I know I speak for Premier Ebrahim Rasool as well when I say how delighted I am to be here in Hermanus as your Provincial Government delivers on the promise to provide an enabling environment for the small, micro and medium-sized enterprise sector - what we call S-M-M-Es.
These RED Door offices are the result of discussions with stakeholders, who lay an important role in developing the economy of our Province. These discussions focussed on the need for partnerships between the state and private sector. As government we have used these interactions to solicit the opinions of business, labour and civil society, on what we need to do to grow our economy. Throughout these interactions, one complaint has constantly been raised, i.e., the lack of an enabling environment that would allow the SMME sector to flourish for the benefit of our economy.
To this end the Provincial Government has initiated a R110-million R eal E nterprise D evelopment (RED) strategy that recognises the urgent need to support small business development in the Western Cape. The RED Door is just one of the many parts that make up our RED strategy, and one of its focal aims is to provide S-M-M-E-s with access to opportunities and finance.
In fact, finance has been identified as the single most difficult problem to overcome because many S-M-M-Es just cannot offer meaningful collateral when applying for loans. The RED Door office can help redress this through a range of inputs, not least through a R30 million loan fund to underwrite loans to those who do not meet standard banking or financial institution requirements.
I want to assure you that loans such as these are not a money giveaway. Therefore, loan beneficiaries must participate in a comprehensive mentoring and skills development programme tailor made to meet their individual needs. This kind of programme is recognised as adding to the sustainability of the business venture and facilitating the environment for the loan to be repaid.
I also want to assure you that the Provincial Government does not intend to continue the role of loan provider indefinitely. Instead we will work with banks and financial institutions to encourage them to be more consumer-friendly to loan applications from S-M-M-Es.
Our first RED Door offices Khayelitsha and Mitchell's Plain have shown us that we are on the right path in providing a one-stop shopping option to small business people. And I have no doubt that Hermanus will follow suit. As you know, the Hermanus RED Door office has been open since the first of March and already has provided services to more than 66 people, more women than men, in retail, tourism and manufacturing. Overall the RED Door offices have advised 2 428 people up to the first week of April. Of this number, many were helped to access government tenders; so far worth R8.8 million and counting. I am very pleased that we have been able to assist small business people in breaking into this potentially lucrative market. In helping them, we help ourselves.
While the aim of the Provincial Government is promotion of broad-based black economic empowerment (BEE) tied to the population of the Western Cape, a breakdown of clients using the RED Door offices show that 35% are women, 25% are youth, and 1% is disabled. The Provincial Government will continue to encourage all designated groups to utilise the RED Door offices in order that BEE is totally reflected in terms of people advised or helped.
The majority of entrepreneurs who have used the RED Door so far fall into the micro or survivalist market, and 60% are engaged in the retail sector. Construction is also a popular selection.
The main requests for advice or help - which is offered in all three provincial languages - are related to:
- business plan writing;
- access to finance;
- t raining and capacity building; and
- a ccess to and assistance with tenders.
The Provincial Government hopes to build on this by also providing on-the-job training.
Given that the majority of the 2 428 small business people gained help through the RED Door offices in Khayelitsha and Mitchell's Plain, we can only imagine the numbers of people throughout the province who will benefit from having access to six more RED Door offices now, and later when the 35 RED Door offices we plan for the Province in the next three years become a reality.
Without small business development, the economy stagnates, employment declines and ultimately the general standard of living deteriorates. A study done by my Department has shown that if properly supported the SMME sector could generate between 50 000 and 60 000 jobs a year in the Western Cape.
Last year's Provincial Growth and Development Summit was aware of this and resolved to establish the conditions that would allow for the creation of 100 000 net new jobs by the year 2008. If we are to realise this goal, then we don't have a choice but to ensure that we do all in our power to support this sector.
We have embarked on the RED Door initiative because we understand that historically, a vast proportion of the population was either excluded from participating effectively in the economy or was actively discouraged from establishing its own businesses. The resource poor seldom are able to offer financial institutions any meaningful collateral to obtain loans.
The result is that the greater majority of our citizens face insurmountable obstacles when attempting to enter the formal economy. This is not only a tragedy for the poor and marginalised, but it is a barrier to the optimal functioning of the economy as a whole.
While Government initiatives to promote S-M-M-Es in the past have been well-intended, the Provincial Department of Economic Development has concluded that two things need to happen: that we need to make a quantum leap in the level of support we are giving to promoting S-M-M-Es and that we need to address the problems in a holistic and integrated manner.
Information, advice and services will be provided in at least the following areas:
- Business idea development.
- Business plan development.
- Financing, including: loans, incentives, grants and investment recruitment.
- Manufacturing advice.
- Tendering and procuring advice and opportunities productivity improvement.
- Operational and administrative advice.
- Management skills and Human Resource Development labour relations.
- Patenting and intellectual property tax assistance.
- Export and import processes.
- Marketing research and advice legal advice.
- IT advice.
- Financial management advice.
- Black Economic Empowerment (BEE) strategies and deal structuring client care.
Information, advice, support, mentoring and access to finance will go a long way towards increasing the number and success rate of S-M-M-Es. However, on their own, these elements will not necessarily result in a flood of new
S-M-M-Es unless new business opportunities are opened up for emerging entrepreneurs, entrepreneurship is encouraged and developed and S-M-M-Es are given access to good sites from which to operate.
To ensure success, we will need to engage with the key players in eleven priority sectors of our economy about the need to help create opportunities for S-M-M-Es in their industries. We will be embarking on an intensive campaign to encourage big business to procure from S-M-M-Es.
We will intensify the use of procurement by the public sector to create opportunities for S-M-M-Es. We will facilitate access to affordable franchise opportunities. We will help shape and pioneer successful business ideas that can be easily replicated. We will mobilise public infrastructure budgets to create spaces for manufacturers and traders to locate themselves optimally.
Most importantly we are saying we need you as SMME and big business to partner us on this road we have taken. At the end of the day we will all benefit.
Thank You.
