South African Business 2018 edition

OVERVIEW Development

OVERVIEW Development finance and SMME support South Africa has over two-million SMMEs. SECTOR INSIGHT The Northern Cape is supporting co-operatives. The National Department of Small Business Development (DSBD) has several programmes to assist small, micro and medium enterprises (SMMEs) and co-operatives. These include: • The Black Business Supplier Development Programme, a costsharing grant to promote competitiveness • The Co-operative Incentive Scheme, a 100% grant. The Small Enterprise Development Agency (Seda) is a subsidiary of the DSBD. In a recent publication, Seda reported that the number of SMMEs in South Africa increased by only 3%, from 2.18-million to 2.25-million between 2008 and 2015. Limpopo had the highest growth rate (34%), followed by Gauteng. Rural provinces tend to have more informal SMMEs, due to their high number of hawkers and informal traders. About half of South Africa’s formal SMMEs operate in Gauteng and more than half are in the wholesale and retail sector and the accommodation sector. The next most popular sectors are community, social and personal services. Recent studies have shown that South Africa’s townships represent a substantial market. The CEO of Minanawe Marketing, GG Alcock, told the FMCG Insights conference in 2016 that the “invisible market” was worth R10-billion. Alcock told the Sunday Times that a Johannesburg township fast food operator made R50 000 per day from three outlets. Seda has 42 incubation centres in South Africa under its Seda Technology Programme (STP). An example is the Zenzele Technology Demonstration Centre, a project that helps smallscale miners and mineral processors to create viable businesses. The National Gazelles is a national SMME accelerator jointly funded by Seda and the DSBD. The aim is to identify and support businesses with growth potential across priority sectors. Businesses can receive up to R1-million for training, productivity advice, business skills development and the purchase of equipment. The Industrial Development Corporation (IDC) supports SMMEs either by disbursing loans or by taking minority shares in enterprises and giving advice. An agricultural project in the Northern Cape is an example of the kind of work it does. Through the IDC’s Transformation and Entrepreneurial Scheme, a black economic empowerment project is underway at Kakamas, where emerging farmers are planting SOUTH AFRICAN BUSINESS 2018 130

OVERVIEW citrus. Vaal Community Citrus could create 1 330 jobs. The Provincial Government of the Northern Cape is an example of a government body which puts a strong emphasis on supporting small business as a way of stimulating economic activity, getting more people into the mainstream of the economy and bolstering food security. In 2016, support was given to 210 SMMEs and 91 co-operatives. Business and financial management training was offered to 83 informal traders. In partnership with the Small Enterprise Development Agency, nine cadets received training before receiving work places at various municipalities. The Department of Economic Development and Tourism hosted an Economic Research Day which brought together support agencies, government and private companies such as Petra Diamonds and Anglo American. A Provincial Incubation Strategy is planned, as is a specialist Renewable Energy Incubator. Two of the Eastern Cape Development Corporation’s seven business units are devoted to small business: Development Finance and Enterprise Development. The ECDC and the Technology Innovation Agency (TIA) jointly run the TIA-ECD Innovation Seed Fund Programme which identifies and co-funds early stage technology innovation projects in the Eastern Cape. The National Department of Labour has a programme to support people with disabilities. The Sheltered Employment Factories initiative puts out about 3 000 different product types in fields such as leather and canvas work, furniture, textiles, screen printing and book binding. The Enterprise Investment Programme (EIP) of the National Department of Trade and Industry (dti) is another support programme. In 2017, the success of a uniform and protection equipment company was advertised by the EIP: having received a grant in 2014, Thorax LP Equipment, a 100% black-women-owned company, has subsequently turned over more than R8-million and employed many young people. The Development Bank of Southern Africa (DBSA) is another major funder of projects. Private sector The major banks all have SMME offerings. Standard Bank runs a Community Investment Fund and Nedbank offers an enterprise development product for businesses with turnovers up to R35-million. Agribusiness and agri-processing are among the three sectors that are targeted by the Masisizane Fund for loan financing. The others are franchising/commercial and supply chain/manufacturing. Training is offered through a Business Accelerator Programme. As a non-profit initiative of the Old Mutual Group, the fund focusses on the cash flow of potential businesses rather than insisting on security in the form of property. Private companies are supporting SMMEs through their buying chain. Woolworths is funding TechnoServe to ensure that small tomato growers can grow produce that will meet the demanding standards of the retailer, and to help them expand production. A regular supplier to Woolworths, Qutom, assists with the project. Using the supply chain to benefit small business is at the heart of Anglo American’s Zimele, which runs four enterprise development and investment funds. Hub managers support small business in the downstream sectors relevant to the resource mined by the Anglo subsidiary. The Thermal Coal Hub and the Platinum Hub are two examples. The Mondi Zimele Hub in Piet Retief supports businesses in the paper and forestry supply chain. ONLINE RESOURCES Development Bank of Southern Africa: www.dbsa.org Eastern Cape Development Corporation: www.ecdc.co.za Gazelles: www.nationalgazelles.org.za National Empowerment Fund: www.nefcorp.co.za National Department of Small Business Development: www.dsbd.gov.za Small Enterprise Development Agency: www.seda.co.za Small Enterprise Finance Agency: www.sefa.org.za 131 SOUTH AFRICAN BUSINESS 2018