2012/13 SPECIAL EDITION
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in this issue ECDC highlights ECDC DRIVING FORWARD FOR GREATER DEVELOPMENTAL IMPACT
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An inspired development finance role
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Harnessing competitive SMMEs
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Innovative risk capital
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Growth prospects for Eastern Cape Bio-fuels industry
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Eastern Cape Jobs Stimulus Fund brings hope to thousands
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Turning dreams into reality
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Fertile ground for an energised rural economy
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Life is sweet in Centane
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Investment promotion an anchor for SMME sector
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First Marron out of Eastern Cape sold on the National Market
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Creating market-ready and competitive SMMEs for real trade performance
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Eastern Cape companies in bid for share of lucrative Chinese consumer market
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An exciting transition into a property investment dispensation
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Editorial contact: Ikhona Mvaphantsi Tel: +27 43 704 5739 | Cell: +27 83 451 1687 Email: ikhona@ecdc.co.zA
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...con ti nu ed on pg 29
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MTHATHA PRIVATE HOSPITAL WITH THE INDUSTRIAL DEVELOPMENT CORPORATION (IDC), ECDC CO-FUNDED A PRIVATE HOSPITAL THAT IS CURRENTLY UNDER CONSTRUCTION IN MTHATHA. THIS DEVELOPMENT IS SET TO BENEFIT THE HEALTH SECTOR IN THE REGION.
ECDC FINANACE
R3.8 MILLION ECDC INVESTMENT
22% EQUITY ECDC
R0.4
IDC
R2.7
DBSA
R3.5
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The 2012/13 financial year was characterised by a sustained effort to establish a basis for clean administration and rekindle public confidence in the development finance institution. We have developed a clear strategic point of view and we are taking steps to tidy and clean up a number of issues in our balance sheet. In an effort to clean up, build public confidence and a strong balance sheet that is responsive to the needs of our customers, the development financier took a considered decision to review its funding structure and to dispose of non-core and non-performing assets. These assets such as residential properties and some subsidiary equity investments have hurt and threatened the viability of the corporation for too long. By the end of the financial year, ECDC had taken the first step to dispose some of its residential properties valued at R6.5 million. The development financier intends to dispose of its entire stock of 238 standalone houses which have a balance sheet value of R110 million. Already, 113 good offers have been received during the period under review. In the new financial year, ECDC will fast-track the process of a public disposal of its 21 vacant houses with an expected selling value of R12 million This work is tightly linked to the development and approval of the ECDC viability model. The viability model provides a roadmap and compass that will lead the corporation towards improved selffunding and financial sustainability over the medium to long term. This plan is a platform to develop a solid foundation for critical elements for self-funding and a financially viable entity by 2015/16. The plan emphasises cost cutting measures, improved revenue collections, disposal of non-core investments and building alternative revenue sources. Practical steps have been taken to implement measures to reduce operational costs and financial costs related to loan impairments and losses, disposing of non-core residential properties, reviewing non-performing subsidiary investments and establishing projects with the potential to generate alternative future sources of revenue. In essence, the corporation will spend what it can afford, avoid uneconomic investments and unauthorised expenditure. The viability model further underscores plans for adequate capitalisation levels in relation to corresponding socio-economic development risks. The shareholder is required to adequately capitalise the amalgamated institution, as this was never considered at its inception when a new mandate for a broader democratic development state was conceived.
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The business case is for ECDC to get a financial injection of R481 million over the next three years from external sources in order to meet its viability target. It is envisaged in the plan that revenues generated from the disposal of all non-core and non-performing assets will provide approximately R600 million. This should increase capitalisation to R1 billion over the next three years. The expectation is to use such proceeds only for funding and investments of high performing investments, creating alternative sources of revenues and promoting economic development for the benefit of the Eastern Cape.
Standards (SABS) to train ECDC staff on total quality management and mapping process to prepare for ISO 9000. The corporation is committed to becoming the first development finance institution to receive the ISO 9000 certificate. The ISO 9000 standard benchmarks quality management with global counterparts. ECDC is also investigating an efficient IT platform to drive effective customer servicing. During the period under review ECDC also engaged Vodacom for business solutions at no cost. The development financier has formed a strategic partnership with Productivity SA in order to build organisational awareness and a training program for competitiveness, efficiencies and productivity issues. A process to establish an effective IT strategy/Master Systems plan is being finalised.
