CentralRegion

Regional Office

SouthernRegion

Northern

Region

Amajuba

Uthukela Nambhi

ti

Sisonk

e

MidlandsRegion

Ugu

Umkhany- akude

Umzin-yath

Ethekweni

CentralRegion

Regional Office

SouthernRegion

Amajuba

Ilembe

Uthukela

Nambhiti

Sisonke

MidlandsRegion

Ugu

Uthun-gulu Zululand

Umkhany- aku

Umgungu- ndlovu

Umzin-yath

TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!

Creating Abundance through our people

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109 The Marine 22 Gardiner Street

Durban 4001Private Bag x 001Bishopsgate 4008

Tel: +27 31 310 5400Fax; +27 31 310 5354

Website: www.kzn-deat.gov.za

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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.

Background Info KwaZulu Natal

SMME Development in KwaZulu Natal (KZN)

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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.

Socio-economic indicators of KZN

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Manufacturing sector is the leading employers 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.

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.

KZN-Department of Economic Development - SME DirectorateKZN MACs (since merged with SEDA)

SEDAIthalaKhula

Industrial Development Corporation (IDC) Tertiary institutions (in particular Durban Institute of

Technology)District MunicipalitiesBusiness Chambers

Further Education and Training (FET) Colleges Trade and Investment, KwaZulu-Natal (TIK)

Science and Technology Institutions (CSIR, NRF etc.)Commercial Banks

Private sectorSMME 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.

CURRENT ROLE PLAYERS

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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

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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

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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

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.

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.

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ANALYSIS OF CONSTRAINTS FOR SMME DEVELOPMENT

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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.

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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.

Policy and Regulatory Environment Human Resource Development & Capacity

BuildingMarketing Support Financial Support

Technology Support

Constraints

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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

FINANCIAL SUPPORT

SUPPORTED BY

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.

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

partnershipsTax incentives for venture capitalists serving SMEs (long

term approach)

SUPPORTED BY

Human Resource Development & Capacity BuildingBusiness & Personnel Empowerment training

Enhancing SMME Marketing CapabilitiesNetworking smme with like industry mentor

Access to Financing

Partnership with Ithala & ABSA

Access to Information &Technology Partnership with other strategic stakeholders e.g.

SEDA

Focused initiatives

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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.

ROLE OF REGIONAL MANAGERManage 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 centrePublicise 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

ROLE OF SMME MANAGER AND TEAMProvide first line of support to businesses in the region

Maintain a database of businesses in the regionFacilitate training session in the regionsProvide 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)

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

THE WAY FORWARD.

SUPPORTED BY

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; andA powerful virtual presence linking

entrepreneurs and SME’s to business growth services.

Partnership Value Proposition

SUPPORTED BY

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

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 seminarsMentoring and networking opportunities

Up-to-date leading edge informationInformation on patents, copyright and trademarks

andUp-to-date information on small business issues

e.g. brochures, booklets, newsletters etc.

SUPPORTED BY

Regional Operation Model- Regional & District Offices

CentralRegion

Regional Office

NorthernRegion

Southern

Region

Local

Local

local

Local

MidlandsRegion

Local

Local

Loc

Local

Local

CentralRegion

Regional Office

SouthernRegion

Northern

Region

Amajuba

Ilembe

Uthukela Nambhi

ti

Sisonk

e

MidlandsRegion

Ugu

Uthun-gulu

Zulu-land

Umkhany- akude

Umgungu- ndlovu

Umzin-yath

Ethekweni

Regional Operation Model- Regional & District Offices

SUPPORTED BY

Outline of Regional framework and District Municipalities

Southern Region( Ngane Mkumla)EThekwini Ugu

•Midlands Region (Lwandlekazi Mqedlana)Uthukela Nambhiti Amajuba Umzinyath

Central Region (Vacant)UmgungundlovuIlembeSisonke

•Northern Region (Caeser Khuzwayo)ZululandUmkhanyakudeUthungulu

SUPPORTED BY

SUPPORTED BY

SUPPORTED BY

SUPPORTED BY

TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!

SUPPORTED BY

TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!

SUPPORTED BY

TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!

TOGETHER, ACCELERATING LOCAL ECONOMIC DEVELOPMENT!

SUPPORTED BY