1st Quarterly Plans (May

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Business Environment in the Eastern Cape
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Contents

• Background and context
• Character of the SMME sector
• Institutional framework for Enterprise
  Development
• Key programmes and interventions
• Regulatory environment
• Challenges

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1.Background and context

• Policy context
• Efforts are made to ensure implementation of
  programmes supporting SMMEs is aligned to new
  policy shifts and strategic directions such as
  NGP, IPAP 2 and 3 NDP PIDS etc.
• Legislative context
• The following pieces of legislations guides the
  implementation of support programmes for SMMEs
  (white paper 1995 small business act 1996
  amended 2004 BBBEE act 2003 amended 2012 ECDC
  act 1997)

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1. Background and context ..cont.

• The Eastern Cape accounts 7.8 of the total
  national economic output. According to Global
  Insight (2009) finance and community services
  contribute slightly more than 50 of the
  provincial economy.
• Despite significant shifts in the global economy,
  the manufacturing sector remains the third
  largest contributor at 17 followed by trade at
  14.2 in terms of GVA contributions.
• The contribution of the agriculture remains
  relatively modest at 2.1 when compared to the
  mining contribution of 0.1.
• The provincial economy performed relatively well
  during 1998 to 2000 and 2002 to 2006 registering
  growth rates from -0.44 to 4.34 and 1.66 to
  5.23 respectively.
• Spatially the Nelson Mandela Bay Municipality and
  Buffalo City Municipality account for three
  quarters of the provincial Gross Value Added
  contributing 59.5 and 25.1 respectively. Both
  regions account for 84.6 of the provincial
  manufacturing output.
• In terms of the labour market the community
  services sector (government services) remains the
  largest employer at 35.2 (higher than the
  national average of 22.9). The Trade sector is
  the highest contributor in terms of productive
  sectors to employment, accounting for 19.0 and
  followed by Manufacturing at 12.0.

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2.Character of SMME sector

• SMMEs play a very vital role in the SA economy,
  considering the following estimates of their
  contribution to
• GDP estimates range from 36 to 45, compared to
  an estimated 33 contribution in 1995 and 35 in
  2007 targets of SMME future contributions to GDP
  range from 60 to 80 over the next 10 to 15
  years
• Private sector employment estimates range from
  56 to 61
• Gross capital formation at around 25
• Exports contribution is markedly low, as an
  estimated 2 of SMEs are export-oriented

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2.1 Provincial Structure and Performance of SMMEs

• Stats SA (2007) puts the number of SMMEs in the
  province at 261 000 the third largest SMME
  market after Gauteng and KwaZulu Natal.
• According to the DTIs SMME Annual Review (2007)
  the Eastern Cape accounts for 5 formal SMME
  activity and 13 of informal SMME activity in
  South Africa.

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2.1 Provincial Structure and Performance of
SMMEs..cont..

• The South African Small Business Index estimates
  the provincial share of the SMME market at only
  7.
• According to the DTI/ECDC Survey (2003) about 65
  of the provincial small business sector is
  located in the Amathole, OR Tambo and the Nelson
  Mandela Bay Metro.
• About 51 of small businesses in the Eastern
  Cape are located in rural areas, being largely
  micro and survivalist in nature.

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2.1 Provincial Structure and Performance of
SMMEs..cont..

• The International Trade Centre (SME and
  Export-led Growth) suggests that the Eastern
  Capes structure of the small business market is
  such that the Eastern Cape
• Has the third largest number of survivalist
  enterprises (17 of national market)
• Has the fourth largest number of
  micro-enterprises (10)
• Has a relatively small number of very small
  enterprises when compared to Gauteng, Western
  Cape and KZN weighing in at 42, 16 and 15
  respectively
• Has a low percentage of small and medium-size
  enterprises whereas Gauteng, KZN and the Western
  Cape account for 46, 16 and 12 respectively.

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2.1 Provincial Structure and Performance of
SMMEs..cont..

• The ECDC/DTI (2003) estimates that
• Micro enterprises make up to 91 of all
  enterprises in the Eastern Cape
• Small enterprises make up to 8 of all
  enterprises in the Eastern Cape
• Medium and large enterprises make up the balance
  of 1 of enterprises
• Collectively, SMMEs contribute 35 of the
  provincial GGP and 54 of employment as indicated
  below (ECDC/DTI 2003)
• Micro enterprises account for 6 of GGP and 17
  of employment
• Small enterprises account for 14 of GGP and 16
  of employment
• Medium enterprises account for 15 of GGP and
  21 of employment!
• Large enterprises contribute about 65 of the
  total economic output of the province.

