Strategy
Draft
“The significant participation and meaningful inclusion of the people of the township
into mainstream economy of Gauteng through their own township enterprises that are
supported by the government and big business will be one of the key game changers…The
townships must be self-sufficient and vibrant economic centres.” Premier David Makhura,
State of the Province Address (June 2014)
TABLE OF CONTENTS
1. INTRODUCTION
4
1.1 Purpose
4
1.2 The Vision for the Gauteng Township Revitalisation Strategy
4
2. SITUATIONAL ANALYSIS.
5
3. LEGISLATIVE FRAMEWORKS, REGULATIONS AND STRATEGIES TO SUPPORT SMMES.
13
3.1 Enterprise Development and support Policies and strategies
13
3.2. Informal Economy
14
4. STRATEGIC PILLARS OF SUPPORT
15
4.1. Economic Infrastructure
15
4.2. Resourcing
16
4.3. Entrepreneurship developments
17
4.4. Market support and competitiveness
18
4.4.1.Networking and partnerships among SMEs
19
4.4.2.Market access
19
4.5. Support for indigenous Knowledge systems
19
5. RESOURCE MOBILISATION AND PARTNERSHIPS
20
5.1. Partnerships
20
6. MONITORING AND EVALUATION
21
7. ANNEXURE1: PLAN OF ACTION
22
8. LIST OF REFERENCES
23
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1.
INTRODUCTION
Entrepreneurs are vital to South Africa if the country is to
create jobs of a diversified nature, produce new products,
services, or technology, and enhance overall productivity
at the national and global level. History has demonstrated
that almost all leading economies of the world developed
on the back of entrepreneurial and innovative attempts.
In fact, the Economist states that: “America gets more
than half its economic growth from industries that barely
existed a decade ago.”
The level of entrepreneurship in South Africa is one of the
lowest in the world, ranked 27th out of 59 countries in the
primary measure of entrepreneurship used by the Global
Entrepreneurship Monitor (GEM). In 2012, almost 4400
small businesses closed down in South Africa due to the
lack of funding. In South Africa, 60% of SMME’s are at
Business Sophistication Model (BSM 1-4) and are classified
as survivalists, informal and very small. Regrettably, the
2012 Global Entrepreneurship Monitor (GEM) survey
indicated declining levels of local entrepreneurship, from
a reported 9,1% in 2011 to 7.3% in 2012. In addition,
the study revealed lower perceived business opportunities
for South Africa (39%), compared to Sub-Saharan Africa’s
average of 70%.
In his State of the Province Address (SOPA) on 27 June
2014, Gauteng Premier, Mr. David Makhura stressed the
need to revitalize the township economy by supporting
the development of township enterprises, cooperatives
and Small, Micro and Medium Enterprises (SMMEs).
He asserted that township entrepreneurs are capable
of producing goods and services to satisfy the demand
of the populations in the townships and sell excess to
other provinces as well as cross-border markets, provided
they are supported across the value chain of enterprise
development
It is against this background that the Gauteng Provincial
government has called for paradigm shift in how to grow
the economy and focus public spending to decent job
opportunities through enterprise support across the public
sector goods and services value chain. The revitalization of
township economy is rooted into the National Development
Plan, which emphasise that 90% of the new 11 million
jobs to create in 2030, will come from Small, Micro and
Medium Enterprises (SMME)1, G2055, which stresses that
Gauteng City Region growth path should be inclusive and
equitable. Specifically, the Gauteng Township Economy
Revitalisation falls within the provincial pillars of Radical
Economic Transformation, Decisive Spatial Transformation,
Modernisation of the Economy and Re-industrialisation.
Whilst the government has done a lot to ensure that
townships become liveable and vibrant economic centres
to its residents, little was done to re-invigorate the
entrepreneurial spirit of township economies. Low levels
of entrepreneurial activities hold innovation back and
survival of small medium enterprises is due to combination
of factors including lack of access to commercial finance,
high interest rates, poor value proposition and underdeveloped skills. The highly concentrated market structure
dominated by established businesses tends to be associated
with lower output, employment and higher prices in the
affected sector.
1_In this document, the word SMME means all emerging enterprises, irrespective of the structure of ownership, from a company, sole proprietorship and cooperatives.
1.1 Purpose
This strategy is thus an attempt to create a foundation
for Township Economy Revitalization Action Plan through
dialogue and collection of quantitative and qualitative
information on the township economy and its potential by
taking into account local dynamics and social organisation.
It is an approach in which Gauteng provincial government
has vigorously engaged2 township entrepreneurs so that
the support measures planned are informed and addresses
the challenges of township businesses. Fundamentally
this approach seeks to confront the market failures that
undermine the growth of township economy in sustainable
way and correct the misallocation of resources in the
province. In a nutshell, the strategy will seek to change
of attitudes that define township as reservoir of labour
for towns and turn them into productive centres, capable
of absorbing local labour, where the township resources
circulate internally for the benefit of local communities,
contribute to social welfare, challenges the monopoly
patterns of ownerships and subsequently create cohesion
in the communities. Ultimately, in order to achieve this,
an enabling supportive environment and robust technical
assistance and business development support are
inextricably linked and indeed required.
1.2. The Vision for the Gauteng Township
Revitalisation Strategy
The Gauteng Township Economy Revitalisation Strategy
aims to contribute to the overall vision for South Africa by
2030 of a country with an economy that can sustainably
meet the material needs of all its citizens. In particular,
this strategy has a vision of Gauteng City Region as
an entrepreneurial region, which identify those in the
communities who possess entrepreneur cognition and
aptitudes and support them to pursue it. It also recognize
that the people from the townships and peri-urban
centres, who were once excluded from full participation in
the economy will have access to support and development
services and be fully integrated into the core of the Gauteng,
South African, African and international economy.
2_The strategy is informed by the feedback emanating from the Gauteng Township Revitalization Roadshow, in which Gauteng provincial government and its partners visited 65 townships
between 21 July and 27 August 2014, to study and observe the township economy at its own
setting. In the Roadshows, the government and its partners dialogued with on average 500
entrepreneurs as well as aspirant ones (per township) on the nature of their business, their
potential as well as challenges, that when addressed, will turn the township economy into its
high growth trajectory.
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2.
SITUATIONAL ANALYSIS
2.1 The Gauteng Township Economic Revitalisation Roadshows
The Roadshows for the Gauteng Township Economy
Revitalisation (in 65 townships) has helped the government
and its partners to go beyond the generalisation of
typical township business, their challenges and perceived
solutions. Of the township visited and feedback received
from entrepreneurs and aspirant ones, the following are
the common challenges facing township entrepreneurs:
•
Proliferation of foreign-owned business, in
particular within the retail sector. These foreign
entrepreneurs are said to be non- compliant with
the laws of the country and drives locals out of
business through cartels, vertical ownership,
collusion with wholesales and bazaars.
•
According to the Township entrepreneurs, the
government should introduce health and licensing
standard and the township should be declared
‘out of bounds’ to foreign retail entrepreneurs.
Furthermore, the government should organize the
local entrepreneurs in the township with better
facilities to do business and provide them with
training on how to run their businesses better,
how to create networks that will be advantageous
to their business;
•
The government business support services are
far from the townships-It is suggested that
government should introduce the mobile business
support unit (such as Gauteng Investment Centre
on wheels) for routine visit to the township.
Furthermore, cooperation and partnership with
municipalities, in particular agencies that support
SMMEs will create economies of scale;
•
There is a concern that responses by government
officials in dealing with entrepreneurs and aspirant
ones is poor-Request for financial/non-financial
support by the government is poor-There is a need
to return to the ethos of public services and disdain
for communities and clients should be punishable.
