Section 8 Funding Options and Support Services

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1 Resources are not unlimited and it is therefore extremely important that the resources be spent on the most important projects. Prioritising projects makes implementation easier as it is possible to start with projects with the highest impact potential. Section 8 Funding Options and Support Services 8.1 External Partnerships and Support Service Agencies A vital institutional arrangement that can be utilised is the formation of partnerships between the municipality s LED unit and the West Rand District LED unit, as well as between the local LED unit and various support organisations. The formation of these partnerships is especially essential at Programme and Project level. As a result of the limited budget for LED initiatives it is important for LED department to coordinate the involvement of various community groups and support service agencies. Within these partnerships it will be able to implement the Programmes and Projects identified and described in this LED framework. Support Service agencies have a vital role to play in the development of a sustainable, dynamic, diverse economy in Mogale City Local Municipality. However, the majority of residents, entrepreneurs, SMMEs and established businesses in the municipality do not have access to the services provided by support services agencies. The following section offers more detailed information of the core services and focus areas of the various support service institutions. The Department of Trade and Industry (the dti) The Department of Trade and Industry (the dti) offers a variety of services to companies planning on investing in South Africa. The dti and its subsidiary agencies are involved in promoting 144 Contact details of the dti Tel (locals): Tel (international callers): +27 (12) Fax(locals): Fax (international callers): +27 (12) Website:

2 economic development, SMME support, black economic empowerment and promoting and regulating international trade. The aim of the dti is to lead and facilitate access to sustainable economic activity and employment for all South Africans through its understanding of the economy, its ability to identify economic opportunities and potential, and its anticipation of the future. This will be achieved through attracting higher levels of investment, increased access to local products and services in international markets and creating a competitive market for domestic and foreign businesses. The dti is a group of developing bodies that form part of the Council of Trade and Investment Institutions. The group is divided into three main clusters, i.e. development finance, regulatory and specialist services. Some of the major developing bodies included in the dti group are the Industrial Development Corporation and the Khula Enterprise Finance Limited. These organisations are examined in more detail below. The Industrial Development Corporation (IDC) The IDC is a self-financing state owned development finance institution whose primary objective is to contribute to the generation of Contact details of the IDC Tel: balanced sustainable economic growth in callcentre@idc.co.za Southern Africa. The aim of the IDC it to secure Website: and stimulate rapid economic growth, create employment opportunities and reduce poverty. Sectors that are supported by the IDC funding are outlined in Annexure B: IDC Financing Options. Although the IDC reviews each project separately, funding preferences are given to the following: Financing fixed assets and the fixed portion of growth in working capital requirements Projects/businesses which have a significant developmental impact e.g. rural development Empowerment, job creation, township development and value addition Core strategies and objectives include: To contribute to the goals of the ASGISA by providing financing that will stimulate job creation, investment activity and economic growth To develop economies that are viable, sustainable and environmentally and socially responsible To develop Small and Medium Enterprises (SMEs) 145

3 To accelerate BBBEE To serve as a catalyst for balanced, sustainable development To provide risk capital in partnership with the private sector Trade and Investment South Africa (TISA) Trade and Investment South Africa (TISA) is a division Contact details of the TISA of the dti and provide investment facilitation services for inbound investors. Its aim is to increase South Tel: Africa's capability and to promote exports into Website: targeted markets and increase and retain the level of foreign and domestic direct investment. Tisa focuses on promoting sectors of the South African economy that show the biggest growth potential and marketability, and coordinates provincial initiatives to match investors requirements with opportunities in the provinces. TISA has three business units, namely: Investment Promotion and Facilitation. It is responsible for attracting foreign direct investment, developing and promoting investment by domestic investors, and enhancing government policies and processes that impact on South Africa's appeal to investors. Export Development and Promotion. It is responsible for developing and promoting South African goods and services including specific technical interventions in terms of export advice, matchmaking, and market intelligence. This business unit aims to increase the competitiveness and export capacity of South African companies so that they are able to export into various markets. The assistance provided is in the form of financial or non-financial assistance. International co-operation. International Operations Unit is responsible for the effective management and administration of the Department's Foreign Office network. Small Enterprise Development Agency (SEDA) SEDA is a government agency and a member of the dti group. It is mandated to implement government s 146 Contact details of SEDA Tel: (Gauteng) Fax: (Gauteng) Website: info@seda.org.za