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2.2 sector profiles
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2.2 Sector GVAs contribution at constant 2005
prices for ECs municipalities, 2012
Municipality   Total Primary Sector Secondary Sector Tertiary Sector
Nelson Mandela Bay   40.8 6.8 56.0 37.6
Buffalo City   23.6 9.3 25.2 23.5
Cacadu   7.5 33.7 5.3 7.3
Amatole   10.0 12.6 7.1 10.7
Chris Hani   6.1 12.4 2.5 6.9
Joe Gqabi   1.9 6.4 1.1 2.0
O. R. Tambo   8.1 16.1 2.2 9.5
Alfred Nzo   2.0 2.1 0.5 2.5
Total   100.0 100.0 100.0 100.0
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2.2 Sector GVAs contribution at constant 2005
prices for ECs municipalities, 2012
Municipality   Total Primary Sector Secondary Sector Tertiary Sector
Nelson Mandela Bay   40.8 6.8 56.0 37.6
Buffalo City   23.6 9.3 25.2 23.5
Cacadu   7.5 33.7 5.3 7.3
Amatole   10.0 12.6 7.1 10.7
Chris Hani   6.1 12.4 2.5 6.9
Joe Gqabi   1.9 6.4 1.1 2.0
O. R. Tambo   8.1 16.1 2.2 9.5
Alfred Nzo   2.0 2.1 0.5 2.5
Total   100.0 100.0 100.0 100.0
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3.Integration of institutional initiatives and
delivery mechanism

• Horizontal and vertical issues of integration
• Policy alignment
• Review of the SMME strategy to ensure alignment
  and integration with other policy initiatives
  e.g. NGP, NDP IPAP 3 national informal business
  strategy etc.
• Involvement of the local municipalities in the
  roll out of the red tape reduction programme to
  ensure compliance to legislative requirements
  e.g. by laws and municipal ordinances that may
  serve as constraints for business development.
• Stakeholder coordination
• Coordination of policy implementation through
  Provincial SMME Forum Interdepartmental
  Cooperatives coordinating committee provincial
  income security (economic transformation
  committee)
• Replicate the same structures at district and
  local levels to ensure participation of
  Municipalities through the existing LED Forums.
• Institutional arrangements
• Provision of education and training to
  cooperative enterprises through IFCD
• Fast track capacity building and business support
  to cooperative enterprises through CDCs
• Roll out of the one stop shops through
  strategic collaborations with SEDA and SEFA
• Sector focused incubation programmes e.g. ICT
  manufacturing, construction aquaculture agro
  processing etc.

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4. Key programmes interventions
Actions Opportunities for integration of sectoral programmes Short term (next 8-12 months) Medium term (within 3 years) Long-term (gt 3 years)
Automotive industry Total productive maintenance programme has been introduced to improve the efficiency of the suppliers. Logistics infrastructure identification of value add activities for packaging and route optimization. Skills development various initiatives and programmes are implemented to ensure alignment with the needs of the industry. X x x
Manufacturing Non-Auto Manufacturing Cluster to be established for purpose of manufacturing diversification . Agro-Industrial Manufacturing cluster to be established to create a platform for support of Agro processing initiatives. Develop a comprehensive database of local manufactures and enhance capacity of local suppliers for public sector needs. x x
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4. Key programmes interventions.cont.
Actions Opportunities for integration of sectoral programmes Short term (next 8-12 months) Medium term (within 3 years) Long-term (gt 3 years)
Green economy finalise a Renewable Energy value chain opportunities and gap analysis in order to identify skills needs and opportunities for local suppliers. Pilot a rural alternative energy mini-grid in order to explore ways in which rural energy hubs can stimulate local enterprise development Green skills campaign collaboration with the Higher learning institutions for alignment of curriculum with the needed skills for green industries Local manufacturing of components for the needs of the green industries e.g. solar panels wind turbines etc. x X x X x
Small scale farming Promote establishment of secondary agricultural marketing cooperatives for commercialization and penetration of markets. Support for farmers involved in pineapple, Chicory, wool, Nguni livestock Tea and coffee for export markets . Support of Hydroponic farming methods in rural areas and linkages with markets on crops produced. x
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4. Key programmes interventions.cont.
Actions Opportunities for integration of sectoral programmes Short term (next 8-12 months) Medium term (within 3 years) Long-term (gt 3 years)
Cross cutting issues Supplier development programme (promote local content through SOE localization programmes e.g. Eskom infrastructure roll out programme. Buy E.C campaign serve as a platform to support local suppliers and increase their capacity to service the needs of the public sector. Roll out of the business incubators in line with the targeted priority sectors. Implementation of one stop shop especially in rural areas collaboration with SEDA and the dti on pilot in wild coast initiative. Rollout of the Local Red Tape Reduction programme to 4 more municipalities in the Province. Implementation of the set asides for targeted procurement supporting SMMEs and Co-operatives, Research Agenda regular research updates on state of SMMEs and Cooperatives that is shared with provinces and municipalities. Roll out of the craft hubs for promoting craft and textile sector, Training of the LED staff in Municipalities for registration of businesses in the interim period meanwhile investigations of an integrated system is still been done by the dti X X X X X X x X X X X x x