•
There is a lack of operating facilities/spaces/land
within the township and furthermore constant
harassment to those who ply their trade outside
the demarcated zones-The government must
build hubs (industrial and business parks) and
repair the existing ones for operating. The model
of occupation for the identified business should be
short-tem in order to give space to the others. The
maximum number of years in which entrepreneurs
can be housed within the incubation facilities
should be a period of maximum three years, in line
with the international norms of Rapid Incubation
Model, which is widely used in South Africa.
There must be cooperation between the provincial
government, local government and private sector
in identifying land and disused building that can
be converted into operating facility for SMMEs in
the township.
•
The Apartheid era tactic of authorities harassing
those who ply their trade in the street should
be stopped and municipal police, who are the
major culprit of this shameful behaviour, must
be punished. Thus said, the implementation of
the law should be maintained, albeit in human
manner.
•
There is a lack of market/market access and
information to sell their products-The government
must deal with the monopoly pricing that makes it
a barrier to enter certain markets by lobbying the
Competition Commission, among other regulatory
bodies. The income from companies that have
been fined for anti-competitive behavior should
be re-invested to the vulnerable within the sector
concerned, be they consumers or entrepreneurs.
•
The government should use the regulatory
environment to create markets for emerging
entrepreneurs, in particular in products, where the
government is a major buyer. Here one looks at
food that is commonly used in feeding schemes
in hospital and schools, clothing, footwear, textile
and leather, building materials, furniture and so
forth. Given Gauteng’s procurement budget of
R6 billion per annum as well as municipalities
and State-owned enterprises budgets related to
procurement, the government can change the
structure of the economy, by creating cooperatives
across the value chain of production.
•
Many of the township entrepreneurs do not have
skills to run their business efficiently (both soft and
technical skills)-The government should create
an entrepreneurship development programme,
which caters for technical, business development
and interpersonal skills. Furthermore, the
government should partner with the private
sector as well as pioneer black businesspeople to
provide the mentoring and coaching of emerging
entrepreneurs. In business, as in other things in
life, role-modeling plays a crucial role in shaping
those
•
The other problems are related to the provision
of municipal and government services such water,
sanitation, and electricity-The Service Delivery War
Room should be effected to deal with the service
delivery problems timeously before the situation
becomes a crisis as witnessed during service
delivery protest across the province.
2.2 Socio-Economic Conditions
Gauteng is South Africa’s smallest province geographically,
but is also the most populous, with 12.3 million inhabitants.
The province also consistently outperforms all others in
South Africa in terms of contribution to national Gross
Domestic Product (GDP), which reached 34.5 percent in
2011. Johannesburg is the province’s financial capital,
with advantages including well-developed infrastructure,
and as the site of the Johannesburg Stock Exchange (JSE).
The City of Tshwane is the world’s third largest metro in
terms of land area, after New York and Tokyo. It is a main
hub for South Africa’s automotive industry, contributing
Gauteng Township Economy Revitalisation | strategy DRAFT
5
to 40 percent of overall national production, and also
has competitive advantages in metal production and the
defence industry. The city is also home to four universities
and seven of the eight national science councils. The City
of Ekurhuleni is known as “Africa’s Powerhouse” and is a
strong manufacturing and industrial centre. It is also South
Africa’s main national transport hub, as the location of the
O.R. Tambo International Airport and Germiston Station,
where all South African rail infrastructure converges.
Sedibeng District Municipality consists of three local
municipalities – Emfuleni, Midvaal and Lesedi – and is
one of the country’s five most important centres of high
value mass production manufacturing, primarily in metals,
metal products, and machinery and equipment. West Rand
District Municipality comprises of Mogale City, Merafong
City, Randfontein and Westonaria, and within the Gauteng
province, has comparative advantage on the mining sector.
With strong infrastructure, West Rand is referred to as the
“Western Gateway”, with access to the N14, R24, N41,
N12 and N4 roads, as well as Lanseria Airport.
It is a hub of innovation and leads the nation in research
and development, accounting for 52% of total national
expenditure. Meanwhile population growth has
concentrated in few locations and has resulted in strong
spatial polarization, urban sprawl and tracks of underutilized land between main urban centres’. This pattern of
development not only reinforces existing social inequalities
but also generates high economic and environmental cost.
The biggest proportion (70%) of Gauteng’s 12.3 million
people resides in the townships, peri-urban centre and
semi-rural confines. According to the World Bank Study
on South African townships, their combined economy is
estimated at R100 billion and a major proportion of this
money does not circulate in the township given that the
township economies are consumer-driven, with almost all
the products consumed being sourced from outside the
townships.
The spatial planning and developmental designs fitted very
well with the grand scheme of apartheid and separate
development. The Apartheid government viewed the black
majority in the township as labour reserves to serve the
white economy as well provide services to white suburbs.
The end of apartheid and advent of democracy has reversed
such development patterns and to integrate the township
economies with the mainstream economies.
Unemployment in Gauteng metros is the highest among
all South African Metro. This could be attributed to high
unemployment in the townships, informal settlements and
peri-urban centres. The situation was exacerbated by the
global economic crisis in 2008, which resulted in more
than a million jobs lost nationally. The recent decline in
mining sector output and subsequently the manufacturing
and service sectors between 2012 and the first quarter
of 2014 has dimmed all prospects of job creation in the
short to medium-term. Furthermore statistics reveals
that unemployment is not equally distributed across
race and gender in the province. For instance Sedibeng
municipality suffered the highest unemployment rate with
30%, followed by Ekurhuleni 25.8%, West Rand 22.8%,
Johannesburg 20.3% and Tshwane at 12.6%. The level of
intra-municipal inequality is also accompanied by extreme
poverty and measured by the Gini-coeffient it registered
high degree of personal income inequality. The City of
Johannesburg ranks as the most unequal with a Ginicoeffient value of 0.73.
Income is unevenly distributed amongst races and Black
Africans earn disproportionately low levels of income, while
Black Africans make up 73% of the province population.
Empirical evidence suggests that 75.8% of Black African
households are trapped in poverty and most of them reside
in the townships across the province. Indeed, 95.8% of
household in the lowest income band are Black Africans,
while only 2.1% of the white population, who only
constitutes 20% of the province’s total population, is in
the same income band. In the highest income band whites
are overrepresented at 75.8%. Black Africans are grossly
underrepresented making up only 10% of the highest
income household. Gauteng’s concentrated poverty rate
stands at 38.6%, the rate in Sedibeng is 64.1% and in
Ekurhuleni is 54.7% are particularly egregious. This
level of economic segregation means that Gauteng’s
poor household must deal with lower quality of schools,
inadequate infrastructure and social networks with high
levels of unemployment.
The spatial analysis confirms that low income Africans
disproportionately reside in deprived communities
compared to low-income groups of other population,
limiting the ability to take advantage of economic
opportunities. In the same vein, increased concentration
of Black Africans in high income communities suggest
that racial desegregation is occurring. The improved
social integration does not literally translate into vibrant
economically integrated communities. Africans remain the
consumers of products with minimal contribution in the
production value chain of such products. Such high levels
of inequality have undercut the benefits of GDP growth.
Gauteng has been the primary beneficiary of the
tertiarisation process of the South African economy; this is
reflected by total gross value added of 70.3%, which was
derived from services sector. Followed by manufacturing,
electricity, gas and construction at 27.1% and primary
sector at 2.6%. By indication manufacturing has emerged
as the clear opportunity for boosting employment as the
province is connected to upstream suppliers with potential
greater multiplier effects. However the province needs to
develop an active an industrial policy strategy that creates
a manufacturing space for downstream linkages in the
economy. Gauteng could build upon its position as South
Africa’s innovation hub so that it can broaden the economic
development opportunities for small enterprises and starts
up initiatives.
The structure of the economy crowds out small enterprises.
Applying the global classification of manufacturing
industries, Gauteng industry is led by medium-low
technology at 40.3%, followed by low-tech at 55.1% and
high-tech at 4.1%. Due to weak downstream linkages
small medium enterprises are not linked to supply value
chain.