To complement the efforts of giving effect to clean administration and the building of public confidence, ECDC conducted the first awareness educational session by a public entity on corporate governance, risk and fraud prevention. The financier invited the Auditor-General, national treasury and PricewaterhouseCoopers to workshop the entire ECDC team on risk management, corporate governance and clean administration. I am proud that this work has found effect throughout the entire organisation with substantial benefits. During this financial year, the Auditor-General gave ECDC a thumbs-up in the areas of procurement, information technology governance as well as honesty and integrity of ECDC leadership. However, challenges remain on areas such as performance management, which the corporation is working hard to rectify. Furthermore, the corporation solicited the expertise of the South African Bureau of
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The corporation has further organised and offered training to staff on business writing skills, presentation of business proposals as well as further investments on financial assistance for further studies. Management and staff in key operational areas have also received specialised training on due diligence, risk management and governance to improve their decision making processes. Further on-the-job training seminars and workshops have been provided on finance, project management, legal and others. These training programs are fully funded by the corporation. During the period under review, the organisation dramatically improved employee participation in certain areas of decision-making, strategy planning and brainstorming for corrective measures. Such investments in human capital are preparing ECDC to move towards the vision of becoming an energised and high-performing development financier. The corporation is preparing its people
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so they are ready to service customers well at all service points and leave “memorable impressions.� The true test of whether ECDC lives by its ethos and its strategic thrust will be through the testimony of its customers to that lived experience. By virtue of its empowering and development role, the sight of ECDC and its people should excite and entice our customers. This is only possible once we do what we are meant to do thereby bringing strategy to life. The only guarantee for ECDC success is a highly disciplined workforce and satisfied customers. I am excited that these efforts and interventions are the ideal foundation, which should lead to the effective discharge of the ECDC mandate. Already these efforts have declared a dividend. From 2010, there has been a sustained reduction on loan impairments advanced to ECDC clients. There has also been an improvement in loan collections versus disbursements which means the financier is able to collect more than it disburses. For example, by the end of 2012/13, ECDC had disbursed R130 million and managed to collect R188 million. The development financier continues to pursue its focus and shift towards long-term loans which provide solvency and long-term sustainability for the corporation. Short-term loans provide short-term fluidity with no long-term returns. For example, during the year, the financier made longterm investments such as R12 million into granite mining, R10 million into aquaculture and R3 million into biofuels. These investments should bring long-term dividends and contribute towards a sustainable and profitable balance sheet. The ECDC Board has afforded management the necessary support to discharge its executive functions to create an energised, focussed, disciplined, inspired and high-performing development finance institution (DFI). Moving forward, the corporation will continue to focus on the development of its people to become a highly talented, disciplined and motivated workforce, improving operational efficiencies as well as increasing alternative sources of revenue streams and reduction of waste. Particular focus will also be paid to strengthening efforts to improve risk management, fraud prevention and anti-corruption measures. The financier will strengthen information technology infrastructure and implement the Master Systems Plan as well as leverage key strategic partnerships and use innovative risk capital and development finance for a greater developmental impact.
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When medical doctor Coy Yako approached ECDC, he had no idea his courtship would result in the birth of a R200 million Mthatha Private Hospital.R75.1 million to 330 businesses. This development finance injection resulted in the facilitation of 1 849 jobs.
“The corporation is pleased that its interventions have further resulted in the reduction of loan In 2011, Yako approached the development financier with the idea of developing a hospital. ECDC established that the concept made economic sense and decided to put R3.8 million towards the project as well as 22% in equity. The project required partnerships to come into play such as the Industrial Development Corporation (IDC), a group of doctors as well seasoned hospital managers. “In order to protect the interests of ECDC and of the investors, the skills of the promoter had to be brought in the form of health partners. These are the people that will have a visible hand in the hospital’s operations. This project is one of the few in South Africa, which is owned directly by the health practitioners. The group of doctors that own shares in the hospital are the same doctors that will be providing services to patients. “Without ECDC’s involvement their dream would not have been realised. These projects justify the existence of ECDC and also unlock the sustainability of economic development in communities.” says ECDCs short-term loans structuring specialist Mninawe Nomnga. The project is aligned with the National Health Insurance (NHI) and the Mthatha community has access to a second state-of-the-art private hospital at a cost effective rate. It also created job opportunities for 150 previously disadvantaged Mthatha residents during construction stage. ECDC executive manager for development finance Ndzondelelo Dlulane says projects such as the Mthatha Private Hospital allow the financier to use its development finance and non-financial support mechanisms as capable stimulants for real economic growth and development of the provincial economy.
Ndzondelelo dlulane - ecdc executive manager
Dlulane says this is evident in the corporation’s resolve to increase funding to deserving and qualifying enterprises during the period under review. Furthermore, the corporation took steps to improve the quality and quantity of its loan book to reflect a true and energised development corporation as well as maximising investment returns. The spin-offs of increased funding to entrepreneurs are a superior development impact characterised by rising job creation, business sustainability and competitiveness. “These interventions have yielded affirmative returns which continue to entrench ECDC as a visionary steward of economic development. For example, in the 2012/13 financial year, ECDC approved R145 million for disbursement to enterprises, which is up by 4% from the previous year’s R139 million. Of this amount, R130 million was disbursed to 496 enterprises compared to the previous year’s disbursement amount of R75.1 million to 330 businesses. This development finance injection resulted in the facilitation of 1 849 jobs.
