Helping today’s SMEs become tomorrow’s giants

A new guide published by the Institute of Directors in Southern Africa (IoDSA) sets out to give the SME sector a much-needed boost by helping it to access one of the corporate sector’s most potent success factors: good governance. "Governance enshrines how accountable, responsible, transparent and fair an organisation is run,” says Vikeshni Vandayar, Legal and Governance Specialist at the IoDSA.

The Department of Small Business Development also gave its stamp of approval at the recent launch of the guide. "The Governance in SME guide will greatly aid the Ministry in achieving our task of enhancing the support to small business and co-operatives through adopting it as part of the instruments we use in the department,” says Mr Mojalefa Mohoto, Acting Deputy Director General: Broadening Participation Division (BPD).

South Africa’s King III has established itself as the gold standard for corporate governance globally, but SMEs often assume that it is too expensive or time-consuming to implement. Not so, says Vandayar. King III is extremely flexible because it follows an "apply or explain” approach.

"Our Governance in SMEs guide aims to help SMEs understand their current state of development and thus the appropriate level of corporate governance required,” she says. "Then as the company evolves, the guide will help the leadership strengthen and adapt its governance framework, in the process clearly differentiating itself from competitors to investors, banks and potential customers.”

This sentiment was evident at the event where the guide was launched. One of the attendees gave a valuable recount of his own experience with implementing corporate governance and the value the guide could have provided him at the time. "He raised a valid point as to why it is important for the board/organisation not to just blindly apply King III principles. The board members need to apply their mind so as to ensure that the governance practices implemented are best suited for the SME - whilst still achieving the desired outcomes” says Vandayar.

"Overall, SMEs can benefit hugely from learning how to apply the governance best practices to ensure they operate well and build stakeholder confidence,” Vandayar says. "SMEs that want to become tomorrow’s corporates have to start building solid foundations from the start—this guide can help them do just that.”

The IoDSA’s Governance in SMEs: A guide to the application of corporate governance in small and medium enterprises has been prepared by the IoDSA and is being distributed with the support of the South African Chamber of Commerce and Industry and the Department of Small Business Development.