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2.2.1. The Comparative Advantage of Gauteng Regions
Each economy has its own comparative and competitive advantage, and each contributes towards growth and development
of the country. Some local economies have strengths, which provide them with both comparative and competitive
advantages. Government’s policy thrust is to increase investment by building competitiveness in all municipal regions.
This competitiveness is driven by organised communities and enterprises engaged increasingly in the manufacture and
distribution of sustainable, ecological and environmentally friendly products and services.
Table 1; depict the comparative advantage of Gauteng Regions through the location quotient, which is the concentration
of the sector in an area or region. The concentration is highest when the quotient is larger than one, reflecting a
comparative advantage that can be tapped in to make the region competitive on the sector. A quotient of less than one
reflects low level of concentration on that sector. This does not however mean that if the sector can be stimulated along
all the aspects of the value chain, it will not be able to be competitive.
The City of Johannesburg has a strong finance and business service, whilst Ekurhuleni is the manufacturing hub of the
country and the city of Tshwane has a strong transport and government and community services.
Table 1: Concentration of sectors in Gauteng Regions
Gauteng’s
Metro’s
Agric
Mining
Manuf
Electr
Construction
Transport
Trade
Finance
CommService
Ekurhuleni
0.18
0.19
1.81
1.14
1.27
1.27
0.87
0.96
0.83
COJ
0.12
0.27
1.06
1.07
1.30
1.30
1.21
1.30
0.99
Tshwane
0.15
0.08
0.93
0.77
1.40
1.40
0.99
1.09
1.43
Source: Global Insight (2013)
Table 2: Strengths and potential industries in COJ
Strengths
Potential
Weakness
Potential clustering
Financial hub of Gauteng and SA
Advance manufacturing
Concentration of the
economy
Provide skills development and
infrastructure support in West
Rand and Sedibeng to enhance
both agricultural and industrial
activities
Trade, Community Service & Manufacturing
(largest share of low tech
Green Economy (Joburg
Equity Fund which targets
green projects)
More vulnerable to
external shocks
Provide skills & financial support
to agriculture in Sedibeng and
Westrand
City Deep Inland logistics hub
Green economy (roll-out of
solar geyser heaters
Weak in agriculture and
mining
Assist Ekurhuleni to improve
diversification in the
manufacturing and the creation
of employment
Surrounded by two big Universities (University of
Joburg and Wits University)
Potential to increase the
knowledge economy and
also source the services of
the CSIR, Innovation Hub
etc. in Tshwane
Leverage on the proximity
of Research institutions
in Tshwane such as CSIR,
HSRC, and Innovation
Hub.
Collaboration with University of
Joburg, Wits University and CSIR,
HSRC etc
Strong railway and road networks
Bus Rapid Transit has a
potential to reduce the
cost of doing business in
COJ (Time taken to the
workplace).
Traffic congestion and
unreliable transport
system.
There is a need to encourage
the creation of jobs and
enhancement of investments in
the depressed regions. This could
assist in reducing the traffic and
in reversing the patterns of inmigration
Wholesale and Trade
Clothing, textiles, footwear
and Leather (CTFL)
Weak infrastructure
facility to cater for various
needs of SADC traders
Collaborate with DTI, DED, GEDA
and Blue IQ to expedite trade
facilitation and ease the cost of
doing business in Gauteng
Concentration on the
inner city. Need to focus
on the depressed regions
to realize the vision of a
Gauteng City Region
Leverage on the Enterprise
development expertise in the
University of Joburg and Wits
University. Assist enterprise
development in depressed
municipalities like West Rand and
Sedibeng
Film, Crafts and Creative
Industries
Micro-Enterprises
Funds to support SMME’s
and Cooperatives
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Table 3: Strengths and potential industries in City of Tshwane
Strengths
Potential
Weaknesses
Potential clustering
Community Services
Business Tourism
Low level of diversification despite
concentration of industrial skills/
Research
Provide skills shortage in
Weak in Agriculture and mining
but the merger with Metsweding
can make the COT competitive in
agriculture
Extend financial support in the
tourism
Automotive hub/Supplier ParK
Grow light and medium
manufacturing
depressed areas such as
Metsweding
and agriculture in Metsweding,
hence the imminent merger with
COT
Knowledge hub of SA (Research
Institutions & Innovation Centers/
CSIR)
Provide skills support to ailing
municipalities
Advance manufacturing
Drive innovation to improve
global competitiveness
Not moving fast in terms of
enhancing industrial skills and
sharing knowledge especially with
depressed regions
Share economic intelligence with
all the
Not moving fast in terms of
enhancing industrial skills and
sharing knowledge especially with
depressed regions
Collaborate with Metsweding to
enhance
Municipalities in Gauteng
Agro-processing and
infrastructure needed
to expedite economic growth,
attract and
retain investors
Industrial Parks
Babelegi and EkaIndustria have
a potential to create labour
intensive jobs, hence the
attraction of green investments in
these areas
These areas were abandoned for
a long period and a turn-around
strategy is needed to resuscitate
them. Infrastructure needs to be
upgraded.
The merger with Metsweding will
assist but the City of Tshwane to
start rolling the infrastructure to
ensure that investors are attracted
to these areas
Vast land
Establish Business Parks & Green
buildings
Under-utilized government land
and un-utilized buildings
Mobilize business and investors to
Establish business Parks and
create
Employment
Innovation Hub/Center and CSIR)
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Table 4: Strengths and potential industries in Ekurhuleni
Strengths
Potential
Weakness
Potential clustering
The transport Hub of the province
Strong rail and transport
networks to drive the economy
Mining and agriculture
Partner with Tshwane on
improving their low skills base
Manufacturing (strong industrial
base)
•
•
•
•
•
•
•
•
•
Public Employment Creation
Knowledge sectors
not sufficient. Need to
diversify the economy
to ensure that job
opportunities are
created.
Improve on tool, die
and moulding
Machinery &
equipment, electrical
Focus on electronics
(brown and white
goods
Mobilise the private
sector and leverage on
the incentives to create
employment
Demand for plumbers
(electricians and green
economy)
Jewellery Beneficiation
(design and
manufacture)
Decisions to enhance
green economy reside
with the National
Departments and
Eskom and the process
increase the cost of
doing business in
Gauteng
Lack of technical
colleges to enhance
technical skills required
by the manufacturing
sector
Potential to create jobs and skills
development
Lack proximity to academic
institution
Air transport cluster
Clustering by sectors/programmes
Collaborate with COJ on
financing industrial activities.
The Ekurhuleni Metro needs to
collaborate with the CSIR and
Innovation Hub/Center to improve
manufacturing
Partner with West Rand
on manufacturing mining
equipment’s
Work closely with the IDC to
leverage on incentives to support
sector development
Green economy has a potential to
drive manufacturing and attract
investment
Collaborate with the GCRA and
the DID to create jobs for the
youth and leverage on the Public
Employment Fund
Green Economy
Business Tourism
Heritage Tourism (CODESA
Museum)
Finance
The World Bank Study on Township Economy, with special emphasis on Diepsloot revealed that township economies have
weaknesses in all major socio-economic indicators.
The study revealed the following graphical representation of Socio-economic indicators, in terms of employment,
population share to total provincial population, education attainment. The comparisons is between the following
geographical areas in South Africa:
• Rural Areas;
• Urban Townships (TS);
• Urban Informal Settlement (IS);
• Other Urban areas (excluding T& IS)
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Figure 1: Share of Population
Source: World Bank (Economy of Diepsloot)
The Figure 1, indicate that township population is 30,2% of the total population. It has grown from 24,9% since 2000
through in-migration from rural area. This migration, create a social and welfare pressures on Gauteng municipality to
ensure that the migrants are accommodated.
