Business Plan

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Establishment of a Common Shared Furniture Manufacturing Facility

(Incubator) in the Ugu District

Prepared by Kingdom Business Solutions084 520 4642

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ACKNOWLEDGEMENTS

This project is the result of an initiative of the Ugu District Municipality to grow the furniture manufacturing industry of the District through a series of programs in which the resources of the District could be harnessed to bring about a strengthening of the furniture manufacturing industry and, thereby, the economy of the Ugu District.

Key role players, viz. The Development Bank of Southern Africa has funded the research and business plan development of the project and the Department of Economic Development has expressed an interest to provide funding support towards the program.

The project builds on the concept of a furniture manufacturing cluster called the Khuphuka Furniture Manufacturing cluster which is in its formative stages and is designed to serve the Ugu District.

Acknowledgement is given to the following individuals and organisations that have been instrumental in unfolding the vision of this industry:

o Deon Govender, an architect of the Khuphuka Furniture Manufacturing cluster concept and the manager responsible for this project prior to his departure from the Ugu District Municipality.

o Mandla Mkhungo, LED Officer at Ugu District Municipality

o Hibiscus Coast Municipality. Representatives of the HCM LED department have given invaluable input to the process.

o Karen Harrison and Neels Vermaak of the DBSA who have played a significant role in the Project Steering Committee in giving direction to this initiative.

o Nathi Mthiyani, KZN Department of Economic Development and Tourism.

o Lethukuthula Dlamini of COGTA(KZN COGTA: Coastal Regional Manager - LED Business Unit)

o Wiseman Myeni, Regional Manager: DTI, KZN Durban Office

o TK Naicker and Leigh Hayes, FP&M Seta

o Themba Kunene, SEDA Ugu

o Tilana van Vuuren, Esayidi FET College

o Key industry role players viz. Builders Trade Depot and other companies in this industry who have provided information and intelligence so that this project could take on a pragmatic and implementable form.

It also draws from:

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o the Furntech model

o the Khuphuka Furniture Manufacturers Association strategy and plan

o Various local and international studies on incubators

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Contents

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The Concept

Industry Research

The 4 Pillars of Support

The Key Stakeholders

Roles, relationships & Responsibilities

Organisational Structure & Systems

Operational Plan

Financial Plan

Annexures: Annexure 1: Site Identification ReportAnnexure 2: Technology ReportAnnexure 3: Kirkpatrics Training Model EvaluationAnnexure 4: Unit Standards in Furniture ManufacturingAnnexure 5: The Logic Model for Program Planning and EvaluationAnnexure 6: Detailed roles and responsibilities of Incubator staffAnnexure 7: Non-profit Company – Registration, roles and responsibilitiesAnnexure 8: Summary of King III Governance Principles

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ACRONYMSDBSA Development Bank of Southern Africa

DED Department of Economic Development

DoL Department of Labour

DM District Municipality

DTI Department of Trade and Industry

ESDLA Employment Skills Development Lead Agency

FP&M SETA Fibre Processing and Manufacturing Seta

FET Further Education and Training

HDI Historically Disadvantaged Individual

HCM Hibiscus Coast Municipality

ICT Information and Communications Technology

IP Intellectual Property

IT Information Technology

KZNISC KwaZulu-Natal Innovation Support Centre

MOU Memorandum of Understanding

NSF National Skills Fund

PDI Previously Disadvantaged Individual

PGDS Provincial Growth and Development Strategy

PMFA Public Management of Finance Act

PSC Project Steering Committee

R&D Research and Development

SEDA Small Enterprise Development Agency

SETA/s Sector Education and Training Authority/ies

SMME Small, medium or micro enterprise

TIKZN Trade and Investment KwaZulu-Natal

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PREAMBLE

The difference between progressive and stagnant economies is the ability of the governing authorities and key role players to harness the strengths of their geographical domains and to put in place strategies to create industries that will provide jobs, increase skills and provide an environment for communities to grow and thrive.

The economic success of communities today is significantly influenced by their ability to adapt to the fast changing technologies that pervade every economic sector and to use this technology to increase their internal efficiencies and productivity while breaking through into local and global markets.

In some cases, globalisation and the opening of markets has led to the demise of once-productive industries as a result of encroachment and accessing of markets by companies from other parts of the country and of the world. It is therefore an important

Imports per Product Category, 2005- 2010

strategic initiative that local industries are developed and grown to protect and secure its own future and that of the local economy.

It is against this background that the Ugu District Municipality and its government and institutional partners have embarked on a strategy to revive and grow the furniture manufacturing industry in the Ugu District.

The DTI Furniture Industry Strategy reports that “total imports of furniture increased from R1.4bn in 2005 to just over R2.4bn in 2010. China is by far the dominant exporter of furniture to South Africa, with Chinese products imports growing by from a 24.5%

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Import Per Category

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2005 2006 2007 2008 2009 2010

Year

Impo

rts

Ran

d Va

lue

Seats Office Kitchen Bedding Parts Others

share in 2004, to 42.7% share in 20091. Of the top five import countries (making up 80% of total imports); Chinese imports make up 59%

of total imports followed by Malaysia, Italy, Germany and Indonesia, each at around 5% of total imports.

The above graph shows that furniture imports coming into the country have been increasing over the years. The main products being imported in South Africa are seats and other furniture which includes predominantly case goods, followed by office furniture. The graph also shows that although a major part of the industry is facing big competition with imports, bedding and mattress supports are not subject to the same pressure as other categories of furniture. The most pressure and imports impact is felt in other categories

including bedroom furniture, case goods, seats (whether it is lounge sets or other seats) and office furniture.”

It is critical that South Africa improved its positions as a supplier of furniture to the South African market. To this end strategically planned local economic development (LED) strategies are being used increasingly by communities to enable them to improve their potential for economic and social development.

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Chapter 1 : The Concept of the Incubator

The Concept:

One of the key tools used to grow emerging industries is the concept of incubators. Incubators are based on the idea that business aspirations of people with skills potential in a particular industry can serve as the foundation for developing new businesses in a particular industry. An incubator has in place four fundamental components which, when combined in a holistic programe, can yield excellent results. These four components are:

infrastructure and shared services, business development, mentorship and skills training and development.

An incubator exists within an environment in which key role players viz. Government (local and provincial), skills and training institutions, the private sector and other institutional role players work together to create the optimal environment for the success of incubatees. The linkages between these role players and

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1.1 The Concept Overview

1.2 A Diagrammatic Representation

1.3 The Project Description

1.4 The Proposed Model

1.5 The Site

Incubator Management & Staff

Board

Ugu District Municipality

DEDT Key experts

Stakeholders / Institutions Funders

I N C U B A T E E S

the incubator serves as the umblical cord for the incubator without which it would be almost impossible for the incubator to exist.

The proposed project is based on the committment of the above-mentioned role players within the Ugu District to play their respective roles to develop the furniture manufacturing industry. A key influence on this project has been the alignment of government policy to use incubators as a tool to increase skills and develop profitable industries for all of the economic and social benefits that this brings. Several governmenmt agencies have incentivised the development of incubators by offering funding support to incubator models that meet their

requirements. This support is critical if incubators are to meet the global standards that industry are now working to. These new standards are seen in work practices and new technologies.

As the key driver in this initiative, the Ugu District Municipality will serve as the parent body and will oversee the activities of the board. The board will act independently to represent the interests of the various stakeholders. The board will oversee the strategy and its implementation by the incubator manager/CEO and the board will report on its performance to the Ugu District Municipality Council via its LED Department.

A diagrammatic representation of the Ugu Furniture Manufacturing Incubator in relation to its key stakeholders.

Historically, the Ugu District has not had a strong furniture manufacturing sector although the available resources of

manpower, raw materials and a suitable environment in various parts of the district are in place. Typically, most of the furniture

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originates from factories in the major centres and is distributed via established marketing networks and distribution channels.

An attempt by the Esayidi FET College in 2000 to establish a technical training programme for the woodworking industry was not as successful as envisaged due to the high exit rate that resulted in too few students in the final term to make the programme financially practical. The Esayidi FET College was accredited as a training institution with FIETA, the responsible Seta for the furniture industry at that time, but deregistered in 2006 due to low enrolment figures.

This phenomenon is symptomatic of an industry that is ailing and not being able to generate enough interested in the community as a viable business sector.

If there has to be a strategic shift to change this situation, an external agency must be

introduced. It is this role that the incubator plays. To some degree it will catalyse the industry and will result in the emergence of

new business in this sector, put technical and business skills into the hands of the beneficiaries and serve as a training ground to bring skills and expertise into the industry.

The Esayidi FET College has a well-equipped workshop with under-utilised equipment. The College has indicated that it certainly has an interest to implement furniture-manufacturing training programmes but would need to formally secure its role in the initiative. The aspect of sustainability of the training programmes indicates that the industry and the incubator need to motivate and mobilise the public to respond to the initiatives that have been planned; as described in this document.

The lack of cohesion and collaboration in the industry has largely been addressed in the proposed formation of the Khuphuka Furniture Manufacturers Association (KFMA). However, this organisation is in its formative stages and its objectives as given below may only be achieved when its plans are implemented and gain traction.

The objectives of the KFMA are as follows:

Short term objectives

1. The formalisation of the Ugu Furniture Cluster.

2. To create an enabling environment for dialogue amongst key industry players, including enterprise development institutions and financiers.

3. Access finance for the implementation of identified projects in relation to the Cluster, individual upgrade processes as well as micro-finance for emerging entrepreneurs.

4. The implementation of suitable interventions to ensure the survival of furniture manufacture operations and other stakeholders of the furniture manufacture value chain currently operating in the Ugu District.

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5. To consultatively develop and implement scarce skills development programmes that will complement growth in the Furniture Industry.

6. The planning and implementation of suitable developmental interventions to incorporate the informal segment, i.e. emerging entry level furniture manufacturing entrepreneurs, into the mainstream manufacturing segment.

Long term objectives:

1. To ensure the sustained survival and growth of the Ugu Furniture Cluster.

2. To develop an extended support programme for established furniture manufacturing entrepreneurs.

3. To expand on developmental programs and interventions for emerging entry level furniture manufacturing entrepreneurs.

4. To promote transformation of the Furniture Sector by mainstreaming Black Youth, Women and the disabled.

The proposed Ugu Furniture Manufacturing Incubator will, in part, be the achievement of the KFMA’s long term objectives and will serve to provide the industry with valuable skills.

Conceptually, it can be stated that the proposed incubator is a part of the KFMA strategy yet is somewhat independent in its design, concept and will continue to exist whether the KFMA achieves its overall objectives or not.

The KFMA and the proposed incubator will serve as vehicles to drive the furniture manufacturing industry in the Ugu District towards growth and expansion. Such initiatives have, up to now, been non-existent. It is expected to serve a significant role in the economic and social progress of the district.

Generic Incubator Services:

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Help with business basics

Networking activities Marketing assistance High-speed Internet access Help with accounting/financial management Access to bank loans, loan funds and

guarantee programs Help with presentation skills Links to higher education resources

Links to strategic partners Access to angel investors or venture capital Comprehensive business training programs Advisory boards and mentors Management team identification Help with business etiquette Technology commercialisation assistance Help with regulatory compliance Intellectual property management

Depending on the type of incubator, different combinations of the above services may be offered.

Positioning the Ugu Furniture Manufacturing Incubator

The Ugu Furniture Manufacturing Incubator will provide all of the above services within a model specifically adapted to local conditions.

In the incubator model described in this document the following critical aspects have been taken into account:

o A PESTEL Analysis

o A SWOT analysis

o The current state of Infrastructure to support a furniture manufacturing incubator.

o The political will to support an incubator.

o The role players and their level of readiness to engage in the support of an incubator.

Over the past 30 years, across many regions of the world, incubators have gained momentum as the preferred path for the establishment of emerging companies in specific sectors of the economy. If the Ugu Furniture Manufacturing Incubator is to become successful, then all of the elements above must be considered and the model designed to access every advantage and mitigate every possible disadvantage.

The proposed model also is designed to prepare incubatees to operate on a computerised platform viz. The use of emails, spreadsheets and word processing for

finances and providing quotations, etc. While this may seem to be a misplaced emphasis for emerging black entrepreneurs, the need to establish emerging businesses on a global standard will give then a tremendous advantage when they operate as independent businesses outside the incubator.

In this sense, the Ugu Furniture Manufacturing Incubator will be a first of its kind in which the progress in furniture manufacturing technology will be complimented by the computer technology supporting business. This includes the web-based design and

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research that will unlock the creativity of the incubatees. It is this ability that will allow incubatees to operate on a global platform.

This dimension of the incubator’s programme of activity then sets a new standard for incubatees. However, to prevent the exclusion of those who are not technologically minded, the IT dimension of the incubator’s programme could be offered on an optional basis.

In the preparation of this business plan, various models and options have been considered. What is reflected is the preferred option which has been deemed to be the most suitable for the Ugu District.

