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Driving towards prosperity

May 07 2017 06:10
Lubabalo Ngcukana

Tell me about what the IDC is doing in the province and what the five biggest opportunities entrepreneurs can look forward to in this part of the world are.

Over the past financial year, more than 2 100 jobs were created and R778 million in funding was approved. This is consistent with the funding approved over the past five years.

As the IDC in the Eastern Cape, we have contributed to our government’s agenda in terms of job creation and transformation, both in funding existing businesses and new opportunities.

The Eastern Cape has the highest expanded unemployment rate, so job creation has an added significance in this province.

We encourage businesses with high job-creating opportunities to approach our office so that we can partner with them and further develop these opportunities.

The Eastern Cape is the automotive hub of South Africa, with the key original equipment manufacturers (OEMs) and Hi-Tech Automotive based here.

These OEMs, together with the imminent establishment of the Beijing Automobile International Corporation (BAIC) plant, will provide viable opportunities over the life of the production vehicle.

The next significant opportunity is in agroprocessing because of the job-creation nature of the industry.

The current low agricultural usage of arable land makes for plenty of opportunities in agriculture.

Both of these industries are key sectors for government and are supported through various programmes, such as the Automotive Production and Development Programme, and the Agri-parks Programme.

Citrus exports have grown exponentially in the past few years, which has created a number of jobs in the agriculture sector.

Tourism has immense growth potential in urban and rural areas. The Eastern Cape has 800km of largely unspoilt coastline with noteworthy wildlife reserves that are malaria free.

The maritime cluster also has major opportunities, and includes boat and ship repair and building. The Eastern Cape is the only province with three ports – in Port Elizabeth, East London and Ngqura.

There is a plan to create maritime industrial capacity around these three ports. Nelson Mandela Bay is one of the largest bays in South Africa and has good conditions for ships to anchor.

Chemicals and textiles remain an important value chain, a portion of which is driven by the automotive industry.

The province also has a solid base of clothing, textile and footwear companies, which are large job-creating entities.

Government has many incentives in place and supports the textile industry so that it can compete against imports.

In terms of rural opportunities, a mostly ignored area for business is Mthatha. Whenever I travel there, I see a vast population that places a great demand on limited capacity in a place where most products are brought into the area.

Having a natural geographical advantage provides the possibility of establishing a manufacturing concern in Mthatha.

Recently, the IDC funded a brick manufacturing company in Flagstaff, as well as a chemical company that will produce cleaning products in Butterworth.

In rural towns, you can replicate the manufacturing entities established in the metropolitans on a smaller scale, and have the competitive advantage of reduced logistic costs and time.

The OR Tambo district has close to 1.4 million inhabitants, indicating the potential buying power.

The country is facing high unemployment and slow economic growth. What challenges do businesses have to overcome and how does the IDC help them?

The market for businesses is key in this global economy, where South African products compete internationally.

The Eastern Cape government has realised this and is setting its local procurement target at 50%, creating a market for locally manufactured products and services.

The IDC will finance entities that are prepared to manufacture locally produced products.

Another critical factor faced by business is having the skills to match industry requirements.

The Eastern Cape has four universities that can potentially supply graduates who meet the skills required by businesses.

For example, the Nelson Mandela Metropolitan University and the provincial government have set up maritime schools to address the skills shortage in the sector.

Volkswagen SA and Mercedes-Benz South Africa have established training centres for the skills set that is required for their businesses.

When applying to the IDC, we assess the skills required for the project and provide business support funding for training to enhance the skills level of the entity to meet the IDC’s requirements.

Regarding unemployment and slow growth, the issue is, how do we create new businesses that create employment?

The IDC and other development financial institutions need to partner with entrepreneurs. We all need to play a role in developing entrepreneurs so that they can create new businesses and, in the process, sustainable jobs.

The IDC has funded a number of projects in the past financial year. Which will have a large effect on the province?

Attracting an OEM to South Africa is a substantial positive investment for the country, particularly to the Eastern Cape, which already exports about 50% of South Africa’s manufactured vehicles.

The Eastern Cape has a strong automotive industry, which is why the BAIC project chose to establish itself in this region.

In terms of the project itself, it’s going to be implemented in phases.

The first phase is going to produce about 50 000 vehicles during the first year of full production and will create just under 1 000 permanent jobs.

Other jobs will be created during the construction phase.

The BAIC project is one of the major projects the IDC is working on.

What has your office done to actively empower youth, women and black-owned businesses? Of the projects that you have funded, how much funding has gone to those sectors of society?

Black, female and youth ownership is an integral part of the IDC’s assessment for funding, especially in a start-up, where lessons learnt by experience train the next generation of entrepreneurs.

The department of trade and industry has the Black Industrialist Programme, which provides a grant in relation to capital expenditure.

The IDC then funds the balance of the project.

The corporation has set aside R23 billion over the next five years for black industrialists, which will help change the landscape of ownership and assist in transforming the business sector.

We place much emphasis on the change of management control so that the entrepreneur becomes a true industrialist, not only an investor.

With regard to youth development, we hosted a youth conference late last year, where pertinent issues relating to youth entrepreneurship were discussed.

In the Eastern Cape specifically, we have attended a number of road shows, youth and business chamber events, where the IDC provided insight into its youth funds and support for young entrepreneurs.

Added to this, R344 million has gone towards funding female-owned businesses over the past year.

Informing these entrepreneurs about the IDC and the help that is available to them is vital, and we have built relationships through partnerships with business chambers and forums to help provide the necessary platforms that are key to reaching these entrepreneurs.

What would your advice be to an entrepreneur who walks into your office asking for funding from the IDC?

I always say to entrepreneurs that the first thing to do is to put their business plan down on paper.

This helps them formulate their ideas and enables them to obtain input from others on the viability of the project.

You need to talk to people who have been in business before, whether their business is related to your idea or is something completely different – the business chambers can also assist in this.

The business plan highlights what you want to achieve, how you intend to achieve it and the finance required to achieve it.

You must try to find out how to get from point A, where you don’t have a business, to point B, where you receive funding from the IDC.

Other people have successfully travelled that road, and preparing the business plan is an essential learning curve for any entrepreneur and will help us understand the project and, ultimately, be able to fund it.


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