterparts will make available to the beneficiaries of the program, entrepreneurs and BDS providers who are under going a learning process, the best of their support capacity. Therefore, the BDS component makes the following assumptions:
B.2.3.1 BDS Centers based in INEFOP premises:
INEFOP Tangible Inputs
A "focal point" office with a dynamic and professional Manager that will interact with the Program Coordinator of the program on all strategic and implementing aspects, such as logistical arrangements for the agreed activities, promotional actions, etc.
Secretarial/ Administrative support for the "focal point" office.
Office space, including basic equipment (furniture, PCs, telephone, fax and photocopier)
Communication lines (telephone, internet, fax).
Access to appropriate training rooms for all planned workshops.
Two or three offices for business counseling activities.
Maintenance (cleaning, security) for all areas to be used by the Program.
Training materials for workshops, produced locally, and sold to trainees when possible.
INEFOP Non-Tangible Inputs
The BDS centers established within INEFOP premises will target most of the small and medium size companies and also the micro enterprises with the most potential. Therefore, the INEFOP centers should meet quality standards and promote a friendly business environment. These centers should function as an "incubator without walls", where entrepreneurs and the BDS providers create personal and institutional synergies.
B.2.3.2 BDS centers providing CEFE methodologies.
These centers will target mainly micro and informal business entrepreneurs. This important segment of the Angolan society should feel that these centers offer supportive environments for their initiatives.
Tangible Inputs Of Licensed CEFE Centers
The project assumes that each centre will provide the necessary logistical, technical and administrative staff required for the proposed activities while the manager of the centre will interact with the coordinator of the Program in all organizational and operational aspects.
Non-Tangible Inputs of Licensed CEFE Centers
The BDS providers should maintain an attitude of excellence as part of the new business culture.
B.2.3.3- Main aspects to be considered for implementing a successful Incubator
a) Host Counterpart
-The institution selected should have a clear understanding of the need of this kind of initiative, and should offer as a minimum: i) business space, ii) an environment that stimulates creativity and innovation, iii) clear terms of acceptance and permanence of users, iv) support for the solution of micro and small enterprises problems.
INEFOP has shown interest in establishing a BI in one or more of their Centres, where synergies can be created among the clients of vocational training, users of BDS, and tenants of the BI facilities. INEFOP has offered their Centre in Viana (a municipality close to Luanda and a Industrial Park) for the implementation of a pilot-project that later could be replicated in other Centres around the country.
-Most of the success of an Incubator is based on the identification of an appropriate Manager for the Incubator. The manager has overall responsibility for the planning and day-to-day operations of the Incubator.
c) Tenants/ Users
The tenant selection is a critical aspect for the incubator success in order to guarantee the migration of the enterprises to the "real-world-stage" within the agreed terms of time (3rd year on average). Emphasis should be given to the "entrepreneurial" profile of the candidates and the commercial possibilities of his/her project/enterprise.
B.2.3.4 Expected Inputs From Incubator Host-Counterparts (UCAN and INEFOP)
Space: The tenants will have approx. 50 sqm. each, to install necessary equipment and to develop their products/services. They also will have at their disposal a common room for meetings with clients and suppliers, a cafeteria and rest rooms.
Facilities: The tenants will also have, water and electricity for the normal operations of their enterprises, as well as fax, telephone, computer and photocopy machine.
Administrative Assistance: The Incubators will provide to the tenants, assistance in the administrative and legal organization of their enterprises, formulation of their business and marketing plans, and promotion of their business.
Financing: As it is reflected in the corresponding budget, they will be expected to financially assist the tenants in the acquisition of technical equipment (e.g. by leasing). However it will be important to create a seed capital fund that could financially assist the enterprises with small loans for initial expenditures. This will depend upon availability of funds.
B.2.4 Expected end of project situation
B.2.4.1 After Pilot Phase
The results of the Market Study will be disseminated.
2 or more BDS centres functioning.
A Business Plan will be prepared for increasing the number of potential BDS providers.
B.2.4.2. After Fifth Year
Upon conclusion of the project it is expected to have a MSMEs strategy in place, effectively reaching formal and informal entrepreneurs in the rural and urban areas. Staff, trainers and counsellors working in public and private BDS outlets will have been trained in updated and tailored methods for Angola, and prepared to work in a competitive basis.
The number of Angolan enterprises applying for BDS will have increased. Access barriers will have been reduced effectively and more BDS providers will have been trained. In addition:
7,200 entrepreneurs will be trained from which 750 will have received special business development services (counselling) in 7 Business Centres located in Luanda and other Provinces. 50% of participants will be women entrepreneurs.
A small group, 350, of these entrepreneurs, will have received support to become ready for profitable linkages with large companies.
7 associations and/or formal groups of micro, small and medium enterprises will be created, one per each Business Centre.
A least two Business Incubators will be assisting 60 (30 each) promising companies.
By the end of the project, training material and experiences will have been made available to most of the suppliers country-wide. Know-how from UNCTAD/SEBRAE and CEFE will be transferred and expanded to selected local experts and institutions.