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Project Description1.1 Proposed name of new entity: Ugu Furniture Manufacturing Incubator

It is proposed that the incubator be established into an entity that can first receive public aid and thereafter develop its business model according to how the stakeholders and board see the future direction of the entity. It can start off as the Ugu Furniture Manufacturing Incubator and the board can thereafter decide on a new name.

1.2 Proposed legal entity for the planned furniture manufacturing incubatorIt is proposed that the incubator be registered a Non Profit Company through CIPC (Previously Section 21)

1.3 Proposed date of commencement of businessIt is proposed that the planned Ugu Furniture Manufacturing incubator should prepare to commence operations in March 2014. The first 3 – 4 months should serve as the establishment period and the operations should commence by 1 July 2014.

During the establishment period, the board should be formalised for commencement on 1 July 2014. Up to that date it is proposed that the Project Steering Committee serve as the interim board.

The period November 2014 to 30 June 2014 will serve to establish the following components of the incubator:

o The physical space

o Procurement of equipment

o Appoint key staff

o Establish systems

o Recruit and induct incubatees

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The doors of the facility should then be opened for business on 1 July 2013. A comprehensive project implementation timeframe should be developed for the establishment phase and the 6 months thereafter.

The Proposed Model

1.4 Proposed Model for the Furniture Manufacturing Incubator

Several models of the proposed incubator have been studied and two of the five possible models have been selected as the best possible options based on the prevailing conditions. The detail of the models and the selection process is contained in Annexure 1 to this document.

Hereafter in this document the two models described below will be the primary reference point in the design of the incubator.

In summary, the preferred models are:

A stand-alone Incubator

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Incubator space

Shared Services

Management offices Meeting rooms

Retail showroom

Ablutions

IncubatorHost Company

This model may be considered as the classical incubator model in which all components are under one roof and an independent management / board runs the operation. There is no ‘parent’ to lean on but there are many avenues of support through agreements and interaction with all stakeholders.

Adoption Model - Private Sector Host:

Hosting of an incubator within an existing business suitably inclined to support such an incubator. This would include existing furniture manufacturers and traders in materials required by furniture manufacturers.

If the host company is a large corporate, this model lends itself to receiving CSI and other types of support from the host company. In this model, the management of the incubator may or may not be linked to the host company.

The Site

1.4.1 Site Determination Criteria

While the incubator will serve the needs of the entire district, the selection of the site plays an important role in determining the success and sustainability of the incubator. The following criteria have been used as the basis of the site selection:

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Cost of rental and services Easy access to markets – distance to markets and the cost of transport Good road infrastructure – accessibility by large vehicles Must be served by commuter transport or close proximity thereto.

Must be easily accessible for external support, technology, etc.

An extensive exercise has been carried out to identify a suitable site. Annexure #1 details the process to find a suitable site and the results thereof.

1.4.2 Physical Design of the Incubator Facility

While the final decision in terms of the model and site is still to be determined, both of the preferred options have been studied and the following floor plan configurations are proposed. Note, the Site Identification report attached as a more detailed with complete specifications and costing.

1.4.3 Proposed Phased Development of the Incubator

As the population of the incubator with suitable incubatees may not necessarily take place at one time, it may be expedient to stage population of the incubator in 2 or 3 phases.

A suggested minimum initial occupation is 6 incubatees selected in terms of the selection criteria set out later in this document. The mix of products and skills will be a significant factor contributing to the success of this phase.

A second phase, perhaps 6 months later, will allow for the careful selection of incubatees, having learned from the challenges arising from phase 1.

Strategic Leadership Team / Interim Board

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It is proposed that the Project Steering Committee (PSC) serve as the interim board while the incubator is being established. The PSC, which is currently well represented by all of the key stakeholder groups, may want to accept new members to its board at its discretion.

Currently the PSC is representative of the following institutions:

o Ugu District Municipality

o Development Bank of Southern Africa (DBSA)

o KZN Department of Economic Development and Tourism

o South Coast Chamber of Commerce and Industry

o Esayidi FET College

o Representatives of the Local Municipalities within the Ugu District

It is proposed that SEDA, DTi and TIKZN be invited to participate in the interim board. The DBSA has indicated that it will not sit on the board but will have a keen interest in the development and operation of the incubator. Similarly, while invited to be represented on the board, the DTi may chose not to be represented at this level if their availability to do so is limited.

While the board receives its mandate from the Ugu District Municipality, the board is envisaged as an independent entity that decides its own direction. The objectives of the Ugu District Municipality and the various funders are expressed in the functioning of the incubator through the decisions made at board level.

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Vision statementThe following draft vision statement has been formulated.

The Ugu Furniture Manufacturing Incubator will serve as a model of excellence in developing emerging businesses and skills within the furniture manufacturing

sector for the benefit of the local economy and for the creation of rich social returns.

This concise vision expresses the core of what the Ugu Furniture Manufacturing Incubator is about. This vision is will be achieved through the development of:

o a sufficient and appropriate furniture manufacturing skills base

o a vibrant local furniture manufacturing industry through

- promoting local business solutions

- fostering new business start ups in the industry

- increasing the survival and growth rates of furniture manufacturing SMMEs.

Ugu Furniture Manufacturing Incubator will:o develop innovative learning programmes in furniture manufacturing through the

support of the FP&M SETA and the Esayidi FET College to strengthen the skills base of the district

o foster programmes that spark entrepreneurial spirit and foster creativity in new business ventures

o develop appropriate and effective support programmes for the furniture manufacturing industry.

o Implement mentorship programmes to develop incubatees.

o establish a facility that will facilitate SMME start-ups and growth in the industry.

o provide a range of business support services

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o provide shared resources for furniture manufacturing entrepreneurs and the established industry

o create a partnership and collaborative opportunities for incubatees to undertake complex and large projects.

o minimise the input cost to the incubatees by providing subsidised services

o serve as the basis for employment growth in the furniture manufacturing sector

o enhance the development and growth of small businesses in the furniture manufacturing sector.

o Serve as a centre of intelligence to understand and respond to market and environment changes.

o stimulate interaction amongst incubatees and encourage participation in consortia tendering for major projects.

1.7 Business purposeUgu Furniture Manufacturing Incubator will need to be established for the purpose of developing the business base of the furniture manufacturing industry in the Ugu District Municipality. The development of this industry has been identified as a priority for the Ugu district. In order to sustain developing SMMEs and emerging entrepreneurs in this sector it is essential to ensure that new businesses are exposed to, and can, utilise the latest technology. This will be achieved by:

o providing skills programmes to build up a critical mass of appropriate skills to service industry needs

o providing a comprehensive set of high quality business development services, support facilities and premises for rent, to facilitate

- business and technological innovation

- the establishment and growth of new businesses

- improving the SMME survival rate from 25% towards 80%

- Providing an environment in which firms and development organisations can form partnerships of various forms for commercial and educational objectives.

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While the Ugu Furniture Manufacturing Incubator is envisaged as a non-profit operating entity, the individual incubatees will operate as profit-making businesses.

The incubator board may want to establish an independent profit-making entity under its authority for the purposes of conducting commercial transactions, such as the lease of the property and sub letting, as well as other financial relationships. This decision may need to be undertaken by the board on a need-to-have basis.

Goals and objectivesThe proposed furniture manufacturing model is specifically intended to support one particular sector. However, in its existence it will lean heaving on the mechanical engineering and ICT sectors that integrate into the furniture manufacturing sector through the technology used.

The specific objectives of the project are to:o to use the furniture manufacturing incubator to create a strong, durable

industry/institutional /local government partnership

o to integrate the furniture manufacturing incubator with local and provincial growth initiatives

o to integrate the furniture manufacturing incubator with other innovative manufacturing initiatives, regionally and nationally

o to use research to inform decision-making and product development

o to develop innovative learning and support programmes in furniture manufacturing.

o to serve as the basis for employment growth in the furniture manufacturing sector.

Expected OutcomesThe Ugu Furniture Manufacturing Incubator will result in:

1. A leverage of funding and institutional support to assist the incubator in achieving its objectives.

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2. An integration with the (to be formed) Khuphuka Furniture Manufacturing Association to serve the furniture manufacturing industry in Ugu through the offering of shared services through its fully equipped workshop. This service will be available to all in the industry at a reasonable cost.

3. The emergence of new furniture manufacturing businesses in Ugu.

4. The development of businesses and technical skills through a range of accredited training and development programmes.

5. The incubator will serve as a ‘catalytic enabler’ for other spin-off business and employment opportunities.

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Key Stakeholders

A summary of the roles played by some of the above key role players is given below. (Readers are requested to note that this section takes a pre-emptive approach as the

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Ugu District Municipality

Trade & Investment KZN

COGTA

Local Municipalities

KZN DEDT

SEDA

Esayidi FET College

FP&M Seta

DTI

Khuphuka Furniture Manufacturers

Association*

Furniture Retailers

Suppliers to the Furniture

Industry

Institutions supporting LED eg. SC Chamber

Private Sector

Partner

process of engagement with the role players is currently in progress and their degree of involvement is still to be finalised).

The Ugu District MunicipalityThe Ugu District Municipality will have oversight of the project to ensure that its economic development objectives are met. The incubator, in serving to fulfil the economic and social objectives of the Ugu District Municipality, will provide regular reports and any desired change in policy or direction will be enacted by the board so that the objectives of all stakeholders are met.

In its oversight role , Ugu DM will :

Provide the necessary resources within the context of its function and availability to ensure that the Ugu Furniture Manufacturing Incubator successfully achieves its outcomes.

Leverage funding and institutional support

Avail its manpower resources and intellectual expertise to provide direction to the board.

If necessary, release certain key vacant buildings and properties to serve the incubator programme. This could take the form of storage space, etc. These should form part of their strategic contribution to this initiative.

Ongoing monitoring and evaluation of growing economic sectors and the trends in KZN to assist direct the activities of the incubator.

If possible, provide the incubator with a preferential supplier agreement in respect of the furniture needs of Ugu DM.

The FP&M Seta (Fibre Processing and Manufacturing Seta)The FP&M Seta will fund the approved training programmes of the incubatees through its discretionary grant funding.

It terms of the FP&M Seta regulations, the implementation of their learnership programmes

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Must meet the following requirements: Training must be provided through an accredited institution. The training facility must be appropriately equipped. The FP&M Seta will assess the

facility prior to finalisation of its support.

The FP&M Seta will give an annual grant to all learners entering the learnership programme. This grant will cover the cost of training, administration and the stipend ordinarily given to the learner. The current grant is R25000 per learner per annum. This amount may be reduced by the FP&M Seta at their discretion and availability of funds.This grant covers the learner’s stipend, facilitation and training, assessments, moderation, certification, printing, graduation, protective gear and administration.

As most of the above elements of the learnership programme will be undertaken by the Esayidi FET College, it is expected that the bulk of the grant will go to the College. A small portion will be retained by the incubator for the provision of protective equipment, consumables and for administration.

The Esayidi FET College As the accredited training provider, the Esayidi FET College will undertake the following:

o The initial learner assessment, training facilitation, performance assessment, moderation, certification, graduation and printing of learning material.

o provides a feeder market for the Incubator

o Manages transition from learner to start-up (pre-incubation).

The programmes offered by the Esayidi FET College will essentially be the FP&M Seta units standards in the in the agreed qualifications as set out in this document.

Khuphuka Furniture Manufacturers Association (KFMA)

The KFMA is the proposed association made up of the established furniture manufacturers in the Ugu District who have organised themselves within the association to find mutual benefit and synergies by working together on specified common objectives.

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A key component of the KFMA is the use of a shared facility in which the entire industry can have access to technology and equipment, albeit at a nominal cost.

The shared services component of the incubator is planned around the following core services:

High tech furniture manufacturing equipment

Computerised technology for the design of furniture

In addition to the above, the training and skills programmes that will be offered to incubatees will also be offered to employees within the furniture manufacturing industry in Ugu.

The management of the incubator will, in the process of opening markets for incubatees, also unlock markets for the established furniture manufacturing sector. In many cases it is hoped that the incubator and the KFMA can collaborate on projects for mutual benefit and for the progress of the industry in the Ugu District.

Private sectorAn integral component of the model is the involvement and participation of private sector business and mentors who:

o produce and supply furniture to external parties

o Serve as ‘consumers’ of furniture

o effectively engage with the incubator as business mentors and coaches.

As detailed above, an important service function within the furniture manufacturing incubator model is the generation of projects for tenants, with the objective of providing opportunities for consortia of SMEs to compete for projects normally the preserve of larger manufacturers; providing SMEs, anchor tenants, outside companies and strategic partners with opportunities to collaborate on projects which address the mission objective of building leading edge and internationally competitive SME sectors in the Ugu District Municipality.