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4.1 Interventions

• Sector Clustering
• The Eastern Cape economy is largely dependant on
  a few key sectors namely
• Automotive Manufacturing.
• Non- Automotive Manufacturing (NAM)
• Agriculture
• The automotive sector is a dominant employment
  creator.

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4.1 Interventions cont.

• Buy E.C campaign
• Purpose
•  
• Buy Eastern Cape Campaign is to create demand
  side mechanisms and incentives that would
  increase levels of localised production.
• How
• Leverage the provincial spend across all
  departments to build on exiting manufacturing
  capability and enable small scale investment in
  these sectors.
• Supply Chain Management
• Transversal Contracts, take off agreements,
  Contract specifications, Contract
• management, opportunity/ commodity
  analysis, provincial spend analysis.
• Establish supplier development mechanisms and
  incentives to stimulate these sectors.
• What type of incentives would be
  favourable?

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4.1 Interventions cont.

• Buy E.C Campaign
• Approach
•  
• A multi-level approach have been adopted to kick
  start the initiative
• Baseline Study have been initiative to assess the
  provincial government spend across 2 financial
  years (FY11/12 to FY12/13)
• Assessment on expenditure on goods and service in
  the Eastern Cape.
• Leakage factors
• Supplier Development
• The department have partnered with EC business
  chambers (FABCOS, NAFCOC, Border Kei NMBBC) for
  the establishment of interventions to support
  existing enterprises operating in the
  manufacturing sectors

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4.1 Interventions cont.

• Jobs fund
• The primary mandate of the Jobs stimulus Fund is
  to incentivize the creation of new jobs located
  within the Eastern Cape by attracting, sector
  specific, catalytic investments which stimulate
  sustainable new jobs across the value chain.
• Focus on industrialized jobs

CATEGORY FOCUS AREA
Sector Agro-Processing, Green Economy, Tourism, Non-Automotive
Spatial Provincial wide, with points benefit to identified spatial zones
Employees Preference points for number of new jobs created
The oversight function of the Fund l focuses on
the creation of real and sustainable jobs.
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4.1 Interventions cont.Jobs stimulus fund

• A total of 101 companies were approved to a tune
  of R69 .9 Millions
• A Total of R34 Million was disbursed to 74 of the
  101 companies
• A total of 6990 jobs were created through the job
  stimulus fund

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4.1 IMVABA- Number of beneficiaries

• Since establishment 98 Coops have been approved
  for R56 Mil
• Since establishment R36 Million has been
  disbursed
• Technical skills training was provided to 48
  cooperatives
• Food Health and Safety standards
• Governance and Leadership
• Occupational health and safety
• First Aid Training
• Training on Crop production livestock
  production Broiler production, piggery
  production honey production

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5.Regulatory environment

• Supported 2 pilot sites for red tape reduction in
  2012/2013 (BCM and Lukhanje LM).
• Processes are underway to roll out to for
  Municipalities for 2014/2015.
• Regulatory impact assessments to be conducted in
  conjunction with Municipalities.
• Sharing of lessons learned during the pilot phase
  is very critical for a corporate governance and
  benchmarking.

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Key Challenges

• 30 day payment of SMMEs is still a challenge for
  sector departments and municipalities.
• Business infrastructure remains a hassle
  especially for small enterprises
• Reluctance to enforce some of the by laws serve
  as hindrance for growth of the SMME sector.
• Cumbersome administrative processes continue to
  negatively affect the growth of the SMME sector

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THANK YOU!DANKIEKEA LEBOHAENKOSI