EHLANZENI SMME DEVELOPMENT AND SUPPORT PLAN

Transcription

1 EHLANZENI SMME DEVELOPMENT AND SUPPORT PLAN ( ) Compiled By Seda and EDM 1

2 Table of Contents Pages No: 1. Section One: introduction 1.1. Background and Context Purpose of the study Introduction of study methodology and techniques 8 2. Section Two: Desktop Analysis 2.1. Classification of SMMEs Legislation, policies and strategies supporting SMME development in SA National SMME Development and Support Programmes Section Three: Primary Research Methodology 3.1. Sampling techniques Research Instruments used and Data collection Procedure Data Analysis Section Four: Study Results 4.1. SMME Size SMME Scope The Demographic Scope of SMMEs SMME Practical Problems SMME Development Programmes Section Five: District Economic Evaluation and Problem Analysis 5.1. Economic Evaluation: Bushbuckridge Local Municipality Economic Evaluation: Thaba Chweu Local Municipality Economic Evaluation: Umjindi Local Municipality Economic Evaluation: Nkomazi Local Municipality Economic Evaluation: Mbombela Local Municipality Problem Analysis Context 78 2

3 6. Section Six: SMME vision, goals, objectives and Projects 6.1. The EDM SMME vision Goals and Objectives Programmes and Projects for Implementation Alignment of vision, goals, objectives and projects for implementation Section Seven: Implementation Framework 7.1. Institutional Plan Implementation Plan Financial Plan Monitoring and Evaluation Plan 108 Attachments Annexure A: SMME Database Annexure B: SMME Programmes 1. 3

4 Acronyms Meanings ABSA AIDS CC CHAMSA CIDB CSIR DALA DEAT DEDP DLA DME DPLG DTI EU FMAG FNB GVA GVA-R HIV IDC IRDP LTD MDC Amalgamated Bank of South Africa Acquired Immune Deficiency Syndrome Close-Corporation Chamber of Commerce and Industry South Africa Construction Industry Development Board Council for Scientific Industrial Research Department of Agriculture and Land Affairs Department of Environmental Affairs and Tourism Department of Economic Development and Planning Department of Land Affairs Department of Minerals and Energy Department of Planning and Local Government Department of Trade and Industry European Unions Fumani Ma-Afrika Group First National Bank Gross Value Added Gross Value Added by Region Human Immune Virus Industrial Development Corporation Integrated Rural Development Programme Limited Maputo Development Corridor 4

5 MEGA NDA NDF NEF NYS PIC PTY SABS SAHRA SAQI SARS SAWC SDF SETAs TEP TETA THRIP TSB WHO Mpumalanga Economic Growth Agency National Development Agency National Development Fund National Empowerment Fund National Youth Service Public Investment Corporation Proprietary South African Bureau of Standards South African Heritage Resources Agency South African Quality Institute South African Revenue Services South African Woman in Construction Spatial Development Framework Sector Education Training Authorities Tourism Enterprise Programme Transport Education Training Authority Technology and Human Resources for Industry Programme Transvaal Suiker Beperk World Health Organisation 5

6 1. SECTION ONE: INTRODUCTION 1.1. Background and Context South Africa is faced with a number of socio-economic challenges. Key among these are issues of unemployment, poverty, household income and economic growth. Small businesses have a critical role to play in both the growing of the economy and employment creation, improving household income as well as poverty reduction. Mpumalanga Province has no clear strategy or plan that deals with SMME development and support, currently being implemented. At a municipal level, both Ehlanzeni District Municipality and its five local municipalities do not have SMME development and support programs which are part of their Local Economic Development (LED) strategies and Integrated Development Plans (IDPs). In the context of the above situation, Ehlanzeni District Municipality and SEDA decided to commission a study on SMME size, scope and development programmes within the Ehlanzeni District Municipality s area of jurisdiction. The study intended to cover all the five local municipalities within the district, namely; Mbombela Local Municipality Nkomazi Local Municipality Umjindi Local Municipality Thaba Chweu Local Municipality Bushbuckridge Local Municipality 6

7 1.2. Purpose of the study At national and provincial government level, a number of studies have been conducted to determine the nature, characteristics and dynamics of SMMEs in South Africa. These studies have contributed to the development of national SMME development and support legislation, policies and programmes. Unfortunately, such national data is unhelpful at district and local levels since it is not disaggregated to reflect SMME profile, dynamics and challenges confronted by these enterprises at the local level. Furthermore, the national plans and strategies cannot be utilized at the local level to support SMMEs. It is against this background that the SMME study for Ehlanzeni District sought to achieve the following: Gather and provide up-to-date data on SMME profiles, challenges and dynamics within the District and its five local municipalities. Develop an Ehlanzeni District SMME Development and Support Plan for implementation by the District and its key partners. To achieve the above purpose, the following objectives as stipulated in the Terms of Reference had to be met: a. Gather, analyze and review all SMME programmes, strategies and projects already identified or being implemented by EDM, the five local municipalities, any organ of state, private sector, NGOs or other service providers within EDM, categorized in terms of project name, nature of initiative, location, project sponsor and current status and recommendations for the future. b. Gather, analyze and review spatial and socio-economic demographics within EDM. c. Analyze and compile a comprehensive database of existing registered SMMEs within EDM, as categorized by sector, nature of business, focus areas, strengths and weaknesses, location etc. 7

8 d. Gather, analyse and review all role-players and key stakeholders in economic development in general, and SMME sector in particular, including their current and potential roles and responsibilities e. Gather, analyze and review all current and potential SMME financial and non financial support services within EDM. f. Gather, analyze and review all existing institutional structures and instruments related to SMME and economic development within EDM and elsewhere in South Africa. g. Analyze and review practical challenges and obstacles facing the SMME sector in general and within EDM in particular h. Gather, analyze, review and compile database of all SMME support agencies within EDM as categorized by location, sector, areas of focus, services they render, number of years in business and challenges they face. i. Provide the District with a set of recommendations or options in respect of the effective implementations and measurement of the SMME strategy incorporating the national drive of developing and implementing SEDA programme. j. Provide a minimum of three project/ intervention business plan with associated costs to be implemented immediately by the EDM and its partners Introduction to Study Methodology and Techniques The process flow that was adapted by the study involved a seven step study methodology which was adopted as follows: Step 1: Orientation The orientation part of the methodology mainly focused on creating an enabling environment for the study by agreeing on the terms of reference; defining the key concepts, scope of work and key deliverables; and adopting the Project Implementation Plan. 8

9 Step 2: Desktop Study Secondary data analysis assisted in understanding international and national policies, programmes and legislation that underpin SMME development and support, as well as the key sources of data on SMMEs with the District. Step 3: Consultation Processes Primary data collection and analysis assisted in gathering up-to-date information on SMME size, scope, problems and programmes offered within the District. Step 4: District Economic Evaluation and Problem Analysis The main thrust of the step is to present SMME problems in the context of the District economy (economic evaluation broken down by local municipality). Step 5: SMME vision, concepts and strategies The purpose of this step is to formulate a focused approach to SMME development and support within EDM through clear vision, strategies and programmes. Step 6: Implementable SMME Development and Support Plan With a clear vision, strategies and programmes identified, step 6 provides an implementation framework for EDM in SMME development and support. The methodology is diagrammatically summarised as follows: 9