4 small business strategy design and implement a delivery network for SMME development and integrate government-funded support agencies across all tiers of government. SEDA also supports, promotes, and grows enterprises with a special focus on co-operative enterprises located in rural areas. The task of SEDA is as follows: Provide information on how to start a business Assist with the setting up of a cooperative Assist with the compilation of business and marketing plans Mentor and coach entrepreneurs Build capacity of entrepreneurs through training Provide advice on the legal form of businesses, franchising, tendering and how to access finance Identify opportunities and business linkages for small enterprises. In general, SEDA aims at providing information to small business and prospective enterprisers that would encourage them to start and build sustainable businesses. The Gauteng Enterprise Propeller (GEP) The Gauteng Enterprise Propeller is a provincial government agency established in 2005 under the auspices of the Department of Economic Development to provide non-financial support; financial support; co-ordinate stakeholders for Contact details of GEP Tel: Fax: Website: the benefit of Small Medium and Micro (general information): owaiz@til.co.za Entrepreneurs (SMME s) in Gauteng. The goal of the GEP is to facilitate increased SMME participation in mainstream economy, and their contribution to economic growth and development and employment in Gauteng The objectives of GEP are to: Promote, foster and develop small enterprises in Gauteng Implement the policy of the Gauteng Provincial Government for small enterprise development Design and implement small enterprise development support programmes within Gauteng 147

5 Establish and promote a support network in order to increase the contribution of small enterprises to the Gauteng economy Promote economic growth, job creation and equity Integrate all government-funded small enterprise support agencies in Gauteng Strengthen the capacity of service providers to assist small enterprises to compete successfully domestically and internationally The province recognises that SMMEs have a valuable role to play in addressing the afore-mentioned objectives and can directly and indirectly: Contribute to the Province's and country's GDP Create some long-term sustainable jobs Ensure transformation in terms of the representivity of the economic sector as a whole and contribute to a reduction of poverty GEP has identified six Strategic Priorities towards fulfilling its role, achieving its goal and delivering on its mandate. These are: Provision of efficient and timely financial support to SMMEs towards facilitating their development Provision of efficient and timely business development support to SMMEs towards increasing their professionalism and sustainability Contribute to the creation of an enabling environment for SMMEs growth and sustainability Identify business opportunities and enhance business facilitation and business partnerships for, and between SMMEs Facilitate increased SMME participation, including of women, youth and people with disabilities, in the Province's economic growth sectors and GPG's priority socio-economic development projects Ensure effective and efficient management of GEP Gauteng Economic Development Agency (GEDA) The Gauteng Economic Development Agency is the first point of contact for smart investors and entrepreneurs who need access to unlocking new value in Gauteng and South Africa. The agency is responsible for marketing and facilitating the economic, investment and trade promotion of the province. The mandate of GEDA is to implement Contact details of GEDA Tel: Fax: Website: info@geda.co.za 148

6 approved departmental policies designed to grow the economy, attract investment and develop sustainable social-economic infrastructure. In particular, GEDA s responsibility is to implement policies in the areas of economic production, investment and trade. GEDA s key objective is to identify market investment opportunities and to respond to requests for assistance from local and foreign investors. The benefits of doing business in South Africa and Gauteng in particular, include various incentive options, which may be broadly classified into the following categories: Development finance Empowerment Export facilitation Human resources and skills development Investment incentives Matching grants Small, medium and micro-enterprises Technology (research and development) and, Tourism Development Band of South Africa (DBSA) The Development Bank of Southern Africa is a development finance institution and its purpose is to accelerate sustainable socioeconomic development by funding physical, social and economic infrastructure. By means of funding it is possible to improve the quality of life of the all the residents in South Africa. Contact details of the DBSA Tel: Fax: Website: The DBSA is currently working on the following strategic projects. Sustainable Communities Programme: The programme aims to broaden and deepen its development impact. In pursuit of this, the DBSA provides a comprehensive, integrated package of support to struggling municipalities in their efforts to develop social and economic infrastructure. Local Investment Agency: The DBSA and Old Mutual have established a partnership to set up local investment agencies which can act as a catalyst for private and public sector investment. 149