Figure 2: Youth Labour Market Indicators
Source: World Bank (Economy of Diepsloot), 2014
Figure 2; depict the level of unemployment among the youth in rural, township and informal settlement. Unemployment
is second and third highest in the township and informal settlement.
In terms of levels of educational attainment, close to 70% of township residents do not have matric and even worse in
informal settlement at 75%. See figure 3.
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Figure 3: Educational Levels of Adult of 25 and older
Source: World Bank (Economy of Diepsloot), 2014
Figure 4; depict the levels of access to financial services. Whilst a lot has been done since the introduction of the Financial
Charter, leading to the universal access product such as Mzantsi Account, almost 17% of townships resident are not
served by financial institutions.
Figure 4: Access to Financial Services
Source: World Bank (Economy of Diepsloot), 2014
The de-industrialisation of the South African economy to tertiarisation had pushed the entrepreneurs from the township
to periphery of the mainstream economy and re-structured the township economy to service orientated economy, with
no manufacturing capacity. Township economy had a minimal contribution in the development of productive sectors of
the economy. For instance no township has manufacturing site for train tracks, cement plant, bolts plant, tin plant etc.
Townships have become debt-driven consumption based communities instead of vibrant productive centres. And as such,
Africans experienced economic exclusion and have relied on labour as the only asset that they can place a price on it.
The principal aspect of this path is attributable to the decisions taken by large firms in various sectors. Because large firms
drive the demand and supply of inputs (access to inputs), how they set the standards within their value chain and prices.
The power lies in the value chain and how that affects people’s ability to participate as well as the distribution of returns
from such activities throughout the value chain. The exclusion from these upstream and downstream linkages means that
township economies will survive on low margins with no comparative or competitive edge.
The failure of public spending to be channelled to township economies through competitive regulation regimes as
well as lack of access to developmental finance has exacerbated the problem. The lack of willingness to recognize
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social organization, embrace social capital and take a
handholding approach in supporting township enterprises.
The one size fits all enterprise development strategies that
are not risk orientated have destroyed entrepreneurial
initiatives in the townships. Development finance by design
should not be risk averse because it’s meant to achieve
development outcomes.
Majority of the township enterprises operate from small
scale and suffers from diseconomies of scale hence the ongoing vigilante uprising against non South Africans. This
has made them to be uncompetitive and many of them
have either been outmanoeuvred by shopping malls in
the township and have suffered from hostile take-over by
foreign entrepreneurs.
Furthermore, the entrepreneurs who have thrived in the
township before through trading activists in both formal
and informal settings have been chocked by the influx of
foreign entrepreneurs in the traditional township economic
activities. These foreigners possess a competitive edge over
local entrepreneurs through networks, bulk buying and
ultimately offers goods and services at cheaper prices and
they are organised.
The following are some of the typical or traditional
township business:
• Spaza shops and/or general dealers; Hair and
beauty salon;
• Bakeries and confectionaries; Shebeens and bottle
stores;
• Restaurants and Shisanyamas; Brick building;
Bricklaying;
• Light manufacturers in activities such as welding,
shoe-making/cobbler
• Auto body repairs and mechanics; Mortuaries;
• Dress makers and tailors; Subsistence farming;
Hospitality-Guest house;
• Crafts; Tour guide and Safety Monitors;
• Recycling, and so forth
What has compounded the stranglehold for local
entrepreneurs is the proliferation of shopping malls in the
township replacing old township general dealers, grocery
shops and bazaars as well as informal food and grocery
outlets. The aggressive nature of insurance industry has led
into many Black African South Africans investing in burial
societies who are now linked to the Johannesburg Stock
Exchange. Even the social transfers that are intended
a safety nets for poor households from the fiscus are
directed toward burial societies. There is a huge leakage of
resources from the township to the formal economy, e.g.
money spent at shopping malls and funeral parlour leaves
the township for the commercial banks and retail owners
who do little to re-invest in the township.
Gauteng Township Economy Revitalisation | strategy DRAFT
12
3. LEGISLATIVE FRAMEWORKS, REGULATIONS AND STRATEGIES
TO SUPPORT SMMES
Over the years the government and finance houses has
refined mechanism to support the formal SMME sector
and have developed policies, guidelines and practices
narrating the kind of support needed. The refinements
had a minimal impact on township economy. According to
Global Entrepreneurship Monitor, South Africa continues
to lag behind other emerging market economies in terms
of the survival rate of new enterprises. The government
created enterprise support agencies that have disbursed
billions of Rands over the years, but SMME mortality has
not improved, with 70% of all new enterprises dying
within the first three years of existence.
For the township economy to thrive, there will be a need
for the government and its agencies to consolidate the
support as envisaged in many policies and strategies,
review those that have become obsolete in supporting
entrepreneurship and regulate with the view to make sure
that township enterprises are more competitive, are able to
enter new markets (not choked by the monopoly barriers
to entry) and ease the cost of doing business through
streamlined administrative burden.
The policies, regulations and strategies covered in this
section, details various attempts/actions that have been
deployed by all spheres of governments to support the
SMME and other forms of small businesses.
3.1 Enterprise Development and support
Policies and strategies
Gauteng provincial government has developed the
following policies and Strategies for enterprise development
and support:
•
•
•
•
•
Small Macro and Medium Enterprises policy,
Cooperative Policy.
These policies are aligned to the national policies
on enterprise development and support and all of
them purport to provide the following:
Financial Support such as loans and grants;
Non-financial support offerings such incubation,
market support, mentoring and coaching as well
as business development
Furthermore, both the national and provincial government
have adopted policies and strategies to ensure that 75% of
all inputs to the manufacturing should be sourced locally
and that state procurement of certain goods and services
should favour locally produced goods and support black
business. At a national level, the Preferential Procurement
Policy Framework (as amended) and Local Procurement
Accord, (2011) has been developed to implement what has
been described above. At the provincial level, Gauteng has
developed the B-BBEE strategy, (2009) and the Strategic
Procurement Framework, (2012) to ensure that the state
uses procurement as a leverage and developmental tool
to create new industries, whose goods and services will
satisfy the state demand. The Procurement Accord signed
in October 2012 sets an inspirational target 75% of local
procurement and identifies a number of immediate steps
that will be taken by social partners towards achieving
the goal as part of efforts to increase jobs and deepen
industrialisation and to encourage the emergence of black
industrialists, whose goods are guaranteed a market by
government.
It is estimated that the Gauteng Provincial government’s
procurement expenditure amounts to R6 billion per
annum. This amount does not include capital expenditure
for infrastructure projects as well as procurement by private
Table 5: Policy Analysis Overview
Support for
SMMEs
Document
Broader Economic Development
objectives to support the townships
NATIONAL POLICIES & LEGISLATION
ü
Constitution of South Africa
Municipal Finance Management Act
ü
ü
Preferential Procurement Policy Framework Act and Regulations
ü
ü
National LED Framework
ü
Broad-Based Black Economic Empowerment Act
ü
ü
Municipal System Act
ü
ü
New Growth Path
ü
ü
IPAP3
ü
ü
Micro-Economic Reform Strategy
ü
ü
National Development Plan 2030
ü
ü
GAUTENG POLICIES & LEGISLATION
Gauteng Employment Growth and Development Strategy
ü
Gauteng LED Framework
ü
Gauteng Industrial Policy Framework
ü
Gauteng Township Economy Revitalisation | strategy DRAFT
ü
13
sector, which when combined, will run into billions of
Rands. This amount is spent largely on goods and services.
The vendor lists (at sector departments) is dominated
by distributors who act as middlemen between foreign
manufacturers and the government as the consumer. The
Local Procurement Campaign, if is to be effective, must
replace these distributors with local manufacturers (whose
goods are verified as locally produced
3.2. Informal Economy
The approach to informal sector on the other hand,
is a minefield, given that until recently3, there was no
documented approach to support the sector and even
national statistics office is still grappling with tools to
measure the contribution of the sector to both the national,
provincial and regional economies. There is also a lack of
consensus between the government and the informal
sector in terms of what constitute the required support.