10 Project Process Flow 1. ORIENTATION In-augural meeting Defining Scope and deliverables Adoption of Project Implementation Plan 2. DESKTOP STUDY: Analysis of; Legislation Policies Programmes Strategies Best case experiences (National and international) 3. CONSULTATION PROCESSES SMME size, scope, database SMME Problems SMME Support 4. DISTRICT ECONOMIC EVALUATION AND PROBLEM ANALYSIS Economic evaluation (by LMs) SWOT analysis Problem Analysis in Context 5. SMME VISION AN STRATEGIC RECOMMENDATIONS Vision; concept; strategies; Programs 10

11 2. SECTION TWO: DESKTOP STUDY The technique was used in the following instances: Analysis of legislation, policies, programmes and strategies that support of development of SMMEs in RSA Evaluation of the District economy to understand the economic environment in which SMMEs operate Website of different organizations to understand national and international best practices in SMME development Journal, magazine and any other publications relevant to SMME development 2.1. Classification of SMMEs The National Small Business Act of 1996, as amended in Act 26 of 2003, defines small business enterprise as any entity, whether or not incorporated or registered under any law, consisting mainly of persons carrying on small enterprise concerns in any economic sector and established for the purpose of promoting the interests of or representing small enterprise concerns, and includes any federation consisting wholly or partly of such association and organization. The SMME sector plays a critical role in the South African economy by creating employment opportunities for communities within the second economy as well as providing Livelihood to the dependants. Poverty alleviation can be targeted through programmes for developing and supporting the SMMEs. 11

12 The White Paper on National Strategy for the Development and Promotion of Small Business in South Africa, Notice 213 of 1995, identifies four categories of SMMEs in South Africa as follows: Survivalist Enterprises Mainly activities by individuals not getting formal employment in which activities generate income not even enough for survival Individuals usually do not have skills training in the field and tend to be women who require upliftment from survivalist activities Micro Enterprises Are small businesses often run by the owner, family members and at most two paid workers Firms lack formality in terms of licenses, VAT, premises and accounting procedures Often have limited capital to start the business and basic business skills Small Enterprises Have employment ranging between five and fifty Are owner managed or the community Usually operate from premises Are usually registered for taxes and other formal requirements Medium Enterprises Viewed as owner-managed or controlled Sometimes has other shareholders in the ownership Employment levels of up to 200 workers 12

13 The white Paper is more concerned with the medium-sized enterprises which face obstacles and constraints not easy to solve through normal market forces and private sector action In line with this Project, the National Small Business Act, Act 102 of 2006; provides a schedule of the classification of SMMEs on the basis of: Sectors and sub-sectors in accordance with the standard industrial classification (SIC) Size of the classes The total full-time equivalent of paid employees Total turnover Total gross asset value (excluding fixed property) 13

14 The following (table 2.1) schedule provides a schematic representation of the different class sizes and related criteria Column 1 Column 2 Column 3 Column 4 Column 5 Sector or subsector in accordance with Size of class The total full-time equivalent Total Total gross value (fixed the Standard Industrial Classification of paid employment turnover property excluded) Agriculture Medium 100 R5m R5m Small 50 R3m R3m Very Small 10 R0.50m R0.50m Micro 5 R0.20m R0.10m Mining and Quarrying Medium 200 R39m R23m Small 50 R10m R6m Very Small 20 R4m R2m Micro 5 R.20m R0.10m Manufacturing Medium 200 R51m R19m Small 50 R13m R5m Very Small 20 R5m R2m Micro 5 R0.20m R0.10m Electricity, Gas and Water Medium 200 R51m R19m Small 50 R13m R5m 14

15 Very Small 20 R5.10m R1.90m Micro 5 R0.20m R0.10m Construction Medium 200 R26m R5m Small 50 R6m R1.90m Very Small 20 R3m R0.10m Micro 5 R0.20m R5m Retail and Motor Trade and Repair Services Medium 200 R39m R6m Small 50 R19m R3m Very Small 20 R4m R0.60m Micro 5 R0.20m R0.10m Wholesale Trade, commercial agents and allied Services Catering, Accommodation and other Trade Medium 200 R64m R10m Small 50 R32m R5m Very Small 20 R6m R0.60m Micro 5 R0.20 R0.10m Medium 200 R13m R3m Small 50 R6m R1m Very Small 20 R5.10m R1.90m Micro 5 R0.20m R0.10m Transport, storage and communications Medium 200 R26m R6m 15

16 Small 50 R13m R3m Very Small 20 R3m R0.60m Micro 5 R0.20m R0.10m Finance and Business Services Medium 200 R26m R5m Small 50 R13m R3m Very Small 20 R3m R0.50m Micro 5 R0.20m R0.10m Community, social and Personal Services Medium 200 R13m R6m Small 50 R6m R3m Very Small 20 R1m R0.60m Micro 5 R0.20m R0.10m In the absence of a provincial SMME Development and Support Plan, a clear understanding of the Ehlanzeni District SMME category challenges and opportunities is critical for SMME support. 16

17 2.2. Legislation, Policies and strategies supporting SMME development in South Africa SMME development and support in South Africa is governed by the following key legislation: White Paper on National Strategy for the Development and Promotion of Small Business National Small Business Act of 1996, as amended in South Africa, which highlights the following categories: Survivalist Enterprises Micro Enterprises Small Enterprises Medium Enterprises An understanding of the characteristics of each category as outline in White Paper is fundamental in the development of an EDM SMME development and support plan. By understanding the key challenges of each category, Ehlanzeni District Municipality and its partners are able to develop targeted support programmes. However, the most critical challenges is that most SMMEs are not aware of the categories in which they operate and are therefore not aware of the programmes targeted at them. The National Small Business Act of 1996 as amended provides a schedule of the classification of SMMEs on the following basis: Sectors and sub-sectors in accordance with the Standard Industrial Classification (SIC) Size of the class The total full-time employment of paid employees Total turnover Total gross asset value 17

18 Research has shown the following challenges associated with this classification: By revealing the number of paid full time employees, most SMMEs feel threatened by non-compliance with labour relations regulations By revealing their annual turnover, most SMMEs feel threatened by non-compliance on VAT and other tax issues Some SMMEs are not consciously aware of the asset value of their businesses Despite the presence of supportive legislation, SMME development and support is plagued by a number of challenges emanating from lack of information on how the legislation seeks to address these challenges. In addition to the identified legislation, a number of policies, programmes and strategies have been formulated to address the plight of SMMEs. Key among these includes the following: Integrated Strategy on the Promotion of Entrepreneurship and Small Enterprises The Micro-Economic Reform Strategy Accelerated and Shared Growth Initiative South Africa Draft Regional Industrial Strategy Broad Based Black Economic Empowerment National Strategy for the Development and Promotion of Franchising and South Africa Strategic Framework for Gender and Women s Economic Empowerment National Youth Enterprise Strategy Cooperative Policy and Development Draft Strategy These policies and strategies seek to promote an entrepreneurial culture within South Africa by providing targeted support to different SMME segments. However, despite the good programmes at national level, critical challenges emerge at the implementation phases at both the provincial and local levels. Mpumalanga Province does not have an SMME strategy or plan currently under implementation. Equally, the IDPs and LED strategies of local municipalities do not have SMME development and support as a key component being implemented, signifying 18

