Grow op­por­tu­nity to har­vest suc­cess

The West­ern Cape is most fa­mous for its wine and as a per­fect place for a hol­i­day. How­ever, there are plenty of busi­ness prospects in the prov­ince too. The In­dus­trial Devel­op­ment Cor­po­ra­tion’s tells Gayle Edmunds where to find them

CityPress - - Business -

Most peo­ple as­so­ciate the West­ern Cape with wine and tourism. Though, in­creas­ingly, the base of op­tions for driv­ing eco­nomic growth in the prov­ince is grow­ing. What would you name as the five big­gest op­por­tu­ni­ties en­trepreneurs should look for in the prov­ince over the next two years? Tourism re­mains an im­por­tant sec­tor in the prov­ince to sup­port in­clu­sive eco­nomic growth. It is very labour in­ten­sive, with ris­ing pro­duc­tiv­ity and its abil­ity to cre­ate sus­tained jobs for all skill lev­els in both ur­ban and ru­ral nodes. Our worl­drenowned wine in­dus­try in the West­ern Cape con­tin­ues to make strides in global mar­kets and the op­por­tu­nity is there to de­velop other niche prod­ucts that will sus­tain our po­si­tion as a global player.

Agri­cul­ture and agro­pro­cess­ing are key sec­tors in the West­ern Cape, and con­tinue to show a strong ad­van­tage com­pared with other prov­inces in terms of ex­port po­ten­tial. Al­ready, we have seen in­creased ex­ports of agri­cul­tural prod­ucts to the rest of Africa.

In terms of the prov­ince’s eco­nomic game-chang­ers, the oil and gas sec­tor is also iden­ti­fied as key. The devel­op­ment of the Sal­danha Bay in­dus­trial devel­op­ment zone and the pro­posed At­lantis spe­cial eco­nomic zone present a lot of op­por­tu­ni­ties for metal fab­ri­ca­tors, rig and ship re­pair com­pa­nies, and com­po­nent man­u­fac­tur­ers, es­pe­cially in ar­eas of re­new­able en­ergy, en­ergy ef­fi­ciency and other greener tech­nolo­gies.

The plas­tics and chem­i­cal in­dus­tries are also well es­tab­lished in the West­ern Cape, and we al­ready have a plas­tic re­cy­cling in­dus­try that feeds into an­other op­por­tu­nity for con­vert­ers of re­cy­cled and blended prod­ucts. Cou­pled with the al­ready en­trenched re­cy­cling cul­ture in the West­ern Cape, we do be­lieve that there is still more to be ex­ploited in ar­eas of ba­sic, spe­cial­ity chem­i­cals, phar­ma­ceu­ti­cals and other chem­i­cal prod­ucts.

Lastly, the rel­a­tively un­der­val­ued rand pro­vides some op­por­tu­ni­ties for in­creased film pro­duc­tion. We have seen in­creased ac­tiv­ity in this area and its mul­ti­plier ef­fect for job cre­ation in tourism ac­com­mo­da­tion and other ser­vice-re­lated sec­tors, such as cater­ing and re­tail. The whole coun­try faces un­em­ploy­ment and stag­nated eco­nomic growth. What spe­cific chal­lenges do busi­nesses in the West­ern Cape have to over­come and how does the In­dus­trial Devel­op­ment Cor­po­ra­tion (IDC) help them?

While we are aware of the re­al­i­ties of the cur­rent eco­nomic cli­mate, we re­main op­ti­mistic about the po­ten­tial some of th­ese busi­nesses pos­sess should they over­come ob­sta­cles. Some com­pa­nies find them­selves in a dis­tressed sit­u­a­tion due to in­ter­nal cash flow pres­sures, lower de­mand for their prod­ucts and ser­vices, and prob­a­bly an in­abil­ity to source fi­nance from tra­di­tional sources. It is in times like th­ese that the IDC plays its coun­ter­cycli­cal role in fill­ing some of the gaps in the mar­ket, thereby en­sur­ing that jobs and ca­pac­ity in th­ese busi­nesses are re­tained.