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impairments of R16.8 million, which is 47% lower compared with the previous year’s R31.7 million. “This is attributable to improved monitoring of loans as well as vigilant due diligence processes at origination. The corporation is equally delighted that a sizeable number of the loans disbursed went to 129 youth-owned enterprises to the tune of R24 million and R21 million went to 113 women-owned enterprises,” Dlulane explains. He says the development financier intends to grow its development finance contribution to previously marginalised groupings such as women and people with disabilities. There is also a commitment to ensure that young people are presented with economic and wealth creation opportunities that equitably distribute the development impact. ECDC also took a considered decision to ramp up the quantity of its loan book and realise a shift towards good quality long-term loans. The significant longterm loans have gone to key strategic sectors. These sectors have sustainable job creation potential, which responds directly to development impact and returns. About R59.9 million went to businesses in the construction sector, R37.1 million to services, R13.5 million to agro-processing, R5.6 million to manufacturing, R2.4 million to tourism enterprises and R8.9 million to businesses in the retail sector. The balance of R18.3 million went to information technology, aquaculture and others. The largest portion of the disbursements went to the Amathole District Municipality (ADM) region, which received 44%, OR Tambo District Municipality received 33.5%, Nelson Mandela Bay Metro received 14%, Chris Hani District Municipality received 9.6% followed by Joe Gqabi 4%, Alfred Nzo 2.5% and Cacadu 1.5%. The low disbursements to these later three areas are largely due to the fact their main economic activity is primarily agricultural production while the corporation’s involvement is on value chain financing. “In future, the focus of the operations will continue to be on larger long-term loans in the key strategic sectors of the economy mainly driven by emerging and new industries for better impact and improved financial returns. “It should be noted that ECDC needs to grow its loan book in order to remain sustainable versus the significant current internal cost drivers as well as external demand. “The corporation is therefore required to secure capitalisation to enable it to grow the loan book. “Recent forecasts indicate that a capitalisation of approximately R481 million will be required to enable the unit to start meeting demand as well as become sustainable in the long-term,” Dlulane adds.
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With its head office in Queenstown and further presence in East London, information communication technology (ICT) solutions provider Lym Myl Technologies is steadily growing its share of the industry pie. Lym Myl is just one of 20 small businesses being incubated at the Eastern Cape Information Technology Initiative (ECITI).
Fundam says that while financial support is a crucial element of SMME development, nonfinancial support is a central tool in harnessing the competitiveness of small businesses.
An ECDC subsidiary, ECITI helps in the early stage development of ICT and film entrepreneurs. The programme accelerates the successful development of small businesses through various support resources and services offered in the incubation hub and through ECITI’s network of contacts. These include non-financial support such as training and development, access to finance, mentorship and coaching, networks, industry information, office space and shared services. “Our participation in the incubation programme has played a role in Lym Myl recording steady growth in 2012/13 mainly on the supply and delivery of hard and software to clients which included the South African Social Security Agency, Joe Gqabi, Chris Hani and Alfred Nzo district municipalities “There was also ongoing work for the departments of public works and health specifically on the supply of consumables and hardware,” says Lym Myl co-owners Lubabalo Nontsele and Mfundo Tsheketshe. The business was also awarded a Department of Trade and Industry black supplier development programme grant. The grant is helping improve the skills of the team particularly on fibre cabling which has the potential to create jobs. The business was also able to secure a signboard machine which allows us to do this area of the business inhouse. ECDC results management specialist Mpumi Fundam says Lym Myl is on the eGrowth stage of incubation, which means the business is growth oriented and has a sustainable revenue base.
Mpumi Fundam - ECDC results management specialist
“It ensures that the enterprise is well-managed and poised for long-term growth. Non-financial support further allows the business to become market-ready. ECDC’s non-financial support mainly includes business development services which are aimed at building competitive enterprises, improving performance and facilitating access to markets. “The corporation’s business support interventions are designed for demonstrable impact.
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For example, during the review period ECDC invested R2.4 million towards the running of ECITI. Income generated by the enterprises incubated in 2012/13 is R6.5 million. The enterprises created a total of 62 jobs with 34 of the jobs being permanent,” Fundam says. Fundam says some of the business support services offered by the corporation include business advisory support services, due diligence and feasibility studies, business planning, marketing support, mentorship and coaching, quality management support as well as intellectual property management among others.
Lym Myl co-owners Lubabalo Nontsele and Mfundo Tsheketshe
During the review period, 204 SMMEs in priority sectors benefitted from pre- and post- finance support. The total amount allocated for non-financial support was R2 million for established and start-up businesses. Further nonfinancial support provided was directed to NAFCOC, FABCOS and the BorderKei Chamber of Business. The total funding support for the year under review was more than R5 million and this has impacted on more than 700 members of the chambers. The programmes implemented included the continuation of support to the Local Business Service Centre and Mentorship programme as well as the Buy Eastern Cape Campaign. “In addition, a total of 1,167 businesses were trained in business skills and a further 14 business opportunities workshops, conferences, seminars, trade fairs and exhibitions were held. Businesses supported in the creative and information communication technology industries recorded a total turnover of R6.5 million in the period under review. A total of 6,089 new businesses were also registered in the review period,” Fundam says.
