A.N. Damane, CEO

A.N. Damane, CEO

brief on seda

for the portfolio committee 9 march 2007

Presentation Overview

1. Small Business Environment

2. Development / Background

3. Strategic Thrust

4. Progress to date

5. Budget

6. Lessons Learnt

7. Conclusion

PresentationOverview

The Small Business Environment• Small enterprises comprise 95% of all enterprises

• Currently between 2,5 million to 3 million – equivalent to 7% in numbers per

annum

• Contribute +45% to GDP

• Absorb +60% of formally employed labour

• Enterprise density is higher in metropolitan areas of Gauteng

• Year on year increase of 45% of close corporation registrations, 32% of

companies and a massive increase in registration of cooperatives

• Participation of small business in export trade is + 33% (rising steadily)

• Only + 16% of entrepreneurs belong to business associations

1

Factors limiting entrepreneurial activity in SA

• Educational system does not encourage entrepreneurship as a career

• Lack of financial resources available to start a business

• Regulations create huge administrative burdens and high costs when starting a business.

• SA is not entrepreneurial due to factors such as sanctions in the past.

• Environment in which children grow up influences them to believe that it is better to find a job and

be safe.

• Starting a business is risky process that often involves cycles of failure.

• Infrastructure and necessary skills required for development of entrepreneurship are lacking.

• A paradigm of entrepreneurship does not exist - expectation is that big business, government

and others should create jobs, rather than that one can create one’s own employment.

• Competencies such as management and entrepreneurial skills are lacking.

Source: GEM 2006 South Africa Report

1 Small BusinessEnvironment

Development / Background

2

December 2004

– Small Business Amendment Act merging Ntsika and NAMAC.

– Appointment of the CEO

– Appointment of the Interim Board

April 2005

– Appointment of the Executive Team

– Beginning of Provincial consultations and roll-out process

– Population of seda structure

seda Milestones


2

17 August 2005– Launch of seda in North West Province

27 December 2005– Launch of seda in Northern Cape

27 January 2006– Launch of seda in Mpumalanga

8 February 2006– Launch of seda in KwaZulu Natal

16 February 2006– Launch of seda in Bisho, Eastern Cape

24 February 2006– Launch of seda in Free State

seda Milestones (Cont)


2

April 2006– Incorporation of seda Technology

August 2006– Tri-nations Summit between seda, SEBRAE (Brazil) and NSIC (India)

November 2006– The dti Annual Summit on Small Business

seda Milestones (Cont)

seda was established by the Small Business Amendment Act 29 of 2004 through merging Ntsika and NAMAC to be the national service delivery entity for small enterprise

development services with the mandate

• to implement the policy of the national government for small enterprise development

• to design and implement a standard national delivery network uniformly applied throughout the country in respect of small enterprise development, integrating all government-funded small enterprise development agencies across all spheres of government

• to design and implement small enterprise development support programmes

seda’s mandate

3 Strategic Thrust

to promote, develop and support small

enterprises to ensure their growth and

sustainability

The seda mission

3 Strategic Thrust

• improved:

competitiveness of small enterprises

sustainability of small enterprises

growth of small enterprises

access to the international and national markets for small enterprises

access to finance by small enterprises

• more businesses established

• increased capacity of service providers to serve small enterprises

• improved and more equitable access of small enterprises to support

services

seda’s key outcomes

3 Strategic Thrust

Seda will move: from expanding the network to effective service

delivery through the existing network• Why:

• Financial constraints• Delivery model being reviewed (maybe mobile centres?)• Existing centres not fully equipped and ready (only 6 totally

ready)• Existing delivery staff not fully capacitated• To avoid reputation risk

Strategy 2007-2009

Strategic Thrust :

New Focus

Seda will move: from centrally controlled organization to

decentralized, flexible and customer-oriented organization

• Why:• Existing model not customer oriented• Currently the decision making model and

structures not efficiently facilitating effective delivery

Strategy 2007-2009

Strategic Thrust :

New Focus

Seda will move: from reliance on mono-funded approach to

sustainable multi-sourcing of funds.• Why:

• Current funding from the dti not enough for the mandate• Great uncertainties related to future level of the dti funding• Other Government departments/levels willing to participate• Opportunities for PPP • Clients willing to pay for the services

Strategy 2007-2009

Strategic Thrust :

New Focus


Progress to Date1. The seda Roll-out and Operations

2. seda Key Programmes

1. Information and Advice

2. Export

3. Training and Mentorship

4. Manufacturing Support

3. Financial Management

4. HR Issues

4

footprint in the provincesOur4

Roll-outEASTERN CAPE

Provincial Office:Bisho

Amathole East London

Chris HaniQueenstown

O R TamboMthatha

Nelson MandelaPort Elizabeth

Alfred NzoMount Ayliff

UkhahlambaBarkley East

CacaduJeffrey’s Bay

4.1

Existing Offices

To be established in 2007/ 2008

seda Outreach :