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National Government: SEDASEDA Ugu has indicated a willingness to consider ‘adopting’ the incubator as a SEDA initiative to which it will give financial and institutional support. Its services cover:

o Business and Business Development (which give advice and information on market surveys, business plans and other preparatory activities)

o Business Linkage which assists on sub-contracting and partnering

o Tender Awareness which assists with tender document dissemination and preparation.

o The SEDA provides access to seed capital in co-operation with lthala.

Incubation and SMME support under the management of the SEDAo ensures and supports SMME growth

o promotes collaboration and networking

o manages tenants and facilities within the building

o performs an internal administrative function.

National and Provincial GovernmentServices cover:

o Funding for the equipment through KZN DEDT/COGTA/DTi.

o Funding for a wide range of incubator establishment costs through the DTI Incubator Support Programme and COGTA. This includes

o Business development services (e.g. business advisory services, coaching and mentoring, training, facilitation of funding, production efficiency and improvement, quality and standards acquisition)

o Market access

o Machinery, equipment and tools

o Infrastructure linked to incubator (buildings, furniture)

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o Feasibility studies for establishing and expanding incubators

o Product or service development

o Information and Communication Technology (ICT)

o Operational costs

o Funding of learnerships

o Funding for evaluation and monitoring

CHAPTER 2: Study of the Environment & Industry Research

The research process was undertaken primarily by consulting with the various role players, researching documents relating to earlier developments of this industry in the Ugu DM, studies done in South Africa and internationally with regard to the furniture industry and through extensive desktop research.

The PESTEL analysis was undertaken for the macro environment and a SWOT analysis chosen for the local industry.

2.1 A PESTEL Analysis

Political

Import controls in this industry currently favour international low-cost producers of furniture

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2.1 PESTEL Analysis

2.2 SWOT Analysis

2.3 The Ugu furniture Manufacturing Industry

due to prevailing bilateral and multilateral trade agreements with various countries and economic blocks.

Government policies lean heavily to increased productivity and production capacity from within SA and have put various incentives in place to drive this.

Reduction in import tariffs in terms of WTO agreements.

Economic

Declining demand for SA manufactured furniture from the developed countries due to the exchange rates.

Positive potential for growth in the SA market due to the economy coming out of the recession resulting in more disposable income.

The national housing programme to build 200000 houses per year and to upgrade informal settlements gives impetus to the furniture industry.

Access to finance and high interest rates hinder the emerging of new furniture manufacturers.

Low cost of production in primarily the eastern countries resulting in cheap imports.

Largest importers are European countries, North America, oil countries and Australia.

Increased competition from developing countries eg. Malaysia, Poland, Thailand, Romania, Slovenia and China.

High investments needed to upgrade skills in SA.

Distance to markets impacting of prices and, hence, volumes.

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Use of overseas agents solves service and quality problems.

High cost of attending international fairs.

Social

International fashion trends are constantly changing. Led by the western world. Local manufacturers must keep pace of lose market share.

Employment numbers in the furniture industry have declined over the years.

Furniture manufacturing is perceived as a low paid industry in SA.

Investment in technology and design giving some manufacturers the edge. International trends, demands and technology can be seen at trade fairs.

Lack of name recognition. There is nothing ‘special’ about SA furniture.

Consumers are looking for ‘total service’ and not just the product

Technological

Rising technology benchmarks in furniture production with alternate materials and processes being used.

SA furniture industry lacking quality technology, design skills and final quality.

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Production capacity in most SA companies too small to serve global markets.

Funding is available for industry growth and innovation

Environmental

Decreasing availability of raw materials spawning move to synthetic materials for furniture manufacturing. International demand for eco-friendly materials.

SA lagging. Poor quality of SA pine (compard to Nordic and other pines) . Cracking.

Tree replanting in SA lower than that of other countries. Long term material supply problems.

Tree replanting in SA lower than that of other countries. Long term material supply problems.

Legal

Co-operation agreements between international and SA manufacturers and retailers possible.

Large international design firms pushing for legislation to stop fabric and furniture design copycats.

2.2 SWOT Analysis

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SWOT Analysis

The purpose of the analysis is to inform and guide the future success of the proposed Ugu Furniture Manufacturing Incubator. The findings here are based on the outcome of the survey done in the business community in Ugu, other studies undertaken in the area, the indications of research done on the furniture industry in the Ugu District and discussions with LED officers.

Strengths

A local Industry Development Initiative, the Khuphuka Furniture Manufacturers Association (KFMA) has been mooted to galvanise and advance the industry in Ugu.

KFMA is supported by the KZN Furniture Industry Cluster.

Mature industry participants. The industry in the Ugu District is characterised by some businesses who have been in existence for many years.

The industry players are willingness to participate in integrative, synergistic growth strategies.

Local Board product supplier can underpin low cost furniture manufacturing strategy.

Current negotiations for solid wood supplies will afford competitive positioning.

Support for the incubator exists throughout the Ugu district, from the District Municipality, the Chamber and local entrepreneurs.

It can be morphed to suit the exact and specific needs of Ugu.

Weaknesses

The national and global economic recession continues to stifle the industry with casualties of the recession being unwilling to re-enter the industry.

High input costs. Labour and certain raw material costs are very high.

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Lack of product diversification to address varied consumer demands.

Low levels of exposure and access to local markets (Ugu District).

Poor access to external markets – domestic and export.

Absence of formal skills development programmes in the furniture manufacturing sector.

Lack of design innovation in response to global trends.

Poorly developed industry networks.

Barriers to entry for emerging entrepreneurs.

Response from entrepreneurs to enter training programmes for the furniture industry is low.

The understanding of industry incubators is not widespread within the district and this lack of knowledge may impede response to the concept.

The Ugu Incubator is designed to be specific for Ugu and therefore it will develop its own unique set of problems

Opportunities

Accelerate the development of the Khuphuka Furniture Manufacturing Association.

The incubator could assist informal sector SMMEs to catapult them into the formal sector and expand their business.

TIKZN mentorship (Manufacturing Industry Renaissance Model)

Integrative marketing and production initiatives

Steady growth of local consumer market.

National distribution of niche market furniture products.

Export opportunities, specifically Africa.

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Capacity building / developmental initiatives by identified stakeholders.

Access to funding and investment.

Esayidi FET College willing to serve as the Skills Training Centre.

FP&M Seta support secured and will contribute to financial sustainability of the incubator.

This is the first furniture incubator in Ugu and has been conceptualised to set a new standard in incubator design.

The establishment of the incubator will result in spin off business opportunities and add greater sustainability in the services, retail, manufacturing and tourism sectors.

The incubator will create a pool of skilled learners who will be available for employment and/or to start their own SMMEs.

Threats

Lack of understanding of industry clustering and its benefits.

Loss of impetus caused by delays in the formation of the incubator.

Lack of integrative approach in the formation of the incubator.

Lack of trust and cohesion amongst incubator members.

Ineffective governance of the incubator.

Poor industry participation and integration in the incubator.

Further degeneration of industry participants due to economic decline.

Lack of finance to implement the incubator.

An inability to attract and retain competent staff to effectively manage the incubator and implement its programs.

Ongoing funding might not be attained for the project to continue after its first year despite support from the stakeholders.

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Chapter 3: The 4 Pillars of Support

The Ugu Furniture Manufacturing Incubator is designed around 4 categories of service viz. Business development, training and skills development, shares services and mentorship:

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3.1 Training and Skills Development

3.2 Mentorship

3.3 Business Development and Support

Mentorship

Business Development &

Support

Furniture manufacturing Incubator

Knowledge and skills programmes

Programme

implementation

Customised mentorship programme

development

Business plans, strategies – support

and guidance

Business opportunities

Training & Skills Development

Infrastructure & Shared Services

Incubator workshop space

Materials storage space

Training & Skills Development

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Support, supervision & monitoring

Specific Project-based training

Monitoring & evaluation

Practical application

Systems development & support: Admin,

legal, finance, HR, etc.

Trade shows and fairs, visits to established

companies

Marketing for special projects /

deal brokering

Networked Computer

Internet access

Meeting facilities

Copier & printing

Filing systems

Secure parking

Access control/CCTV

Office equipment

Telephone

Research & Development

Shared services for the Ugu Furniture

Industry

Training and skills development in the incubator is undertaken in a structured way so that each learner (an incubatee who has been accepted onto the learnership programme) progresses from Level 1 to Level 3 in each of the 3 years he is in incubation.

5.4 Training and Skills DevelopmentThere are 4 categories of training that must be offered to the incubatees viz.

Skills based training

These are structured training programmes that are designed to develop the skills of the incubatees. These are usually accredited training programmes recognised by the FP&M Seta and includes practical as well as theoretical modules(unit standards).

Management and business development training

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Initial assessment & acceptance into the learnership programme

Year 1. Unit standards at NQF Level 2

Year 2. Unit standards at NQF Level 3

Year 3. Unit standards at NQF Level 4. Qualification obtained.

This is to develop the business skills of incubatees and includes programmes that will equip them to be good managers of people and systems.

Ancillary training

This category of training includes environmental awareness, fire fighting, safety and health programmes, etc.

General and Life Skills training

These include HIV/AIDS, money management, and other training programmes.

While the focus on the training done in the incubator will be on skills and business development, the ancillary and general training programmes will form part of the training package so that incubatees are developed holistically. The ancillary and general training programmes are usually give as core unit standards for the FP&M Seta learnerships.

In cases where specific training requirements are not met within the qualifications, the training programmes will be supplemented by additional training.

Skills based Training

The proposed skills training is in the form of FP&M Seta accredited modules that are provided by the Esayidi FET College.

The registered qualification is : National Certificate: Furniture Making: Wood and is offered at NQF Levels 2, 3 and 4. At each level, a ;learner has to make up a minimum points score with each unit standard carrying a specific number of credits. Also, the qualification is composed of fundamental, core and elective components.

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The core and fundamental unit standards are compulsory for each qualification and the learner may choose from amongst the electives to make up the balance of the credits needed for the qualification.

The elective components of the qualification allow the learner to choose his field of specialisation. This includes upholstery, cabinet-making and furniture-making; all using solid and board timer.

A complete description of the unit standards that make up each of the above trades is given as Annexure #4.

Practical Experience

The emphasis will be on practical programmes, the workplace experience linkage will be primarily within the incubator working environment. Short-term work placement arrangements with also be established with furniture manufacturers in the district.

To fulfil the requirements of the learnership programme, adequate practical experience demonstrated by the learner is necessary to attain the qualification. This experience is noted in a log book for each learner and makes up his portfolio that will indicate if he has met the requirements to qualify in that particular trade.

Monitoring and Evaluation

Each learnership programme had stringent quality standards that need to be adhered to. With respect to the academic component of the training, the Esayidi FET College will manage the quality standards in terms of ETQA guidelines.

The workplace quality standards will be managed by incubator staff who will be fully trained in this aspect.

Specific Project-based Training

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It is envisaged that some projects/work contracts will require specific skills for particular applications. In this case, the incubator management will source the necessary training providers and undertake that every incubatee is fully trained for that particular task.

Research and Development

Use of the Computers / Computer Design Software / Training Facilities

The incubator will be equipped with at least 5 (preferably more) computers that have advanced capacity and the latest furniture design software. These computers may be used for the training of incubatees in this field, undertaking of computerised marketing and administration; and may also be hired to other furniture manufacturers who may want to use this service.

The incubator management will need to develop a system for the payment for the use of shared services.

Management and business development training

This component of training equips the incubatee with the necessary skills to manage and run a business and includes:

Business and entrepreneurial training – Basic business skillsProgrammes of this nature must cover the following areas:

The skills, aptitude and expertise of a successful business person

Identify different consumer markets

Conduct an evaluation of a specific market

Carry out basic product planning

Complete a range of budgets for a small business

Develop a business plan

Explain how a small business can be financed

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How to calculate profit

Basic accounting and administration systems

Business Communication

Marketing

Management functions

Leadership skills

Supervisory Skills

Legal Compliance

Some of these programmes may not be accredited by Setas. Where necessary, service providers delivering the appropriate programmes must be utilised to fulfil this component of the development of the incubatees.

Ancillary training

This category of training fall outside of the direct skills-based training programmes but are deemed to be important as they often are done in fulfilment of certain regulations in various industries. This includes:

Fire Fighting

Safety Training (various topics0

First Aid (various levels)

Etc.

The appropriate level of ancillary training must be given for the holistic development of the incubatees so that they are fully trained in these disciples by the time they reach the third phase in the incubator.

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General and Life Skills training

These training programmes may be deemed optional. However, these programmes may contribute to the positive development of the incubatees and warrants a place in the bigger training programme. They include:

HIV/AIDS training

Employee wellness programmes

Personal money management

Etc.

Training Services to the Furniture Manufacturing Sector in the Ugu District

The various training programmes envisaged for the incubatees has already been described in this document. These learnership and extended training programmes will be offered to the furniture industry in the Ugu District at a fair cost.