1,167
businesses trained in business skills
6,089
new businesses registered
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He adds that at the beginning of the year, ECDC signed a partnership agreement with the Tourism Enterprise Partnership wherein ECDC contributed R200,000 towards business management training and mentorship. The purpose of the partnership was to collaborate on the programme to support SMMEs in the tourism sector with capacity building. As a result of this partnership, more than 500 enterprises benefited from the training programme. As part of the partnership, 20 enterprises were mentored for a period of a year. The enterprises generated an income of more than R11 million with a total of 146 employees. Other interventions include the publication of Khula Nathi, ECDC’s SMME informative insert in the Daily Dispatch and The Herald which provided useful information on topical issues affecting small businesses. There has been continued support to enterprises within the creative industry. More than 100 enterprises from throughout the province have benefited in the programme which, mainly focused on facilitating access to markets. This programme has supported enterprises to participate in exhibitions, expos and festivals, which include the Grahamstown National Arts Festival, East London Home Expo, Decorex Johannesburg and Cape Town as well as international exhibitions in Italy and India. The majority of enterprises that participate and benefit from these programmes are women-owned.
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ECDC committed a total of R9.6 million in 2012/13 towards the development of 17 projects for further development into market-ready products. The long-term objective of ECDC’s use of its risk capital facility is to develop a high quality pipeline of loans and equity investments for ECDC. The corporation executes this role through a number of activities such as the funding of feasibility investigations to determine whether a business idea can lead to a sustainable enterprise, ideas that need testing before they are market-ready as well as risk capital for conducting trials. This also includes the development and testing of prototypes as well as the compilation of business plans for commercialisation. ECDC provides this capital to a very risky segment of the market due to its ideas being untested. ECDC’s commitment to this work is driven by the structure of the Eastern Cape economy in which government services is the largest employer followed by the automotive sector and related sectors such as the components industry. The Provincial Growth and Development Plan (PGDP) calls for the diversification of the provincial economy away from the saturated sector. Government services are unsustainable due to the shrinking fiscus and competing needs.
Phakamisa George - ECDC risk capital specialist
“Five new projects were established during the review period. One of these new projects is Lubala Poultry in Lubala Village in Mthatha. The project farms broiler chickens for the market. It has two broiler units which take about 10,000 birds. Its operations began in September 2012. ECDC is implementing and project managing the venture with R500,000 funding from the Department of Economic Development, Environmental Affairs and Tourism. “ECDC also added additional funding of R65,000 for the project. This business was assigned to ECDC as part of the presidential projects identified by the president. The women-run project has an available market where chicken is the main source of protein. A total of 15 permanent and 10 temporary jobs have been created,” says ECDC risk capital specialist Phakamisa George. George says ECDC is creating alternatives through risk capital that supports new sectors of the economy. These sectors create new high-return businesses for the corporation. ECDC’s approach is providing loan funding and equity in these high-risk, high return projects depending on the nature of the business. He explains that ECDC also attracted R77 million in third-party funding for its development projects. Third-party funding is crucial considering that it allows ECDC to share the risk with other state agencies. “This means the corporation is able to mobilise funding from other agencies where it can’t meet demand from its own funds. The corporation is thus able to tap into the various expertise of other funders. This ultimately contributes to an enhanced development impact than what ECDC can achieve on its own” George adds.
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The bio-fuels industry in the Eastern Cape is set for a major boost with the establishment of the Ibuyambo Milling Enterprise in Lady Frere through a R1.5 million grant from the Department of Economic Development Environmental Affairs and Tourism (DEDEAT). ECDC is project managing the establishment of Ibuyambo Milling Enterprise at a time when most milling businesses have closed down in the Eastern Cape. The black-owned milling company was founded by Lady Frere farmers as a way of adding value to sorghum crops through milling in July 2012. Funding was also approved and made available for the establishment of a milling plant by the European Union’s Thina Sinako project. Ibuyambo mills all types of grain, including wheat, maize, and sorghum. The mill also produces its own cereal brand. Ibuyambo received R1.5 million from DEDEAT for the construction of the milling plant. The business is a secondary co-operative with seven primary co-operative members. These co-operatives in turn have a collective membership of approximately 800 rural farmers situated in the Emalahleni Local Municipality, and ECDC as managers of the Local and Regional Economic Development funding awarded to Ibuyambo. “One of the main purposes of milling sorghum is to start supplying the large bio-fuel plant situated in Cradock. The bio-fuel plant will require approximately 225,000 tons of sorghum grain as inputs. This translates into rapidly escalating primary sorghum grain production to a level of some 67.000 hectares per annum, creating massive potential to generate employment in the Emalahleni municipal area.
ECDC’s Bowell Solwandle
required skills on how to plant sorghum and these are skills they will possess for the rest of their lives, which can also result in them starting their own businesses. A second building is under construction to expand agro-processing operations into livestock feed and ultimately wheat milling. “Ibuyambo has opened a successful shop in Lady Frere to market its products. We also have a fleet of tractors and implements which are made available on a contract basis to member cooperatives and local farmers to assist with crop production activities,” Ibuyambo general manager Allan Webb says.