14 973 Clients assisted

24 EICs+

Roll-outFREE STATE

Provincial Office:Bloemfontein

Fezile DabiKroonstad

Thabo MofutsanyaneBetlehem

XhariepTrompsburg

MangaungBloemfontein

LejweleputswaWelkom

4

seda Outreach :


4.1

9 EICs+

Roll-outKWAZULU-NATAL

Provincial Office:Durban

UthukelaLadysmith

UthunguluRichards Bay

AmajubaNewcastle

UmgungundlovuPietermaritzburg

UguPort Shepstone

SisonkeKokstad

EthekwiniDurban

seda Outreach :


4.1

9 EICs+

Roll-outLIMPOPO

Provincial Office:Polokwane

VhembeThohoyandou

MopaniTzaneen

CapricornPolokwane

SekhukhuneGroblersdal

ModimolleWaterberg

Existing Offices


seda Outreach :


4.1

11 EICs+

Roll-outMPUMALANGA

Provincial Office:Nelspruit

BohlabelaBushbuckridge

NkangalaWitbank

Gert SibandeSecunda

EhlanzeniNelspruit

NkomaziMalelane

seda Outreach :


4.1

12 EICs+

Roll-outNORTH WEST

Provincial Office:Mafikeng

BophirimaVryburg

SouthernKlerksdorp

BojanalaRustenburg

CentralMafikeng

MadibengBrits

seda Outreach :


4.1

4 EICs+

Roll-outNORTHERN CAPE

Provincial Office:Kimberley

Pixley ka SemeDe Aar

NamakwaSpringbok

KgalagadiKuruman

Frances BaardKimberley

SiyandaUpington

seda Outreach :


4.1

3 EICs+

Roll-outWESTERN CAPE

Provincial Office:Cape Town

EdenGeorge

BolandStellenbosch

City of Cape TownBelville

Central KarooBeaufort West

(satellite)

OverbergBredasdorp

West CoastMooreesburg

Existing Offices


seda Outreach :


4.1

8 EICs+

Roll-outGAUTENG

Provincial Office:?

TshwanePretoria

seda Outreach :


4.1

24 EICs+

Roll-out SUMMARY

2006/2007

Target Achieved

Provincial Offices 0 0

Branches 38 38

EICs 103 103

2006/2007

Province Branches EICs

Limpopo 3 11

Mpumalanga 5 12

Gauteng 1 24

North West 5 4

KZN 7 9

Free State 5 9

Eastern Cape 4 24

Northern Cape 5 3

Western Cape 3 7

Total 38 103

Geographical spread of seda offices

SERVICE DELIVERY: URBAN vs RURALUrban29%

Rural71%

4.1

Key Programmes

Information and Advice

• 103 Enterprise Centres

• 12 960 clients were assisted through seda website

• 285 716 clients visited the seda website

• 219 Radio Programmes implemented (including community radio)

• 20 Print media programmes implemented

• 4 TV programmes implemented

4.2

Key Programmes

Export Readiness Programmes

• Export promotion training – 716

• ABSA International Trade Bureau

• Technonet Africa

• Trade Point Programme (3)

– Tshwane (Tshwane Municipality)

– Johannesburg (JICC)

– Durban (Durban Chamber of Commerce)

• National Procurement Support, accessible through all seda branches

4.2

Key Programmes4.

2

Technology Support (sTP)

• Technology Incubators

• Technology Transfer Fund

• Business Hives

Key Programmes

Training and mentorship

• Mentorship (SA Plato) – Flanders in Belgium

• UNIZO Ntataise (“handholding” of SMMEs in SA) between Flanders in Belgium

and SA

• Productivity training with NPI

• Western Cape Chamber of Industries – seda has in partnership with WCCI

successfully conducted a mentorship programme to 28 SMEs from various

sectors. The success of this project was attributed to the role played by mentors

from both Chambers and private sector companies.

4.2

Key Programmes

Manufacturing Support• National Industrial Chamber – project to support small manufacturers to

supply big retailers, eg Massmart that will result in income generations of R70m and a creation of 188 new jobs in initial stage

• Shintsa - Furniture making programme, targeting young people in partnership with 5 FET colleges (40 learners per college / total 200 learners). Support will be given in seda branches where FET colleges are found.

– Port Elizabeth

– Motheo

– Northern Cape

– Umgungundlovu

– Cape Town

4.2

• Unqualified audit report in the first year of operation

• Internal control environment strengthened through additional capacity in

the finance department

• Full capacity to spend allocated funds

• Moratorium was placed on new funding commitments because of

inadequate funds

Financial Management4.

