Empowering SMMEs for Economic Growth: ECDC Initiatives and Impact in Eastern Cape

1. “ECDC Contribution towards SMME Development, Finance and Growth of the Eastern Cape Economy”Presented to:2010 SOUTH AFRICA SMME CONFERENCE PROGRAMMEBirchwood Hotel, Boksburg, Gauteng21 OCTOBER 2010By: Noludwe Ncokazi

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

3. THE EASTERN CAPE ECONOMY

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

5. The SMME Context… • 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.)

7. Non-financial Business Support Services Core Business OR Revenue Generating Support Services Employs both Pro-active and Demand-drivenapproaches Mentorship & Increased support to companies in distress Main Revenue Generation Pipeline After-care Development Investments (Loans & Equity) Development Properties Delivery Model Depicting linkages between Finance & non-financial support Development Services Development Services

8. 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

9. HIGHLIGHTS

10. HIGHLIGHTS

11. HIGHLIGHTS

12. 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.

13. HIGHLIGHTS • 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)

14. OBSERVATIONS & FINDINGS • Strong links with government service delivery • Infrastructure Development • School Nutrition Programme • Transport • Development Finance can contribute towards reviving ailing industries (turnaround strategies) • Clients differ significantly from each other depending on industry, location, size, level/stage of growth, etc. and therefore tailor-made solutions are required.

15. 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

16. 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

17. Thank You for listening .