“The aim of having sorghum is the bio-fuel plant in Cradock, the sorghum is mostly needed there. ECDC is currently making sure that by 2015 there is enough sorghum to supply the plant. This means that a large portion of sorghum needs to be produced in order to cope with the need,” says ECDC’s Bowell Solwandle. Solwandle says Ibuyambo Milling Enterprise is providing employment opportunities to the Emalahleni community. They are receiving the
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A total of R15,6 million was disbursed by the Eastern Cape Jobs Stimulus Fund to established companies and those in distress in the 2012/13 financial year. The disbursed funds resulted in the creation, retention and the saving of 1 560 jobs. Administered by ECDC on behalf of the Department of Economic Development, Environmental Affairs and Tourism (DEDEAT), the Eastern Cape Jobs Stimulus Fund helps with job creation, as well as the saving and retention of jobs particularly in distressed businesses and established businesses relocating to the Eastern Cape. “The Eastern Cape Jobs Stimulus Fund is a stimulus incentive disbursed to approved beneficiary businesses on the basis of R10,000 per job with a minimum eligibility of 10 jobs. “This fund was administered through three windows of applications. The first window was from October to November 2011, the second from February to March 2012 and the third from October to November 2012,” says ECDC fund manager Thabo Shenxane.
THABO SHENXANE - ECDC FUND MANAGER
Shenxane says a total of 198 applications were received of which 101 were approved. The expected number of jobs created/retained and/or saved is a total of 6,514. The uptake of the fund is making a difference to thousands of people, particularly the youth who are unemployed or seeking permanent employment. It has also assisted companies with saving a significant number of jobs. For example, from the moment it received its first call in July 2011, the Discovery Call Centre knew it had struck the right chord when it made the decision to make the Eastern Cape one of its four service centres in South Africa. Starting with a modest complement of 30 staff, it has since grown to 360 people in little under two years. The call centre provides services to members on the Discovery medical scheme. It handles general and admin telephonic inbound queries. The scheme previously lacked presence in the province and it soon realised the untapped market that exists in the Eastern Cape. The high unemployment rate means that the call centre has the services of highly qualified and educated graduates at its disposal. Of the 360 employees, 231 are totally new jobs made possible with the support of R2.3 million from the fund during the 2012/13 financial year. All these jobs were sourced from the Port Elizabeth area. Over 90% are youths with an average age of 24 years. In East London, Adalwa Trading has been able to remain competitive in the protective clothing industry. The small company received a R100 000 incentive from the fund for creating 10 new jobs. This has gone a long way towards generating capacity for Adalwa to service bigger clients. Currently nurses at renowned medical institutions such as Tygerberg, Groote Schuur and Red Cross hospitals are wearing Adalwa-made uniforms. The company is now diversifying into bridal wear.
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Babalwa Mali, Discovery Call Centre service consultant
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Mdantsane-born apprentice Madoda Tinta is edging closer to fulfilling his dream of becoming a qualified artisan and owning his own pipe-fitting company in the future. Currently plying his trade with dairy blend concentrate maker, Dynamic Brands, in East London, the ambitious 27 year old is one of 18 employees who saw their fortunes change when the company offered them permanent employment late in 2012. Dynamic Brands (Pty) Ltd is a national concentrate beverage manufacturer which produces a dairy blend concentrate called Fusion and a 10% fruit drink concentrate, Sunsation. The company was started in 1999 by its CEO, John Kew, and operated out of a garage in Komga. It has since grown into a national manufacturing concern based in East London. Previously a casual worker within the company doing general and electrical maintenance as well as fitting, Madoda’s new status has given him the opportunity to plan for the future and the well-being of his family. “Late in 2012 I was one of 18 employees at the company who were offered a permanent position at the company. I am grateful that the Eastern Cape Jobs Stimulus Fund provided further impetus and a business case for the company to take us on a permanent basis.
Dynamic Brands’ Madoda Tinta
“Being a permanent employee has opened opportunities for me. The company has registered me with the Master Artisan Academy to realise my dream of becoming a qualified artisan. As a result I can now plan for the future with a consistency of income which has enabled me to take care of my parents,” Madoda says. ECDC has disbursed a total of R900,000 incentive funding to Dynamic Brands to aid its expansion which would require the retention of existing jobs and creation of new ones. This expansion required a substantial capital investment to increase output as well as to develop new product lines. “We received R180,000 from the Eastern Cape Jobs Stimulus Fund in the first window which allowed us to make an additional 18 jobs permanent. “We have been paid out an additional R720,000 in the third window. These jobs enabled us to form a structure for the business and realise our plan of turning casual staff into permanent employees and creating new jobs,” says Dynamic Brands human resources executive Maura Jarvis. ECDC business analyst Kerry van Harmelen says the fund has gone a long way towards training and development to ensure the business a highly skilled workforce. The company has gone further and applied for an incentive for an additional 94 jobs, which has been approved, and from which we have already received a portion of funding.
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“The permanent nature of these employees creates a more stable environment. Households now have a stable income which then allows them to improve their standard of living,” says Dynamic Brands chief financial officer Claire Sutherland. Sutherland adds that “the fund has allowed the business to increase the training opportunities
offered to our staff, such as ABET (Adult Basic Education and Training), computer literacy and various learnerships. She says it has also enabled the company to employ a number of casuals on a permanent basis, which has reduced our reliance on labour brokers and enabled us to build a team of Dynamic Brands people.
