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
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