Creating a Competitive Advantage for the Highveld Ridge

1. Creating a Competitive Advantagefor the Highveld Ridge Bernhard AdamHenning BanthienJörg Meyer-Stamer Carl-Duisberg-Gesellschaft(CDG)

2. 1. Creating a Competitive Advantage:Key Issues in Local Economic Development

3. What isn’t Local Economic Development Attraction of new investment = investment promotion Community development Skills development SMME support + development Employment creation ... in a segmented and fragmented way!

4. What is Local Economic Development Community development Attraction of new investment Employment creation SMME development Skills development

5. Local economic development Community development Infrastructure Employment creation Transport SMME development Health Energy Poverty alleviation Technology Investment promotion Schools Housing Urbanization Water / sewage Skills development Education How does local economic development relate to other activities? Local development SMME promotion

6. Principles of economic development: Rivalry / competition Invisible hand of the market Survival of the fittest Principles of community development: Solidarity Collaboration Support for the weak and disadvantaged Why there is a tension between economic and community development Consequences: • It is important to separate economic development and community development in terms of organization and implementation • It is possible, and indeed essential, to seek areas of overlap, to create synergies, and to learn from each other

7. Three key issues in local economic development • Target groups of local economic development • Strengthening locational advantages • Synergy between economic development and employment promotion

8. Target groups of local economic development: firms Attract suppliers and complementary firms, manufacturers of capital goods, service providers supplier development,outsourcing, spin-off;support for owner succession - streng- thening local firms Promotion of start-ups and entre- preneurship Attraction of new firms new business opportunities in industry and services

9. Strengthening locational advantages Tangible locational factors Location Infrastructure Real estate Labor Energy + environment Taxes + incentives Relevant for individuals Relevant for firms Quality of habitation Environmental quality Quality of schools Social infrastructure Leisure infrastructure Competence of public administration Image of city Proximity of related industries Universities, R&D Business associations Intangible locational factors

10. Synergy between economic development and employment promotion * Work programmes * Skills development * Internships for special target groups * Adequate labor market information systems * Development of real estate * Attraction of investment * SMME support * Support for firms in crisis * Business development * Improving quality of life * Promotionof start-ups* Rehabilitation ofdeprived estates* Development ofinfrastructure Economic development Employment promotion

11. 2.A first diagnostic of theHighveld Ridge

12. Structure of this section • General observations • Marketing • SMME development • Sasol • Communication and cooperation

13. General observations: Strengths • Spirit: developmental orientation, communication, competent individuals • Preoccupation and effort with skills development • Practical orientation of education effort • Basic structure of supporting institutions • Excellent infrastructure • Sasol: economic dynamism, market access, community involvement • Positive examples of black entrepreneurship • Quality of life

14. General observations:Weaknesses • Confusion between economic development and community development • Fragmentation of business associations • Lack of quality of life in eMbalenhle • Complaints about housing, crime, lack of jobs • Frustration -- based on unrealistic expectations regarding speed of structural change • Self-reference / lack of international perspective; strong Sasol-focus

15. Strengths TLC work on regional marketing Competence region in synthetic fuel and chemicals (“petrochemical heartbeat”) Weaknesses Regional marketing is little known -- no shared effort Stakeholders’ Forum is perceived as “Sasol’s Stakeholders’ Forum”= unclear mission Block C: little frequented Small black businesses: unclear profile / statement Marketing

16. SMME Development:Strengths • Availability of capital in the region • Availability of know-how in the region • High political priority for SMME development

17. SMME Development: Weaknesses (1) • Inadequate business models • “What is my skill” instead of “Where is a market niche I can serve” • Finance -- access to credit, lack of start-up capital • No micro-finance institution • Lack of entrepreneurial skills • Exaggerated orientation at Sasol and other big customers

18. SMME Development:Weaknesses (2) • Small black businesspeople mixing politics and business • Lack of know-how about support • central government -- region • promotion agencies -- businesses • Political priority is not translated into significant action • HBDC: • unclear mission -- tender advice vs start-up support • mixing community development and business development

