Creating a Competitive Advantage for the Highveld Ridge

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Creating a Competitive Advantagefor the Highveld
Ridge

• Bernhard AdamHenning BanthienJörg Meyer-Stamer
• Carl-Duisberg-Gesellschaft(CDG)

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1. Creating a Competitive AdvantageKey Issues
in Local Economic Development
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What isnt Local Economic Development
Attraction of new investment investment promotio
n
Community development
Skills development
SMME support development
Employment creation
... in a segmented and fragmented way!
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What is Local Economic Development
Community development
Attraction of new investment
Employment creation
SMME development
Skills development
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How does local economic development relate to
other activities?
Local development
SMME promotion
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Why there is a tension between economic and
community development

• Principles of economic development
• Rivalry / competition
• Invisible hand of the market
• Survival of the fittest

• Principles of community development
• Solidarity
• Collaboration
• Support for the weak and disadvantaged

• Consequences
• It is important to separate economic development
  and community development in terms of
  organization and implementation
• It is possible, and indeed essential, to seek
  areas of overlap, to create synergies, and to
  learn from each other

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Three key issues in local economic development

• Target groups of local economic development
• Strengthening locational advantages
• Synergy between economic development and
  employment promotion

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Target groups of local economic development firms
supplier development,outsourcing,
spin-offsupport for owner succession
Attract suppliers and complementary
firms, manufacturers of capital goods, service
providers
-
streng- thening local firms
Promotion of start-ups and entre- preneurship
Attraction of new firms
new business opportunities
in industry and services
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Strengthening locational advantages
Tangible locational factors
Location Infrastructure Real estate
Labor Energy environment Taxes incentives
Relevant for individuals
Relevant for firms
Competence of public administration Image of
city Proximity of related industries Universities,
RD Business associations
Quality of habitation Environmental
quality Quality of schools Social
infrastructure Leisure infrastructure
Intangible locational factors
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Synergy between economic development and
employment promotion
Work programmes Skills development
Internships for special target
groups Adequate labor market
information systems
Development of real estate Attraction
of investment SMME support Support for firms
in crisis Business development Improving
quality of life
Promotionof start-ups Rehabilitation
ofdeprived estates Development
ofinfrastructure
Economic development
Employment promotion
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2.A first diagnostic of theHighveld Ridge
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Structure of this section

• General observations
• Marketing
• SMME development
• Sasol
• Communication and cooperation

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General observations Strengths

• Spirit developmental orientation, communication,
  competent individuals
• Preoccupation and effort with skills development
• Practical orientation of education effort
• Basic structure of supporting institutions
• Excellent infrastructure
• Sasol economic dynamism, market access,
  community involvement
• Positive examples of black entrepreneurship
• Quality of life

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General observationsWeaknesses

• Confusion between economic development and
  community development
• Fragmentation of business associations
• Lack of quality of life in eMbalenhle
• Complaints about housing, crime, lack of jobs
• Frustration -- based on unrealistic expectations
  regarding speed of structural change
• Self-reference / lack of international
  perspective strong Sasol-focus

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Marketing

• Strengths
• TLC work on regional marketing
• Competence region in synthetic fuel and chemicals
  (petrochemical heartbeat)

• Weaknesses
• Regional marketing is little known -- no shared
  effort
• Stakeholders Forum is perceived as Sasols
  Stakeholders Forum unclear mission
• Block C little frequented
• Small black businesses unclear profile /
  statement

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SMME DevelopmentStrengths

• Availability of capital in the region
• Availability of know-how in the region
• High political priority for SMME development

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SMME Development Weaknesses (1)

• Inadequate business models
• What is my skill instead of Where is a market
  niche I can serve
• Finance -- access to credit, lack of start-up
  capital
• No micro-finance institution
• Lack of entrepreneurial skills
• Exaggerated orientation at Sasol and other big
  customers

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SMME DevelopmentWeaknesses (2)

• Small black businesspeople mixing politics and
  business
• Lack of know-how about support
• central government -- region
• promotion agencies -- businesses
• Political priority is not translated into
  significant action
• HBDC
• unclear mission -- tender advice vs start-up
  support
• mixing community development and business
  development

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Sasols developmental role (1)