These training programmes will contribute to the up-skilling of the industry.

All strategic approaches to how the training programmes of the incubator can be designed for the benefit for the industry must be explored and exploited as it forms an important income stream for the incubator.

Mentorship

Mentoring has the power to transform lives. Mentoring programmes help to support and encourage people to manage their own learning in order that they may maximise their potential, develop their skills, improve their performance and become the person they want to be.

Mentoring is a powerful personal development and empowerment tool. It is an effective way of helping people to progress in their careers and is becoming increasing popular as its

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potential is realised. It is a partnership between two people (mentor and mentee) normally working in a similar field or sharing similar experiences. It is a helpful relationship based upon mutual trust and respect.

A mentor is a guide who can help the mentee to find the right direction and who can help them to develop solutions to career issues. Mentors rely upon having had similar experiences to gain an empathy with the mentee and an understanding of their issues. Mentoring provides the mentee with an opportunity to think about career options and progress.

A mentor should help the mentee to believe in herself and boost her confidence. A mentor should ask questions and challenge, while providing guidance and encouragement. Mentoring allows the mentee to explore new ideas in confidence. It provides the environment for an incubatee to look more closely at himself, his issues, opportunities and what he wants in life.

In the Ugu Furniture Incubator model, the mentorship programme looks to pair the wise, experienced people in the established industry with incubatees who, at the outset, have minimal experience in the industry.

The mentorship proposed for the Ugu Furniture Manufacturing Incubator provides mutual benefit for the mentor and mentee.

Benefits for the mentor:

Can improve leadership skill.

The mentor gets a broader perspective of the industry, its challenges and its opportunities.

The mentor can learn alternate ways of thinking and find new approaches to solve problems.

The mentor will have the satisfaction that he has contributed to the development of an individual, the industry and the economy.

Criteria for mentors:

Mentors should have a thorough knowledge of the furniture manufacturing industry, operate at a senior level in the industry and have a good personal track record.

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Mentors should have enough time to invest in the mentorship programme.

Benefits for the mentee:

Mentees get the benefit of receiving the advice and guidance from someone who has been in the industry for a long time; and can learn from mentor’s mistakes.

Mentors can open new opportunities for mentees.

Mentees can accelerate the attainment of their goals by tapping into the momentum of the mentor.

The mentee can have access to the network of contacts of the mentor.

Association with a mentor could boost the confidence of a mentee.

Criteria for mentees:

It is the mentees responsibility to ‘pursue’ the mentor. The mentee will need to do the leg work.

The mentee must be willing to commit to the mentorship program and must give his time willingly as the program is for his benefit.

The mentee must have the right attitude to the mentor and the programme.

The mentee must be willing to document the key aspects of the programme and his development within it.

The steps towards implementing a mentorship programme:

1. Potential mentors in the industry are approached and signed up as mentors for a period of at least one year. If necessary they are guided as to that is expected of them.

2. Mentees are assessed for their suitability.3. Mentorship plans are designed based on the findings of the assessment.4. Mentees are paired with mentors.5. Mentorships plans and pairings are approved by the incubator board.6. The mentorship plan, rules and expectations are discussed with the mentorship7. The incubator management releases the incubatee to participate in the programme

as and when necessary.8. Mentoring activities are tracked and assessed by the incubator management.

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The Qualities of an Ideal Mentor someone who is respected in the community who can listen buttoning lipped and can reflect upon what is being said who is interested and prepared to invest time in the mentee a sounding board to bounce ideas off who is knowledgeable and open, prepared to share their own experiences who challenges, offers advice - but does not give advice who encourages, can be critical but always positive who has a realistically positive outlook

Business Development & Support

Business development and support services provided by the incubator is designed to unlock business potential through the following:

Business opportunities

The incubator management will continuously explore market opportunities where furniture can be supplied. The marketing and distribution strategy will include supply of furniture to :

o National and local government departments

o Schools

o Hospitals

o Established furniture chain stores

o Second-hand furniture stores

o The corporate sector

o The private / domestic sector

The incubator strategy also includes a retail showroom where people can buy directly from the incubator at a preferential price.

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The international market will also be explored and export potential of the incubator will be maximised.

If necessary, large orders will open the door for the incubatees to work together collectively. In some cases, established manufacturers under the ambit of the KFMA will be requested to join the short-term partnerships that may be formed to fulfil large orders.

Where the incubator unlocks marketing opportunities, a percentage of the revenue will be taken by the incubator to cover its expenses viz. Administration, communication costs, implementation of quality controls and standards, coordination of the production and delivery process, etc.

Business plans, strategies, funding acquisition – support and guidance

The incubator management will provide support to the incubatees in their preparation of their individual business plans and strategies. These plans and strategies will be regularly reviewed in terms of the incubator support programme and strategic realignment will be undertaken as and when necessary.

Incubatees are also eligible to receive funds from some institutions and the incubator management will give incubatees the necessary support to access these funds.

Where necessary he incubatees may be referred to external consultants to assist with funding acquisition due to the complex requirements from potential funders.

Trade shows and fairs, visits to established companies

It is an integral part of the incubator programme that incubatees get to showcase their products to potential buyers and for them to get exposed to other similar suppliers. This allows them to understand the level at which their competition is working to as to work to higher standards.

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This exposure comes to them through attending and participating in trade shows, exhibitions, promotions, etc.

It is proposed that the incubator programme provides no less than 2 events as described above every year for each incubatee.

Some of the possible events in which incubatees can participate in is:

Various trade shows at the Durban exhibition Centre and other venues in and around Durban eg. Decorex Durban, My Business Expo, East Coast Radio House & Garden Show,

The Royal Show in Pietermaritzburg

Overseas exhibitions arranged by Trade point

Locally-held exhibitions that are arranged by the incubator

Marketing for special projects / deal brokering

To assist in bringing work to make the incubatees sustainable, the incubator programme must continuously look to secure supply contracts for incubatees. As the legal status and good standing of the incubator will entitle it to register on the databases of government departments, parastatals and large corporates, the opportunity to tender for work leverages the sustainability of the incubatee.

It is proposed that such marketing endeavours be backed up by an documented agreement with the incubatee that a percentage of revenue (say 5%) be taken by the incubator for their role in the process. This provides one of many income streams to the incubator.

The undertaking of this function will provide:

o Opportunities for consortia of incubatees to compete for projects normally the preserve of larger firms.

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o For incubatees and outside companies, and strategic partners with opportunities to collaborate on projects which address the mission objective of building a leading edge and internationally competitive furniture manufacturing sector in the Ugu DM.

o Providing an income stream to balance the budget and ensure sustainability.

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Infrastructure and Shared Services

The concept design of the facility is given below.

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Floor Level Upper Level

The infrastructure and other services offered to incubatees as part of the incubator programme includes the provision of:

Incubator workshop space

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The workshop equipment : Incubatees personal tool box and common equipment

Shared Services and equipment

Material storage space

Access to a web enabled computer with MS Office suite

Meeting and training facilities

Office equipment and communication systems – copier, binders, filing systems, fax, telephone, etc.

Parking if possible

The incubator will have to be mindful that to attract buyers and to ensure the competitiveness of the incubatees, it will need to keep pace with technological progress.

It will be important that ‘state of the art’ technology should be installed. Furthermore, it will be essential that all manufacturing and ICT technology be regularly upgraded to ensure that Ugu Furniture Manufacturing Incubator and its incubatees remain competitive within the industry.

It should be a task of the Facility Manager that the incubator be kept abreast of technological developments and must institute a planned maintenance and upgrading programme. It is anticipated that this would be accommodated in each annual budget from year two.

This ICT enabled platform addresses the ICT requirements of the furniture incubator must be subject to the same upgrading of both hardware and software.

Incubator workshop space

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A 50 square meter of exclusive floor space has been allocated to each incubatee. This space will house the necessary work benches, mounted incubatee toolbox (contents given below), and the necessary working space.

While incubatee may set his space to suit his preference, specific requirements will be prescribed by management to ensure that safety and other mandatory requirements are met.

The workshop equipment: Incubatees personal tool box and common equipment/shared services

Every incubatee will have a personal toolbox containing the following equipment. While this toolbox will be ‘given’ to the incubatee, controls will be put in place by management to ensure that the equipment is not lost, stolen or misused. At the end of the 3-year period the toolbox will be given to incubatees who successfully complete the programme.

Each of the 3 chosen furniture-making disciplines will have a custom-made toolbox as follows:

The toolbox will contain:

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Incubatee Toolboxes:

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Common Equipment

Furniture Manufacturers Wood Workers Upholsterers

13" Circular saw 13" Circular saw 13" Circular saw

Band saw Band saw Band saw

Ball pein hammer Ball pein hammer Ball pein hammer

Claw hammer Claw hammer Claw hammer

Cordless Screw driver Cordless Screw driver Cordless Screw driver

Drill 13mm Drill 13mm Drill 13mm

Drill bits (wood) Drill bits (wood) Drill bits (wood)

Hand router Hand router Hand router

Orbital disk sander Orbital disk sander Orbital disk sander

Jig Saw Jig Saw Jig Saw

Square Square Square

Rubber mallet Rubber mallet Rubber mallet

Long nose pliers Long nose pliers Long nose pliers

Portable rechargeable drill Portable rechargeable drill Portable rechargeable drill

Pliers Pliers Pliers

Rule measure Rule measure Rule measure

Retractable Measuring tape Retractable Measuring tape Retractable Measuring tape

Specific Equipment

Furniture Manufacturers Wood Workers Upholsterers

Belt Sander 6pce carving set Carving tools

Blower Back saw Compressor

Carpenter's chain saws Belt Sander Electric hand Planer

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Electric hand Planer Belt Sander Groove cutting machine

Groove cutting machine Blower Industrial sewing machine

Hand saws Electric hand Planer Pneumatic staple guns (x3)

Punch Groove cutting machine Saw blades

Saw blades Half-round file Spray gun

Spade drill bits Hand saws Staple remover

Mitre saw Suction hose reel

Punch

Rasp file

Saw blades

Spade drill bits

Wood chisel

Shared Services and Equipment

At the heart of the incubator is the shared services programme. This comprises of a range of services that is provided by the incubator to the incubatees at no charge. However, as the shared services component of the incubator is designed to serve the entire Ugu furniture making industry, these services will be made available to any other furniture manufacturer in Ugu by arrangement.

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These shared services takes the form of a fully equipped workshop floor that will have all of the necessary equipment needed to process wood for furniture manufacturing. This equipment includes:

Multiboring Machine

Panelsaw

Singel Bag Dust Extractor

Edgebander

Double Bag Dust Extractor

Heavy Duty Single Head Spindle Moulder

Wheel Feeder

Wide Belt Sander

Dust Extractor

Tilting Arbor Saw

Thicknesser

400mm Planer

Vacuum Press Machine Double Table With Plc System

Processing Centre - Auto Tool Change

The above equipment is costly and cannot be afforded by the incubatees. The provision of this equipment for use by the incubatees will allow them to compete actively with other furniture manufacturers.

In addition, a well-stocked inventory of hand and powered equipment will be kept within the incubator and loaned to those using shared services. Strict controls on the issuing and return of the loaned items will be used to prevent the loss or misuse of the equipment.

Inventory of Equipment held by the Incubator:

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13" Circular saw Drill bits (wood) Portable rechargeable drill

6pce carving set Electric hand Planer Punch

Ball pein hammer Groove cutting machine Retractable Measuring tape

Band saw Hand router Rubber mallet

Belt Sander Hand saws Rule measure

Blower Industrial sewing machine Saw blades

Carpenter's chain saws Jig Saw Spade drill bits

Carving tools Long nose pliers Spray gun

Claw hammer Orbital disk sander Square

Compressor Pliers Staple remover

Cordless Screw driver Pneumatic staple guns (x3) Suction hose reel

Drill 13mm

While the above inventory of equipment will be available to incubatees on a free loan basis, a fair charge will be levies on all other needing to make use of such equipment. A schedule of charges per hour per item must be decided on by the incubator management (and ratified by the board). Some of the conditions that apply to the used of the shared service by external parties must include:

A demonstrated ability to use the equipment correctly and safely. Where this ability cannot be demonstrated or proven, the services may be rendered by the facility supervisor or a skilled incubatee (with the permission if the facilities supervisor) at an additional charge.

The use of all prescribed safety equipment eg. Aprons, goggles, safety shoes, etc.

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Material storage space

200 sqm of common storage space for finished goods (awaiting despatch) has been allocated to incubatees.

This will be a lockable space controlled by the incubator staff where incubatees may store their finished goods. Suitable controls must be established to ensure that there is no loss or damage to furniture while in storage.

Management will have the prerogative to manage the amount of time in which finished goods can be kept in storage.

Access to a web enabled computer with MS Office suite

If the incubator is to operate at a world class standard, it is necessary to develop incubatees to interact with their market with the appropriate computer technology.

