Growth, partnerships and sustainability

MCEP can help Limpopo entrepreneurs revive local economy

As the Covid-19 pandemic continues to impact the global economy, it’s evident that supply chain disruptions have practically affected manufacturers across the world.

In the local economy, this is evident in the increasing number of manufacturers that have shut their operations in the wake of the pandemic and lockdowns. This has had a knock-on effect on Limpopo — just like the rest of South Africa’s provinces.

Although the threat of Covid-19 is likely to recede in the long-term, it’s a fact that the pandemic has not only turned industry on its head but shaken the core of South Africa’s industrial base.

Pre-the 2009 financial meltdown, manufacturing was vital to South Africa’s economy. However, fortunes have waned. A recent report by global auditing firm Deloitte states that the sector has lost over 300 000 jobs in the last decade.

This can be blamed on the fourth industrial revolution and a mix of other factors, including local products’ failure to compete aggressively against imports, but the reality is that local manufacturing is facing an existential crisis due to increased automation and the invention of more advanced manufacturing technologies. As the industrial sector slowly grinds its way out of the lockdown and localisation of products becomes a dominant theme, there is however renewed optimism for a potential rebound rooted in import substitution and appreciation for locally manufactured products, among other factors.

It is encouraging that Limpopo is not only rich in mineral deposits, but also has a robust agro economy. This bodes well for growth of beneficiation as well as localisation industries. Even as supply chains begin to re-align globally, the question is, how long will it take for local manufacturing to return to its stellar years that once made it the bedrock of our economy? It was the enforced economic embargo of apartheid that prompted South Africa to establish Sasol, which has now become a global petrol-chemicals giant. The same could be attributed to the birth of aluminium manufacturing behemoth Hulamin, phosphate and fertilizer manufacturing giant Foskor, then steel merchant Iscor, among other companies formed to fortify economic independence at the height of international isolation.

Far from nostalgia, it’s this resolve and resilience that raises the optimism that faced with a daunting challenge, homegrown ingenuity can also help South Africa to overcome its economic challenges. Some of the biggest take-aways for local manufacturing from the pandemic is an acute need for them to become more agile and nimble in this fast-changing manufacturing terrain — and never again to be caught up in a dependency syndrome for raw materials. For example, did we really have to resort to importing ventilators, sanitisers, masks and other essentials to meet demand as we did during the peak of the pandemic?

Perhaps drawing on lessons from the far east, notably China, countries that have successfully made the transition from low-income to upper-middle and high-income status have relied on, among other interventions, reconfiguring manufacturing so the industry becomes the main driver of growth. China’s exponential economic growth and industrialisation makes this model worthy of examination.

For local entrepreneurs, including Black Industrialists looking for lift-off in an economy characterised by a rarity of green shoots, timing is everything. It’s for this reason that the government launched programmes such as the Manufacturing Competitiveness Program (MCEP). Launched in 2012, MCEP was established to support existing manufacturing enterprises through interventions to improve competitiveness in manufacturing as well as encouraging manufacturers to upgrade their production facilities in the process, to help sustain employment.

Several factors continue to impact the industry, including constraints of an infrastructural nature, rising input costs and an unreliable energy supply regime, among others. However, it is encouraging to see focused attention on two vital pillars in our national recovery plan — restoring manufacturing to its pre-imminent status, as well as the government’s envisaged rapid rollout of infrastructure projects.

Other opportunities in various state-led infrastructure development projects, including the construction of road networks, bulk water supply infrastructure, and energy capacity building projects identified in government’s Reconstruction and Recovery Plan bode well for the future of local manufacturing. 

But most importantly, the rest of Africa presents a great opportunity for the revitalisation of local manufacturing. The continent is an expanding market, with 93.2% of South African exports to other African countries being manufactured goods. Therefore, a re-invigorated focus to make MCEP a success also provides a great opportunity for Black Industrialists looking to break into a sector that for long has been considered exclusionary.

Joanne Bate is the Chief Operating Officer at the Industrial Development Corporation

*This article first appeared in Business Report

Partnering Impact Catalyst to expand developmental mandate

Early this year, IDC joined the Impact Catalyst, an initiative founded by Anglo American, the CSIR, Exxaro and World Vision to create mechanisms that drive socio-economic development initiatives through public-private partnerships.

