SEDA IMPACT EVALUATION WESTERN CAPE (SOUTH AFRICA) Varsha Harinath (the dti) Francisco Campos (World Bank)

1. SEDA IMPACT EVALUATIONWESTERN CAPE(SOUTH AFRICA)Varsha Harinath (the dti)Francisco Campos (World Bank) Finance and Private Sector Development IE Workshop Dakar, Senegal February 2010

2. Content Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010 • Background • Objective of the impact study • Impact Evaluation methodology • Process and timelines • Challenges and lessons • Next steps

3. South Africa background Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010 • Unemployment is high: • 19% for males • 25% for females • South Africa has identified the development of small, micro and medium enterprises (SMMEs) as means to mitigate the unemployment crisis in the country, as well as to ensure a more equitable distribution of income (Department of Trade and Industry, 1995).

4. SEDASmall Enterprise Development Services Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010 • The Small Enterprise Development Agency (seda) offers non-financial business development services to small businesses in South Africa. • The agency, overseen by the Department of Trade and Industry (the dti), was created in 2004 and operates in all 9 provinces of South Africa. • Business assessments, training as well as assistance with business plans, promotional material, technology systems, registering process are among a range of non-financial services that seda offers to clients. • Eighty percent of its support to enterprises is focused on businesses with less than 20 employees.

5. Objective of the impact evaluation Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010 The impact evaluation seeks to test if seda services in the Western Cape Province lead to improved business knowledge and practices by SMMEs and hence have a positive impact on growth, competitiveness, sustainability and formality.

6. Key outcomes Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010 Outcomes Indicators 1a. Increase in turnover 1b. Increase in number of employees 1. Growth 2. Competitiveness 2a. Increase in productivity 2b. Increase in net profits 2c. Improvement in operational margins 2d. Increase in number of customers 3. Sustainability 3a. Survival rate 4. Formality 4a. Registered 4b. Certification of tax payment

7. Methodology Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010 To measure the impact of seda services, we would like to observe the performance of the same enterprise with seda’s intervention and without seda’s intervention over the same period in time………. Both states of the world do not exist at the same time!

8. Methodology Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010 • We “construct” these states of the world by creating an “experiment”, whereby we randomly assign a representative group of small business to either: • A treatment group - those that receive seda’s services. • A control group - those that do not receive seda’s services. • The treatment and control group is obtained from a representative sample of formal and informal small businesses in the Western Cape Province of South Africa. • To date, there is no extensive list of formal and informal small businesses in the Western Cape. Hence, for this study a multi-stage sampling technique was used , including the sampling of households and the identification of small enterprises within those households.

9. Methodolody Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010 Populations of SMMEs SMME Sample (906 businesses) Treatment group (453 businesses) Control group (453 businesses) Average outcome for treatment group _ Average outcome for control group __ Impact of seda’s intervention

10. Process Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010 • Sample identification - ~9,500 sampled households surveyed to identify SMMEs owned by household members • Baseline survey - ~900 SMME owners surveyed on business characteristics, financial accounts, support from government, registration status • Intervention - seda contacts the businesses in the treatment group to complete an office visit, assess their needs and provide appropriate services. • Follow-up survey - information collected on outcomes for treatment and control group 12 months after the intervention • Analysis - impacts measured with difference in differences

11. Timelines Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010

12. Baseline reports Baseline data can be useful for decision-making by assessing the status of entrepreneurship, as well as differences between sub-groups and their corresponding needs Growth Series: Profile of businesses Profile of entrepreneurs Awareness of SEDA Informality Access to finance Performance (financials) Labor Markets Challenges to growth Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010

13. Baseline data Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010

14. Challenges and lessons Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010

15. Next steps Impact Evaluation South Africa WB FPD Workshop, Dakar February 2010 • Office visit intervention for the Western Cape to be completed by March 2010. • Following the interest of this study in the Western Cape, the dti was also requested by seda to do an impact evaluation for the agency on a national scale. The baseline data for national seda study is piggybacking of a national small business study that is presently being conducted for South Africa. • Follow–up survey for Western Cape and for the National study in 2011.

16. SEDAImpact Evaluation Finance and Private Sector Development IE Workshop Dakar, Senegal February 2010