Therefore the incubator will be equipped with 5 computers in a shared IT centre where each incubatee will be assigned 2 to a computer for the purposes of:

Research

Computer skills development

Issuing of quotations, invoices

Managing of costs, financials, etc.

The computers will be linked to a central server and will all be equipped with the necessary software for their purposes.

This software includes: Latest windows operating system, MS Office, internet software, etc.

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Meeting and training facilities

The incubator facility will be equipped with a training/board room/ meeting room and will be equipped with the following:

Boardroom Table to seat 12 people

Additional seating for 20 people.

Projector

Screen

Whiteboard

Lockable Cupboard for training material and consumables.

The training room will also be air-conditioned.

Office equipment & communication Systems

Incubatees will also have access to office equipment in the form of:

Photocopier

Fax machine

Laminating machine

Binder

Filing Cabinet space

Office resources.

While much of this may be provided to incubatees as a free service as part of the incubation programme, service that use consumables will be charged for at nominal rates.

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The incubator staff will put controls in place to ensure that there is no abuse of the privilege and that all equipment is used responsibly.

Other support systems and infrastructure

As part of the incubator, the following will be provided:

Ablutions, showers and change rooms

Personal lockers

Depending on the need of incubatees, the incubator management may also want to incorporate additional services eg. an in-house canteen.

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Ugu District Municipality

The Incubator Management

Esayidi FET College

FP&M Seta

Funding & Support Institutions

The Established Furniture Manufacturing Industry

The Incubator Board

Responsibility: Oversight of the incubatorRole: Active role on the Board, facilitate funding and support

Responsibility: Sustainability of the incubatorRole: Direct the affairs of the IncubatorMay outsources specialised/professional services.

Responsibility: Manage the activities and implementation of incubator programmesRole: Ensure safe, effective and optimal operation of the incubator on a day-to-day basis.

Responsibility: Offer structured learning programmes Role: Accredited training provider

Responsibility: Fund the accredited learning programmes.Role: Funder and certification of learners

DTI, COGTA, KZN DEDT, SEDA serve as potential funders to the incubator

Will play their role as mentors and will have access to the shared services component of the incubator, including the training programmes.

Private Sector Partner (BTD/Massmart)Responsibility: Provide financial and infrastructure support in terms of agreementRole: Board responsibilities – direction to the incubator

Chapter 5: Roles, Relationships & Responsibilities

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5.1 Private Sector Partner

5.2 The Incubator Board

5.3 The Incubator Management

5.5 FP&M Seta

5.6 Funding & Support Institutions

5.7 Ugu District Municipality

The Governance Model

While the Ugu Furniture Manufacturing Incubator board has an independent mind and operates independently of the structures of any one of its principals, it has a responsibility to deliver on its mandate to fulfil its obligation to its various sponsors and funders. This means that the incubator will establish its own systems and procedures in terms of good corporate governance.

The incubator will be registered as a Non-Profit Company (previously Section 21) and will meet the obligations as required by this form of company. Refer to Annexure 6.

The board will be comprised of representatives of sponsors, funders and industry experts. Other strategically positioned individuals or organisations that can add value to the incubator may be invited to join the board.

The primary governing stakeholders are:

The Ugu District Municipality

KZN DEDT

DTI

SEDA

The primary objectives of the incubator are:

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To serve the furniture manufacturing industry in Ugu through the offering of shared services through its fully equipped workshop. This service will be available to all in the industry at a reasonable cost.

6. The support emerging furniture manufacturing businesses in Ugu.

7. The development of businesses and technical skills in the furniture manufacturing industry through a range of accredited training and development programmes.

8. To serve as a ‘catalytic enabler’ for other spin-off business and employment opportunities.

9. To develop the furniture manufacturing sector into a significant job creation sector.

10. To grow the furniture manufacturing industry into a significant contributor to the local economy.

To achieve these objectives, each of the role player must take on certain responsibilities as given below.

The Operational role of the Ugu District Municipality

The governance structure describes the model for the operation of the incubator. The Ugu District Municipality is the lead agency that is responsible for the establishment of the Ugu Furniture Manufacturing Incubator and will have a significant role in directing the programmes of the incubator through its participation in the board so that its objectives are realised. It will be one of the key stakeholders to which the board will be accountable.

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The key operational role of the Ugu DM is to ensure that the environment in which the incubator operates is conducive to its effective operation. This role is played by Ugu DM by its involvement in:

Contribute to the progress and direction of the incubator at board level

Ensuring that stated objectives of Ugu DM are met

Ensuring the high quality of the operation and management

Implementing strategic changes to the direction of the incubator through the board.

Providing financial support or leveraging such support where necessary

Unlocking resources and support for the incubator

Unlocking supply channels and opening marketing opportunities for the incubator

Serving as a platform of industry intelligence and research and development for the incubator.

Much of the above is direct to the incubator via the board; or directly to the incubator within the understanding established at board level.

The Composition and Role of the Board

The board established by the Ugu DM must be registered as a Non-profit Company through the CIPC must be representative of all the key role players in this initiative. It is proposed that the board be made up of:

o Ugu District Municipality

o KZN Department of Economic Development and Tourism

o South Coast Chamber of Commerce and Industry

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o DTI

o Esayidi FET College

o SEDA

o At least 2 experienced experts in the local furniture manufacturing industry

The role of the board is to give direction to the incubator in the following areas:

Establish vision, mission and values

• Determine the incubator's vision and mission and direct its current and future activities to fulfill the vision and mission.

• Determine the values to be promoted throughout the incubator

• Determine and review the goals of the incubator.

• Determine incubator policies.

Set strategy and structure

• Review and evaluate present and future opportunities, threats and risks in the external environment and current and future strengths, weaknesses and risks relating to the incubator.

• Determine strategic options, select those to be pursued, and decide the means to implement and support them.

• Determine the mix of incubatees in terms of their product focus areas so that the individual strategies are in line with the overall strategy of the incubator.

• Ensure that the incubator's organisational structure and capability are appropriate for implementing the chosen strategies.

Delegate to management

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• Delegate authority to management, and monitor and evaluate the implementation of policies, strategies and business plans.

• Determine monitoring criteria to be used by the board.

• Ensure that internal controls are effective.

• Communicate with the incubator management.

Exercise accountability to the relevant stakeholders

The board is accountable to primarily the Ugu District Municipality and all stakeholders who have given support to the finances and programmes of the incubator.

Ensure that communications both to and from the Ugu District Municipality and the other stakeholders are relevant and effective.

• Understand and take into account the complimentary strategies of other stakeholders eg. national and provincial strategies via their respective agencies.

• Monitor and manage relations with relevant stakeholders by gathering and dispensing appropriate information through meetings, electronic and written communication, etc.

• Promote the goodwill and support relevant stakeholders.

Composition and Role of the Incubator Management

It is the responsibility of the board to engage the appropriate staff to manage the day to day affairs of the incubator.

The following staff complement is envisaged to be sufficient at the inception stages:

Chief Executive OfficerBusiness Development and Facilities Manager

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Facilities SupervisorSecretary/Receptionist/SMME support officer

An assessment of the workload and the financial support will determine whether additional staff and in which capacities they will need to be engaged.

A comprehensive list of roles and responsibilities of the above staff members are given as an Annexure to this document.

In summary:

Chief Executive Officer : Primary duties are:

o strategic leadership

o represent the incubator at the board

o developing and managing relationships with the board, partners and other stakeholders

o fundraising

o directing the marketing plan.

Business Development and Facilities Manager: Primary duties are:

o Managing the facility with regard to the implementation of all incubator programmes, financial controls, shared services, administration and HR.

o Making payments to suppliers and service providers.

o Delegate authority to the facilities supervisor to procure on behalf of the incubator.

o advising and mentoring the incubatees with all aspects of planning and managing their businesses, with special emphasis on those businesses defined as part of the business incubation process.

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o ensuring the efficient administration and timeous reporting to the board

o recruiting and selecting candidates for the Business Development Programme

o Media, advertising.

o Establish legally compliant systems for finance, administration and Human resources for the incubator.

o advising and assisting firms to implement their Business Development Plans (BDPs)

o assisting incubatees to conclude contract for key accounts

o securing key business relationships with the board, partners and other stakeholders

o preparing contract proposals and tender bids

o accountability for Ugu Incubator results in graduating incubatees to independent status.

o Achieve a positive rate of return on the capital investment in the project.

o Prepare an annual budget for the incubator.

Facilities Supervisor: Primary duties are:o Supervises the incubatees and their use of the equipment

o Ensures that safety standards are adhered to

o negotiating all tenancy and service contracts

o collection of rentals and service fees from tenants

o compiling all information necessary for the facilities manager to make account payment for all services and facilities

o managing the procurement and supply of all services and raw materials to Ugu Incubator

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o Making recommendations to the management team and board with regard to the maintenance, upgrading and extension of services to Ugu Incubator and from Ugu Incubator to the incubatees.

o any other functions which the board and management team may properly regard as falling within the ambit of the facilities management function

o producing an accurate schedule of monthly operating

o continuously presenting proposals to maximise the level and standard of services while containing or reducing costs

o developing a means to increase the revenue generating potential of the shared services

o Obtaining regular feedback from incubatees and users as to their requirements and initiating appropriate responses as required.

Secretary/Receptionist/SMME support officer: Primary duties are:

o all secretarial functions necessary to support the Business development manager and CEO.

o office administration

o control of photocopying, faxing and document binding for SMME tenants.

o receiving and signposting visitors to Ugu Incubator

o operating the switchboard.

o Delegated responsibility for various other key tasks.

While the above list of duties may comprehensively outline the duties of the senior management of the incubator, it may be decided by the incubator board to use a specialised company to undertake certain management services on a contractual basis.

This contracted services may cover one of more of the following areas:

Administration

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Human resources

Financial management

Marketing

Accessing of funding, etc.

Experience has shown that contracted services with specific deliverables and accountability structures result in better systems and legal compliance as it is often the case where in-house staff do not have the skills or capacity to operate effectively in certain areas.

The Role of Esayidi FET College

Esayidi FET College serves as the accredited training provider accepted by the Fibre Processing and Manufacturing Seta (FP&M Seta) as the legitimate conduit to effect skills development and training to this programme. The incubator approach to training and development has already been described earlier in this document.

Esayidi FET College, through its Sizanani Business Development Centre, will undertake the following:

Get the necessary accreditation from the FP&M Seta

Source accredited trainers and facilitate the training in accordance with the learnership programme.

Provide the learners with stationery and learning material

Provide Uniforms

Provide all training consumables

Undertake the certification of successful learners

Host the graduation ceremony

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The Fibre Processing and Manufacturing Seta (FP&M Seta)

As the authorised body to coordinate the development of the skills in the sector of the economy, the FP&M Seta has various training and learnership programmes which it has endorsed.

These structured programmes will be made available to the incubator through an accredited training services provider (Esayidi FET College). These programmes are made up of unit standards that detail the outcomes required from the learners to achieve the certification.

In addition, the FP&M Seta will give a learnership grant of R25000 pa for every learner on the programme. This grant is to cover all of the expenses incurred in implementing the programme.

Funding Institutions

The potential funders to this incubator have been identified as the KZN DEDT, COGTA and the DTI (Incubator Support Programme). The SEDA STP Incubator Programme is also proposed as a potential funder. The IDC is being investigated as a potential loan funder.

Industrial Development Corporation:

The IDC will provide loan funding for sustainable incubator projects. The IDC will be willing to consider proposals from the incubator in respect of sustainable, profit-generating projects that will be able to service any loan repayment obligations.

Department of Corporate Governance and Traditional Affairs:

COGTA is generally supportive of projects that indicate a good level of sustainability and an attainment of other social and environmental goals. COGTA has indicated that they will look at this incubator proposal with the objective of advising which of the various cost components it will be able to fund.

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Department of Trade and Industry:

DTI will match a private sector funder 50:50 up to a maximum of R10 million per annum for 3 years. The incubator must be based on a sustainable model.

SEDA STP Incubator Programme

The SEDA STP Incubator programme is one of the main sponsor of various incubators around the country. Similarly, the Ugu Furniture Manufacturing incubator will investigate the possibility of bring in SEDA as a key role player in the Ugu Furniture Manufacturing Incubator.

The Established Furniture manufacturing industry in Ugu

The incubator is designed to serve and be served by the established industry in the following ways:

Some experienced senior people in this industry may choose to serve as mentors to the incubatees.

Some established companies may take on skilled staff coming out of the incubator programmes.

The established industry may choose to send their staff on the various learnership programmes being offered by the incubator.

The shared services workshop is at the disposal to the furniture industry in Ugu. The shared services workshop will offer an opportunity for furniture makers in the Ugu District to open new product lines and markets.

