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“ECDC Contribution towards SMME Development, Finance and Growth of the Eastern Cape Economy”

Presented to: 2010 SOUTH AFRICA SMME CONFERENCE PROGRAMME Birchwood Hotel, Boksburg, Gauteng 21 OCTOBER 2010 By: Noludwe Ncokazi

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PRESENTATION OUTLINE

Eastern Cape Economy The SMME Context ECDC Value Proposition & Delivery Model Performance Highlights Observations & Findings ECDC focus going forward Conclusion 2

THE EASTERN CAPE ECONOMY

GDP Composition by Economic Sector, SA vs Eastern Cape 2008 Gen government services Community, social & other personal services Finance, real estate & business services Transport & communication Wholesale & retail trade; hotels & restaurants Construction Electricity and water Manufacturing Mining and quarrying Eastern Cape South Africa

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Source: StatsSA

Agriculture, forestry and fishing 0.0 5.0 10.0 15.0 20.0

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25.0

The SMME Context

SMMEs are part of the global village Various stereotypes still dominate and dilute the SMME Development Agenda Big is better Throwing money into all problems will help solve them Entitlement Government must promote “local content” at the expense of “value for money” SMMEs are solely responsible for their failure or success (policy environment, infrastructure, skills, systems & processes, etc.) Export business is for the “elite” and opportunities exist in the developed economies “Magic” success formula or one size fits all

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SMME support presents an opportunity to contribute towards rural development China’s dominance in the manufacturing sector 4

The SMME Context…

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Lack of entrepreneurship spirit.

More job-seekers than entrepreneurs Business – waiting area Dependency (on government) Entitlement Lack of hard skills (business & technical skills) Poor or limited business infrastructure.

Premises Technology Systems Lack or poor access to markets State of readiness for exports (quantity, quality, time & price) Scepticism and or ignorance – trading in Africa/SADC, BRIC) Lack or poor understanding of what the market requires.

Access to finance (speed, flexibility, Government system inefficiencies, cost of capital, etc.) 5

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Delivery Model Depicting linkages between Finance & non financial support

Development Services Development Services

Non-financial Business Support Services Core Business OR Revenue Generating Support Services

Employs both

Pro-active

approaches and

Demand-driven

Main Revenue Generation Mentorship & Increased support to companies in distress Pipeline

Development Investments (Loans & Equity)

After care

Development Properties

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Service Delivery Context

ECDC has presence in all Districts within the province Primary focus is on supporting ECDC clients to improve loan performance It has formal agreements signed for delivery of services with: Department of Trade and Industry (

the dti

) IDC Centre for Scientific and Industrial Research Small Enterprise Development Agency (SEDA) East Cape Aids Council CIPRO Department of Housing Department of Public Works Organized Business Partnerships are established on a project basis with the following: DBSA NEF Eastern Cape Tourism TEP Local Government HEI & FETs 8

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HIGHLIGHTS

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HIGHLIGHTS

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HIGHLIGHTS

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HIGHLIGHTS

The Corporation increased the number of small businesses it financed over the previous year by 11.8 %, i.e. from 800 to 907 enterprises.

Women-owned businesses received 37 % of the funding, while 85 % of disbursements went to small enterprises with a turnover less than R500 000.

ECDC disbursed the majority of its loans (59 %) to rural enterprises to promote economic opportunities. This allowed ECDC to play a meaningful role in government’s renewed focus on rural development.

Improved cash collections on the entire loan portfolio from R169,9 million in 2008/09 to R219,9 million in 2009/10.

ECDC invested heavily in research in targeted sectors to assist in identifying and packaging new business and investment opportunities especially in emerging sectors, such as renewable energy, agro-processing, aquaculture and services sector.

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HIGHLIGHTS

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Revitalization of the Eastern Cape Information Communication Technology Initiative [ECITI] which is an ICT and Film Incubator Partnership with SEDA Technology and the

dti

in the establishment of the Mthatha Furniture Incubator.

Improved access to international markets for SMMEs in the Arts & craft sub-sector Improved Turnaround times for business registrations due to a close working relationship with CIPRO Increased Entrepreneurship Outreach Programme targeting poverty nodes (rural and farm areas) 13

OBSERVATIONS & FINDINGS

Strong links with government service delivery Infrastructure Development School Nutrition Programme Transport Development Finance can contribute towards reviving ailing industries (turnaround strategies)

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Clients differ significantly from each other depending on industry, location, size, level/stage of growth, etc. and therefore tailor-made solutions are required.

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GOING FORWARD

Focusing on the provision of after-care to existing clients to curb high impairment of loans Focused provision of finance in vital sectors of the economy Agro-processing (e.g. Mohair, Livestock, High-value crops, wood processing, pharmaceuticals, etc.) Green Industry Tourism Creative Industries (craft, film – content generation, etc.) Market intelligence generation Stronger financial muscle required to encourage diversification and acceleration of economic growth Leveraging resources, strategic alliances and partnerships Focus on High Impact Priority Projects L-T investments Develop human capital (DFI competencies, sectoral focus, etc.) Constantly review business processes to improve internal efficiency and throughput 15

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CONCLUSION

SMME Development should be aligned with the priority growth sectors Not only do SMMEs create jobs but the cost per job is significantly lower SMME Development must include investing in Research and Development to ensure the following: Innovation New product development Access to new markets 16

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Thank You for listening

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