19 the disparity between policy and strategy development at national level and implementation at the local level. A more concerted effort both at provincial and local level on implementation of SMME programmes is needed. Strong ties between the municipalities and other support agencies are needed National SMME Development and Support Programmes To support national legislation, policies and strategies, a number of SMME programmes have been developed for implementation by various agencies within the country. The following sources were utilized for the compilation of the programmes list: National Department of Trade and Industry Pamphlets and website Small Enterprise Development Agency booklets and website Gtz-MRDP booklets and website Provincial Department of Economic Development and Planning booklets and websites 19

20 Table 2.2 Programmes Programme Sponsor Type of Support Technology for Women In Business (TWIB) Women Empowerment Programme Technology Transfer for Social Impact Programmes Technology for Women In Business (TWIB) Department of Science and Technology (DST) The programme provides SMMEs that are owned by women with access to science and technology support technology intervention, innovation and application. Technology is introduced through workshops and assistance is given with market access. Sectors covered are agriculture and agro-processing; mining and energy; textiles and clothing; ICT; arts, craft and tourism; manufacture; services and construction. The programme aims to introduce innovative technology and management systems, to create sustainable job and wealth opportunities in deprived areas and to promote sustainable human settlement. It achieves this through: Technology for Sustainable Human Settlement that focuses on introduction of technologies for improved service delivery and human settlement. Areas are: service delivery health, ICT and energy. Technology for Sustainable Livelihoods that focuses on natural resources. Beneficiation [value-addition] focuses on 20

21 technologies that could be commercialized. Agro-processing: aquaculture, essential oils, and medicinal plants, with a view to establishing commercially viable and sustainable enterprises [SMMEs] in these growing industries. Other agroprocessing technologies and mineral beneficiation will also be considered. TechnoServe Programmes (TNS) Tourism Business Development Programmes Social Plan Programme TechnoServe (TNS) Department of Environment and Tourism (DEAT) National Productivity Institute [NPI] Training, mentorship, partnering and advice TechoServe helps entrepreneurial men and women in poor rural areas of the developing world to build businesses that create income, opportunity and economic growth for their families, their communities and their country Marketing The programme assists emerging tourism enterprises to market their products at international exhibitions. The scheme pays for some costs; attending and preparing for exhibitions marketing materials [50% of stand]; accommodation and daily allowance. Mentorship and advice The aim of the Social Plan is to reduce retrenchment costs and create new jobs. It applies when at least 50 people or 10% of an organization s labour force is likely to be retrenched. The state pays 65% of the consulting costs and the company pays the balance. If a 21

22 company cannot afford the 35%, a special application of 100% funding can be submitted. The NPIs helps prevent job losses by giving support and technical assistance to the company. The NPI is contracted by the private sector and by local government to conduct productivity assessment and to give recommendations. The Social Plan Fund Programme Technology Advancement Programmes [TAP] Department Of Provincial And Local Government [DPLG] National Research Foundation [NRF] The Social Plan Fund was established in 1998 at the National Job Summit. The Department of Provincial and Local Government was allocated an amount of R3 million for 1999/00 to 2001 to support SMMEs and improve LED. In the last two years, 102 municipalities received a grand of R to undertake local economic regeneration studies Patent support The Innovation Fund invests in technologically innovative research and development projects, the effect of which will be new knowledge and widespread national benefits in the form of novel products, processes or services. TAP solicits proposals that build on the existing research and knowledge i.e. at a stage where a real or potential product, process, or services has been identified and the R&D proposed will enable progress to the prototype stage or equivalent. Preference is given to proposals that have significant potential to: expand existing commodity sectors; facilitate migration of industries 22

23 to new or emerging high R&D intensive industries; create new opportunities for previously disadvantaged groups involved in a consortium arrangement, with the appropriate combination of research, business, NGO and BEE partners to achieve national benefit. Technology And Human Resources For Industry Programme [THRIP] National Research Foundation [NRF] THRIP aims to improve competitiveness of South African industry by supporting research and technology development activities and enhancing the quality and quantity of appropriate skilled people. It is a research and development programme funded by the Department of Trade and Industry (DTI) and is managed by the NRF. THRIP supports projects as universities of Technology and Science Councils,, engineering and technology research collaboration that address the technology and human resource needs of South African business. Industry and the dti share the cost and therefore the risk of developing commercial technology. 23

24 Programmes Programme Sponsor Type of Support Khula Credit Indemnity Scheme Department of Trade and Industry [DTI] The purpose of the Indemnity Scheme is to share the financing risk with banks thus enabling SMMEs to access funding from a participating bank or bank or financial institution. Khula Land Reform Empowerment Facility Department of Land Affairs [DLA] and the European Union [EU] The scheme enables entrepreneurs to funds for access purposes of establishing, expanding or buying out an existing business, business assets and working capital. The aim is to facilitate land transfer and economic participation by black people in economically viable land based agricultural enterprises [both primary and secondary] and ecotourism sectors. Khula Mentorship Programme Department of Trade and Industry [DTI] The primary aim of the Mentorship Programme is to act as a risk mitigator and facilitator of access to finance for SMMEs. It offers two services, namely; pre-loan and post loan mentorship services. During the pre-loan stage entrepreneurs are assisted by experienced mentors with advice, counseling and the development of viable business plans in order to access funding. In the post-loan stage clients are assisted with various aspects of managing a successful business as identified by the client, mentor, bank and Khula. 24

25 The non-bank: Retail Financial Intermediaries Department of Trade and Industry [DTI] Retail Financial Intermediaries, commonly referred to as RFIs, are independent organizations or companies accredited by Khula to lend money directly to SMMEs. Once accredited, RFIs receive loan funds from Khula to disburse to small and medium enterprises according to their own lending policies. RFIs have to ensure that loans disbursed are paid back by the SMMEs in order to pay back the loan originally received from Khula. Khula Joint Ventures Khula, Anglo American, Checkers, Enablis and FNB This programme aims to: Enable entrepreneurs to establish as well as early phases business expansion. Facilitates entry of junior but commercially viable mining ventures into the mainstream mining sector. Create positive spin-offs for BEE in South Africa by granting successful SMME applicants OK Food franchise concessions on negotiable terms. OK Franchise and Khula provide dual guidance in terms of outfitting, training and mentoring the SMME to deliver maximum viability for their new businesses. Provide fund that gives 90% guarantees for loans extended to ICT focused and enabled businesses. 25