Chapter 6: Organisational Structure and Systems

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6.1 The Organisation Chart

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6.1 The Organisation Chart

6.2 Systems and Procedures

6.2.1 Internal Systems: Admin, HR, Financial, Legal

6.2.2 Monitoring and Evaluation of Incubator Performance

Business Development & Facilities Manager

CEO

BOARD

6.2 Systems and Procedures

The incubator will ensure that the various systems mentioned above are in place. This includes setting up files and keeping documentation for the various components of the job. The filing system is usually categorised into subsections and, within these subsections, a chronological sequence. The files may include:

Administration systems:

Policies and procedures

Legal

Management files

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Facilities Supervisor

Secretary/Receptionist/

SMME Support Officer

I N C U B A T E E S

Agreements – MOU’s, etc.

Intellectual property – designs, strategies, etc.

Manpower - organisation charts, payroll schedules, etc.

Marketing

Accounting – debtors, creditors, payments, etc.

Human Resources:

Incubatee HR files – contracts, work performance, disciplinaries, etc.

Learnership agreements

Contracts of employment

Issuing of safety clothing

Health and Welfare records

Issuing of equipment on loan, etc.

Training records

Incubatee recruitment records

Incubatee benefits

Records of management/incubatee meetings

Payroll and remuneration administration (consider Pastel Payroll)

Financial:

A computerised accounting system with supporting spreadsheet controls eg. Pastel Accounting

Filing systems to support the above.

Reporting systems and protocols to provide the board with relevant information timeously.

Legal:

All registration documents relating to the registration of the non-profit company

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All legal agreements.

This above list is an example of what needs to be kept on record. However, the final system will be designed to suit the nature of the operation.

A filing system for the incubator and for incubatees should also be labelled correctly noting also the year for which the file is kept.

While a large corporation may have a decentralised filing system, a 2-level filing system is proposed for the incubator. The first level is for the incubator management and the second level is a filing system that is kept by each incubatee. The eventual system to be implemented must suit the needs of the both the incubator and incubatee.

6.2 Monitoring and evaluationThe monitoring and evaluating the performance of incubators is undertaken as follows:

6.2.1 Monitoring and Evaluating Incubator Performance

Firstly, the incubator model which has clearly identified outcomes and objectives must be evaluated. In essence, this level of evaluation assesses the performance of the incubator management.

A proposed measurement tool is the Logic Model that has been used for more than 20 years by program managers and evaluators to describe the effectiveness of their programs. The model describes logical linkages among program resources, activities, outputs, audiences, and short-, intermediate-, and long-term outcomes related to a specific problem or situation.

Once a program has been described in terms of the logic model, critical measures of performance can be identified.

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1) What is the current situation that we intend to impact?

2) What will it look like when we achieve the desired situation or outcome?

3) What behaviors need to change for that outcome to be achieved?

4) What knowledge or skills do people need before the behavior will change?

5) What activities need to be performed to cause the necessary learning?

6) What resources will be required to achieve the desired outcome?

This evaluation model evakuates a programme on the basis of its outcomes and prevents the defensive position often taken when evaluating a programme by justifying its inputs.

The Logic Model is the framework to be used for Analysis, Project Management, Monitoring and Evaluation (commonly used in a Programme Evaluation). This is well established internationally, but is relatively new in South Africa. The Logic Model is a powerful tool used in Evaluation research. It optimises the chances of an intervention succeeding and/or it identifies where it failed and why, and/or it extracts lessons learnt for the future. Logic Models enhance three processes:

o project management

o quality assurance

o learning and evaluation.

The Logic Model facilitates rigour in project reporting through providing an agreed framework and assisting programme managers to put in place clear indicators and measures for monitoring progress throughout the lifecycle of the intervention. The Logic Model facilitates proactive problem-solving and mid-stream corrections by enabling programme managers to identify problems timeously. A more comprehensive description of the Logic Model is given as an annexure to this document.

6.2.2 Monitoring and Evaluating Incubatee Performance

Incubatee performance is measure at two levels as follows:

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6.2.2.1 Evaluation of Incubatee Peformance on Training and Skills ProgrammesThe second level of evaluation is the performance evaluation by the individual incubatees.

The 3-phase programme for incubatees is clarified later in this document. In summary, each incubatee must agree to participate in the programmes set for each of its 3 phases. These programmes are progressively designed to advance the incubatee for the beginner to advanced stage with each stage being marked by definite outcomes and achievements in the form of:

Training programmes Operational and technical Skills programmes Management skills Administration skills Etc.

A performance evaluation in the form of a site inspection, evaluation of programmes attended and results of tests supported by an interview will form the basis of this evaluation.

Within this evaluation component, every individual attending a training or skills programme must be asked to fill out a course evaluation sheet to measure the effectiveness of the trainer, course content and the training environment. This is in line with Kirkpatrick’s Training evaluation for Level 1.Ideally, the evaluation of training should be undertaken for all 4 levels as proposed by Donald Kirkpatrick.Kirkpatrick’s Training Evaluation Model is given in more detail as an annexure to this document.

An incubatee who does not meet the minimum performance levels prescribed may be referred for additional training within the incubator programme or may be asked to exit the programme.

6.2.2.2 Evaluation and Monitoring of Incubatee Business PlansThe third level of monitoring and evaluation is based on the individual business plan for the incubatee.

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On accepting an incubatee into the incubator programme, it must be a requirement that the incubatee prepare, with the assistance of the incubator management, a business plan that describes how the incubatee will progress towards operating a effective, efficient and financially successful business. This business plan should incorporate the support and training given by the incubator.

The performance and outcomes of the individual incubatee must be monitored and assessed by the incubator management regularly (minimum monthly) to ensure that the incubatee is making suitable progress in terms of his business plan. As and where necessary, the incubator management and the incubatee must strategically realign the plan to meet changing circumstances.

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Chapter 7: Operational Plan

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7.1 Introduction

The business component of the incubatees business needs to conform to trading norms. While it is acknowledged that a wide range of business skills must be imparted to the incubatees, the following business operating norms will be used where possible and if appropriate.

7.2 The Range of Furniture that can be produced in the Incubator

The Ugu Furniture Manufacturing Incubator is based on the 3 primary furniture-making components viz. Manufactured boards, solid wood and upholstery. Within these categories, most types of furniture can be manufactured. It is understood that plastic, metal and glass

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7.1 Introduction

7.2 Range of Furniture

7.3 Furniture Design

7.4 Materials and Costing

7.5 Purchase of Material

7.6 Use of Equipment

7.7 Safety and Health Standards

7.8 Quality Standards / Finished product quality

7.9 Storage of finished products

7.10 Sales and Administration

7.11 Marketing

7.12 Incubatee Finance Management

components that go to make up furniture will be used as and when appropriate. A list of possible furniture options are given below:

Cabinet making

Household furniture

Office and school furniture

Outdoor garden furniture

Customised furniture made to order

Coffin making

Kitchen units manufacturing and installation

Built in cupboards manufacturing and installation

Wooden windows, doors, balustrades and staircases

Upholstered furniture / Upholstery repairs

7.3 Furniture Design

With a fully equipped IT centre incorporated into the centre, the opportunity to design all products manufactured using CAD become a possibility. While CAD will require an advanced level of computer skill, the incubatees will be assessed for their level of skill and potential and will be developed in the use of CAD.

Where incubatees are not able to use CAD, all designs will be manually drawn up with specifications, measurements and quality standards and kept on file.

Furniture design skill programmes will be offered to incubatees. The incubator will assisit with the registration of new and innovative concepts created that are created.

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7.4 Materials and Costing

Following the design of the product, a costing will be done to include all logistic and indirect costs. Unit cost of productiona nd economies of scale will be worked out and a comparison made to the sale cost of existing products on the market.

If there is an indication that the incubatee cannot compete with other products on the market, then a fresh exercise must be undertaken to improve efficiencies and productivity to ensure that the lowest possible cost per unit is attained without compromising quality.

The incubator management will help the incubatee with strategies to optimise cost per unit. . Only work/contracts that offer a good prospect of profits will be supported by the incubator.

7.5 Purchase of Material

The standard procedure, where the incubatee purchases raw materials and consumables on his own account, will apply.

While each incubatee operates as an independent business, the incubator will avail its buying power to gain the best possible advantage for the incubatee. This may take the form of bulk purchasing to receive supplier discounts or supporting access to credit facilities.

The incubator management may also undertake the purchase of raw material stock for later sale to the incubatee. This concept needs to be explored and a policy and procedure put in place accordingly.

7.6 Use of Equipment

The shared equipment facility must be made available to all incubatees to use. However, to regularise the chargeout of costs to incubatees, it is suggested that all shared equipment be

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set on a scale of charges per hour. This is best done as a proposal by the incubator management that will be discussed and ratified by the board.

It is proposed that this scale of charges be based on the following criteria:

The capital cost of the equipment

The electricity consumption

The cost of maintenance/repairs

This approach will allow the income generated by shared equipment to pay for its consumables and to ensure that it is in a good state of repair.

Furthermore, as it can be expected that a particular piece of equipment may want to be used by two or more incubatees simultaneously, a booking and usage log be kept by the incubator Facilities Manager. This record will help schedule the equipment usage and to process the charge-out to the incubatees.

7.7 Safety and Health Standards

Safety in the incubator will cover two primary areas viz. Plan and equipment safety and personal protective equipment.

Plant and equipment safety and health aspects encompass:

Safety signage

Guards and rails

Safety related operating instructions

Noise Levels

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Lighting levels

Dust emission levels

Personal Protective Equipment (PPE) will cover:

Overalls

Safety shoes/boots

Dust masks

Eye protection

Hearing protection

Head protection

The above PPE must be used in all designated areas while should be clearly marked with regulatory signage. The prescribed PPE must be in line with legislation. For this purpose it is recommended that a qualified OH practitioner assist in the drawing up of a Incubator Health Policy under the direction of the board.

Every incubatee will be given a comprehensive annual medical examination.

For the purpose of managing the health of employees, it is recommended that a contract be entered into with a certified Occupational Health Practitioner who will render their services at a cost.

7.8 Process and Finished Quality Standards

The industry in not regulated in respect of quality as this is primarily driven by the specifications and needs of the purchaser.

However, high quality specifications translate to greater opportuinities for contracts and sales; and is a reflection of the incubator’s management and philosophy of excellence.

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Therefore, it is recommended that a very stringent standard be set for the manufacturing process and that of finished goods. The oversight of this standard and any actioj resulting from a deviation from this standard must be undertaken by the facility supervisor.

7.9 Storage of Finished Goods

A demarcated holding area for finished goods awaiting despatch will be provided so that the incubatee does not work in a cluttered work space.

All goods stored will be logged with the facilities supervisor. It is envisaged that finished goods should only be kept in storage for a few days. An internal standard may be set to regulate the storage time allowed.

7.10 Sales and Administration

The common meeting room will be made available to incubatees who may want to conduct direct and personal transactions with purchasers.

As incubatees will be provided with resources and given support to undertake their sales and administration n the computer, each incubatee will be assigned to one shared and networked computer which will serve their administrative needs.

Incubatees will also be schools in the various aspects of sales and administration and given support to conduct these components of their business using the computer and internet.

7.11 Marketing

Marketing forms part of the business development of the incubatee. They will be developed in the areas of :

Website marketing and development

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Email communication and marketing promotions

7.12 Finance – Management

Each incubatee will be developed to manage his/her business finances using spreadsheets. They will be given instruction in the following areas of finance management:

Budgeting

Debtors and creditors books and reconciliations

Monthly financial reporting

Annual financial statements

Bank reconciliations

Record keeping and filing

7.13 Incubatee Selection

7.13.1 The Application Process

7.13.2 The Admittance

7.14 The Incubation Process

7.14.1 Incubatee Orientation

7.14.2 Phases 1, 2 & 3

7.14.3 Graduation

7.14.4 Exit

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The Incubation Cycle

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The Admittance

Incubatee Application Process

7.13 Incubatee Selection

7.13.1 The Application Process

7.13.2 The Admittance

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Orientation

Phases 1,2 and 3

Graduation

Exit

7.14 The Incubation Process

7.14.1 Incubatee Orientation

7.14.2 Phases 1, 2 & 3

7.14.3 Graduation

7.14.4 Exit

7.13. Incubatee Selection

It is important to attract and accept the right quality of incubatee. To do this, it is suggested that proper criteria be set so that the outcomes set for the programme can be achieved. It is also important to ensure that the incubatee meets the criteria required for the learnership programmes offered in the incubation programme.

All potential incubatees should:

Meet the entrance requirements set by Esayidi FET College

Must demonstrate the willingness to start and complete the programme

Have a desire to grow and expand his own furniture or upholstery business.

Must be disciplined willing to confirm to the rules and regulations of the incubator.

Other criteria to be met are:

Incubatees to be PDI’s.

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The above criteria will be determined by the Esayidi EFT College in respect of the learnership entrance requirements and by an interview panel set by the board in respect of the other criteria given above.

