Transcript Slide 1

Creating Abundance through our people
UmkhanyUmkhan
aku
y- akude
Uthun-gulu
Zululand
Norther
n
Region
SUPPORTED BY
UmzinUmzin-yath
yath
Ilembe
Umgungundlovu
Midlands
Region
Regional
Office
Central
Region
Sisonk
Sisonke
e
Amajub
a
Souther
n
Region
Ugu
Ugu
Ethekweni
TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!
109 The Marine
22 Gardiner Street
Durban 4001
Private Bag x 001
Bishopsgate 4008
Tel: +27 31 310 5400
Fax; +27 31 310 5354
Website: www.kzn-deat.gov.za
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Background Info KwaZulu Natal
SMME Development in KwaZulu Natal (KZN)
KwaZulu-Natal is a province of extreme contrasts. It is
a diverse and flourishing regional economy. It
generates the second largest contribution to GDP and
employment. The province is the trade and logistics
hub of South Africa. In addition, the province has a
large and established manufacturing base. The
province also has a thriving tourism industry and SUPPORTED BY
attracts a major share of the country’s tourism market.
On the other hand, the province is faced with enormous
developmental challenges. It has one of the highest
unemployment rate in the country, the largest number of
unemployed workers and more than 50% of the KZN
population living in poverty. The severity of the poverty is
intensified by the rapid spread of the HIV/AIDS epidemic –
KwaZulu-Natal has the largest HIV positive population of all
nine provinces in the country.
Socio-economic indicators of KZN
The 9.6 million inhabitants of KZN comprise 20.6% of the
National population.
KZN is the second largest contributor to the National Gross SUPPORTED BY
Domestic Product (GDP) - (17.5%)
GDP growth of KZN over the past five years averaged 3.11%
vis-à-vis 3.24% of National average for the same period.
24% of GDP of KZN’s economy is from manufacturing sector
(as opposed to 18% of GDP Nationally).
The tertiary or services sector is contributing in more than
half (53%) of KZN’s total GDP in 2004.
Comparing GDP and employment by Industry sector, it is clear
that
Community, social and personal services accounted for
6.2% of KZN GDP in 2004 and 1/3rd of its contribution to
formal employment,
Communication industry contributed 4.8% to GDP and
only 0.7% to formal employment.
Transport industry contributed 9.4% to GDP in the
province and only 2.1% to formal employment.
The service, manufacturing and primary sectors have grown at an
average annual rate of 5%, 1.6% and 0.2% respectively.
KZN contributes 18% of South African exports.
KZN has enjoyed a trade surplus since 1998.
KZN unemployment rate stands at 31%, second highest unemployment
rate after the Limpopo Province.
Manufacturing sector is the leading employers in KZN contributing to
more than 20% of total formal employment.
68% of workers in KZN are employed in the formal sector of the economy.
18% of total employment in KZN works in elementary occupations.
At best 18% of the income earners in the province earn enough to
contribute to the income tax revenue base.
15% of the population (20 years and older) have no schooling, 41% no
secondary schooling and only 7 % have some form of higher education.
73% of KZN population (over 20 years) had not completed Grade 12.
The spatial distribution of economic activity in KZN is very uneven.
Economic activity is geographically concentrated in the urban district
municipality of eThekwini which generates almost two-thirds (61.2%) of
the GDP of the province.
An estimated 1.52 million people (15.6 %) are living with HIV / AIDS in
KZN.
CURRENT ROLE PLAYERS
KZN-Department of Economic Development - SME Directorate
KZN MACs (since merged with SEDA)
SEDA
Ithala
Khula
Industrial Development Corporation (IDC)
Tertiary institutions (in particular Durban Institute of
Technology)
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District Municipalities
Business Chambers
Further Education and Training (FET) Colleges
Trade and Investment, KwaZulu-Natal (TIK)
Science and Technology Institutions (CSIR, NRF etc.)
Commercial Banks
Private sector
SMME formation is a critical feature of the Provincial
Government strategy to promote job creation. The roll-out of the
new National Small Business Support Framework, through the
Small Enterprise Development Agency (SEDA) is ensuring that
outreach at local level is maximized for ensuring efficient and
effective delivery at the grass root level.