26 The Small Enterprise Development Agency National Procurement Programmes (SEDA) Department Of Trade And Industry [DTI] Through this programme, SEDA gives small enterprises access to procurement and tender opportunities in the public and private sector. The national procurement programmes assists small enterprises in completing tender documents, including costing, pricing and complying with the conditions of tenders. Post-tender support is provided to ensure that contracts are undertaken successfully. SEDA makes use of the latest electronic technology to pass information on to small enterprises using number of methods, including fax, , SMS, notice boards and walk-ins according to the facilities preferred by enterprises to receive information. The Small Enterprise Development Agency Exporter Training And Development Programmes (SEDA) Department Of Land Affairs [DLA] And The European Union [EU] Increasing competition locally from enterprises based in various countries of the world is putting pressure on South African small businesses to become globally competitive. SEDA has taken steps to assist small enterprises in becoming strong enough to compete in markets both at home and in overseas countries. SEDA sets out to do this by the means of its Small Exporter training and Development programmes. The programme is designed to help small enterprises in South African to gain practical skills which they can use to become equipped to enter the export markets 26

27 The Industrial Development The National The programme gives valid and appropriate financial assistance in Corporation Programmes (IDC) Development Finance order to develop Small and Medium Enterprises (SMMEs), and to Institution (NDF) accelerate Black Economic Empowerment (BEE) The National Empowerment The National The programme provides finance and financial solutions across a Fund Programmes (NEF) Empowerment Fund range of sector to black enterprises. (NEF) The Council For Scientific Industrial Research Development Programmes (CSIR) Technology For Women In Business (TWIB) Women Empowerment Programme Technology Transfer For Social Impact Programme The National Council For Scientific Industrial Research (CSIR) Technology For Women In Business (TWIB) Department Of Science And Technology (DST) The programme aims at understanding and applying directed research and innovation in science and technology to improve the quality of life of the country s people. The programme provides SMMEs that are owned by women with access to science and technology support interventions. Technology is introduced through workshops and assistance is given with market access. Sectors covered are agriculture and agro-processing; mining and energy; textiles and clothing; ICT; arts; crafts and tourism; manufacturing; services and construction. The programme aims to introduce innovative technology and management systems, to create sustainable job and wealth opportunities in deprived are as and to promote and to sustainable areas human settlement. It achieves this through: 27

28 Technology for sustainable human settlement that focuses on introduction of technologies for improved service delivery and human settlement. Areas are: service delivery, health, ICT and energy Technology for sustainable livelihoods that focuses on natural resources. Beneficiation (Value-addition) focuses on technologies that could be commercialized. Agro-processing technologies are: agriculture, essential oils, and medicinal plants, with a view to establishing commercially viable and sustainable enterprises (SMMEs) in these growing industries. Other agro-processing technologies and mineral beneficiation will also be considered. TechnoServe Programme TechnoServe (TNS) Training, mentorship, partnering, advice (TNS) TechnoServe help entrepreneurial men and women in poor rural areas of the developing world to build businesses that create income, opportunity and economic growth for their families, their communities and their country Tourism Development Programmes Business Department Of Environment And Tourism Marketing The programme assists emerging tourism enterprises to market their products at international exhibitions. The scheme pays for some cost: attending and preparing for exhibitions marketing accommodation: 28

29 daily allowance 25 pounds per day for exhibition plus two extra days. Three exhibitions per business The South African Bureau Of Standards Development Programme (SABS) The South Africa Quality Institute Development Programme (SAQ) National Productivity Institute Development Programme (NPI) National Development Agency (NDA) Request For Proposals (RFP) And Programmes Cluster The South African Bureau Of Standards (SABS) The South Africa Quality Institute (SAQ) National Productivity Institute (NPI) National Development Agency (NDA) SABS programme provides independent and objective assessment of the quality management systems of companies against internationals, providing companies with a competitive edge and enhancing customer satisfaction. The programme provides training on giving quality services, quality business sense and making quality products. Mentorship, training, business plans, financial analysis etc. This a new programmes to facilitate business development. The NPI assists a new business to register (VAT, SARS, levies, etc) and provides whatever assistance is needed to help gat the business running successfully for the long term. Loans with favourable interest rates are available. The programme provides whatever reports the sponsors request. Funding assistance given will depend on meeting certain criteria. Training, networking, capacity building. The national Development Agency is mandated to support and strengthen the capacity of civil society institutions to eradicate poverty within communities where they operate. They do this by providing training as well as offering dialogue, networking and 29

30 capacity building. Heritage Resources Fund Programme South African Heritage Resources Agency (SAHRA) SAHRA may provide financial assistance in the form of a grant to community organizations or individuals for a project, which will assist project community involvement in identifying sites that bring healing; contribute to local pride, self worth and dignity; build community spirit; contribute to redress and advance local heritage management. 30

31 3. SECTION THREE: PRIMARY RESEARCH METHODOLOGY Consultation Processes Processes that assisted in gathering up-to-date information on SMME size, scope, problems and programmes offered within the District involved devising techniques in selecting a sample from sampling frame developed by create a database of SMMEs represented in their economic sectors provided by key role players (i.e. SEDA, Khula Enterprise Finance, Umsobomvu Youth Fund among others) developing an instrument to survey the status of SMMEs within the District, collecting data in the form of face-to-face interviews with selected participants (SMMEs) and analyzing data. The process was achieved as follows: 3.1. Sampling Technique A sampling frame of 2078 SMMEs was developed by first integrating all SMMEs that appeared in the database provided by key role players. Data was then cleaned by eliminating all duplicate SMMEs that appeared more than once in the data bases for the sampling frame. This process was done to avoid repetition of the same SMMEs in the sample. SMMEs were then stratified according to their represented economic sector and location. The sample was stratified because of the natural inequality of SMMEs in different municipalities in the district. It is natural that SMMEs may differ by the geographical location and size, number of businesses in the area and by the economic turnover therefore. After stratifying them a sample of 200 SMMEs from the 2078 pool was randomly drawn representing each local municipality as our final sample. By virtually using a simple random sampling technique it was envisaged that each SMME in each sector and in each local municipality within EDM have an equal chance of being surveyed. SMMEs captured in the sampling frame were characterized by these following attributes: Name of the business Business economic sector 31

32 Products or services offered Contact person and details Physical address Table 3.1 below shows the original sampling frame that was developed and from which our final 200 SMME sample was drawn. Table 3.1: Sampling frame of 2078 SMMEs Municipality Number of SMMEs % of total Mbombela Umjindi Nkomazi Bushbuckridge Thaba Chweu % 6.9% 20.4% 9.6% 13.9% Total % Table 3.2 below shows the final selected sample by sector and local municipality: Table 3.2 Municipality Sector Number surveyed Mbombela Umjindi Agriculture Mining Manufacturing Transport Trade Construction Electricity Finance Services Community Services Agriculture Mining

33 Nkomazi Thaba Chweu Bushbuckridge Manufacturing Transport Trade Construction Electricity Finance Services Community Services Agriculture Mining Manufacturing Transport Trade Construction Electricity Finance Services Community Services Agriculture Mining Manufacturing Transport Trade Construction Electricity Finance Services Community Services Agriculture Mining Manufacturing Transport Trade Construction Electricity Finance Services Community Services

