1st Quarterly Plans (May & June)

Report
Business Environment in the
Eastern Cape:
Contents
1.
2.
3.
4.
5.
6.
Background and context
Character of the SMME sector
Institutional framework for Enterprise Development
Key programmes and interventions
Regulatory environment
Challenges
1.Background and context
Policy context:
•
Efforts are made to ensure implementation of
programmes supporting SMME’s 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 SMME’s
(white paper 1995; small business act 1996 amended
2004; BBBEE act 2003 amended 2012; ECDC act
1997)
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%.
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
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 DTI’s SMME Annual Review
(2007) the Eastern Cape accounts for 5% formal
SMME activity and 13% of informal SMME activity
in South Africa.
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.
2.1 Provincial Structure and Performance of
SMMEs:…..cont..
 The International Trade Centre (SME and Export-led Growth)
suggests that the Eastern Cape’s 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.
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.
2.2 sector profiles
2.2 Sector GVA’s contribution at constant 2005 prices for EC’s
municipalities, 2012
Municipality
Nelson
Mandela Bay
40.8
6.8
Secondary
Sector
56.0
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
100.0
100.0
100.0
100.0
Total
Total
Primary
Sector
Tertiary
Sector
37.6
2.2 Sector GVA’s contribution at constant 2005 prices for EC’s
municipalities, 2012
Municipality
Nelson
Mandela Bay
40.8
6.8
Secondary
Sector
56.0
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
100.0
100.0
100.0
100.0
Total
Total
Primary
Sector
Tertiary
Sector
37.6
3.Integration of institutional initiatives and
delivery mechanism
Horizontal and vertical issues of integration:
 Policy alignment:
o Review of the SMME strategy to ensure alignment and integration with other policy initiatives e.g. NGP, NDP; IPAP
o
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
o
o
Coordination of policy implementation through Provincial SMME Forum; Interdepartmental Co=operatives
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
CDC’s
• 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.
4. Key programmes & interventions
Actions: Opportunities for integration of sectoral
programmes
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.
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.
Short –
term
(next 8-12
months)
Medium –
term
(within 3
years)
Long-term
(> 3 years)
X
x
x
x
x
4. Key programmes & interventions
….cont….
Actions: Opportunities for integration of sectoral
programmes
Short –
term
(next 8-12
months)
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
Small scale farming:
 Promote establishment of secondary agricultural
marketing cooperatives for commercialization and
penetration of markets.
 Support for farmers involved in pineapple, Chicory,
Medium –
term
(within 3
years)
Long-term
(> 3 years)
X
X
x
x
x
4. Key programmes & interventions
….cont….
Actions: Opportunities for integration of sectoral
programmes
Cross cutting issues :
o Supplier development programme: (promote local content
through SOE localization programmes e.g. Eskom
infrastructure roll out programme.
o Buy E.C campaign: serve as a platform to support local
suppliers and increase their capacity to service the needs of
the public sector.
o Roll out of the business incubators in line with the targeted
priority sectors.
o Implementation of one stop shop especially in rural areas :
collaboration with SEDA and the dti on pilot in wild coast
initiative.
o Rollout of the Local Red Tape Reduction programme to 4
more municipalities in the Province.
o Implementation of the set asides for targeted procurement
supporting SMME’s and Co-operatives,
o Research Agenda: regular research updates on state of
SMME’s and Cooperatives that is shared with provinces and
municipalities.
o Roll out of the craft hubs for promoting craft and textile
sector,
o 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
Short –
term
(next 8-12
months)
Medium –
term
(within 3
years)
Long-term
(> 3 years)
X
X
X
X
X
X
X
x
X
X
X
x
x
4.1 Interventions
Sector Clustering:

The Eastern Cape economy is largely dependant on a few key sectors namely:
I.
Automotive Manufacturing.
II. Non- Automotive Manufacturing (NAM)
III. Agriculture

The automotive sector is a dominant employment creator.

Rising import competition and inputs costs are affecting these sectors significantly.
o
Shrinking markets
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
I.
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.
II.
–
Establish supplier development mechanisms and incentives to stimulate these sectors.
What type of incentives would be favourable?
4.1 Interventions cont.
Buy E.C Campaign
 Approach
•
– A multi-level approach have been adopted to kick start the initiative
o 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
o 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
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.
20
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
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
22
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.
Key Challenges
• 30 day payment of SMME’s 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
THANK YOU!
DANKIE
KEA LEBOHA
ENKOSI

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