19. Strength Black empowerment Outsourcing / promoting black entrepreneurs in-house promotion in-house skills development Locational development industrial park east of Sasol SMME park Weakness Tendering and subcontraction incomplete information unclear criteria discretionary decisions Small tender is unsustainable for small subcontractors and Sasol creating unrealistic expectations black and white businesses are frustrated Outsourcing market distortions (e.g. sub-market rents) Sasol’s developmental role (1)

20. Strength Community development HBDC Stakeholders’ Forum Osizweni eMbalenhle Esperanza Sports development Woman and youth development Weakness Mixing of economic development and community development Small tenders Unclear role of HBDC: Sasol tender centre for disadvantaged microfirms or business development centre Sasol’s developmental role (2)

21. Expectations Joint development effort Effective, result-oriented Stakeholders’ Forum Effective business associations Obstacles Too general development goals No neutral support structure Unclear representativeness Possible conflict with elected representatives Unclear role and mandate of participants Fragmentation, parallel structures No clear goals No clear vision of tasks Cooperation and communication (1)

22. Expectations Effective task groups / organizations (Osizweni, HBDC, ...) Transparency and information flows Obstacles Unclear goals No defined milestones Unclear status of decisions made No monitoring and evaluation Task Groups: Little follow-up / leadership Little information flows Lots of hearsay and prejudice Lack of trust Cooperation and communication (2)

23. Some suggestions

24. Marketing • Block C-fair (HBDC) • Focus group => clarify business profile (André Roos + Petrus Mpete) • Strategic profile of the region: Survey of 5 leading chemical regions in the world -- Joint-venture TLC and Sasol (Albert Olivier, Pieter Bouer)

25. SMME-Development • Coaching and business angel model (Deon van Garderen, Black Management Forum) • Bank managers presenting credit products at NAFCOC

27. Sasol’s development role (1) Evaluate black empowerment practice • Minimize distortions (overpromotion of few, unmet and unrealistic expectations of many) • Enhance transparency • Separate community development and economic development = do empowerment with a business logic in mind Eliminate micro-tenders • create subsidiary to contract micro-enterprises • sustainable business relations • kick-off meeting HBDC - NAFCOC - Sasol • NAFCOC gives speeches to small black SMMEs

28. Sasol’s development role (2) Analyse the potential to use current non-product output commercially • low-temperature energy to create high-value biomass in greenhouses • methan fuel-gas for house fires

29. Cooperation and communication (1) Business associations • Business Forum voices business interests and gives services to members • Business associations as social gatherings Process Management • Definition of goals => breaking down goals • use GOPP methodology • Define milestones => establish monitoring • Set incentives, work on mutual interests • Stepwise, project-oriented work • Open learning process

30. Cooperation and communication (2) Trust and expectation • Stepwise approach • “You’re always a beginner” • Try to thing the way your counterpart thinks • Try to overcome boundaries • between organizations • between sectors (e.g. SMME and Labor)

33. Some International Experience

34. Income generation for small farmers Small NGO in Southern Brazil: • Managing the entire production chain • Market-driven approach • Scanning international best practices • Strictly business approach • Strictly working with associations, not with individuals

35. Combining skills development with other activities • Converting an old steel plant in Duisburg / Germany into a recreational area: • Training courses for long-term unemployed • metalworking • gardening and landscaping • Re-integration of skilled unemployed into the formal labor market

36. Combining skills development with other activities • Renovating a chapel in a former seminar and future museum and research center in Rio Negro / Brazil • Hiring 1 specialist • Offering a training course in chapel renovation for up to 10 students • Training course takes place on-site at chapel • Monthly fee of R 400 per student

37. Planning = learning Implementation = learning Perpetual process of planning, implementation, monitoring & evaluation, new planning You’re never there! How do you plan the unthinkable?