34 3.2. Research Instrument used and Data Collection Procedure A structured survey questionnaire with 28 questions and consent form was designed and administered by hired fieldworkers who made door-to-door visits of the selected SMMEs for face-to-face interviews with SMME respondents who mainly consisted of managers of the business. In the absence of managers of the business or the owners of the cooperative, fieldworkers were directed to conduct an interview with whoever was second in command in the business or the partners. Fieldwork was undertaken mostly during business hours when respondents could be reached. Other SMME respondents were interviewed approached SMME respondents by first introducing themselves and briefed the participation in the study was not compulsory and informed them of other ethical issues where their names would not be included anywhere on the questionnaire for any publicity purposes and that their synonymy was protected. The 28 item questionnaire consisted mainly of closed-ended rating questions which allowed a quantifiable categorical data. Other items in the questionnaire were open-ended questions that sought to measure the feeling of participants. An example of this questionnaire is annexed at the end of the report (see Annexure A) Data Collection Challenges Data collection on SMME size and scope is a daunting task. The following key challenges were encountered in the process: Some SMME agencies, stakeholders and role players indicated their unwillingness to divulge information due to the confidential nature of such information SMME treated the study with skepticism and suspicion and were therefore unwilling to cooperate Some document were regards as merchandise information and therefore payment was needed 34

35 Most SMMEs are not aware of the standard categorization of the SMME sector and therefore do not regard themselves as SMMEs and could not cooperate A few of the SMMEs regarded government programmes as unhelpful and saw no need to cooperate Action taken to solve the problems of Data Collection Fumani Ma-Afrika Group adopted the following strategies or actions to overcome the challenges: Persuasion and diplomatic appeals Information buying especially where it was being sold Use of researchers or interviewers from the same racial grouping, where race played a decisive role in SMME cooperation Persistent appeals where SMMEs indicated time constraints Incentives were considered where possible 3.3. Data Analysis The type of analysis undertaken in this study was description nature. Specific critical questions that could illustrate the size and scope of SMME within the Ehlanzeni District were identified from the questionnaire and captured manually to create a dataset of questions that could be analysed quantitatively. The capturing process involved identifying SMMEs according their economic sector and municipality to describe their demographic profile. The captured data was then analysed using the analysis program in MS Excel. The results are illustrated in tables, pie charts and bar charts (see Section 4 for the Results). 35

36 4. SECTION FOUR: STUDY RESULTS Result that follow aimed to determine the size and scope of SMMEs within the Ehlanzeni District Municipality SMME Size In line with the National Small Business Act, SMMEs are classified according to size in terms of the following criteria: The total full-time employment of paid employees Total annual turnover Total gross asset value (excluding fixed property) Using the questionnaire, sampled SMMEs were assessed and classified using the above criteria as follows: Micro Very small Small Medium 36

37 The following table 4.1 summarizes the SMME sizes within Ehlanzeni District, broken down by local municipality (based on the sample). Municipality Total SMME Size Micro Very small Small Medium Nkomazi (68.9%) 11 (24.4%) 3 (6.7%) 0 Mbombela (30.3) 36 (64.3%) 3 (5.4%) 0 Umjindi (95%) 2 (5.0%) 0 0 Thaba Chweu (65.4%) 7 (27.0%) 2 (7.6%) 0 Bushbuckridge (91.1%) 3 (8.9%) 0 0 Total The analysis shown in table 4.1 above shows that of all the SMMEs surveyed by municipalities most of them exist within the Mbombela Local Municipality of SMMEs combined, with almost 56 in total followed by Nkomazi with 45. Small Medium enterprises have the smallest number when compared to other types of municipalities there was however no indication that medium enterprises existed in all municipalities of the Ehlanzeni District. With regards to micro enterprises Umjindi has the largest number with almost 38 in total than any municipality. The following (Table 4.2) shows the representation of the different SMME size as a percentage of the total. SMME Size (Category) Micro Very small Small Medium Total Per Size Category % of total 67% 29.5% 3.5% 0% Total % 37

38 Of the SMMEs surveyed in the final sample of sample of 200 in the Ehlanzeni District Micro enterprises (67%) have the largest percentages by size. Medium enterprises account 0% percentages of existence in the district SMME Scope SMME scope is defined in terms of the Standard Industrial Classification of economic sectors, categorized as follows: Agriculture Mining Manufacturing Construction Trade Transport and Communication Electricity Finance and Business Services Community Services Tourism is not an economic sector but cuts across many sectors such as trade, transport services and others. 38

39 The following table (Table 4.3) summarizes the scope of SMMEs within Ehlanzeni District Municipality, broken down by local municipality and by sectors: Municipality SMME Scope Agriculture Mining Manufacturing Construction Trade Transport Electricity Finance Community service Mbombela 2 (2.3%) 0 24 (22.8%) 65 (41.6) 677 (54.7%) 23 (41.8%) 11 (47.8%) 61 (59.8%) 159 (52.1%) Umjindi 3 (3.4%) 1 (25.0%) 11 (10.4%) 16 (10.2%) 56 (4.5%) 5 (9.1%) 6 (26.1%) 5 (4.9%) 40 (13.1%) Nkomazi 18 (20.5%) 0 61 (58.0%) 51 (32.6%) 239 (19.3%) 22 (40.0%) 5 (21.7%) 34 (33.3%) 41 (13.4%) Thaba Chweu 57 (64.8%) 3 (75.0%) 3 (2.8%) 21 (13.4%) 145 (11.7%) 3 (5.5%) 0 2 (1.9%) 53 (17.4%) Bushbuckridge 8 (9.1%) 0 6 (5.7%) 3 (1.9%) 119 (9.6%) 2 (3.6%) 1 (4.3%) 0 12 (3.9%) Total Scope) (District

40 Results above show that the scope of SMMEs in the District are well represented more in the Trade sectors in all municipalities than any other sector, followed by community services and construction. Mbombela Local Municipality has the largest number of enterprises in Trade than any of the municipalities in the district. What is surprising is that the mining sector is not well represented in the district with numbers ranging from zero to three SMMEs. Thaba Chweu has the largest number of SMMEs in the mining sector. Construction and Manufacturing are well represented businesses in Ehlanzeni. With regard to construction Mbombela still dominates with 65 SMMEs followed by Nkomazi with 51. Nkomazi dominates SMMEs who venture businesses in the manufacturing sector with 61 businesses when compared to the rest of the municipalities. The following table provides a much clearer picture of the statistical representation of the different sectors within Ehlanzeni District. Table 4.4 SMME Scope Agriculture Mining Manufacturing Construction Trade Transport Electricity Finance Services Community Services Total No. of SMMEs within Sector Sectoral Representation 4.24% 0.19% 5.06% 7.52% 59.60% 2.65% 1.11% 4.90% 14.71% Total % 40