We do this through our busi­ness sup­port pro­gramme, which is aimed at ad­dress­ing some of th­ese ob­sta­cles. Or­di­nar­ily, this may come in the form of pre- and post-in­vest­ment sup­port, which is also one of the unique non-fi­nan­cial sup­port sys­tems that we of­fer to our clients in the 2015/2016 fi­nan­cial year to grow their busi­nesses. The IDC has funded 55 projects in the 2015/2016 fi­nan­cial year. Which of th­ese did you find to be a sur­pris­ing fit for a prov­ince de­fined by wine and hol­i­days in the mind of the pub­lic?

We have seen an in­creased in­vest­ment in ba­sic met­als, metal prod­ucts and ma­chin­ery; tex­tile, cloth­ing and leather goods; mo­tor ve­hi­cle com­po­nents, parts and ac­ces­sories; coke and petro­chem­i­cal prod­ucts; elec­tri­cal ma­chin­ery and ap­pa­ra­tus; the man­u­fac­ture of trans­port equip­ment; and the man­u­fac­ture of food and bev­er­ages.

Man­u­fac­tur­ing; agri­cul­ture, hunt­ing, forestry and fish­ing; and elec­tric­ity, gas and wa­ter sup­ply are strongly rep­re­sented in terms of the IDC’s cur­rent sec­toral dis­tri­bu­tion in the prov­ince, and we could see this trend re­peat­ing it­self in the fund­ing of the 55 projects. What are the spe­cific ben­e­fits the West­ern Cape of­fers en­trepreneurs who are look­ing for op­por­tu­ni­ties?

Cus­tomer ser­vice and stream­lined turn­around times for de­ci­sion making and ap­proval of ap­pli­ca­tions are non­nego­tiable. Be­sides and as part of the ap­pli­ca­tion process, in-depth due dili­gence to iden­tify and mit­i­gate risks; struc­tur­ing to suit the unique­ness and mer­its of the trans­ac­tion; pric­ing based on risk and de­vel­op­men­tal fac­tors; as well as the con­sid­er­a­tion of busi­ness sup­port when needed are all taken into ac­count when as­sess­ing an ap­pli­ca­tion. A con­stant in any dis­cus­sion around the econ­omy is driv­ing ben­e­fi­ci­a­tion in the agri­cul­tural field. Do you see more open­ings for en­trepreneurs to get into this busi­ness? What have been the most ex­cit­ing ben­e­fi­ci­a­tion pro­grammes you’ve been in­volved in since the IDC opened of­fices in the prov­ince?

There are spe­cific sub­sec­tors that are driv­ing growth in the agri­cul­ture and agro­pro­cess­ing value chain. Hor­ti­cul­tural, field crop pro­cess­ing, live­stock and meat pro­cess­ing, and aqua­cul­ture value chains are ar­eas of growth po­ten­tial and in­ter­est to the IDC. As part of this value chain, there are also other niche prod­ucts in the West­ern Cape that are not yet fully ex­ploited, such as rooi­bos, buchu and hoodia, which can be used for medic­i­nal and other non-food pur­poses, and they have a huge po­ten­tial to cre­ate large num­bers of jobs, es­pe­cially dur­ing har­vest­ing time.

In the five years to Septem­ber 2016, we had ad­vanced more than R650 mil­lion to en­trepreneurs to grow their busi­nesses in this sec­tor. The in­vest­ments ranged from the grow­ing and pro­cess­ing of fruit, nuts, bev­er­ages and spice crops; grow­ing and pro­cess­ing of rooi­bos tea; poul­try and meat pro­cess­ing; grow­ing and pro­cess­ing of blue­ber­ries and per­sim­mons; and marine aqua­cul­ture and fish pro­cess­ing. One of the IDC’s ma­jor con­cerns is en­sur­ing that com­mu­ni­ties ben­e­fit from the deals that are done, not only in terms of job cre­ation, but also regarding com­mu­nity own­er­ship.