Among other objectives, Impact Catalyst seeks to strengthen relationships with key economic role players from private and public sectors, including local communities, to support key but sustainable economic drivers.

To date, Impact Catalyst’s membership has grown to include reputable global entities, including Anglo American, Exxaro, the Council for Scientific and Industrial Research (CSIR), Limpopo Office of the Premier and World Vision South Africa (WVSA). 

Explaining the IDC’s decision to join the Impact Catalyst, IDC Chief Operating Officer (COO) Joanne Bate said that IDC’s objectives, among others, were focused on contributing to the generation of balanced, sustainable economic growth and the economic empowerment of the broader South African population. 

“The economic initiatives designed by Impact Catalyst intend to create mechanisms that drive socio-economic development initiatives through partnerships between the private and public sectors. The impact that the collaboration has achieved in Limpopo Province convinced IDC to join and add to the momentum and focus on inclusive development.”

For IDC, partnering with Impact Catalyst will enable the Corporation to add to the excellent partnership Impact Catalyst and the Office of the Premier have done in the Limpopo province.

Agriculture can help spur Limpopo’s economy

Limpopo farmer Maano Khodani, 22, hopes to expand the agricultural enterprise that he runs on traditional authority trust land to enable him to compete with established commercial farmers.

Khodani farms garlic, vegetables, pigs, and cattle in Divhani, a rural village in the Vhembe District of Limpopo. His enterprise, which he started when he was only 16, is self-funded. He does not belong to any farmers’ organisation and has very little knowledge about government funding opportunities that cater for people like him.

He is among scores of emerging farmers who, if they qualify, may find themselves growing from emerging to commercial farmers through the intervention of the Industrial Development Corporation (IDC), which is on a mission to help transform the agri-business and agro processing sectors.     

The IDC recently launched the Agri-Industrial Fund, aimed at addressing funding constraints facing black farmers and breaking entry barriers into commercial farming.

The R1-billion fund is a partnership between the IDC and the department of agriculture, land reform and rural development (DALRRD).

According to the IDC, one of its objectives is to develop and implement high-impact, black-owned, large-scale commercial agricultural projects.

The DALRRD says the fund’s main goal is to support the development and expansion of the agricultural sector by assisting qualifying black producers or investors in developing, expanding, acquiring, and integrating operations in prioritised agricultural value chains. 

“We are moving away from emerging. We don’t want to fund people just to get by. We believe in increasing the size of the cake instead of just keeping on cutting it, because it’s not going to be sustainable in the long term,” says the IDC’s Head of Agro-Processing and Agriculture, Kgampi Bapela.

Bapela says the key mission of the fund is “to create a globally competitive agro processing and agriculture sector, which is market driven, and is inclusive of rural economy and creating entrepreneurship. Its main purpose is to enhance the participation of black individuals in the agri sector all over South Africa and in all sub-sectors of agriculture.”

The IDC seeks to help establish high-value, export-oriented orchards on community-owned agricultural land (restituted or communal properties) across the country and establish competitive contract growers in protein value chains such as poultry, pork and beef, and other agro-processing ventures that support the Agriculture and Agro-Processing Master Plans. 

Ebrahim Patel, Minister of Trade, Industry and Competition, noted in his foreword in the IDC’s 2020 integrated report that the department “has accelerated the development and implementation of sector master plans. We have already completed masterplans in the automotive, poultry, sugar and clothing and textile sectors, which now serve as a blueprint to harness energies among industry players for activities such as investment in sectors which together employ some 500 000 people. We are now working on sector masterplans in the steel and furniture sectors, which we expect to complete in the coming year”. 

Bapela says Limpopo, which is set to host the Limpopo Investment Conference next week, has great opportunities for farmers due to its unique climatic conditions. He cites macadamia, blueberries, and table grapes among some of the commercial crops that are taking off in Limpopo, which is known traditionally for its high-quality citrus produce.

“It is also one of the provinces that has a lot of land that is being transferred back to communities and families. Unfortunately, some of the land is lying fallow or those [portions] that were productive have regressed. But we see that as an opportunity to grow the agriculture sector in the province,” Bapela says.

Limpopo is also in a unique position in that it’s 85% rural, with plenty of land available.