7.13.1 Application Process

1. The call for applications should be undertaken through the local media and through all other networks to ensure the optimal reach of the advert. Potential incubatees should be given a document that outlines the full scope of the programme and complete an initial application form if specific criteria are met.

Applications may be submitted in hardcopy or via email.

2. The initial application is reviewed by the management team. If the potential incubatee meets preliminary standards, they will be contacted by the incubator staff requesting that they complete a formal application.

The initial application for incubator membership includes basic information about the Incubatee, contact details, back ground in furniture making, education level, current suppliers and customers and a motivation to be selected as an incubatee.

3. If the potential incubatee meets application standards, they will be contacted by the incubator staff requesting that they attend an interview with and interview panel. This interview panel may be comprised of a small team of at least 3 people chosen from amongst the board and incubator management.

The interview will include detailed questions to establish the suitability of the applicant in terms of his response on the application form and other relevant questions. The applicant may also be asked to do a brief presentation to management. The presentation will include detailed descriptions of the client’s

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existing business, products and technology, the stage of development and a summary business plan, a list of goals and objectives.

4. Applicants that meet all the criteria and approval of the board will be granted admittance to the incubator.

7.13.2 Admittance of the Incubatee

The incubatee will attend an initial meeting with incubator management and will begin the admittance process including participation in an orientation session. The incubatee will receive the client handbook at this time and, after review, will submit a completed client agreement form pledging to comply with the requirements, rules, and responsibilities contained in the handbook.

The agreement with the incubatee will include:

Access controls to the facility

Rental and other charges to be carried by the incubatee

Business signage that can be erected

Permitted and non-permitted modifications to the work space.

Waiver of liability should the incubatee be injured in any way.

The incubatee will be advised of the safety signage that is to be erected in his work space.

The incubator board will need to decide if incubatees must be given a compulsory entrance medical to ensure his/her fitness and good health to engage in the activities of the incubator. While medical testing is not mandatory, it is strongly recommended that baseline testing for the industry be established and a entrance medical examination be designed accordingly to protect the health of incubatees and the liability of the incubator.

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.

7.14.1 The Incubation Process

7.14.2 Orientation of Incubatees

Initially, the incubator staff will assist the incubatee in assessing their individual level of business development. The incubatees business plan will be discussed and a commencement strategy agreed on.

A timetable will be developed and attendance to all the training for the learnership programme included in the time table.

Incubator staff also will serve as a liaison between the new incubatee and the business support network helping them to identify and begin to interact with these agencies.

The first week will be considered as orientation week during which time the incubator staff will assist the incubatee to understand the operating standards of the incubator and to work

7.2.2 Phases 1, 2 and 3

The 3 Phases are given in summary below. Each phase of study is made up of theoretic unit standards plus a prescribed schedule of practical experience that must be completed before the incubatee can graduate .

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Phase 1 :

UNIT STANDARD TITLE - National Certificate: Furniture Making: Wood (NQF 2)

Course structure: Fundamental: 36 min , Core: 15 min, Elective: 74 Minimum Total: Minimum 125

Core Credits

Apply health and safety to a work area 3

Comply with good housekeeping practices 4

Read and interpret basic engineering drawings 8

Fundamental

Access and use information from texts 5

Apply basic knowledge of statistics and probability to influence the use of data and procedures in order to investigate life related problems 3

Demonstrate understanding of rational and irrational numbers and number systems 3

Maintain and adapt oral communication 5

Measure, estimate and calculate physical quantities and explore, describe and represent geometrical relationships in 2-dimensions in different life or workplace contexts 3

Use language and communication in occupational learning programmes 5

Use mathematics to investigate and monitor the financial aspects of personal and community life 2

Work with a range of patterns and functions and solve problems 5

Write for a defined context 5

Elective

Develop and use keyboard skills to enter text 4

Cover prepared frame using basic upholstery hand tools 32

Perform breakout operations 16

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Perform hand polishing operations 26

Perform wood finishing operations by conventional spraying 32

Prepare and perform the pre-covering upholstery process 32

Prepare final covering for prepared upholstery frames 12

Prepare products for hand staining 16

Produce basic hand crafted furniture 22

Produce machine sanded timber and board product components and products 16

Produce planed timber product components and products 10

Produce sawn timber and board product components and products 16

Produce straight laminated timber and board components 8

Phase 2:

UNIT STANDARD TITLE - National Certificate: Furniture Making: Wood (NQF 3)

Course structure: Fundamental: 38 , Core: 12, Elective: 72 Minimum Total: Minimum 122

Credits

Core 6

Read, interpret and produce basic engineering drawings 6

Apply safety, health and environmental protection procedures

Fundamental 3

Demonstrate the ability to use electronic mail software to send and receive messages 6

Operate a personal computer system 3

Use personal computer operating system 5

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Accommodate audience and context needs in oral communication 2

Demonstrate an understanding of the use of different number bases and measurement units and an awareness of error in the context of relevant calculations 4

Describe, apply, analyse and calculate shape and motion in 2-and 3-dimensional space in different contexts 5

Interpret and use information from texts 5

Investigate life and work related problems using data and probabilities 5

Use language and communication in occupational learning programmes 5

Use mathematics to investigate and monitor the financial aspects of personal, business and national issues 5

Write texts for a range of communicative contexts

Elective 38

Apply specialist decorative effects and finish to furniture by spraying 16

Carry out multi-lay fabric cutting 22

Complete crafted furniture 16

Cover prepared frame 12

Identify and carry out repairs to finishing damage on products 16

Lay veneers and hand fit inlays 30

Machine sew covers for upholstered items 6

Make and maintain jigs and templates 22

Perform wood finishing operations using airless and air mix spraying equipment 10

Prepare buttons and deep button furniture items 6

Prepare veneers 16

Produce bored timber and board product components and products 8

Produce curved laminated timber and board components 8

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Produce edge banded components and products 16

Produce jointed timber and composite board product components and products 22

Produce modern carcasses, doors and drawers 16

Produce profiled timber and board product components and products 10

Produce turned timber components and products

Phase 3:

UNIT STANDARD TITLE - Further Education and Training Certificate: Furniture Making 

Course structure: Fundamental: 64 , Core: 85, Elective: 6 Minimum Total: Minimum 155 CREDITS

Core 16

Contribute to the furniture production process 12

Contribute to the provision of a productive working environment 4

Develop and produce computer aided drawings 3

Mentor a colleague to enhance the individual`s knowledge, skills, values and attitudes in a selected career path 4

Monitor the application of safety, health and environmental protection procedures 16

Produce basic furniture prototypes 20

Produce furniture design specifications 10

Use CNC machinery in the furniture production process

Fundamental 3

Demonstrate knowledge of and produce word processing documents using basic functions 5

Accommodate audience and context needs in oral communication 5

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Interpret and use information from texts 2

Manage electronic mail in a business environment 3

Use a word processing package to produce business documents 5

Use language and communication in occupational learning programmes 5

Write texts for a range of communicative contexts 6

Apply knowledge of statistics and probability to critically interrogate and effectively communicate findings on life related problems 5

Engage in sustained oral communication and evaluate spoken texts 5

Read analyse and respond to a variety of texts 4

Represent analyse and calculate shape and motion in 2-and 3-dimensional space in different contexts 5

Use language and communication in occupational learning programmes 6

Use mathematics to investigate and monitor the financial aspects of personal, business, national and international issues 5

Write for a wide range of contexts

Elective 6

Carry out assembly repairs to damaged furniture 6

Carry out upholstery repairs to damaged furniture 6

Prepare equipment and machines for production 20

Produce furniture design finishing specifications 6

Provide cutting lay requirements for upholstery fabrics 15

Conduct outcomes-based assessment

7.14.3 Graduation Criterion

In terms of the rules of the Esayidi FET College, an incubatee will have deem to have qualified after he has completed the requisite number of credits needed for the certificate based both on theoretic and practical study.

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7.14.4 Exit Procedures

The incubator staff will liaison with commercial realtors and business support providers

to help the incubatee manage the transition out of the incubator.

The incubatee will clear the leased space, and any deficiencies or deviations from standard protocols will be arbitrated between incubator staff and the incubatee. Finally, the client will return all incubator property, including all pass keys, and will arrange for the forwarding of all correspondence and freight to their new address.

By special agreement, a continued relationship between the exiting incubatee and the incubator where the newly formed business can serve to support the incubator programme and receive other types of support in return.

Chapter 8: Financial Plan

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8.1 Capital Needs Analysis

8.1.2 Equipment

8.1.3 Cost of Facility Upgrade

8.2 Potential Income

8.2.1 Internal Income Streams

8.2.2 External Funding Support

8.3 Income & Expense Projections

Introduction to the Financial Plan

This financial plan is based on two scenarios in respect of the involvement of certain key stakeholders. In both scenarios, the operational model remains the same but the contribution of the private sector partner becomes a key determinant in which model is followed.

While Builders Trade Depot has warmly received a proposal to serve as the private sector partner, they have yet to process the proposal with their senior management. Indications are that they may give support through the contribution of land on their existing premises for the erection of a building to house the incubator. There is a lesser probability that Builders Trade Deport will allocate existing space within their warehouse for the establishment of the incubator.

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Ugu Furniture Manufacturing Incubator

Capital Establishment Costs

Scenario 1: Based on the assumption that the land will be contributed by Builders Trade

Depot and the structure and services will be erected by the incubator.

Scenario 2: Based on the assumption that Builders Trade Deport will accommodate the

incubator under their existing roof.

Scenario 1 Scenario 2

Land and Buildings (1000 sqm) parking (500 sqm) 5500000 1000000

Incl. plans, all legal costs to finalisation.

(Land valued at est. R1m)

3-phase electrical supply (est.) 200000 20000

Water 20000 10000

Interior partitioning & second level offices 750000 750000

Galvanised steel partitioning with sliding gates.

Shared IT Centre 300000 300000

7 Computers min i5 - all networked, large

flat screen TV, presentation equipment, DVD player, meeting room resources

Workshop & admin furniture and fittings 300000 300000

103

Includes workbenches, office furniture

Implementation costs 300000 300000

Contingencies & escalation 200000 200000

(Covering pre-establishment activities eg.

recruitment, interviewing, establishing the board, etc) 7570000 2880000

Ugu Furniture Manufacturing Incubator

Technology : Equipment Prices

The incubator equipment and costs are summarised as follows:

Shared Equipment : For common use by incubatees and the furniture-making

industry in the Ugu District 1585300

Incubatee toolboxes : Exclusively allocated to incubatees 1173601

Inventory of equipment held by the incubator. 60217

104

This will be loaned at a cost to incubatees and the industry at large.

Transport, installation and commissioning 100000

Contingencies and escalation @ 2.5% 70478

2989596

Say 3000000

Shared Equipment

EquipmentCMC Group

South Africa*

Multiboring Machine, 48000

Panelsaw, 69500

Single Bag Dust Extractor, 2950

Edgebander, 179000

Double Bag Dust Extractor, 3500

Heavy Duty Single Head Spindle Moulder, 45000

Wheel Feeder 14300

Smartek Mf9030 Double Bag Dust Extractor 7000

Wide Belt Sander, 265000

Dust Extractor, 19500

Tilting Arbor Saw, 21600

Smartek Mf9030 Double Bag Dust Extractor (2 x R3, 500.00) 7000

Thicknesser, 36000

Smartek Mf9030 Double Bag Dust Extractor 3500

105

400mm Planer, 42000

Smartek Mf9022 Single Bag Dust Extractor 2950

Vacuum Press Machine - d/table with PLC & system 349000

Smartek Mf9075j Dust Extractor 19500

Processing Centre - Auto Tool Change 450000

1585300

* Comparative pricing indicated that CMC Africa was significantly lower than

other suppliers.