• Strength
• Black empowerment
• Outsourcing / promoting black entrepreneurs
• in-house promotion
• in-house skills development
• Locational development
• industrial park east of Sasol
• SMME park

• Weakness
• Tendering and subcontraction
• incomplete information
• unclear criteria
• discretionary decisions
• Small tender is unsustainable for small
  subcontractors and Sasol
• creating unrealistic expectations
• black and white businesses are frustrated
• Outsourcing
• market distortions (e.g. sub-market rents)

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Sasols developmental role (2)

• Strength
• Community development
• HBDC
• Stakeholders Forum
• Osizweni
• eMbalenhle
• Esperanza
• Sports development
• Woman and youth development

• Weakness
• Mixing of economic development and community
  development
• Small tenders
• Unclear role of HBDC Sasol tender centre for
  disadvantaged microfirms or business development
  centre

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Cooperation and communication (1)

• Expectations
• Joint development effort
• Effective, result-oriented Stakeholders Forum
• Effective business associations

• Obstacles
• Too general development goals
• No neutral support structure
• Unclear representativeness
• Possible conflict with elected representatives
• Unclear role and mandate of participants
• Fragmentation, parallel structures
• No clear goals
• No clear vision of tasks

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Cooperation and communication (2)

• Expectations
• Effective task groups / organizations (Osizweni,
  HBDC, ...)
• Transparency and information flows

• Obstacles
• Unclear goals
• No defined milestones
• Unclear status of decisions made
• No monitoring and evaluation
• Task Groups Little follow-up / leadership
• Little information flows
• Lots of hearsay and prejudice
• Lack of trust

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Some suggestions
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Marketing

• Block C-fair (HBDC)
• Focus group gt clarify business profile (André
  Roos Petrus Mpete)
• Strategic profile of the region Survey of 5
  leading chemical regions in the world --
  Joint-venture TLC and Sasol (Albert Olivier,
  Pieter Bouer)

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SMME-Development

• Coaching and business angel model (Deon van
  Garderen, Black Management Forum)
• Bank managers presenting credit products at NAFCOC

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Sasols development role (1)

• Evaluate black empowerment practice
• Minimize distortions (overpromotion of few, unmet
  and unrealistic expectations of many)
• Enhance transparency
• Separate community development and economic
  development do empowerment with a business
  logic in mind
• Eliminate micro-tenders
• create subsidiary to contract micro-enterprises
• sustainable business relations
• kick-off meeting HBDC - NAFCOC - Sasol
• NAFCOC gives speeches to small black SMMEs

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Sasols development role (2)

• Analyse the potential to use current non-product
  output commercially
• low-temperature energy to create high-value
  biomass in greenhouses
• methan fuel-gas for house fires

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Cooperation and communication (1)

• Business associations
• Business Forum voices business interests and
  gives services to members
• Business associations as social gatherings
• Process Management
• Definition of goals gt breaking down goals
• use GOPP methodology
• Define milestones gt establish monitoring
• Set incentives, work on mutual interests
• Stepwise, project-oriented work
• Open learning process

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Cooperation and communication (2)

• Trust and expectation
• Stepwise approach
• Youre always a beginner
• Try to thing the way your counterpart thinks
• Try to overcome boundaries
• between organizations
• between sectors (e.g. SMME and Labor)

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Some International Experience
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Income generation for small farmers

• Small NGO in Southern Brazil
• Managing the entire production chain
• Market-driven approach
• Scanning international best practices
• Strictly business approach
• Strictly working with associations, not with
  individuals

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Combining skills development with other activities

• Converting an old steel plant in Duisburg /
  Germany into a recreational area
• Training courses for long-term unemployed
• metalworking
• gardening and landscaping
• Re-integration of skilled unemployed into the
  formal labor market

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Combining skills development with other activities

• Renovating a chapel in a former seminar and
  future museum and research center in Rio Negro /
  Brazil
• Hiring 1 specialist
• Offering a training course in chapel renovation
  for up to 10 students
• Training course takes place on-site at chapel
• Monthly fee of R 400 per student

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How do you plan the unthinkable?

• Planning learning
• Implementation learning
• Perpetual process of planning, implementation,
  monitoring evaluation, new planning
• Youre never there!