“Land is not produced. What we need to do is to forge relationships, increase food security, open markets, enhance competition and entrepreneurship. Limpopo is heavily rural, but at the same time this can also be turned into an opportunity,” says Bapela.

He says agriculture remains a key economic driver and its resilience was underlined by how it continued to grow during the Covid-19 lockdown when other sectors took a severe beating.

The Quarterly Labour Force Survey Q2 for 2021 released by the Statistics SA this week revealed that formal sector employment decreased by 375 000 during the quarter — but employment in agriculture increased by 69 000 (8.7%). 

“The sector is expected to continue to grow,” says Bapela.

He adds that one of the advantages for the agri-business is that unlike mining, the cost of creating jobs in the sector is much lower, hence it’s able to sustain jobs when others are forced to shed workers.

To this end the Limpopo provincial government has announced plans to grow the agriculture and agro-processing sector.

Premier Stanley Mathabatha has announced that in line with the Provincial Industrialisation Strategy, they will be prioritising the revitalisation of agriculture and agro-processing value chain as catalytic projects. Mathabatha announced that they intend to increase agricultural production linked to agro processing.

With the SME sector acknowledged as one of the main drivers of the country’s economy, Bapela says the IDC also has funding models to cater for this sector.

One of these is the Small Business Finance, which is rolled out through the organisation’s nine regional offices located in all the provinces. The SBF caters for businesses looking to access funding from R1-million to R15-million, in sectors funded by IDC. 

Another IDC subsidiary is the Small Enterprise Finance Agency (SEFA) which offers SMEs and co-operatives credit facilities from R500 up to R15-million.

Bapela says while the IDC and its agencies set out to assist, their work is not without challenges and he advises businesses applying for assistance to ensure that they comply. He cited applicants who send ill-prepared applications and who fail to understand that no one is entitled to be funded by the IDC — they have to meet certain requirements.

“They get impatient, and somehow they become despondent. Somebody is in agriculture and they believe they should be funded,” says Bapela, advising that applicants seek assistance from the IDC and its agencies in order to understand its requirements.

Bapela says that the turnaround time for applications within the IDC is determined by the quality and readiness of the applicants and their submissions. He says the IDC has checks and balances in place to ensure that those businesses assisted with loans have the capacity to make timely repayments.

— Lucas Ledwaba

Partnerships are key to growing Limpopo’s industrial base

When Limpopo entrepreneur Vincent Mabunda realised there was a construction boom around Tzaneen and that builders in the area were struggling finding roofing sheets, he decided to exploit the gap.

Mabunda runs Miya Roofing, which manufactures roofing sheets of light, medium and heavy duty in galvanized or chromadek. The business, located in Nkowankowa Industrial Park in Nkowankowa, Limpopo, employs 30 people. He started the business during the lockdown imposed to curb the Covid-19 pandemic last year.

He is among a steadily growing number of black industrialists in the province. The Industrial Development Corporation (IDC) aims to introduce more black people into big business. If they meet the corporation’s requirements more entrepreneurs could see themselves growing from SME level to participating in big business ventures.

The Black Industrialists Policy aligns with the Industrial Policy Action Plan, the National Development Plan and the Nine Point Plan that was announced in 2015. According to the department of trade, industry and competition, the purpose of the Black Industrialists (BI) policy is to leverage the state’s capacity to unlock the industrial potential that exists within black-owned and managed businesses that operate in the country’s economy.

The department seeks to achieve this through deliberate, targeted and well-defined financial and non-financial interventions, as described in the Industrial Policy Action Plan.

“In addition to growing the economy of Limpopo, the IDC plays an important role in ensuring that the economic landscape of the province is transformed through the creation of black industrialists and the inclusion of women- and youth-owned enterprises into the mainstream economy, especially in the key sectors as alluded to,” says Limpopo IDC regional manager Mashweu Matsiela.

The growing number of black industrialists in the province augurs well for the transformation of sectors that previously excluded people on the basis of race and in addressing the unemployment challenges facing the country.

This week Statistics South Africa’s Quarterly Labour Force Survey (QLFS) for the second quarter of 2021 showed that the number of employed persons decreased by 54 000 in the second quarter of 2021 to 14.9-million. 