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The KZN Integrated Business Support
(IBS) Programme is a strategic
intervention which focuses on the
following key Empowerment
programme:Business Support
Business Finance Strategy
Training and Capacity Building
The function of IBS is to create an enabling
environment for SMMEs, allowing them
access to opportunities and resources that
will enhance their competitiveness and
ensure their sustainability. In addition, the
functions of IBS are to a large extent the
formulation of strategies and interventions in
the policy environment (strategic level),
which include the following
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Furthermore, the IBS sub–programme will perform the
following functions at an operational level:
Develop and articulate the SMME strategy for KwaZulu–Natal
Manage and implement the business support and SMME
development programme.
Implement the business plan for the IBS sub–programme
Leverage and provide resources for the business support
and SMME development programme, and other projects
Stakeholder consultation and customer relation management
Monitoring and evaluation of the programme and projects
To improve the coordination of small business
policy implementation.
To mitigate the impact of regulation on small
enterprises without compromising compliance.
To build partnership and communication with
business community.
To implement a research and information
dissemination programme for the small enterprise
policy development and implementation.
To implement development support programmes.
The collective objective of above strategies and
programmes is to generate growth and
employment, by creating a platform for SMME
sector and facilitating competitiveness, driving
broad based black economic and women’s
empowerment and eradicating poverty by
expanding economic opportunities and extending
access to these opportunities and utilizing
technologies to enable growth.
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ANALYSIS OF CONSTRAINTS FOR
SMME DEVELOPMENT
Major weaknesses
There has been too much emphasis on top-down initiatives
controlled at central government or national level, without the
national bodies having the capacity to effectively implement
them
There is a lack of clarity of roles and mandates between the
various national institutions, especially relating to policy
formulation and to strategy implementation functions.
There is frequently a confusion of three different objectives
within the current SMME promotion approach, namely:
The welfare objective of supporting income generation in the
survivalist sector
The socio-political objective of enhancing black empowerment;
and
The economic objective of small business promotion.
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This in turn leads to a lack of differentiation between the
instruments and between the needs of the target
groups.
There is insufficient recognition and integration of
private sector SMME support with the public sector
initiated programmes. Newly created institutions thus
tend to replicate rather than complement or refocus the
range of services provided.
There is no explicit integration of SMME development
strategy into the wider economic context and
overarching Government strategies. SMME promotion
being reduced to a residual function, instead of forming
an integral part of all economic policies.
Constraints
Policy and Regulatory Environment
Human Resource Development & Capacity
Building
Marketing Support
Financial Support
Technology Support
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FINANCIAL SUPPORT
The cost of obtaining information about the bank ability of a SMME borrower,
The cost of monitoring loan performance, and
The cost of administering the loan including legal action in the case of loan
default.
Financial intermediaries are too risk averse, too conservative
for organization's with strong development objectives.
Non-existence of micro-finance institutions for promoting
SMME initiatives.
Lack of commitment and support by the banks and financial
institutions for the small and emerging businesses.
SMME funding linked to collateral instead of business plan
quality and strength.
Absence of a framework to guide the activities of the
development finance institutions to enable provision to access to
finance for SMMEs.
Ineffective debt recovery mechanism in case of defaulting
SMMEs resulting in crowding out of potential (start up) SMMEs at the
expense of former and further scaring private banks who are already
risk averse otherwise.
A misplaced emphasis upon access to finance as the most important
obstacle to small business development rather than focusing upon unnecessary
regulatory disincentives for SMME development
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Lack of product development capabilities – products
manufactured in the country are developed and designed
elsewhere.
Absence of subcontracting and presence of vertical
integration (trying to produce all in-house) causes
procurement of components and parts from other countries,
thus restricting the growth of local SMMEs.
With large suppliers increasingly making technology
tie-ups with foreign companies, local SMMEs’ opportunity to
enter prospective fields gets restricted by the absence of
proprietary technology.
In the absence of technology service providers,
SMMEs find it difficult to withstand global competition
resulting in failures.
Absence of common facility and testing centres for
enabling SMMEs to manufacture quality products.
Use of obsolete machinery and equipments by SMME
belonging to supporting industries, prevents them from
meeting quality or precision requirements.