3

Staff complement in the provinces

Managers13%

Support staff47%

Technical Staff40%

HR Issues4.4

Total staff complement - 464

• All staff from merged institutions successfully placed

• Three outstanding CMMA cases

• Performance Management System

HR Issues4.4

Some key indicators Targets 07/08

Clients assisted 300 000

New business stared and operational 4 000

New jobs facilitated 6 000

Growth of turnover of assisted SMMEs 10%

targets 2007/08


Budget

5

Where From Where to

2004/5 2005/6 2006/7 2007/8 2008/9 2009/10

Budget R120 million R200 million R378 million R455 million R630 million R695 million

Staff 247 351 464 490 554

(30)

602

(30)

Core Network

* National 2 1 1 1 1 1

* Provincial 8 6 8 8 9 9

Satellites / Branches

17 27 40 40 48 54

LBSCs / EICs

61 + 4 87 103 103 200 284

Total Network

92 121 152 153 258 348

Major cost drivers

• LBSC’s funded at R67 000 p.a. : EICs funded at R250 000 p.a. (funding model to change)

• Increase in number of branches

• Increase in number of seda permanent staff

• Enhancement of products and services

NB : Timing of establishment of branches and EICs bewteen FY 2005/06 and FY 2006/07

Preliminary Financial Projections FY 06/07 FY 07/08 FY 08/09 FY 09/10 FY 10/11

R'000 R'000 R'000 R'000 R,000

EXPENDITURE:

OPERATIONS:

- Products and Services 77,000 145,000 205,000 225,000 250,000

- Other Operational 94,000 112,000 200,000 220 000 240,000

Total Operations: 171,000 257,000 405,000 445,000 490,000

OTHER EXPENDITURE:

-Staff cost, 177,000 143,000 160,000 175,000 190,000

- Admin and overheads 25,000 30,000 45,000 50,000 55,0000

- Capital cost 5,000 25,000 20,000 25,000 30,000

Total National Office: 207,000 198,00 225,000 250,000 275,000

TOTAL EXPENDITURE 378,000 455,000 630,000 695,000 765,000

INCOME:

DTI 311,000 444,000 520,000 545,000 555,000

FINNNISH GOVERNMENT 27,000 11,000 10,000 0 0

PROVINCES/DISTRICTS/LOCAL GOVERNMENT 9,000 50,000 75,000 110,000

OTHER INCOME 31,000 50,000 75,000 100,000

TOTAL INCOME 378,000 455,000 630,000 695,000 765,000

Notes on Financial Projections• For the 07/8 Financial year, only the existing 40 centres will be made fully operational whilst

negotiations are started to get additional funding from Provinces/Districts/Local Government.

• At the funding level of R455 million, the following risks still exist:

– The planned new branches for Western Cape (3), Eastern Cape (3) and Limpopo (2) will not materialise in FY07/08 because of budgetary constraints and this has serious reputational risks as negotiations with the provinces had already started in anticipation of more funding

– The opening of a provincial office and five (5) branches in Gauteng province (targeted for FY07) is also compromised because of the budgetary constraints. This also has serious implications since as an economic hub of South Africa, Gauteng’s small enterprise community needs seda’s intervention with respect to development and support

– Under the current budgetary constraints, the EIC outreach programme will not be achieved because of the reduction in the retainer from R250 000 pa to R60 000 and due to the moratorium on the establishment of a further 110 EICs which will affect both outreach and impact of services

– Inability to participate in/or support the upscaling of sector specific and other national programmes, for example, ASGISA related programmes, Expanded Public Works Programme, etc.

• For the 08/09 Financial Year, mild expansion will be done to bring the branches to 48 branches whilst Provincial/District/Local governments start making funding contributions. Efforts will also be made to source funding from other institutions and/or organisations.

• For the 09/10 financial year, the full delivery model will be in place and hopefully Provincial/ District/ Local Government will be making meaningful funding contributions.

• For the 10/11 financial year the network would have been stabilised as well as the funding streams secured for future sustainability.

Plans 2007/08

• Additional staff at the branch level

• IT infrastructure

• Capacity building

• Monitoring and evaluation system


Lessons Learnt

6

Lessons

• Government funding located in different pockets with different

decision making processes

• Compounded by legislation that impedes transfer of funds from lower

tiers of government to higher tiers

• No short-cuts to find win-win solutions

• Role clarification very critical

6

Lessons(continued)

• Slow approval processes even in areas where buy-in exists

• Scarce SMME support skills commanding private sector salaries

• Negative perception regarding delivery track record of national

entities

• Emotional attachment to programmes

• Myth of the “experienced” business advisor

6

• Expansive geographic space and scale that has to be covered requires

large investments

• Unrealistic expectations

• Balancing the political expectations with what entrepreneurs need

• Different levels of capacity of our partners, NGOs, etc.

• Acknowledgement is very critical in a partnership

Lessons(continued)

6


Conclusion

7

• Entrepreneurs want solutions to their problems, not long stories about

available programmes, eg

• Quick turn-around times

• Simple language

• Simple processes

• Listen to the Entrepreneur

What mattersmost

7

Thank you

A.N. Damane, CEO

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