41 Trade as a sector account more than half (60%) of all the SMMEs in the district. Community services account for 15% of SMMEs in the district. The smallest percentages were recorded in the Mining and Electricity sectors in Ehlanzeni. What could be deemed the most promising sectors in the district were the Construction and Manufacturing sectors with 5% and 8% of representation, respectively. By comparison the Finance Services (5%) sector seems to be well represented than Transport (3%). Ehlanzeni District Municipality and its partners have the following key responsibilities Growing the SMME mining sector to ensure full participation especially of the previously disadvantaged people Support the trade sector that dominates SMME categories within the District overcome the critical challenges associated with the sectors SMME Business Focus The following is a disaggregation of the SMMEs within Ehlanzeni District Municipality. A local level approach was adopted to appreciate the business focus of these small enterprises. NB: Note should be taken that most SMMEs within the district have unfocused business operations which poses a challenge on how best to assist them. 41

42 Figure 4.1: Business focuses within the municipality NB: Unspecified and General Trade constitute % of the total SMMEs in Mbombela Outside of unspecified business, construction services and transport and communication dominate the SMMEs within the municipality with 5% in total when compared to businesses in travelling agencies (0.9%) that could be considered to be within the line of business. A significant number of specified SMMEs in Mbombela with a business involve those who do business in Construction (18%) and professional services (17%). 42

43 Figure 4.2: Business activities if SMMEs within Nkomazi Local Municipality. NB: Unspecified businesses and General Trading constitute 69.1% of the total SMMEs in Nkomazi Construction is dominant with 27% of total businesses in Nkomazi when compared to other businesses that could be respectively incorporated in the trade and services sectors. For example those that could be incorporated into trade such as clothing (3%) and those in the services sector such as professional services (12%) account less than 20% combined. 43

44 Figure 4.3: Business focus within Umjindi Local Municipality General trading dominates Umjindi local municipality business focus SMMEs with 25% when compared to other significantly dominating sectors such in professional services (16%) and construction (11%). Other unspecified small businesses in cleaning (2%) and entertainment (0.7%) are not well represented in the municipality. 44

45 Figure 4.4: Business focus of SMMEs within Bushbuckridge Local Municipality Unspecified general Trading sector (25%) and communication sector (11%) are prevalent businesses compared within Bushbuckridge. Other businesses in the tourism industry (Hotel, lodges and Guest Houses) (10%) and those trading in food and drinks (9%) seem to be significantly represented in the municipality. SMMEs businesses doing farming, which could be regarded as important type of business all over is not so well represented in Bushbuckridge with almost less than 1% of representation. 45

46 Figure 4.5: Business focus SMMEs within Thaba Chweu Local Municipality Like in Bushbuckridge, Thaba Chweu is dominated by businesses in the trading sector (32%), and tourism (accommodation) (7%) and in food and drinks (7%). But unlike Bushbuckridge businesses in professional services and farming seem to be even more dominant. For example, farming, with its types in vegetable farming (9%) and other mixed farming (7%) show significant prevalence in the municipality. Professional services account for 10%. Other significant type of businesses in Thaba Chweu involves construction (6%). Compared to all the above businesses, education and training businesses (less than 1%) seem to lack in the municipality. 46

47 4.3. The Demographic Scope of SMMEs A number of SMME specific issues were raised with the sample surveyed and these form part of the profile of Ehlanzeni District. A demographic scope of SMMEs was analysed by business registration status, type of business registration, type of business premises, number of people employed, business ownership by gender, and by age of the business. Business Registration Table 4.5: Summary of the registration status by municipality Municipality Registered status Mbombela Umjindi Nkomazi Thaba Chweu Bushbuckridge Vat/Income Tax Registered 43 (33.9%) 33 (26.0%) 22 (17.3%) 8 (6.3%) 21 (16.5%) Not registered 11 (20.7%) 6 (11.3%) 0 17 (32.1%) 19 (35.8%) Total SMME respondents surveyed were asked if they have registered their SMMEs in terms of Vat/Income Tax or not. A total of 127 respondents in all municipalities said that their SMMEs are Vat/Income Tax registered as compared to 53 who did not register their SMMEs. Comparisons by municipalities show that Mbombela Local Municipality has the highest number of SMMEs registered than all municipalities. Bushbuckridge and Nkomazi had nearly an equal numbers of SMMEs registered, with 21 and 22 SMMEs registered respectively in that order. On the other Thaba Chweu had the lowest with only 8 SMMEs recorded. When respondents were further asked why they are not registered, common reasons for non-registration included the following: 47

48 Not making enough money or profit Do not have information on the registration processes Afraid of failing to remit the taxes to Government Do not see the need to register Type of Business Registration Table 4.6: The type of business registration broken down by local municipality Municipality Sole Close PTY LTD Co- Proprietorship Corporation operation (CC) Mbombela 10 (15.2%) 41 (36.2%) 2 (25.0%) 2(25.0%) Umjindi 12 (18.2%) 25 (22.1%) 1 (12.5%) 1 (12.5%) Thaba Chweu 13 (19.6%) 8 (7.1%) 2 (25.0%) 1 (12.5%) Nkomazi 17 (25.8%) 23 (20.4%) 2 (25.0%) 2 (25.0%) Bushbuckridge 14 (21.2%) 16 (14.2%) 1 (12.5%) 2 (25.0%) Total Respondents were also asked about the type of business their SMMEs belonged to. Respondents were normally given four options in which to choose from with the fifth option to specify other business type that nevertheless did not belong in the first four options. Table 4.6 above analyses the results of the options with the exception of the other category as it was analysed qualitatively. Most businesses registered in all municipalities were CCs with 113 recorded than 8 in both co-operatives and PTY LTDs, respectively. Mbombela Local Municipality has most SMMEs as CCs (41) than as any other type of business. Only Bushbuckridge with though had the smallest number of SMMEs than any municipality had slightly an even number of the types of businesses, but only in sole 48

49 proprietorship (14 in total) and CCs (16 in total). Like any other municipality within Ehlanzeni, its co-operatives and PTY LTDs were below a significant number with only 1 and 2, respectively in that order. Table 4.7: Business ownership by Gender Gender Respondents Percentages % Male % Female 52 26% Total % The majority of the businesses interviewed are owned by males (74%) than women (26%). This means that out of 200 SMMEs surveyed only 52 SMMEs were owned by women. Type of Business Premises Table 4.8: A summary of the ownership of premises by municipality Municipality Ownership of Business Premises Rented Owned Mbombela Umjindi Nkomazi Thaba Chweu Bushbuckridge 39 (33.9%) 22 (19.1%) 15 (13.0%) 16 (13.9%) 23 (20.0%) 17 (20.0%) 18 (21.2%) 25 (29.4%) 10 (11.8%) 11 (12.9%) Total

50 Respondents were asked if the premises their businesses operated were owned by them or rented. Most SMMEs that operated in Mbombela (39 in total), Bushbuckridge (23 in total), Thaba Chweu (16 in total) and Umjindi (22 in total) did not own the business premises they used. On the contrary, only SMMEs operating in Nkomazi tended to own the premises of their businesses than rent them. Number of people Employed Table 4.9: Employment level by SMMEs within different local municipalities Municipality Mbombela Umjindi Nkomazi Thaba Chweu Bushbuckridge Number Employed 157 (17.5%) 308 (34.3%) 43 (4.8%) 167 (18.6%) 224 (24.9%) TOTAL 899 SMMEs respondents were asked on how many people they employed on temporary basis and full time basis. In total the number include 157 employees in Mbombela SMMEs, followed by Umjindi with 308, Bushbuckridge with 224 and Thaba Chweu with 167. Nkomazi had in average the lowest number of people employed SMMEs that operate in that region of the District. 50