Poplar Grove is fertile ground on which the young people of Whittlesea are realising their dreams. The Nonkqubela Youth Agricultural Primary Co-operative was established in July 2012 and comprises nine young people who saw a great business opportunity in the farming industry. These young people have been allowed by the community to use their land for business. They are trying to instill a culture of self-reliance through this project. Having heard of the Imvaba Fund through workshops and mentorship by the Zulukama Community Investment Trust, the cooperative was approved for an incentive of R498,000. With the funding, the co-operative plans to install electricity and a reliable irrigation system that is vital for the vegetable production. Butternut and potatoes will be farmed at Nonkqubela Youth Agricultural Primary Co-operative. The local Spar supermarket, has entered into an agreement with the co-operative to supply the retailer with its vegetables. The Nonkqubela Youth Agricultural Co-operative is only one many cooperatives which have derived benefit from the Imvaba Co-operative Fund. Administered by ECDC on behalf of the Department of Economic Development, Environmental Affairs and Tourism , the Imvaba Fund helps in the establishment of co-operatives as business vehicles to mainly drive the rural economy. “A total of R6.2 million was disbursed to 21 co-operatives in the review period. These disbursements were a continuation from approvals in the previous year. Loan disbursements were slow due to non-compliance by co-operatives. Some co-operatives take longer to meet the conditions of approval. The co-operatives created a total of 496 jobs. “The fund spent a further R1.6 million on the training of 37 co-operatives which have 464 members on governance, Occupational Health and Safety (OHS), First Aid and the provision of personal protective clothing to members of funded co-operatives, ” says ECDC fund manager Thabo Shenxane.
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Nkondwane village used to be silent. Now, there is humming. Nkondwane villagers used to be jobless. Now, they are busy bees. Thanks to the Imvaba Co-operative Fund, life in this small village is getting sweeter and sweeter. The Ubusi Bemveli (nature’s honey) co-operative was established in July 2012. The co-operative began with only three boxes of bees, and has since expanded to 34 boxes. It consists of eight members who have vast experience and knowledge in bee-keeping, harvesting and processing honey. The co-operative brings with it much-needed skills development for the people as well as cash flow for their families. “Bee-keeping is still seen as an unusual venture in this community, but the people are so interested to come and see what we are doing, especially when we are wearing our white protective gear,” says Noloyiso Mafanya, a member of Ubusi Bemveli. The Imvaba Fund approved a R493,000 incentive for Ubusi Bemveli, empowering its members to expand the business and improve operations. They have increased their number of boxes, bought harvesting equipment and hope to train all their members in bee-keeping. “The financial support we received from ECDC will go towards purchasing a 12 metre shipping container and stock such as honey bottles and branding, brewed and super boxes, smokers and extractors. We will also purchase office furniture which includes a desktop, a 3-in-1 printer, scanner and Windows Office Suite. Our seven employees will also receive stable salaries,” says Noloyiso. Members of the co-operative are selling the honey to people within the Nkondwane community and surrounding areas. Not only is the honey bought for its delicious taste, community members also recognise its medicinal properties. In the future, the co-operative hopes to expand its client base to retail outlets in Butterworth, who have expressed interest in the product. “ECDC has also provided the co-operative with non-financial support on training such as governance, OHS and first aid, food safety, Business management and technical skills. It is hoped that this co-operative will provide employment in the Nkondwane community,” says ECDC’s administrative assistant of Imvaba Fund Mary-Ann Ndika.
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An additional 100 people are now employed as a result of a R100 million expansion of the Clover SA UHT Plant in Perseverance in Nelson Mandela Bay. Having played a central role in facilitating the R100 million investment, ECDC used the year to generate and retain further catalytic direct foreign and domestic investment. The Nelson Mandela Bay Municipality provided the required incentives that ultimately made the metro a preferred location from various competing locations in KwaZulu-Natal. The future prospects are great for further expansion in the medium to long term. According to ECDC investment promotion manager Mlamli Nodada, in 2012/13 the corporation proactively undertook inspired investment attraction and investor servicing activities geared towards the generation and retention of meaningful foreign and domestic investment inflows. This work was further supported in collaboration with the East London and Coega IDZs. “This work resulted in ECDC facilitating 22 investments valued at R671 million compared with the previous year’s R613 million. The majority of the investments were in automotives (30%), agro-processing (28%), energy (16%), forestry (10%), metals (8%), infrastructure (3%) and aquaculture (2%). “This increase was driven mainly the automotive, agro-processing and renewable energy sectors. The automotive sector bounced back strongly from the recession in the review period. This had a direct link to expansion in components manufacturing.
A total of 1,285 jobs were facilitated through these investments,” says Nodada. In addition, 17 entrepreneurs benefited from specialised international standard training provided across various entities involved in investment promotion including municipalities. Furthermore, ECDC jointly with the Eastern Cape Rural Development Agency are implementing projects approved by the Development Bank of Southern Africa’s Jobs Fund for the province. These involve forestry rehabilitation and development to the value of R113 million and the trading post and maize milling project (R91 million) over a three-year period, which will create jobs in excess of 1,000 over the same period. “While development finance and non-financial support remains at the core of SMME support, investment promotion, through its catalytic nature, provides substantial downstream opportunities for the development of small businesses. “In essence, investment attraction and trade, through foreign and domestic direct investment inflows; act as an anchor for the establishment, growth and development of the SMME sector. ECDC’s role is to facilitate catalytic investment into the key strategic sectors of the provincial economy as outlined in the Provincial Growth and Development Plan and the Department of Trade and Industry’s macroeconomic strategy,” Nodada explains.