It further noted that the number of unemployed persons increased by 584 000 to 7.8-million compared to the first quarter of this year. 

“These changes resulted in the official unemployment rate increasing by 1.8 percentage points from 32.6% in the first quarter of 2021 to 34.4% in the second quarter of 2021 — the highest since the start of the QLFS in 2008. The unemployment rate according to the expanded definition of unemployment increased by 1.2 percentage points to 44.4% in quarter 2 of 2021 compared to quarter 1 of 2021,” according to Statistics SA.

Matsiela says in advancing a transformative industrialisation, the IDC seeks to promote a balanced racial and gender participation in ownership of assets as well as to provide opportunities for black industrialists, women and youth, to encourage tomorrow’s leaders of industry.

The lingering question asked by most start-up business owners, especially those run by women in Limpopo, is: what opportunities exist for them, and what is it that the IDC can do to assist them to contribute to the growth of the province’s economy?

“Opportunities exist across the sectors funded by the IDC, with the challenge being how to spot these. Belonging to relevant business chambers, research, etcetera, should assist. As alluded to, the IDC is biased towards the creation of Black Industrialists (BI) as well as the support for women and youth entrepreneurs. Through our innovative funding solutions the IDC is poised to support women entrepreneurs to ensure that they participate meaningfully in the mainstream economy,” says Matsiela.

If she qualifies for assistance by the IDC, Maggie Machumele, who runs the Ka-Hina Guesthouse in Nkowankowa, could also realise her dream of expanding her operation and employing more people through the IDC Tourism and Services Strategic Business Unit (SBU).

The unit primarily invests in the accommodation sub-sector, focusing on business hotels in fast-growing areas. Machumele was among tourism operators who received donations from the Limpopo department of economic development, environment and tourism (Ledet) to assist such establishments cope with the effects of Covid-19. She employs three full-time workers and hopes to grow her staff complement.

The IDC’s key mission goals in Limpopo are to grow the regional economy and tackle unemployment through the creation of sustainable economic opportunities. Matsiela says they plan to achieve these through, amongst others, proactive partnerships and collaboration with key stakeholders, which include relevant government departments, agencies and the business community. 

He says they also want to take advantage of the key economic activities that are prevalent in Limpopo which include mining, agriculture and tourism, all of which are big on job creation.

“Through these strategic partnerships [the] IDC intends to have a meaningful impact by stretching our money and reaching out to the rest of the province,” he says. 

He adds that the IDC intends to exploit opportunities presented by Limpopo’s key economic sectors, including those presented by the province’s two Special Economic Zones (SEZs), as well as green energy and industrial infrastructure, in an effort to grow the economy and tackle unemployment. 

The province’s two SEZs — the Musina Makhado Special Economic Zone and Tubatse — are set to pump billions into the province’s economy through investment.

The Musina Makhado SEZ has been given the green light by an Act of Parliament and will cover approximately 11 500 hectares of land, situated along the N1 highway that connects South Africa to the SADC region and the rest of the continent via Zimbabwe. It will include among others the building of a power station and smelters, expected to attract investment of up to R150-billion for the province. The MMSEZ is anticipated to create between 21 000 and 26 000 jobs in its initial stages. 

Matsiela says the IDC aims to expand the province’s economy beyond mining, agriculture and tourism through its SME Connect initiative, which has the objective of creating strategic partnerships with relevant state-owned enterprises, corporates and other businesses “to exploit opportunities under their supplier/Enterprise Development Programmes in order to speed up economic development and growth as well as the transformation of thereof”.

He says: “This initiative, which cuts across the sectors that IDC funds, is already starting to bear fruit, especially for SMEs.”

Many entrepreneurs cite lack of funding and support as their major challenges. Matsiela notes that the IDC has a myriad of funding products including those managed on behalf of third parties. There are special funding schemes to advance initiatives such as the Youth Fund, the Covid-19 Distress fund and Agri-Industrial Fund, among others. 

“The IDC has a dedicated Business Support Unit where we provide support to our clients, mainly SMEs. In addition, the IDC has a dedicated Socio-Economic Development Specialist team under our Technical Services Department that assists with issues of community participation and development, such as community trusts, workers’ trusts, and communal land issues,” he says.

— Lucas Ledwaba