The government is still stuck in the theory that support for
informal sector is synonymous with formalization, leading
3
The Department of Trade and Industry has only managed to approve
the Informal Business Strategy in February 2014 and none of the provinces and
municipalities has developed an approach to support and develop the sector.
Gauteng Department of Economic Development has started the formal process of
developing the strategy/policy to develop and support the informal business.
to the paying of tax. Operators in the informal sector are
not used to paying for the services such as rent, utilities
and tax, thus why they continue to repel local government
effort to house them in proper structures as it has an
impact on their profit.
Whilst the overall objective of informal sector development
is well-run business and ultimately paying tax, the
government messaging should be more developmental,
highlighting issues of phytosanitary, health and standards
of their products. Only when they understand that
government support is to enhance their products and
increase the competitiveness of their business, they will be
willing to be moved into formal dwellings and ultimately
pay tax. Even the revenue services will have to understand
the sensitivities around the introduction of tax measure
for the entrepreneurs graduating from the informal sector
through progressive taxation.
Table 5, overleaf, provides summary of the key documents
and policies assessed and illustrates the contents of each
of the documents with regard to economic development
objectives including local economic development:
Table 5: Policy Analysis Overview
Broader Economic
Development objectives to support
the townships
Support for
SMMEs
Document
NATIONAL POLICIES & LEGISLATION
ü
Constitution of South Africa
Municipal Finance Management Act
ü
ü
Preferential Procurement Policy Framework Act and Regulations
ü
ü
National LED Framework
ü
Broad-Based Black Economic Empowerment Act
ü
ü
Municipal System Act
ü
ü
New Growth Path
ü
ü
IPAP3
ü
ü
Micro-Economic Reform Strategy
ü
ü
National Development Plan 2030
ü
ü
GAUTENG POLICIES & LEGISLATION
Gauteng Employment Growth and Development Strategy
ü
Gauteng LED Framework
ü
Gauteng Industrial Policy Framework
ü
ü
Gauteng Broad-Based Black Economic Empowerment Strategy
ü
ü
Gauteng SMME Policy Framework
ü
ü
Gauteng Cooperative Strategic Framework
The review of these policies revealed that there are a great number of legislation, policy and strategy documents that have
a bearing on SMME support and overall economic development. The abundance of such guiding documents indicates
the seriousness, which the government places on support for SMMEs. The interpretation and implementation record,
however, leave much to be desired. The above analysis provides a grounding and leverage for the Township Economy
Revitalization Strategy. The above policies and strategies provide the sufficient cover to all the value chain of enterprise
support that will be embedded in the strategy.
Gauteng Township Economy Revitalisation | strategy DRAFT
14
4.
STRATEGIC PILLARS OF SUPPORT
The strategy will be guided and enabled by the following
pillars that will be converted into programmes to support
the township economies across an array of sectors. The
pillars are informed by various studies of SMMEs in the
township as well as the data collected during the Township
Revitalisation Road shows.
4.1. Economic Infrastructure
4.1.1. Land
Gauteng’s landmass of 1.4% of national total manifest
into a constraint for activities that require land. The
lack of coordination by spheres of government result in
government land being sold to the private sector without
due consideration for economic and industrial plans. For
entrepreneur on the ground, acquiring land is difficult
because of the price tag and reservation for estate
development.
The government will have to coordinate the access to state
land and furthermore partner with private sector partners
and state-owned enterprises to ensure that available
land is set aside for industrial development. A land audit
is required to determine how much land is available for
industrial development.
4.1.2. Industrial and Business Parks
This refers to an enabling plug and play infrastructure for
township entrepreneurs. It allows them to concentrate
on managing their business without being perturbed by
planning and building infrastructure for their operations.
The government (at both provincial and local level) with
its partners will develop the enabling infrastructure, which
is suitable for a particular township needs in terms of its
sectors. This kind of infrastructure creates a sharing model
for the operations and assists the emerging entrepreneurs
to be sustainable before they can acquire their own
operational infrastructure. In line with the Rapid-Incubation
model, which has been used widely in South Africa and
India, the entrepreneur can be housed in the infrastructure
for a maximum of three years, which is period that is
defined as a survival time for entrepreneurs, given that the
majority of emerging entrepreneurs do not survive beyond
the first three years of operation.
According to the Global Entrepreneurship Monitor, an
entrepreneur who has survived in the first three years has
the highest probability of being a sustainable business.
It is for this reason that the government’s provision
of infrastructure should be availed to the emerging
entrepreneurs for the first three years of infancy.
The type of infrastructure that will be suitable for township
business range from industrial manufacturing hubs, which
will be Greenfield or Brownfield as well as business park for
the entrepreneurs in the service industry. The government
has various successful models at its disposal for replication
for the two types of infrastructure requirements.
CASE STUDY 1: MOHLAKENG TOWNSHIP HUB-MUTLISECTORAL APPROACH
Mohlakeng Township Enterprise Hub (TEH) is located in Mohlakeng Township south of Randfontein. The
facility has been established as a result of partnerships between various stakeholders comprising Randfontein
Municipality, Department of Economic Development, Gauteng Enterprise Propeller (GEP) and local businesses.
The establishment of this Facility emanates from lack of entrepreneurs support centres in the area. The main
purpose is to establish a one-stop advisory and manufacturing facility with main focus on the development
and empowerment of SMME’s in various manufacturing sub-sectors. The concept is to help small and medium
nd
businesses
rd in order to decrease business risks in the initial stages of development particularly during the 2
and 3 year of existence.
The facility will cater for owners of early stage companies in need of a robust set of business programs and
sustainable practices and services. It will enable the SMME’s from the identified sectors the opportunity to
access facilities, which on their own they would not have afforded. Participants can work with the facility
staff to receive relevant training, establish businesses and develop comprehensive bankable business plans.
Additionally, the facility will help entrepreneurs to access start-up capital to launch their businesses, while
supporting more established businesses in their applications for larger loans from organisation such as GEP and
other financial institutions.
This model is a departure from the traditional business incubation model. Through this model the users pay a
maintenance and commitment fee based on the time they share or spend in the workshop. The premise is that
not all target groups have the ability to secure long-term contracts and because their businesses are cyclical or
opportunistic.
The facility will be registered as section 21 company (non-profit organisation) governed by a detailed
memorandum of agreement signed by all parties. The primary funding of this facility is expected to come from
Gauteng Department of Economic Development, Randfontein Local Municipality, Gauteng Enterprise Propeller
and other donors.
Gauteng Township Economy Revitalisation | strategy DRAFT
15
CASE STUDY 2-THE WINTERVELD ENTERPRISE HUB-SINGLE SECTOR (AUTOMTIVE SUPPORT)
The Winterveld Automotive Hub has an automotive focus and support small businesses specialising in tyre fitment and
wheel alignment; panel beating; auto body repairs and spray painting; auto spares; general motor mechanic; car wash
and valet services. The Hub has been developed and is managed by the Gauteng Automotive Industry Development
Centre (AIDC), which is the provincial government support agency for automotive cluster development. The hub has a
the capacity to accommodate 50 people per day to undergo the training that will be on offer
Objectives of the hub
· Achieve technical skills transfer at a professional proficiency level, and of the highest quality possible.
· Create jobs, which have long term sustainability, with continuous entrepreneurial exposure and potential.
· Develop auto body repair industry scarce skills, which would lead to immediate employment and/or business
growth.
· Stimulate the local community’s economy by drawing outside participation and investment.
· Off-site business support for new/existing SMME’s and aiding in their future business sustainability.
· Support existing SMMEs to expand and employ more people.
· Prepare and motivate the youth to follow technical careers.
