Entrepreneurship Promotion

“Role of Government and its Agencies”

21 October 2010 Presented By:

Kaybee Motlhoioa

Executive

Manager :

Corporate

Services

South Africa at a glance

Key Economic Sectors:Mining services, Transport, Energy, Manufacturing, Tourism and Agriculture

Population49,32 million (mid-year estimates for 2009 – Statistics South Africa)

GovernmentConstitutional Multiparty

three-tier (local, Provincial and Nationa) democracy

11 Official Languages

1

SMME Performance

Growth Trends

SA Economic Growth 5,4% in 2006, 5,1% in 2007 and 3,1% in 2008

in 2007 there were 27% more formally registered enterprises in the Stats SA Integrated Business register than in 2004.

Almost 40 000 new entrants annually

40 % GDP Contribution

Main contributing Sectors

Construction - Services- Transport, telecommunications and financial services

Spread of SMME representation in above sectors

Construction and services and retail account for 90 % ( by number) of informal sector

Formal small business concentrated in business services ( 44%) trade (23%),manufacturing 12 %

Sector growth highly depends on domestic expenditure

Constrained participation in the manufacturing sector

Market failure constraints ( small business access to financial and industry high value chain markets)

Skills versatility constraints ( cost of staff training for small businesses, not all setas have a small business focus)

2

Reasons for SME Failure

Informal Formal

Lack of Infrastructure Low export market

Low profit margins Difficulty competing in SADC export

Lack of collateral High local company tax

Relatively high velocity of stock

turnaround

Insufficient collaboration with small

business in terms of purchases of raw

materials

Limited involvement of informal SMMEs

in Contracts/subcontracts

Skills shortages

Low success rate of tenders awarded to

SMMEs

3

How Can Governments,at all levels,support the

Development of Entrepreneurship

Overview4

ObjectiveTo create an enabling environment for the

promotion and development of entrepreneurship

Enabling Acts and Strategy for small business

National Small Enterprise Act 102 of 1996 Amended by National Small Business Amendment Act 29 of 2004 Public Finance Management Act 1999 Act 1 of 1999

Strategy National Strategy for the Development and Promotion of Small

Business in South Africa (Notice No 213 of 1995)

Policy Framework5

Strategic Actions

Strategic Pillar 1:

Increase supply for financial andnon-financial support services

Reduce small enterprise regulatory constraints

Creating demand for small enterprise products and services

Strategic Pillar 3: Strategic Pillar 2:

The dti’s strategy for the promotion of entrepreneurship

As an integrator of policies, institutions and programmes, the strategy seeks to ensure that adequate support and delivery mechanisms exist across the entire entrepreneurship continuum-• pre-start-up to start-up,• business survival, growth and expansion, • turnaround of ailing businesses

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Advocate for the small business community and advise the government on relevant issues; Monitor the impact of small business in the economy; Monitor the impact and effectiveness of existing initiatives and programmes for small business development; Participate in the assessment of impact and effectiveness of existing and proposed legislation on small business; Strengthen Liaison with the small business community to identify their constrains and concerns; Make proposals to government through the Minister and other structures of government based on the Council’s assessment of all above; In partnership with the dti, commission annual review on small business in South Africa. ,

Institutional MandateNational Small Business Advisory Council 7

Effective implementation of the national policy;

Design and implementation of the standard national delivery framework;

Integration of all government-funded small enterprise support agencies acrossall spheres of government;

Design and implementation of support programmes;

Establishment of provincial structures for network expansion and management; and

Generally strengthen the capacity of service providers to support small enterprises andsmall enterprise capacity to compete successfully domestically and internationally.

Institutional MandateNon-Financial Support Services 8

Institutions for Financial and Non Financial support

Small Enterprise Development Agency (Seda )

Company and Intellectual Property Registration Office (CIPRO)

South African Micro-finance Apex Fund (SAMAF)

Khula Enterprise Limited National Empowerment Fund (NEF) Industrial Development Corporation (IDC)

Other Provincial Agencies

9

Small Enterprise Development Agency (seda) was established in December 2004, through National Small Business Amendment Act, 29, 2004.

Who is seda?

seda was formed through the merger of Ntsika Enterprise Promotion Agency, the National Manufacturing Advisory Centres (NAMAC) as well as the Community Public Private Partnership Programme (CPPP). Godisa incubation programme, technology transfer programme, and the SA Quality Institute were later incorporated into Seda as a ringfenced programme viz Seda Technology Programme (sTP)

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1. Implement national government small business strategy.

2. Design and implement a standard and common national delivery

network that must uniformly apply throughout the Republic in

respect of small enterprise development, integrating all

government funded small enterprise support agencies across all

tiers of government.

Section 10 of Act 29 of 2004

Legislative Mandate11

to develop, support and promote small

enterprises to ensure their growth and

sustainability in coordination and

partnership with other role-players

MISSION12

Enhance competitiveness and capabilities of small enterprises through co-ordinated programmes and projects.