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The first marron (freshwater crayfish) produced on a commercial scale by an ECDC client, Smiling Valley Marron in Kei Road in the Eastern Cape, was sold on the South African market in 2012. A unique project, Smiling Valley Marron is one of the few marron operations in South Africa. Marron is one of the very few high value, freshwater aquaculture species that can be produced in the moderate Eastern Cape climate. “If marron is successfully exported in the future, it will be the first commercial export of this product from South Africa ever,” says ECDC aquaculture specialist Rory Haschick. Smiling Valley Marron has one major client based in Cape Town which takes all the marron produced by Smiling Valley and sells it to various restaurants in the city. Founded between 1999 and 2000, Smiling Valley Marron has made immense progress in the past decade. Smiling Valley has five hectares, on which there are 36 ponds. They have three permanent employees who work directly on the crayfish and during harvesting a further five or six staff is used. “Smiling Valley is currently looking at exporting marron and with the assistance and support of ECDC this should become a reality in the near future. “If I could export I would employ many more people and also make six to seven times more money than I am currently making,” says owner of Smiling Valley Vaughn Bursey. Marron can only be farmed in certain areas, and according to Bursey “the East London area is perfect for doing so, it’s one of the best areas in the country”.
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SMILING VALLEY MARRON
“The investment and trade promotion units have assisted Smiling Valley Marron in exploring new markets specifically in Asia and Europe. ECDC has also paid for studies on regulatory requirements and market information for selected foreign countries. ECDC continues to lobby on a national level for a framework through which marron can be exported,” Haschick explains. “ECDC has been a great help to the company, they are currently helping us with our exports, and I can proudly say that without their assistance I don’t think I would get the exporting side of it right. They have been a great help to me, and an encouragement as well,” Bursey adds. There is good potential to increase production of this species in the province, as it is one of the very few species that is both high value and can be grown on an extensive scale. The future though is uncertain due to confusion over legislation governing alien and invasive species released recently by the national Department of Environmental Affairs. ECDC will continue to lobby for a clearer policy that is conducive to economic development.
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“In 2012/13 ECDC set its sights on improved export and trade activity in the province and as such, placed great emphasis on ensuring that its SMMEs were market-ready and could compete favourably with their international counterparts,” says ECDCs market access specialist Zodwa Kepeyi. According to Kepeyi the end result of these efforts is evident in solid trade performance and outputs. The corporation believes that its efforts have met the objective of increasing the value of trade and number of exporters in the province, exploring new markets, and broadening trade within Africa. “To this end, the corporation embarked on various projects which provided meaningful support to existing and aspiring exporters. These included conducting export awareness workshops in all districts as well as participating in various national pavilions with companies from the province. “The corporation also strengthened its support to the Exporters Club in the province, collaborated with the Department of Trade and Industry on the review of the National Export Strategy as well as collaborated with international trade bodies to facilitate access by local companies through information and networking sessions and registration on global supply chain database,” Kepeyi says.
ECDC’s market access specialist - Zodwa Kepeyi
These interventions resulted in the value of trade facilitated by the corporation stabilise at R1.5 billion in the period under review. ECDC generated 37 new exporters in the review compared with the previous year’s figure of 11. A significant increase was also recorded in the number of existing exporters assisted at 144 compared with the previous year’s 40. Perhaps the most exciting of the interventions was the facilitation of exhibition space for six Eastern Cape companies at the Ningbo trade fair in China for a 30-month period. The first South African company to exhibit at the international Ningbo exhibition, ECDC hopes to open opportunities for Eastern Cape companies to access the large Chinese consumer market. The R2 million investment will help the six companies participating at the exhibition which are East London-based Oceanwise (cob fish), and Berrynice (bluerriey jam). Two Port Elizabeth companies Momentos of Africa (mohair products) and Mend-a-bath (bath resurfacing kit) as well as Carara (cherry peppers) from Grahamstown and Makana Meadery (honey beer) will also participate. Ningbo presents immense opportunities for the Eastern Cape as it could serve as a channel for Eastern Cape products to larger markets within China and the rest of the world. The long-term view is to attract investment from China and boost employment creation in the province by acquiring long-term contracts and new investment.
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Backed by ECDC, Mend-A-Bath International, the world’s leading bathroom fixture resurfacing products exporter is pursuing export opportunities in China in a bid for a share of the lucrative and large Asian consumer market. Founded in Port Elizabeth in the mid 1970s by the late Ivor Benn when he bought a struggling bath resurfacing business, Mend-A-Bath International is one of six Eastern Cape companies placed by ECDC on a 30-month permanent trade fair in Ningbo, China. Since the official opening of the trade fair in April, the companies have received numerous trade enquiries about their products. Mend-A-Bath International has 12 franchises in South Africa and exports its products to more than 20 countries around the world. Every year Mend-a-bath International franchisees resurface thousands of bathroom fixture items (baths, basins and tiles) in hotels, resorts, and private dwellings.
alone. The product ranges included wine, milk, fruit and seafood. Ningbo citizens themselves consumed 5,415 tons of imported foods during this period. “Being placed on a 30 month trade fair in China opens immense opportunities for our business. We produce pickled products such as cherry peppers and patty pans for the export market destined for European markets such as Germany and United Kingdom, and smaller amounts to Australia. Opportunities offered by the Chinese market are significant and we intend to grow in the region,” Duxbury explains.