· Transfer business skills from mentors to beneficiaries.
Business Model
The facility is fitted with state-of–the-art auto body repair equipment that is not ordinarily accessible to the informal auto
body repairer due to the large capital investment required. The facility focuses on the following areas of auto body repairs:
· Spray painting workshop
· Metal prep workshop
· Car wash SMME
· Polishing and paint finish
· Paint finishing
· Paint & abrasives supply
· Vehicle parts supply
· Community Centre providing training to unemployed community members
Auto Body Repairs
Master artisans in the field of panel beating and spray-painting are available to train and mentor learners in the scarce
skill of body repairs.
The third phase is to train new entrants to the field of auto body repairers and to assist existing repairers to expand their
businesses.
Parts and services retail
Parts and services supply has been set-up in containers next to the Shared Services Facility. These operations are perfect
enterprise development opportunities for young entrepreneurs interested in starting their own businesses. They will also
benefit from the Skills Development Programmes. These will include:
· Re-gassing of air-conditioning units of vehicles
· Window repair and tinting services
· Wheel balancing, alignment and fitment
· Recycling services for oil and tyres
· Mag wheels and rim repair
· Carwash
The government does not have an objective of owning township productive infrastructure stock, and should create
mechanism to ensure the long-term ownership of these resources by the entrepreneurs and the general township
economy.
4.2.
Resourcing
This pillar focuses on various forms of financial support including Gauteng provincial government own funding, which is
disbursed through Gauteng Enterprise Propeller, partnership funding from the private sector and government institution,
which could be disbursed through GEP for the township economy. The plan for funding for SMMEs should address the
current challenges for SMMEs, including collateral, lending guarantees, mobilisation and capitalization of community
resources.
Gauteng Township Economy Revitalisation | strategy DRAFT
16
The South Africa’s banking and investment climate is
highly conservative, with financial services and incoming
investment opportunities accruing mainly to smaller firms
in the later stages of development (as opposed to start-up
SMMEs). The challenges facing SMMEs in terms of access
to finance are familiar – inadequate collateral, a lack of a
recorded credit history, etc. These problems afflict blackrun entrepreneurs in particular.
More emphasis should be placed on encouraging SMME
lending by both banks and non-bank financial institutions
– though it is recognized that non-bank institution tend to
be under-capitalized and not adequate when it comes to
lending substantial amounts. The Strategy puts forward
more creative arguments when it comes to recommending
that the South African banking sector be opened to allow
market entry for a larger number of “second-tier” banks
(e.g. micro-credit providers, financial cooperatives, etc.). There is a need for the development of more sophisticated
capital markets by way of increased securitization, taking
into consideration of the resources that are channelled to
the stokvels and other saving institutions in the townships. This, along with enacting legislation that would allow for
the easier inflow of venture capital into South Africa (e.g.
providing tax incentives) would go some way towards
remedying the problems that SMMEs currently face in
attempting to access financial services from commercial
operators.
It will be important for the government SMME support
agencies (including development financial institutions,
DFIs) to introduce differentiated lending emphasising on
the developmental approach and the commercial lending
model.
The developmental approach will cater for starters and
survivalist to ensure that they are able to access soft loans
and grants. This is an area in which the commercial lenders
are risk averse and the majority of township business falls in
this category. In addition to the money, the SMMEs should
be provided with all elements of business development
support such as incubation, technical training, market
support and so forth. This is to ensure that the SMMEs in
this category can be able to graduate from the survivalist
status within a short space of time, giving ways to others.
The Commercial lending approach is for SMMEs in the
townships that are more organised and are prepared and
can afford to pay back the loan funding immediately. Here
the DFIs should allow the commercial banks to play a
leading role of financing and the former role is to provide
a collateral or guarantee to this category of SMMEs when
dealing with commercial banks.
Given that government funding is exhaustible, it will be
important to leverage on partnership funds, venture capital
investments as well as the corporate social responsibility
funds. Furthermore, the government must assist the
shareholders of stokvels and other saving schemes to invest
their funding for wealth creation rather than consumption.
These saving schemes should be mobilised to invest in
economic infrastructures such as malls, industrial hubs and
business parks, to ensure that there is risk sharing between
owners and residents in the township.
4.3.
Entrepreneurship developments
It is often stressed that South Africa has a low level of
entrepreneurship cognition and culture. This is usually
attributed to the culture of dependency from the
marginalized past where Black people in the township
were raised to seek work in the towns and suburbs. While
the authenticity of such assumptions can be debated, the
manifestations are clear for everyone to see.
In South Africa, private and public sector are in a habit
of throwing money around, with the hope that everybody
can be turned into an entrepreneur. The reality is that not
everybody in as society can be entrepreneur and global
indication are that the global average of entrepreneurship
hovers at 15%.
The important lesson for South Africa and Gauteng is
that, the systems of entrepreneur identification should
be improved so that the resources of the state are used
to support the genuine entrepreneurs as opposed to
opportunists ones. However, the culture of entrepreneurship
must be nurtured and encouraged from early age, and
a call is being made to ensure that entrepreneurship is
embedded in school curriculums. Furthermore, the SMME
support organizations should partners with SETAs and
institution of higher learning to design programmes that
capacitate and support SMMEs from infancy.
Pioneer business people and business association should
be brought on-board to assist with mentoring and
coaching emerging entrepreneurs, to impart their lifetime
experiences. In a nutshell, entrepreneurship development
will comprise of the following elements:
1. Skills training-both hard and soft skills such as invoicing,
productivity support, bookkeeping, sourcing as well as
interpersonal and customer relations
2. Incubation-there ware various models used to provide
technical and productive capacity of emerging enterprise.
The rapid incubation model (Indian) is widely used in
South Africa. At National level, various sectoral incubation
programmes have been developed to support incubation
in sectors such as furniture, agro processing, Clothing,
Footwear and Leather, chemicals and so forth. The
common themes among these incubation programmes is
that emerging entrepreneurs are supported for a maximum
period of three years, starting with skills development and
in the end business development. As the entrepreneurs
graduate from these programmes, they are fully capacitated
to produce efficiently; they run their business well and have
markets for their goods and services.
3. Incubation programmes for emerging entrepreneurs
will certainly address the high mortality of infant SMMEs,
which the Global Entrepreneurship Monitor (GEM) rank
South Africa among the lowest in the world in sustaining
business beyond the first three years of existence. The GEM
(2013) indicates that 70-plus percent of all new business in
South Africa do not survive the first three years.
4. Whilst the government across all spheres should be
lauded for the massive investments to support SMMEs over
the years, the programmes has been concerned with the
number of entrepreneur supported as well as the rand value
spent. The government should shift the measure of success
Gauteng Township Economy Revitalisation | strategy DRAFT
17
of its support to SMME to be centred on the sustained
enterprises and their contribution to employment.
5. In recent years, there has been a proliferation of
incubation support programmes, which are classroombased and are far removed the reality of sectors supported.
To be successful, incubation programmes should have
both the elements of technical training, production,
business development and market support. For Gauteng,
these programmes should be located within the township
enterprise hub infrastructure.
4.4. Market support and competitiveness
This pillar addresses challenges beyond production
and deals with how the products can be sold, who are
the customers, breaking entry barriers that are set by
monopolies, leveraging on legislations to ensure that
emerging entrepreneurs have preferential access to both
government and the private markets. A new entrepreneur,
who has turned a good idea, which is developed into a
product and has the infrastructure to produce efficiently
could certainly find himself/herself at the mercy of
unresponsive markets that are dominate by monopolies
who are price setters and are able to produce and a very
low cost with the intention to drive out a new competitor,
who is unable to match the low cost of production.