Broad-based eco­nomic empowerment is one of the main ob­jec­tives for the IDC in projects that we fi­nance – you are spot-on. We al­ways strive, through our spe­cial fund­ing schemes, to fa­cil­i­tate eq­uity par­tic­i­pa­tion by com­mu­ni­ties and the work­ers. Trusts are nor­mally the pre­ferred ve­hi­cles em­ployed for the hold­ing of shares on be­half of the ben­e­fi­cia­ries. What is the West­ern Cape of­fice do­ing to ac­tively em­power youth, women and black-owned busi­nesses in the prov­ince? Of the projects you’ve funded in the past five years, how many have been youth owned, how many owned by women, and does the prov­ince boast a num­ber of black in­dus­tri­al­ists yet?

There are spe­cial funds set aside to sup­port youth, women en­trepreneurs and black in­dus­tri­al­ists within the IDC. Though our in­vest­ments in black in­dus­tri­al­ists may seem mod­est in com­par­i­son with other nat­u­ral re­source-rich prov­inces, we have dis­bursed more than R570 mil­lion to black-owned or em­pow­ered com­pa­nies in the past five years.

While the of­fice has funded sev­eral women- and youthowned busi­nesses over the past year, we would want to see an in­creased up­take from th­ese groups, and we have since re­alised that to in­crease up­take from th­ese tar­get mar­kets, es­pe­cially where the youth is con­cerned, en­tre­pre­neur­ial devel­op­ment and tech­ni­cal sup­port are key to busi­ness op­por­tu­ni­ties, par­tic­u­larly when it comes to in­dus­trial sec­tors.

Be­ing hands-on in the busi­ness and not just a pas­sive in­vestor is a re­quire­ment. In­volve­ment at both an op­er­a­tional and strate­gic level of the com­pany is es­sen­tial. This is of­ten not an easy task for many due to a lack of the nec­es­sary busi­ness acu­men and skills. That is where the IDC steps in to as­sist with its busi­ness sup­port pro­gramme.

In the 2015/16 fi­nan­cial year, the IDC in the West­ern Cape ap­proved a to­tal of R1.4 bil­lion, and R83.4 mil­lion of this was to youth-owned busi­nesses; R63 mil­lion to women-em­pow­ered busi­nesses and R89.7 mil­lion to black in­dus­tri­al­ists.

In ad­di­tion, Eco­nomic Devel­op­ment Min­is­ter Ebrahim Pa­tel an­nounced in May last year that to bring more black South Africans into the pro­duc­tive sec­tors of the econ­omy, par­tic­u­larly women and the youth, the IDC would set aside R9 bil­lion – R4.5 bil­lion for women and R4.5 bil­lion for the youth over the next five years. This is mas­sive, and it is now a chal­lenge to our youth and women-owned busi­nesses to come for­ward with fund­able trans­ac­tions. How much money has the prov­ince put aside for projects in the next two years?

We do not have a spe­cific al­lo­ca­tion per se for the West­ern Cape, but what we can tell you is that R100 bil­lion over five years was set as a na­tional IDC tar­get and we an­tic­i­pate the West­ern Cape con­tri­bu­tion to re­main sig­nif­i­cant, es­pe­cially in terms of the num­ber of busi­ness part­ners. What are your top tips for en­trepreneurs in the prov­ince who are about to walk into your of­fice to ask you to fund their idea or help them up­scale their busi­ness?

Be­sides the nec­es­sary pas­sion, drive and com­mit­ment; a good busi­ness plan, ca­pac­ity, char­ac­ter, co­he­sion and con­ti­nu­ity, and tol­er­ance for risk are all key con­sid­er­a­tions.

This project is re­ported by City Press and sup­ported by the IDC

GO­ING BIG Lizo Nt­loko is con­fi­dent the Sal­danha Bay in­dus­trial devel­op­ment zone will be one of the key eco­nomic driv­ers for the west coast

FROM THE EARTH Agri­cul­ture is strongly rep­re­sented in terms of the IDC’s sec­toral dis­tri­bu­tion

CINEMA Cape Town Film Stu­dios. The un­der­val­ued rand pro­vides op­por­tu­ni­ties for in­creased film pro­duc­tion

TEA TIME Rooi­bos, buchu and hoodia can be used for medic­i­nal and other non-food pur­poses

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