51 Key factors cited as influential in employment decisions include; Tight Labour Laws Wage bill (non-affordable) Pilferage or theft by employees High mobility rate of employees Age of the Business Table 4.10 Age of business in years Period in Business Number of respondents Percentage % 0-3 years % 4-6 years % 7-9 years % years % years 6 3.0% Above 15 years 12 6.% Total % Respondents were asked on the age of their business in years. Years were categorized into six options ranging from no years in business up to above 15 years of business. Of the 200 SMME respondents surveyed nearly half (44%) said that their business was between 0-3 years old across the district. Only 10% of SMMEs seemed to have years older than 10 years (10-12 years category). Only six percent of SMMEs in the district have been running for over 15 years. 51

52 4.4. SMME Practical Problems SMMEs in different categories and sectors face different challenges and problems. However, some of the problems are prevalent across the board and these include the following: Lack of entrepreneurial and business management skills Access to finance Competition from established businesses Access to market opportunities, both local and international Payment delays especially by government departments, resulting in serious cashflow problems Escalating costs due to increase in rental, electricity and fuel cost A further analysis of the problems and challenges by local municipality and sector reveals that certain problems are more prevalent in other sectors as follows: Nkomazi Local Municipality Sector Challenges and Problems Manufacturing Increase in production costs due to petrol price increases Crime Access to finance Competition from established businesses Poor location Lack of information on SMME development programmes Trade Price increases due to escalating costs Inadequate space to operate businesses Transport problems to access the market 52

53 Access to funding Competition from established businesses Lack of skills, especially financial management Construction Lack of financial support Lack of skills, especially on financial management Poor monitoring mechanisms by institutions assisting SMMEs Transportation costs and warehousing problems Community Services Access to finance Inadequate office space mostly poorly located Lack of information on SMME development and support programmes Expensive equipment and machinery High advertising costs Skills challenges Agriculture Lack of entrepreneurial and business management skills Water problems and fencing of the farms High cost of maintaining equipment Poor access to market opportunities Escalating transport costs due to fuel increase 53

54 Mbombela Local Municipality Sector Challenges and Problems Manufacturing Skills Training Marketing and Advertising Stock inventory monitoring Financial management Insufficient material Competition Raw material Premises size and rent Transportation Trade Advertising and marketing Transportation Premises size and rent Competition Agriculture Skills Training Transportation Finance stock and equipment Tender appointment supply White dominant Land ownership Land Affairs Programmes Water Supply Catering Contracts opportunities Payments delays Transportation Tourism Competition Payment delays Staff training Transportation Finance assets Construction Competition CIBD Grading Lack of developmental programmes for small businesses Payment delays Transport Finance management, assets 54

55 Tender appointment Fuel prices ICT Job opportunities Target Market Advertising and Marketing Community Services Competition Transport Finance Assets Marketing and Advertising Business Training Target market Lack of information dissemination 55

56 Bushbuckridge Local Municipality Sector Challenges and Problems Community Services Skills Training Competition Finance assets and stock Security Water and Electricity Marketing Strategy Material Transport Construction Payment delays Premises size and rent Transportation Finance Projects appointment Competition Construction Material Grading System Manufacturing Premises rent and size Finance assets and stock Market Government support Contracts appointment Advanced Technology Competition Trade Business response Finance assets and stock Water and electricity Competition Government support Transport Stock monitoring Target market Fuel prices Premises size and rent 56

57 Umjindi Local Municipality Sector Challenges and Problems Manufacturing Target market Marketing and advertising Skills training Competition Finance stocks and assets Premises rent and size Transport Crime theft Community services Registration Finance material and assets Skills training Target market Equipment Price inflation Construction Tender appointments Lack of projects/job opportunities Price inflation Skills training CIDB grading Service delivery Transport Trade Crime Finance management Competition Marketing and advertising Mining Infrastructure Land affairs programmes Financial support Transport 57

58 Thaba Chweu Local Municipality Sector Challenges and Problems Manufacturing Storage place Premises size and rent Stock supply Skills training Location Agriculture Competition Skills Shortage Late payments Land ownership Marketing Machinery and equipment Trade/Retail Crime Monitoring Stock Inventory Finance Location Marketing and Advertising Competition Transportation Construction Skills trading Finance Transportation Late payment Tendering system Job opportunities/ contract Community Services Premises Marketing and Advertising Finance Competition The Ehlanzeni District Municipality Implementable SMME Development and Support Plan (Strategy) should seek to address the identified problems and challenges faced by SMMEs within the different economic sectors. 58

59 4.5. District SMME Development and Support Programmes A number of SMME development and support programmes are currently being implemented within Ehlanzeni District (see Annexure B) The following key aspects of the programmes are highlighted: Name of the organization Name of the programme Contact details ( address) Geographical area focus International National Provincial Regional (District) Local Programme sponsor Sector support focus Nature of support Financial Non-financial (technical) Key programmes that have both a district and local focus include the following: SEDA Programmes Business planning Procurement 59

60 Cooperatives Exporter training and development Franchise support Khula Programmes Business finance Land Reform Empowerment facility TSB Programmes Farmer support Business Partners Programmes Empowerment Fund Tourism Enterprise Programmes (TEP) Tourism Development MEGA Programmes Enterprise development Property management Trade investment Gtz/MRDP Education and training SMME incubation The other programmes tend to have a provincial, national and international outlook. 60

61 When performing the District Economic Evaluation and Problem Analysis, a critical analysis and evaluation of the challenges and opportunities for improvement of the programmes will be undertaken. 61

62 5. SECTION FIVE: DISTRICT ECONOMIC EVALUATION AND PROBLEM ANALYSIS Economic evaluation of the District was premised on a disaggregated evaluation of the 5 local municipalities within Ehlanzeni District of: Bushbuckridge Thaba Chweu Umjindi Nkomazi Mbombela The following are the key sources of economic information that were used for purposes of evaluation: LED strategies or plans Tourism plans/ strategies IDPs SDFs Other plans that were availed 5.1. Economic Evaluation: Bushbuckridge The economy of Bushbuckridge local municipality is dominated by the following sectors: Community services Trade Finance and business services 62

63 Graph 5.1 Source: FMAG calculations based on Global Insight Research 2007 data adapted from DEDP Sectors such as manufacturing and electricity had been decreasing over the years. Agriculture and mining were fluctuating in the 5 years. All other sectors experienced a marginal growth in the past five years. Graph 5.2 Source: FMAG calculations based on Global Insight Research 2007 data adapted from DEDP Construction showed a significant positive growth over the years. The same trend applies to finance and business services as well as community services. This was as a result of the following sub-sectors that were expanding 63