Growth Proposal
Provide service centers for SMEs, staffed by highly skilled
people with experience to assist small businesses with
financial, marketing, production, organization, and
technical support and feasibility studies
Providing all start up information through single integrated
gate way i.e. Support Centers with complementary
partnerships
Tax incentives for venture capitalists serving SMEs (long
term approach)
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Focused initiatives
Human Resource Development & Capacity Building
Business & Personnel Empowerment training
Enhancing SMME Marketing Capabilities
Networking smme with like industry mentor
Access to Financing
Partnership with Ithala & ABSA
Access to Information &Technology
Partnership with other strategic stakeholders e.g.
SEDA
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Process for SMME support
services
Collection and dissemination of best practices in
SMME registration and support services
.
Implement ways and means to simplify
procedures, and reduce costs and delays in the
formal registration of SMME.
Establishment of a one-stop SMME office
emphasizing on functional areas:facilitation, monitoring, mentoring and evaluation,
outreach, advocacy, networking, information
dissemination, and referrals to strategic partners.
ROLE OF REGIONAL MANAGER
Manage district manager and team
Provide coaching and support to the district manager
and his team
Agree targets and goals for annual delivery from the
regional support centre
Determine annual budget requirement for centre
Publicise the delivery of the Business Support Centre.
Ensure an extensive database of Business
Development Support specialists for referrals.
On-going Monitoring & Evaluation of the centres
performance against agreed targets and goals
Engage with stakeholders in the region.
Produce monthly report for stakeholders and interested
grouping
ROLE OF SMME MANAGER AND TEAM
Provide first line of support to businesses in the region
Maintain a database of businesses in the region
Facilitate training session in the regions
Provide mentoring to new businesses
Help business to draw up business and operational
plans or refer to ABSA
Facilitate the process of linkages to financial
institutions, strategic partners and others.
Facilitate business gathering for sharing of ideas and
learning in the region, including talks by prominent
business leaders.
Gather and feed-up barriers for successful business
delivery in the region.
Facilitate opportunities in government & Private sector
for SMMEs in the region ( procurement of goods &
services)
THE WAY FORWARD.
Appoint Specialist SMME managers
Workshop and agree in writing deliverables from
each region
Agree time lines for each deliverable
Get SMME manager to attend business training ,
preferably with the next lot of business leaders
being trained so that they can start building
relationships
Get SMME manager involved in some of the
mentoring sessions
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Partnership Value Proposition
To foster and support entrepreneurship;
To promote small business training and
economic development in local communities;
Provide a structured framework for supporting
the building of successful businesses,
including funding, staffing, training and
mentoring;
Provide a continuous stream of new valueadding SME services;
Provide a programme for entrepreneurial
skills development; and
A powerful virtual presence linking
entrepreneurs and SME’s to business growth
services.
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To provide a differentiated advisory service to SMME’s placing
more focus on Previously Disadvantaged Individuals having a
business or who want to establish a business
Educating and supporting the previously disadvantaged
communities
Introduction to new and innovative banking solutions
and
To offer a one stop convenience for a wide variety of support
and advisory services for the SMME’s.
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Proposed Service Offering
Creation and review of business plans
and cash flow
Guidance on forms and documents required to start
and build a business
Workshops and seminars
Mentoring and networking opportunities
Up-to-date leading edge information
Information on patents, copyright and trademarks
and
Up-to-date information on small business issues
e.g. brochures, booklets, newsletters etc.
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Regional Operation
Model-ModelRegional Regional
& District Offices
Regional
Operation
& District Offices
Loc
Zululand
Umkhan
y- akude
Local
Norther
Souther
n
n
Region
Region
Uthun
-gulu
Local
Umzinyath
Ilemb
e
Local
Central
Central
Region
Region
Umgung
u- ndlovu
Local
Midlands Midlands
Region Region
Regional
Regional
OfficeOffice
Sisonk
Local
e
Norther
n
Region
Souther
n
Region
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Local
Local
Ugu
Ethekweni
Amajub
a
Outline of Regional framework and District Municipalities
Southern Region( Ngane
Mkumla)
EThekwini
Ugu
•Midlands Region (Lwandlekazi
Mqedlana)
Uthukela Nambhiti
Amajuba
Umzinyath
Central Region (Vacant)
Umgungundlovu
Ilembe
Sisonke
•Northern Region (Caeser
Khuzwayo)
Zululand
Umkhanyakude
Uthungulu
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SUPPORTED BY
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TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!
SUPPORTED BY
TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!
SUPPORTED BY
TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!
SUPPORTED BY
TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!
SUPPORTED BY