Developing sustainable Township and Rural economies

1. Developing sustainable Township and Rural economies Round Table discussions 24 March 2017

2. TABLE OF CONTETS • Policy context: • Context SMME’s in South Africa • Profile of EC SMME’s • Key issues • Challenges faced by Government • Strategic Interventions • Way forward

3. 1. Policy Context: • The NDP envisages that by 2030 small businesses will contribute 90 percent of new jobs and have a substantial share of output/GDP of 60-80%. • Employment scenarios outlined in the NDP suggest that most new jobs are likely to be sourced in domestic-orientated businesses, the services sector and in growing small- and medium-sized firms. • According to STATS-SA, unemployment, is the primary catalyst for starting an informal business; and, by comparison, more Africans are running informal businesses • SMME sector, inclusive of informal, rural and township enterprises, remain a beacon of hope, not only in terms of its enormous untapped potential to boost economic growth and job creation, but in terms of it being the economic activity of necessity for millions of citizens

4. 2.SMME’s in SA • Data suggests the existence of some 2.175m privately owned businesses in SA, 2.15m of which are SMEs; and, of these • 1.5m are not VAT registered and can therefore be classified as informal; • 150 000 are medium size businesses; • 450 000 are small businesses; • 1.3m are micro enterprises. • Some 250 000 new businesses are registered every year. • In total, these businesses employ 7.3 million people. • SMEs generates +42% of GDP, although estimates vary. • 10%-15% of this contribution is from the informal sector and is therefore likely to be underreported in the national accounts

5. 3. Profile of EC SMME’s • Based on a study conducted by Beever Agency (2014) using the CIPC records as well as the Baseline study conducted by Jupilog (2015) the Total SMME’s in EC is estimated at 180 358. • Informal = 144 000 • Formal = 36 538

6. 4. Key issues • Common challenges: poor business infrastructure, highly informal, lack of skills, lack of markets, government programmes non responsive to township entrepreneurs, dynamic socio-economic factors, unemployment. • Proliferation of foreign nationals retail outlets in Townships and informal settlements. • Uncoordinated Government interventions • (Urban renewal programmes)

7. 4.Key issues …cont • The identified obstacles for the development of the township based enterprises could be summarized as follows: • Lack of entrepreneurial and involvement in value adding activities • Poor understanding of the potential of township based SMME’s as there are no studies or records of their involvement. • Little or no empirical evidence to demonstrate the impact or value add of these SMME’s. • Limited understanding of the needs of the township based SMME’s and needed enabling environment.

8. 5. Challenges faced by government Major challenges to sustainable development of township economies: • Lack of, and variation in capacity in municipalities working to address inequalities, spatial disparities and poverty. • Research: lack of comprehensive understanding of the profile and mapping of township economies across the province. • Limited value chain inclusivity of smaller businesses with larger ones in a fair manner. • Fragmented and lack of coordinated, intervention across and within spheres of government.

9. 6 Strategic interventions • Mapping of township businesses and demographic profiles to enable policymakers to speak to specificities within local municipalities. • Develop a package of support for township entrepreneurs including a review of initiatives in terms of: • Access to markets • Skills development • Procurement and buying strategies • Formations of business associations • Industrialization of township economies, focusing on investment in labour absorbing sectors (LED aligned with NGP, NDP and IPAP).

10. 6. Strategic interventions ..cont • Infrastructure development: take advantage of socio economic opportunities within the spatial strategic Integrated projects (SIPS). • Inclusive Business: attract new businesses to locate in the townships. • Strategies to locate government and other key services in townships to support existing and attracting new businesses. • Interventions to reduce transport costs for township dwellers.

11. 7. Way Forward The TERP programme 1, A need for mapping township businesses and demographic profiles to enable policy makers to come up with specific interventions and identify areas to pilot the programme before the actual roll out. 2. Develop a package of support for township entrepreneurs including a review of existing initiatives in terms of : • Access to markets • Skills development • Procurement opportunities • Formation of business associations

12. 7. Way Forward cont 3.Promote entrepreneurship and involvement in more productive activities as a way to enable township SMME’s participate in opportunities available in value chains across the sectors of the economy. 4. Create enabling environment for township entrepreneurs to actively participate in infrastructure development projects. 5.Encourage inclusive economic growth by encouraging business linkages with Big businesses and protecting small businesses against sheer exploitation. 6. Consultative sessions with Municipalities and stakeholders.

13. Beacon Hill Hockley Close King Williams Town Tel: 043 605 7339 Email: nokubonga.cibi@deaet.ecape.gov.za www.dedea.gov.za P/Bag X0054, Bisho, South Africa, 5605