64 Community services Public administration Defense services Health and social work Finance and business services Finance and insurance Other business activities Sectors like electricity experienced decline over the years. This was as a result of the decline in all its sub-sectors. Overally the municipality experienced positive growth over the years even though it was fluctuating. Economic opportunities within Bushbuckridge Potential for crop farming Potential for beneficiation in agriculture (agro-processing) Horticulture Low cost housing in high demand Brick molding (production) Livestock potential Huge potential for quarrying Craft and tourism opportunities 64

65 Ehlanzeni SMME Development and Support Plan Constraints to economic development within Bushbuckridge Labor force not adequately skilled High crime Outsourcing of most goods and services from non-residents Low buying power of communities Poor road network Inconsistencies in water and electricity supply Few financial institutions Market accessing a serious challenge Beneficiation of most economic activities not explored 65

66 5.2. Economic Evaluation: Thaba Chweu Local Municipality The economy of Thaba Chweu local municipality is driven by the following sectors: Agriculture Transport and storage Construction The following table (table 5.1) summarizes the economic sector contributions for the periods 2001 and 2005 Economic Sector GVA Contribution % Agriculture Mining Manufacturing Construction Electricity Trade Transport Finance Community Services Source: Thaba Chweu LED Strategy The following sectors show a decline between 2001 and 2005 Agriculture Manufacturing Construction Electricity 66

67 On the other hand, the following sectors show an increase in contribution between the same periods Mining Trade Transport finance Community Services Economic opportunities within Thaba Chweu Large tourism investment and development potential High agricultural potential within the municipal space Beneficiation potential (up stream and down stream) in the agricultural sector, especially around agro-processing Proximity to the Limpopo and Gauteng markets Constraints to economic development within Thaba Chweu Climate change and natural and human induced disasters affecting agricultural activities Low level of SMME registration within the municipality Increasing unemployment and poverty which cause social instability Lack of clear SMME development and support programmes driven at local municipality level Negative impact of HIV/AIDS especially on the economically active 67

68 68

69 5.3. Economic Evaluation: Umjindi Local Municipality Gross Value Added (GVA-R) Sector Performance The economy of Umjindi is mainly driven by the following sectors: Community services Manufacturing Trade The following graph shows the economic sector GVA performance between 2003 and 2007: Graph 5.3 Source: FMAG calculations based on Global Insight Research 2007 data adapted from DEDP Sectors experiencing growth within the municipality are: Construction, trade, finance & business services and community services. Other sectors within the Municipality experienced fluctuations over the years 69

70 GVA Average Annual Growth Rates A summary of the average annual growth rates of economic sectors within Umjindi over the 5 year period. Graph 5.4 Source: FMAG calculations based on Global Insight Research 2007 data adapted from DEDP Construction has shown a positive growth over the years. Finance, trade and community services experienced a mixed growth over the years. There is a fluctuating trend. Mining had real growth in period resulting from well performing subsectors like coal and lignite. Negative growth was in year as a result of a decline in the following subsectors; Mining of gold Metal ores Quarrying Uranium ores Focus must be directed on the following sectors which are contributing insignificantly to the municipality; electricity and manufacturing with its respective sub-sectors of food, beverage and tobacco, textiles, clothing and leather ware. 70

71 Economic opportunities within Umjindi Latent tourism potential Unexploited agricultural potential and beneficiation (agro-processing) Latent manufacturing potential Potential to market products locally and in the neighbouring countries Potential to export low value added products Potential to develop SMMEs within the locality in agriculture, tourism and trade Constraints to economic development within Umjindi Poor relative competitive position of the locality Intense rivalry and competitive between businesses Inadequate infrastructure for economic development High levels of unemployment and shortage of critical skills Lack of coordination on preventing and combating crime Lack of space for business activities and storage facilities In adequate small business support from different quarters Lack of proper understanding and appreciation of the LED concept among key players 71

72 5.4. Economic Evaluation: Nkomazi Local Municipality Gross Value Added (GVA-R) Sector Performance The economy of Nkomazi local municipality is dominated by the following sectors: Community services Trade Manufacturing Agriculture GVA sector performance of the economic sectors within Nkomazi over the 5 year period Graph 5.5 SOURCE: FMAG calculations based on Global Insight Research 2007 data adapted from DEDP Mining and electricity are the sectors experiencing a decrease in the years. Mixed growth was experienced by the following sectors: agriculture, mining and manufacturing. Sectors like construction, transport & communication, finance & business and community services. 72

73 GVA- Average Annual Sector Growth Graph 5.6: A summary of the GVA average annual growth rates of economic sectors within Nkomazi Source: FMAG calculations based on Global Insight Research 2007 data adapted from DEDP From the above, the following scenarios emerge Over the years, construction, community services and finance and business services experienced positive growth. This is as a result of the following positively performing subsectors: Real estate activities Other business activities Health and social work Sectors like mining, manufacturing, electricity and their respective sub-sectors need attention as they experienced a negative growth within Nkomazi local municipality. Overally, the agricultural sector has been growing over the years. However there was a drastic fall in year 2006 which was as a result of decline in the agriculture and hunting subsectors. 73

74 Economic opportunities within Nkomazi Potential for economic development through exploitation of the agricultural potential of the area Potential for beneficiation through agro-processing activities Geographical location relative to the Maputo Development Corridor access to the sea and Swaziland market Huge tourism potential around tour operations, accommodation facilities and related activities due to proximity to the Kruger National Park Improved cooperation between the municipality, traditional leadership and other community structures in matters of economic development is assisting in mobilization of resources to develop the economy of the locality Constraints to economic development within Nkomazi Huge infrastructure and service delivery backlog under business budgeting for other economic development initiatives Spiraling unemployment and poverty within the communities Spiraling and uncontrollable influx of immigrants from Mozambique, Swaziland and Zimbabwe High negative impact of HIV/AIDS on the economic active population groups, also prompted by poverty levels Development of unplanned settlements due to influx of immigrants, exerting a strain on the municipal economy, infrastructure and service delivery 74

75 Ehlanzeni SMME Development and Support Plan 75

76 5.5. Economic Evaluation: Mbombela Local Municipality Graph 5.7: Sector performance between 2003 and Source: FMAG calculations based on Global Insight Research 2007 data adapted from DEDP Agriculture, manufacturing, electricity and transport & communication experienced ups and downs over the periods. From the year 2005 to 2007, the mining sector declined from 25.0% to 15.7%. Graph 5.8 Source: FMAG calculations based on Global Insight Research 2007 data adapted from DEDP Sectors like construction and community services experienced positive growth over the years. Sub-sectors that contributed more to this trend are public administration, defence activities, health and social work. Mining, agriculture and manufacturing experienced a 76

77 Ehlanzeni SMME Development and Support Plan mixed growth over the years. Mining and manufacturing experienced growth between and decline during the period Subsectors that experienced a decline between for Mbombela Local Municipality in mining and agriculture sectors are as follows: mining of coal and lignite, gold and uranium ores and agriculture and hunting respectively. Electricity has predominantly negative growth over the years except for year Finance and business services sector generally experienced mixed growth over the years. 77