Worse an entrepreneur might certainly find that the
inputs to the production are controlled by cartels, which is
ready to deny him/her access to the inputs that are key to
production lines. The government should be ready to use its
policies and regulations to break the monopolies and cartel
for goods and services, as they are a barrier to the growth
of township economies. Furthermore, the government
should stand as a buyer of last resort to the goods of
emerging entrepreneurs. It thus become important for
the government vendor systems to verify the suppliers of
goods and services, to ensure that they source from local
manufacturers, in particular, from the townships.
4.4.1. Networking and partnerships
among SMEs
There are different kinds of networks for SMMEs that
makes the sector to thrive and become competitive. In
many countries, these are networks that are relatively
well embedded and offer a range of advantages to SMEs,
such as shared services, shared employees or access to
shared expert employees, shared facilities to train workers,
or shared access to expert advice and consultancy. In
some countries, SME networks take the form of business
associations that provide shared services for SMMEs These
types of networks and links are particularly important to
SMMEs, which often do not have the resources or time to
access such services or facilities alone. The nature of these
networks can take a variety of forms, such as cooperation
between companies, or the setting up of business
associations designed to help SMEs, or encouragement
from employer organisations or public bodies.
4.4.2. Quality and Standards
One of the most cited reasons by customers why they
are reluctant to procure from SMMEs and cooperatives is
poor quality of products and services provided. Quality
and standards of the products and services produced
by the SMMEs and cooperatives are indeed regarded as
one of the important impediments to their success and
sustainability in terms of acquiring, maintaining and
increasing their market share. There is a need to come with
a deliberate, coordinated and collaborative system, using
mainly the current State institutions such Small Enterprise
Development Agency (SEDA) and South African Bureau of
Standards (SABS), to ensure that township enterprises are
supported to produce products and services of the required
quality and standards. SEDA has Technology Programme
designs to support SMMEs and Cooperatives through
facilitation of the acquisition and transfer of technology as
well as the promotion of the use of quality and standards.
On the other hand, SABS has been established as the
quality assurance authority to conduct product testing,
run product quality systems training and certify products
and services produced by enterprises, including SMMEs
and cooperatives. By ensuring that township business are
supported to produce and supply products and services of
the required quality and standards, this will go a long way
in ensuring both local and international market access.
4.4.3. Market access
Market access and a competitive environment are
consistently cited as a critical prerequisite for a vibrant SME
sector. The BBBEE codes of Good Practice, and specifically
the Procurement and Enterprise Development (ED) codes
currently represent both a challenge and opportunity to
further stimulate growth and development within the SME
sector.
2013 marked 10 years since the promulgation of B-BBEE
Act, positioned as soft legislation without consequences for
non-compliance. Ushering in a new era of empowerment,
the Act had to be strengthened to ensure effective and
consistent implementation and reporting across the
economy by introducing minimum requirements in
accordance to government key priorities.
The Amended Codes introduced five priority elements:
Ownership, Management Control, Skills Development, and
Enterprise Development and Supplier Development with all
measured entities to comply with all priority elements, with
the exception of businesses deemed to be Exempted Micro
Enterprises (EME’s) for awarding of B-BBEE status levels.
The Amended Codes is aimed at giving effect to
government policy aimed at reducing inequality, defeating
poverty and creating employment. The codes have the
potential to significantly contribute to increased market
access and competition, as well as to give support required
to assist SMEs to establish, grow and reach maturity. The
revised Enterprise development and Supplier Development
component of the BEE scorecard is therefore aimed at
developing empowerment efforts for SME’s that should
result in the promotion of a culture of venturing into new
territories, operational excellence and risk taking.
The new focus being on businesses and industries that
result in significant job creation and address socioeconomic challenges and harnessing symbiotic relationship
between the public and private sector and amongst private
Gauteng Township Economy Revitalisation | strategy DRAFT
18
sector players, and large and small enterprises to unlock
opportunities.
Similarly, preferential procurement as envisaged in the
Amended B-BBEE codes and the Strategic Procurement
Framework should be expanded to ensure better access by
SMMEs and Cooperatives. Their refinement will stimulate
competitiveness and unlock market access.
In a nutshell, this section has addressed the following
issues:
· Competitiveness Improvements
· Preferential procurement
· Local production- rules of origin
· Bulk buying
· Identification of potential or new markets
· Creating vertical relationships with larger
consumer industries
· Creating
horizontal
relationships
with
competitors to do joint procurement and reduce
costs (e.g. for spaza shops who complain of
foreign infiltration) as well as knowledge sharing.
4.5. Innovation and the Development
of Indigenous Knowledge systems
This refers to the support in the value chain from Research
and Development (R&D) to product development and
commercialisation. The central challenge for governments
and civil society particularly in the developing world is how
to provide protection for indigenous knowledge systems.
The South African Government has placed a great degree
of emphasis on the development of Indigenous Knowledge
Systems (IKS) Policy and Legislation, which will significantly
protect, develop and promote IKS and will help improve
the livelihood and economic well-being of the indigenous
and local communities, by ensuring equitable and fair
benefit sharing.
The knowledge of individuals and the collective knowledge
of communities is the only real competitive advantage
that any country can rely upon to develop. The role of
Technology Innovation Hub (TIH) will be to mobilise
knowledge owners across various communities, assist
those who are in ICT application space and refer those who
are operating beyond TIH mandate to organization such as
CSIR, Universities, Department of science and technologies.
It thus become a responsibility for TIH to ensure that all
the referrals have been attended to a to further monitor
the end of the value chain for Research and development
(R&D) such as product development through partnerships
with institution such as Productivity Institute, South African
Bureau of Standards (SABS).
In a nutshell, TIH should provide incubation services and
facilities, which involves prescreening processes, business
support systems (mentorship, technology support, market
access, market exposure, and seed funding) to help the
entrepreneurs to progress through the different phases of
their business cycle up to commercialization stage. Working with the national bodies like SABS, Agricultural
Research Council, Medical Research Council and others,
Gauteng should ensure that indigenous products such
food, medicine and so forth have standards and the holder
of such knowledge must be assisted to acquire Patents
and Copyrights for their products. The standardization of
indigenous products on the names, cultivation, processing
and packaging will unlock the value chain with substantial
benefits for communities in the township and cities in
which these activities are clustered, here one refers to areas
such as Mai Mai and Faraday in the City of Johannesburg.
4.6.
Manufacturing and Production
This pillar refers to all the interventions that should
be undertaken by the government and its partners to
create incentives for the manufacturing and production
capacity in the townships. Taking advantage of existing
incentives at the national level, the Gauteng province
should supplement them to ensure that production in the
township is supported in terms of the following:
· Products standardisation in terms of processing
and packaging-through ISO standards measurers;
· Creation of Quality Assurance system per sector
and products in the whole production value chain;
· Introduction of world-class manufacturing
techniques such as lean manufacturing, justin-time and so forth for township production
activities; and
· Facilitation of patents and copyright to ensure
that knowledge owner are recognised and their
knowledge registered.
4.7. Regulatory/Policy Review to enhance SMME competitiveness
The new regulatory game changers for the township
economy will be, the full implementation of the National
Preferential Framework, Broad- Black-Based Economic
Empowerment, the Gauteng Strategic Procurement
Framework and the Localisation Accord to ensure the
following objectives Township Economy Revitalisation are
achieved:
· Localisation of inputs to the Strategic Priority
Projects through a concentrated supplier
development, incubation and capacity building;
· Changes to the Treasury Procurement Guidelines,
to ensure that supply chain managers across
all spheres of government deliberately build
databases of manufactures of goods and services
that are largely consumed by government and all
its agencies. A deliberate attempt should be made
to ensure that the issue of local manufacturing
(in particular township manufacturing) is
embedded in the tender documents.
· Regulation that seeks to ring-fence certain
economic activities such as retail for local
entrepreneurs.
· Breakdown the vertical ownership of economic
activities that dominate township economy.
Gauteng Township Economy Revitalisation | strategy DRAFT
19
5.