Ensure equitable access for small enterprises to business support through partnerships

Strengthen the organization to deliver on its mandate

Strategic Objectives2008/9 – 2010/11

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Small enterprises

Micro enterprises

Survivalist enterprises

•Less than 200 employees

•Developed technical & business skills

•Less than 50 employees

•Developed technical/limited business skills

•Less than 5 employees

•Limited technical and business skills

•Individual self employment

•Very limited technical and business skills

Opportunity-driven/

Entrepreneurial

Necessity-driven/

Survival

Medium

enterprises

Small enterprises

Micro enterprises

Survivalist enterprises

Characteristics20 %

80 %

Potential entrepreneurs

Target Market14

SEDA NATIONAL OFFICE SITUATED IN PRETORIA

PROVINCIAL SEDA OFFICE

SEDA BRANCH

SEDA BRANCH

SEDA BRANCH

50 Enterprise Information Centres

EIC

EICEIC

41 Branches

EIC

EICEIC

EIC

EICEIC

EIC

EIC

9 Offices

TECHNOLOGY INCUBATORS

30 Centres

Delivery Model

EIC

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Seda’s Key Products & Services based on size and need

BusinessInformation

Business start advice

Businessinformation andguidelines

Business registration

Business Start

Business start counselling

Businessmanagementsupport

Subsidised expert services

Business planning

Access to finance referrals

Diagnostic tools

Business Grow

Mentorship and incubation

Cooperatives management training

Training and technical support

Tender advice

Franchising

Export readiness

Subsidised expert Services

Diagnostic tools

Business Build

Tender advice

Franchising

Export readiness

Mentorship andincubation

Subsidised expert services

Diagnostic tools

Business counselling

PRE-START UP START UP GROWTH MATURITY

Diagnostic tools

BUSUNESS DEVELOPMENT SUPPOR DRIVERS

Client registration and tracking system

Pool of external experts to increase internal capacity

Sector specific databases

-Enterprises

-Services providers

Shared service administration processes for the network

Established network infrastructure

Generic and customised programmes

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Seda Technology Programme

sTP is made up of the following:-• Incubation division

• Technology Demonstration Centres focuses on demonstrating, exhibiting and providing training in the use of available technologies with respect to value addition processes

• Technology Incubators provide a sheltered and protected environment within which to support and nurture technology-based startups and enterprises requiring “rehabilitation/resuscitation”

• Technology Transfer division• The Technology Transfer division will provide a range of technology transfer services

that will enable small and micro enterprises to have access to appropriate technology, funding for technology transfer interventions, technical advice and support and business assistance

• Technology for women division• This division provides technology transfer services to women owned enterprises (No

funds are available for this division in 2009/10)

• Quality division• This division provides services to enhance the quality and services produced by South

African entrepreneurs for local and export market through the provision of advice and technical support.

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Business Linkages

Payment Assistance Cabinet mandated the Department of Trade and Industry to develop a

framework to step-up measures for government compliance to the 30 days payment cycle and to establish a Public Sector SMME Payment Assistance Hotline

Seda was tasked with the implementation of this mandate

Procurement To contribute to an increased participation by small businesses in accessing

markets through tenders and request for quotations from both the private and public sectors.

Community Public Private Partnerships (CPPP) To promote the establishment of cooperatives and collectively owned

enterprises to ensure their growth and sustainability by facilitating public and private partnerships

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Vertical & Horizontal Integration

Design and implement a standard and common national delivery network that must

uniformly apply throughout the Republic in respect of small enterprise development,

integrating all government funded small enterprise support agencies across all tiers of

governmentSection 10 of Act 29 of 2004

Seda integrating/coordinating activities of all support agencies at all levels of Government as well as collaboration with the private sector

Public Sector• Support Agencies• Parastatals

Private Sector• Chambers• Banks

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Effective Monitoring & Evaluation

The dti annually conducts a review on the status of small business in SA.

The review covers a standardized statistical analysis of trends and performance of small enterprises focusing on the following aspects:

• Number of entrepreneurs, sectoral distribution, geographical spread, distribution by demography, entrepreneurial dynamism (entry & exit) and contribution to the economy by employment and GDP.

Data is sourced from credible reports of the following institutions:

•Stats SA reports (e.g. Labour force surveys & Integrated Business Register, etc.), SA Reserve Bank Quarterly Bulletins, Regional Services Council Levy databases and reports, SA Labour reports, Bureau of market research institution reports, CIPRO register of companies, etc. ( Source index attached)

The Annual Review Report is currently the source that provides statistics on the profile of small business sector in South Africa.

The research process currently relies on best available national data, however, further work in refining this report is in progress, a project led by the National Small Business Advisory Council.

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Long Term Impact Evaluation 21

The Department of Trade & Industry (the dti) together with the World Bank is currently piloting an Impact Evaluation in one province (Western Cape)

Through randomized sampling, track control and treatment groups on an annual basis.

The study is to be replicated nationally in 2010/11.

THANK YOU22

Questions & Answers