Entrepreneurship Promotion “Role of Government and its Agencies” 21 October 2010 Presented By: Kaybee Motlhoioa Executive Manager : Corporate Services

South Africa at a glance 1 Key Economic Sectors: Mining services, Transport, Energy, Manufacturing, Tourism and Agriculture Population 49,32 million (mid-year estimates for 2009 – Statistics South Africa) Government Constitutional Multiparty three-tier (local, Provincial and Nationa) democracy 11 Official Languages

SMME Performance 2 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)

Reasons for SME Failure Informal Formal 3 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

support the Development of Entrepreneurship How Can Governments, at all levels, support the Development of Entrepreneurship

Overview 4 How Can Governments at all levels support the Development of Entrepreneurship Policy (Enabling Environment) Delivery Vehicles (Agencies & Institutions for development & Support) The Fiscus Funding for delivery Entrepreneurship Promotion Grant Funding Incentives Soft Loans Business Linkages Payment Assistance Procurement Opportunities Public Private Partnerships Vertical & Horizontal Integration and coordination across all levels of Government Effective monitoring, evaluation & reporting Long term impact evaluation

Policy Framework Objective 5 Objective To 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)

The dti’s strategy for the promotion of entrepreneurship 6 Strategic Actions Strategic Pillar 1: Strategic Pillar 2: Strategic Pillar 3: Creating demand for small enterprise products and services Increase supply for financial and non-financial support services Reduce small enterprise regulatory constraints 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

Institutional Mandate National Small Business Advisory Council 7 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 Mandate Non-Financial Support Services 8 Effective implementation of the national policy; Design and implementation of the standard national delivery framework; Integration of all government-funded small enterprise support agencies across all 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 and small enterprise capacity to compete successfully domestically and internationally.

Institutions for Financial and Non Financial support 9 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

Who is seda? 10 Small Enterprise Development Agency (seda) was established in December 2004, through National Small Business Amendment Act, 29, 2004. 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)

Legislative Mandate 11 Implement national government small business strategy. 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

in coordination and partnership with other role-players MISSION 12 to develop, support and promote small enterprises to ensure their growth and sustainability in coordination and partnership with other role-players

Strategic Objectives 2008/9 – 2010/11 13 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

Target Market 14 20 % 80 % Potential entrepreneurs

Delivery Model 30 Centres 9 Offices 50 Enterprise Information Centres 15 EIC SEDA BRANCH EIC EIC EIC SEDA NATIONAL OFFICE SITUATED IN PRETORIA EIC EIC SEDA BRANCH TECHNOLOGY INCUBATORS PROVINCIAL SEDA OFFICE EIC EIC EIC 30 Centres EIC 9 Offices SEDA BRANCH EIC EIC 50 Enterprise Information Centres 41 Branches

Seda’s Key Products & Services based on size and need 16 Business Information Business Start Business Grow Business Build BUSUNESS DEVELOPMENT SUPPOR DRIVERS Diagnostic tools Diagnostic tools Diagnostic tools Diagnostic tools Pool of external experts to increase internal capacity Training and technical support Business planning Tender advice Generic and customised programmes Business information and guidelines registration Mentorship and incubation Franchising Business start counselling Sector specific databases Enterprises Services providers Cooperatives management training Export readiness Access to finance referrals Mentorship and incubation Shared service administration processes for the network Business start advice Tender advice Business management support Client registration and tracking system Franchising Business counselling Export readiness Established network infrastructure Subsidised expert services Subsidised expert Services Subsidised expert services PRE-START UP START UP GROWTH MATURITY

Seda Technology Programme 17 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.

Business Linkages 18 Payment Assistance Procurement 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

Vertical & Horizontal Integration 19 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 NATIONAL GOVERNMENT PROVINCIAL GOVERNMENT LOCAL GOVERNMENT 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

Effective Monitoring & Evaluation 20 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.

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 YOU 22 Questions & Answers