“Our product is popular because we can save money for a customer and this should make our product attractive to China. Furthermore, Ningbo is the largest seaport in China and the second largest in the world. It therefore forms a major part of China’s import and export market. The port city of Ningbo also presents vast opportunities for the Eastern Cape as it could serve as a channel for Eastern Cape products to larger markets within China and the rest of the world,” says Mend-ABath International director Ian Moore. In Grahamstown, Mike Duxbury, the managing director of one of the largest pickled cherry pepper processors in South Africa, Carara Agroprocessing, says “access to the massive Chinese consumer market offers fantastic opportunities for Eastern Cape agro-processing ventures as it could serve as a channel for its products to larger markets within China and the rest of the world.” Between January and July 2012, a total of $500 million worth of imported agro-processed products went through the harbour of Ningbo
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MAKANA MEADERY
OCEANWISE
BERRYNICE
MOMENTOS OF AFRICA
CARARA
MEND-A-BATH
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ECDC is currently finalising an exciting transition from property management to a property investment dispensation. According to ECDC executive manager for operations Buhle Dlulane the financier is finalising a property investment framework, which should attract investment into ECDC’s vacant prime land as well as to its commercial and industrial stock. “In simple terms, the new property investment dispensation will enable ECDC to pursue certain investments where it will be able to take equity and benefit from dividends while these are managed by the private sector. These proceeds should further boost investment in the development book of ECDC and further create a superior development impact in the Eastern Cape economy,” explains Dlulane. Dlulane says that in the transitory period, ECDC will continue to pursue maximum return on its investment assets. In particular, the corporation’s vast property portfolio presents immense opportunities for economic returns, which could be used to stimulate the core business. “However, part of this process includes ECDC unbundling its balance sheet to remove non-core and non-performing assets which are a cash drain on the institution. As such, the institution took a principled decision to dispose of those assets that derive no economic value for and are a cost burden to the corporation. “In this regard, the corporation began a process of disposing of its residential property portfolio in a batched approach. From November 2012 to the end of March 2013, 17 properties have been sold to the value of R6.5 million. In the next review period, ECDC would have disposed of all its 238 standalone residential property units which have a balance sheet value of R110 million,” says Dlulane. The 238 standalone residential property units form part of a total of 442 residential stock amounting to R244 million as reflected in the 2012/13 annual report. The purpose of this disposal process is to have an attractive balance sheet that ECDC can take to the market to leverage additional funding for more investments into the economy. Currently ECDC is still in the property management dispensation, which mainly involves the collection of rental. During the period under review, ECDC collected R54.2 million in rental revenue. This is an improvement from the previous year’s R50 million. This revenue helps the corporation to maintain these properties and to pay rates and taxes to the municipalities. ECDCs industrial property portfolio helps to create job opportunities through leasing to manufacturing and processing firms. The corporation also possesses commercial property stock such as offices and hotels. For example, the Mthatha Garden Court is 100% owned by an ECDC subsidiary. ECDC has a 49.5% stake in the operating company.
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ECDC HIGHLIGHTS IN 2012/13 . . . con t i n ued from p g 2
TAPPING INTO PARTNER EXPERTISE FOR ENHANCED DEVELOPMENT IMPACT
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real investor attraction
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The Eastern Cape Development Corporation is the development finance institution for the Eastern Cape province. Business Unlimited is produced every six months. An electronic copy is available on www.ecdc.co.za. Editorial contact: Ikhona Mvaphantsi Tel: +27 43 704 5739 Cell: +27 83 451 1687 Email: ikhona@ecdc.co.za
HEAD OFFICE ECDC House, Ocean Terrace Park Moore Street, Quigney, East London PO Box 11197, Southernwood 5213 Tel:+27 43 704 5600 • Fax:+27 43 704 5700 KING WILLIAM’S TOWN 75 Alexander Road PO Box 498, King William’s Town 5600 Tel:+27 43 604 8800 • Fax:+27 43 642 4199 BUTTERWORTH 24 High Street PO Box 117, Butterworth 4960 Tel:+27 47 401 2700 • Fax:+27 47 491 0443 MTHATHA 7 Sisson Street, Fort Gale Private Bag X5028, Mthatha 5099 Tel:+27 47 501 2200 • Fax:+27 47 532 3548 QUEENSTOWN 22 Cathcart Road Private Bag X7180, Queenstown 5320 Tel:+27 45 838 1910 • Fax:+27 45 838 2176 PORT ELIZABETH 152 Cape Road, Mill Park PO Box 1331, Port Elizabeth 6000 Tel:+27 41 373 8260 • Fax:+27 41 374 4447
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