Incubatee Toolboxes:

Common Equipment QTY Unit Price Total

13" Circular saw 10 8750 87500

Band saw 10 6194 61935

Ball pein hammer 10 66 658

Claw hammer 10 158 1579

Cordless Screw driver 10 2950 29500

Drill 13mm 10 2512 25117

Drill bits (wood) 10 276 2759

Hand router 10 1070 10696

Orbital disk sander 10 4479 44785

Jig Saw 10 1850 18504

Square 10 89 894

Rubber mallet 10 47 473

Long nose pliers 10 63 631

Portable rechargeable drill 10 2500 25000

Pliers 10 75 750

106

Rule measure 10 140 1396

Retractable Measuring tape 10 158 1579

31375 313755

Furniture Manufacturers

Belt Sander 4 3714 14854

Blower 4 786 3143

Carpenter's chain saws 4 2295 9180

Electric hand Planer 4 1856 7425

Hand saws 4 282 1128

Punch 4 60 238

Saw blades 4 500 2000

Spade drill bits 4 134 538

Vacuum cleaner W&D 4 3386 13543

Thicknesser 4 6227 24908

19239 76957

Wood Workers

6pce carving set 3 583 1749

Back saw 3 118 355

Belt Sander 3 3714 11141

Blower 3 786 2357

Electric hand Planer 3 1856 5569

Half-round file 3 58 175

Hand saws 3 282 846

Mitre saw 3 5463 16388

Punch 3 60 179

Rasp file 3 75 226

107

Saw blades 3 500 1500

Spade drill bits 3 134 403

Wood chisel 3 583 1749

Vacuum cleaner W&D 3 3386 10157

Thicknesser 3 6227 18681

Jointer 3 3276 9828

27101 81303

Upholsterers

Carving tools 3 583 1749

Compressor 3 11945 35835

Electric hand Planer 3 1856 5569

Industrial sewing machine 3 4096 12288

Pneumatic staple guns (x3) 3 3906 11718

Saw blades 3 500 1500

Spray gun 3 306 919

Staple remover 3 500 1500

Suction hose reel 3 1000 3000

24692 74077

Summary : Incubatee tool box costs

Furniture Manufacturers 50615 390712

Wood Workers 58476 395057

Upholsterers 56068 387832

Incubatee Tool box total: 1173601

108

Inventory of Equipment held by the Incubator

Prices

13" Circular saw 8750

6pce carving set 583

Ball pein hammer 66

Bandsaw 6194

Belt Sander 3714

Blower 786

Carpenter's chain saws 2295

Carving tools 583

Claw hammer 158

Compressor 11945

Cordless Screw driver 2950

Drill 13mm 2512

Drill bits (wood) 276

Electric hand Planer 1856

Hand router 1070

Hand saws 282

Industrial sewing machine 4096

Jig Saw 1850

Long nose pliers 63

Orbital disk sander 4479

Pliers 75

109

Portable rechargable drill 2500

Punch 60

Retractable Measuring tape 158

Rubber mallet 47

Rule measure 140

Saw blades 500

Spade drill bits 134

Spray gun 306

Square 89

Suction hose reel 1700

60217

Total Cost of Equipment:

Shared Equipment 1585300

Incubatee Tool box total 1173601

Incubator Inventory 60217

Transport, installation and commissioning 100000

Contingencies and escalation @ 2.5% 70478

2989596

Say 3000000

110

Ugu Furniture Manufacturing Incubator

Operational Monthly Financial Projections to year Year 5

Scenario 1: Breakeven on own building or contributed premises / internal trade of raw materials with incubatees.

<------------------------------------------------------------------Year 1------------------------------------------------------------------> Year 2 Year 3 Year 4 Year 5

Mth 0 Mth 1 Mth 2 Mth 3 Mth 4 Mth 5 Mth 6 Mth 7 Mth 8 Mth 9 Mth 10 Mth 11 Mth 12 Total

Income :

Dti

500000

500000 550000 605000 665500 732050

COGTA 1000000 3500000100000

0 1100000 1210000 1331000 1464100

SEDA 1500000 150000

0 1650000 1815000 1996500 2196150

Private Sector (BTD?) 500000 500000 550000 605000 665500 732050

FP&M Seta 62500 62500 62500 62500 62500 62500 62500 62500 62500 62500 62500 62500 750000 825000 907500 998250 1098075

Rental from Incubatees 3000 4000 5000 6000 7000 8000 9000 10000 10000 10000 10000 10000 92000 101200 111320 122452 134697

Royalty/ Trade agreements 0 0 0 10000 12000 14000 16000 18000 20000 22000 24000 26000 162000 178200 196020 215622 237184

Shared Services 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 10000 10000 75000 82500 90750 99825 109808

Internal Sales of raw materials 25500 42500 59500 76500 85000 85000 85000 85000 85000 85000 85000 799000 878900 966790 1063469 1169816

111

3500000 66500 94000 113000 142000 163000 175500 179500 183500 186500 189500 191500 193500537800

0 5915800 6507380 7158118 7873930

Expenses

Property Rates 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000 132000 145200 159720 175692

Water 7500 7500 7500 7500 7500 7500 7500 7500 7500 7500 7500 7500 90000 99000 108900 119790 131769

Electricity 7500 10000 12500 15000 17500 20000 22500 25000 25000 25000 25000 25000 230000 253000 278300 306130 336743

Telephone 2500 2750 3000 3250 3500 3750 4000 4250 5000 5000 5000 5000 47000 51700 56870 62557 68813

Cellphone 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000 39600 43560 47916 52708

Stationery and office equipment 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000 13200 14520 15972 17569

Salaries (incl. 35% standing wages) 97200 97200 97200 97200 97200 97200 97200 97200 97200 97200 97200 97200116640

0 1283040 1411344 1552478 1707726

Incubatee stipends 3000 4000 5000 6000 7000 8000 9000 10000 10000 10000 10000 10000 92000 101200 111320 122452 134697

Train & dev. (incl. Bus Dev/IT/Marketing) 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 720000 792000 871200 958320 1054152

Mentorship costs 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 240000 264000 290400 319440 351384

Vehicle operating costs 5000 6000 7000 8000 9000 10000 11000 12000 12000 12000 12000 12000 116000 127600 140360 154396 169836

Equipment Maintenance 5000 6000 7000 9000 10000 10000 10000 10000 10000 10000 10000 10000 107000 117700 129470 142417 156659

Internet fees 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000 26400 29040 31944 35138

IT Support, maintenance and software 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000 66000 72600 79860 87846

Website Maintenance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000 26400 29040 31944 35138

112

Security 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48000 52800 58080 63888 70277

Seminars, conferences, etc. 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000 132000 145200 159720 175692

Travel/transport 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000 66000 72600 79860 87846

Office meetings and entertainment 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000 26400 29040 31944 35138

Accounting and auditors fee 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000 19800 21780 23958 26354

Business Insurance 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000 132000 145200 159720 175692

Marketing & advertising 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 180000 198000 217800 239580 263538

Consultants - Systems/QMS/OHS, etc 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 180000 198000 217800 239580 263538

Bank Charges 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000 26400 29040 31944 35138

Office Cleaning & Maintenance 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 84000 92400 101640 111804 122984

Raw Materials Inventory 50000 55000 60000 65000 70000 75000 75000 75000 75000 75000 75000 75000 825000 907500 998250 1098075 1207883

Trade fairs and other events 75000 75000 75000 75000 300000 330000 363000 399300 439230

Contingencies and escalation 17610 18148 22435 19273 19810 24048 20535 20773 24560 20810 20810 24560 253370 278707 306578 337235 370959

Total Expenses 0 369810 381098 471135 404723 416010 504998 431235 436223 515760 437010 437010 515760532077

0 5852847 6438132 7081945 7790139

Net Income after Expenses 3500000 -303310 -287098 -358135 -262723 -253010 -329498 -251735 -252723 -329260 -247510 -245510 -322260 57230 62953 69248 76173 83790

Cumulative Net Income 3500000319669

0 2909593255145

8 2288735203572

5 1706228 1454493 1201770 872510 625000 379490 57230

113

* The minimum aggregate external income required to successfully operate this incubator in this scenario (owned premises) is R3.5m in year 1.

While the above analysis shares this responsibility amongst several institutions, there may be a redistribution of the financial responsibility amongst those institutions who respond favourably to the proposal.

* It is suggested that, should additional external income be accessed, that such income is invested strategically to ensure that funds are secured for the future.

This may take the form of erecting additional structures for the furniture/wood industry in upstream or downstream diversification; which will directly benefit the incubator. Such investments would have

sufficient appreciation to hold its value going forward. Part of excess funds may be held as cash reserves as is deemed necessary by the board.

114

Ugu Furniture Manufacturing Incubator

Operational Monthly Financial Projections to Year 5

Scenario 2: Rented building

<------------------------------------------------------------------Year 1------------------------------------------------------------------>

Year 2 Year 3 Year 4 Year 5

Mth 0 Mth 1 Mth 2 Mth 3 Mth 4 Mth 5 Mth 6 Mth 7 Mth 8 Mth 9 Mth 10 Mth 11 Mth 12 Total

Income :

Dti

1000000

1000000 1100000 1210000 1331000 1464100

COGTA 1000000 4500000 1000000 1100000 1210000 1331000 1464100

SEDA 1500000 1500000 1650000 1815000 1996500 2196150

Private Sector (BTD?) 1000000 1000000 1100000 1210000 1331000 1464100

FP&M Seta 62500 62500 62500 62500 62500 62500 62500 62500 62500 62500 62500 62500 750000 825000 907500 998250 1098075

Rental from Incubatees 3000 4000 5000 6000 7000 8000 9000 10000 10000 10000 10000 10000 92000 101200 111320 122452 134697

Royalty/ Trade agreements 0 0 0 10000 12000 14000 16000 18000 20000 22000 24000 26000 162000 178200 196020 215622 237184

Shared Services 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 10000 10000 75000 82500 90750 99825 109808

Internal Sales of raw materials 25500 42500 59500 76500 85000 85000 85000 85000 85000 85000 85000 799000 878900 966790 1063469 1169816

115

4500000 66500 94000 113000 142000 163000 175500 179500 183500 186500 18950019150

0 193500 6378000 7015800 7717380 8489118 9338030

Expenses

Building Rental 75833 75833 75833 75833 75833 75833 75833 75833 75833 75833 75833 75833 910000 1001000 1101100 1211210 1332331

Water 7500 7500 7500 7500 7500 7500 7500 7500 7500 7500 7500 7500 90000 99000 108900 119790 131769

Electricity 7500 10000 12500 15000 17500 20000 22500 25000 25000 25000 25000 25000 230000 253000 278300 306130 336743

Telephone 2500 2750 3000 3250 3500 3750 4000 4250 5000 5000 5000 5000 47000 51700 56870 62557 68813

Cellphone 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000 39600 43560 47916 52708

Stationery and office equipment 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000 13200 14520 15972 17569

Salaries (incl. 35% standing wages) 97200 97200 97200 97200 97200 97200 97200 97200 97200 97200 97200 97200 1166400 1283040 1411344 1552478 1707726

Incubatee stipends 3000 4000 5000 6000 7000 8000 9000 10000 10000 10000 10000 10000 92000 101200 111320 122452 134697

Train & dev. (incl. Bus Dev/IT/Marketing) 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 720000 792000 871200 958320 1054152

Mentorship costs 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 240000 264000 290400 319440 351384

Vehicle operating costs 5000 6000 7000 8000 9000 10000 11000 12000 12000 12000 12000 12000 116000 127600 140360 154396 169836

Equipment Maintenance 5000 6000 7000 9000 10000 10000 10000 10000 10000 10000 10000 10000 107000 117700 129470 142417 156659

Internet fees 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000 26400 29040 31944 35138

IT Support, maintenance and software 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000 66000 72600 79860 87846

Website Maintenance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000 26400 29040 31944 35138

Security 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48000 52800 58080 63888 70277

Seminars, conferences, etc. 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000 132000 145200 159720 175692

116

Travel/transport 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000 66000 72600 79860 87846

Office meetings and entertainment 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000 26400 29040 31944 35138

Accounting and auditors fee 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000 19800 21780 23958 26354

Business Insurance 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000 132000 145200 159720 175692

Marketing & advertising 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 180000 198000 217800 239580 263538

Consultants - Systems/QMS/OHS, etc 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 180000 198000 217800 239580 263538

Bank Charges 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000 26400 29040 31944 35138

Office Cleaning & Maintenance 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 84000 92400 101640 111804 122984

Raw Materials Inventory 50000 55000 60000 65000 70000 75000 75000 75000 75000 75000 75000 75000 825000 907500 998250 1098075 1207883

Trade fairs and other events 75000 75000 75000 75000 300000 330000 363000 399300 439230

Contingencies and escalation 20902 21439 25727 22564 23102 27339 23827 24064 27852 24102 24102 27852 292870 322157 354373 389810 428791

Total Expenses 0 438935 450223 540260 473848 485135 574123 500360 505348 584885 50613550613

5 584885 6150270 6765297 7441827 8186009 9004610

Net Income after Expenses 4500000 -372435 -356223 -427260 -331848 -322135 -398623 -320860 -321848 -398385 -316635

-31463

5-

391385 227730 250503 275553 303109 333419

Cumulative Net Income 4500000 4127565 3771343 3344083 3012235269010

0 2291478 1970618 1648770 1250385 93375061911

5 227730

117

* The minimum aggregate external income required to successfully operate this incubator in this scenario (owned premises) is R4.5m in year 1.

While the above analysis shares this responsibility amongst several institutions, there may be a redistribution of the financial responsibility amongst those institutions who respond favourably to the proposal.

* It is suggested that, should additional external income be accessed, that such income is invested strategically to ensure that funds are secured for the future.

This may take the form of erecting additional structures for the furniture/wood industry in upstream or downstream diversification; which will directly benefit the incubator. Such investments would have

sufficient appreciation to hold its value going forward. Part of excess funds may be held as cash reserves as is deemed necessary by the board.

118