Central Region

1. Creating Abundance through our people Umkhany- aku Umkhany- akude Uthun-gulu Zululand Northern Region SUPPORTED BY Umzin-yath Umzin-yath Ilembe Regional Office Regional Office Midlands Region Midlands Region Uthukela Nambhiti Uthukela Nambhiti Central Region Central Region Umgungu- ndlovu Sisonke Sisonke Amajuba Amajuba Southern Region Southern Region Ugu Ugu Ethekweni TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!

2. 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 SUPPORTED BY SKS SOLUTIONS 0828587805

3. 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 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. SUPPORTED BY

4. 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 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. SUPPORTED BY

5. 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 leadingemployers 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.

6. 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) 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. SUPPORTED BY

7. SUPPORTED BY • 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

8. 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 SUPPORTED BY

9. 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

10. 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.

11. 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. SUPPORTED BY

12. SUPPORTED BY ANALYSIS OF CONSTRAINTS FOR SMME DEVELOPMENT

13. 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. SUPPORTED BY

14. 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.

15. Constraints Policy and Regulatory Environment Human Resource Development & Capacity Building Marketing Support Financial Support Technology Support SUPPORTED BY

16. 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 SUPPORTED BY

17. 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.

18. 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) SUPPORTED BY

19. 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 SUPPORTED BY

20. 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.

21. 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

22. 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)

23. 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 SUPPORTED BY

24. 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 value-adding SME services; Provide a programme for entrepreneurial skills development; and A powerful virtual presence linking entrepreneurs and SME’s to business growth services. SUPPORTED BY

25. 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. SUPPORTED BY

26. 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. SUPPORTED BY

27. Regional Operation Model- Regional & District Offices Regional Operation Model- Regional & District Offices Umkhany- akude Loc Zulu- land Uthun-gulu Northern Region Local Southern Region Local Umzin-yath Ilembe Regional Office Regional Office Midlands Region Midlands Region local Uthukela Nambhiti Central Region Local Umgungu- ndlovu Central Region Local Sisonke Amajuba Local Northern Region Southern Region SUPPORTED BY Local Ugu Local Ethekweni

28. Outline of Regional framework and District Municipalities SUPPORTED BY

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32. TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT! SUPPORTED BY

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