RESOURCE MOBILISATION AND PARTNERSHIPS
The communities in the townships have over the years
developed saving association/stokvels for members. Usage
of such fund varies from burial support, bulk purchase
of groceries, annual savings and loan fund among the
members. Idea around using the community assets/funds
for enterprise development has always been there, but it
has not yet taken the shape and form as the models that
are found in India or Germany, where community funds
are the cornerstones for community-owned enterprises,
commonly known as cooperatives. It is important for
the government to educate the communities around
the usage of community assets and saving to generate
wealth creation in the township. The cooperative model of
enterprise ownerships, suit the model of community based
wealth creation, provided that the government makes
provision for all the enterprise support measures as in:
· Another addition as a model that can be used
is the establishment of a Cooperatives /Stockvel
Banks, whereby the community can invest its own
money and borrow to fund businesses. This model
also requires rigorous training in business and
financial management in order to arrest a high
failure rate of SMMEs and Cooperatives.
5.1. Partnerships
It will be important to crowd in resources from national
government, SMME support organization, commercial
banks, international donor organization and private sector
social responsibility fund. An attempt should be made to
forge partnerships with all potential funders, which will
result in GEP disbursing the partner’s funding. If this is not
done, the government can lose control of the plan with
dire consequences for the communities. GDED should
engage partners to support the plan in all the pillars to
ensure that it is a success.
It is important for the provincial government to partner
and mobilise pledges in money, time and effort with both
the public and private sector in order to implement pillars
of the strategy.
Gauteng Township Economy Revitalisation | strategy DRAFT
20
6.
MONITORING AND EVALUATION
It will be important for GDED to establish a strong monitoring and evaluation team on the implementation of the plan.
Impact on the interventions should be done regularly to ensure that the elements of the interventions that are good are
maintained and scale is increased and those that exhibit a failure are expunged.
GDED Monitoring and evaluation system should incorporate the targets from the Township Revitalization Strategy. The
pillars of the strategy will have to be broken down into budgeted programmes and targets that are reported. The impact
will be on the number of economic infrastructure laid, the number of SMME supported and sustained, the number
of employment created and the contribution (value-add) of township enterprises to regional, provincial and national
economy.
Gauteng Township Economy Revitalisation | strategy DRAFT
21
ANNEXURE I-PLAN OF ACTION
7.
This Action Plan will guide the interventions that will be made in the communities to revitalize the township enterprises. The
pillars will be converted into implementable programmes (for each pillar) that can be resources and monitored. This plan is
depended on strong partnership between the provincial government and other role players in the economy. There is a need
for a sustained stakeholder campaign to ensure that there is total buy-in on this plan and also commitment in money and
time to ensure the success of this plan.
These pillars and proposed programmes will be enhanced at the Gauteng Township SMME summit.
PILLARS
Economic
Infrastructure
FORMS
· Industrial Hubs (single/multisectoral)
· Business Parks
DELIVERY MACHINERY
65 hubs of various forms,
built through multi-year
funding commitment.
RESOURCE
REQUIREMENT
R12 million for a capitalised
hub, totalling R780 million
for 65 Hubs over MTEF.
· Old Hubs (Regeneration)
PARTNERSHIPS
· Local Government
(Municipalities)
· Banking Council of South
Africa and individual banks
· The dti
This is dependent on access
to land, disused building
and infrastructure in the
townships
· Small Enterprise
Development Agency
· IDC
· DBSA
· Stokvels
Entrepreneurship
Development
· Incubation
· Mentoring and Coaching
· Skills development
The Entrepreneurship
Dedicated resources and
development should be
ring-fencing per township
located within the township
hubs
· Business Development
Support
· National Empowerment
Fund
· Small Enterprise
Development Agency
(SEDA)
· ABSA,
· GCRA
· SETAs
· Technology transfer
· Corporates (Sasol)
· FNB, NEDCOR and
Standard Bank
Resourcing
· Loans
· Partnership Funding
· Bridge finance
· Corporate Social
Responsibility funds
Government funding should
be used to leverage funding
with other partners. The
government should be a
guarantor on behalf of
entrepreneur when seeking
funding from the bank
· The dti’s technology Hubs
Funding to be differentiated All commercial Banks
in terms of developmental
DFIs
and commercial through
market segmentation
· Venture capital
Market Access and
Competitiveness
· Preferential procurement
Supplier development
· Increasing share of local
production
Enterprise Development
Partnership agreements
· SABS
· Productivity Institute
· Market support
· South Africa Chamber of
Business
· Networking
· Afrikaans Handel Institute
· Standards and quality
assurance
· FABCOS
· NAFCOC
· Competition Commission
· TRANSNET
· PRASA
· TELKOM
· ESKOM
Gauteng Township Economy Revitalisation | strategy DRAFT
22
Innovation and
Development of
the Indigenous
Knowledge
Systems
· Patents and copyright for
indigenous products
· Standardisation on names,
cultivation, processing and
packaging of indigenous
products
· Research and Development
· Prototyping
· Product development
· Mobilisation of
Innovation in the
Township
Re-orientation of TIH
funding
· Classification of
indigenous product
· Mobilisation of the
scientific Communities
· Technology Innovation
Agency
· Incubation of new ideas
into new products
· Department of science and
Technology
· The dti
· Academic Institution
· Market Support
· Breaking monopolies
dominance of the ownership
of township production and
consumables
· Incentivising township
business to thrive
Supplementing the current
national incentives
Mobilising the support for
township business with
government bodies and
businesses
Agreements with the
monopolies in the value
chain of businesses that
dominate township
economy
Review of existing legislation and
regulations to provide market
access
· The dti
· Sector and Industry bodies
· SABS
· Productivity Institute
· Technology Incubators
· Creating programmes to
ensure the standardisation
and quality of the products
Regulations and
Policy Review
· Agriculture Research
Council
· SABS
· Commercialisation
Manufacturing and
Production
· CSIR
· Universities
The Policy and Regulation
Review Panel of Experts
Gauteng Township Economy Revitalisation | strategy DRAFT
Sponsoring the Reviews
in accordance within the
government schedules
23
· Industrial Research
Institutions such as CSIR,
ARC and others
· National, provincial and
local government
· Creation of the
intergovernmental Policy
and Regulation Review
Panel
LIST OF REFERENCES
Abu, Orefi and Johann F. Kirsten. “Profit
Efficiency of Small and Medium-Scale
Maize Milling Enterprises in South Africa.”
Development Southern Africa 26.3 (2009):
353-368.
Berry, Al et al. “The Economics of SMMEs in
South Africa.” Trade and Industrial Policy
Strategies Research Report (2002).
Buys, A.J. and P.N. Mbewana. “Key Success
Factors for Business Incubation in South
Africa: The Godisa Case Study.” South
African Journal of Science 103.9/10 (2007):
356-358.
Department of Trade and Industry.
“Integrated Strategy on the Promotion of
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Policy Report (2005).
Department of Trade and Industry.
“Unlocking Potential in an Enterprising
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Small Business Economics 22.5 (2004): 379389.
Havemann, Glenn. “Capacity Building of
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Herrington, Mike, Jacqui Kew, and Penny
Kew.
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in
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Kesper, Anna. “Failing or Not Aiming to
Grow? Manufacturing SMMEs and their
Contribution to Employment Growth in
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Kirsten, Marié and Christian M. Rogerson.
“Tourism, Business Linkages and Small
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Development Southern Africa 19.1 (2002):
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Luiz, John. “Small Business Development,
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Mather, Charles. “The Growth Challenges
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South Africa’s Food Processing Complex.”
Development Southern Africa 22.5 (2005):
607—622. E.
World Bank. 2014. The South African
Township Economies.
Gauteng Township Economy Revitalisation | strategy DRAFT
24
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Tel: 011 355 8000
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www.ecodev.gpg.gov.za
Gauteng Department of Economic Development
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