7 Women's Development Programme: The Bank s gender equity programme focuses on the needs of women in construction and their enterprises. Local Government Resource Centre: The Local Government Resource Centre (LGRC) was developed in partnership with local government stakeholders to assist municipalities meet the challenges they face and to fulfil their development responsibilities and duties. It is intended to be a one-stop support centre that is directly accessible to all municipalities and other local government stakeholders through a virtual private electronic network. KM Africa: Knowledge Management brings together policy-makers, sector professionals, researchers, knowledge management experts, governmental leaders and business leaders to collaborate and find solutions to some of the major development challenges faced. Accelerated and Shared Growth Initiative for South Africa: AsgiSA has prioritised increased public investment in infrastructure, and is likely to give rise to a number of large infrastructure projects in South Africa, with municipalities directing more effort towards these areas. 8.2 Potential Funding and Investment Incentives A range of institutions have been identified which could possibly be utilised as potential funding sources. Each of the institutions mentioned is categorised according to the type of economic support for which they could provide funding for. The list of potential national funders is illustrated in the following Table. Table 8.1: Potential Funding Mechanisms Type of Support Potential Funders Comments Skills development and support Department of Labour National Productivity Institute Dept. of Labour COGTA Skills support programmes Social plan programme Local Government Consolidated Municipal Infrastructure Programme Community economic development DWA National government (all departments) Independent Development Trust Working for water programmes Poverty relief programmes Development of the local capacity of communities and business ventures 150

8 DTI Incentive packages for SMME development Khula provides loans and guarantees to reduce risk for SMME s Small and Medium Enterprise Development Programme Ntsika COGTA ARTPAC Support and funding Social plan fund Financial capacity support for small contractors and artisans Business Partners Support services for small businesses Industrial Corporation (IDC) Development Financial incentives to encourage exports SMME Development and Support Dept. of Arts & Culture and Dept. Science & Technology GODISA, which strives to create economic growth and long-term employment opportunities through the enhancement of technological innovation, improvement of productivity, sustainability and international competitiveness of SMME s DTI The Support Programme for Industrial Innovation Technological support Dept. of Communications Bridging the Digital Divide programme Small Business Project Private Sector Initiative Tourism Promotion Manufacturing Development Dept. of Environmental Affairs & Tourism DTI Business Partners CSIR Tourism related activity benefit Tourism development finance Support services to SMME s Conducts research, development and implementation activities 151

9 DTI Sector Partnership Fund Support Programme for Industrial Innovation Competitiveness Fund Technology and Human Resources for Industry Programme Competition Policy Procurement reform Finance for textile, clothing, leather and footwear industries Agricultural Development IDC DBSA Agricultural Research Council DTI COGTA Low interest loans Donor funding Research Agro-industry Development Fund LED fund for job creation Local Economic Development promotion Khula Enterprises Equity Fund Emerging Entrepreneur Fund COGTA Consolidated Municipal Infrastructure Programme Rural Development Department of Rural development and Land Reform DBSA DTI SEDA South Africa Development Fund (SADF) Establish and facilitate community structures and institutions Rural Development Funding South African Micro Finance Apex Fund (Samaf) provides financial services to small-scale entrepreneurs living in ruralareas. Seda supports the growth of small business, especially in rural areas. Funding for rural development. 152

10 Another important potential funder for the Mogale City Local Municipality is the Neighbourhood Development Partnership Grant (NDPG). This is a new and unique grant offered by the National Treasury to municipalities for developments that provide community infrastructure that leverages private sector development physically focusing on target areas that include: Townships that were originally created as separate areas for Black people. Generally located on the periphery of towns and cities Low-income housing estates, which are generally not fully functional neighbourhoods Informal settlements The NDPG is available both as a Technical Assistance (TA) grant and a Capital Grant (CG), with the intention that the National Treasury and the municipality engage in a strategic alliance to deliver the successful project, with a certain measure of security of capital for local government investment identified at early stages of project preparation. The typical ideal project demonstrates a critical mass of both community and commercial development. The council would drive the development of project packages and the establishment of key, appropriate community infrastructure and the creation of the platform for commercial development. The following list of international funders provide a stimulation of economic development and job creation in South Africa: variety of funding options, contributing to the Multilateral Investment Guarantee Agency (MIGA) International Finance Corporation Africa Project Development Facility (APDF) British Investment in South Africa (BIS) Danish/South African Business-To-Business Programme (DANIDA) UK Department of International Development German Technical Corporation (GTZ) European Investment Bank African Development Bank World Bank Commonwealth African Investment Ltd (COMAFIN) Hand-on Training Scheme (HOTS) Southern Africa Enterprise Development Fund Foreign Investors such as Anglo Gold, Investec, etc. 153

11 Donor Agencies: o USAID o United Nations o EU o DANIDA o DFID It is advisable to seek detailed information on their application criteria and financial limits. 8.3 Conclusion There are a number of support agencies and government departments that provide funds for development initiatives. It is critical to form partnerships with these agencies to improve Local Economic Development and Implementation in Mogale City. 154