With a new single development agency, the province gets positioned for economic growth
The provincial government of Limpopo is set to launch a new, single economic development agency. It is expected that the new agency will lead the planning and execution of strategies aimed at boosting the provincial economy. This will also help it shift from a culture of disaggregation to a more collaborative approach, creating a more diversified industrial base that is sector-focused. One of the main areas of focus will be the establishment of special economic zones (SEZs) to accelerate economic development across the province, says Samuel Mafadza, the interim CEO of the newly established Limpopo Economic Development Agency (Leda). The agency will incorporate the functions of the Limpopo Economic Development Enterprise, the Limpopo Business Support Agency, Trade & Investment Limpopo and Limpopo AgriBusiness Development Corp.
The growth nodal points targeted for the SEZs and industrial development will be Lephalale SEZ; Steelpoort SEZ; Mutashi SEZ; Phalaborwa SEZ; and Polokwane SEZ. The development of SEZs in the province is in line with good practice in many thriving economies. In many countries clusters such as the envisaged SEZs have been successful in making business more competitive by increasing the pace of innovation and stimulating new business formation.
It is hoped that businesses will be drawn to the areas where clusters have been formed and thus create more employment opportunities, leading to economic growth.
Local networks of businesses that provide a wide array of logistics services — including transportation carriers, warehousing companies and third-party logistics service providers — are expected to function well in the SEZ environment. The expectation is that they will attract companies for whom logistics is a critical element of their service offering or a large part of their overall costs.
Property and infrastructure investments are expected to play a catalytic role in boosting the level of development across the province. As Mafadza explains: “Infrastructure investments in water, energy, transport and ICT have a fundamental role to play in the development of the provincial economy. The province needs infrastructure to unlock economic opportunities and encourage investment and job creation. “In a province such as Limpopo, it is also important for us to address past spatial imbalances by bringing rural areas into the economic main stream.
”Limpopo’s portfolio of growth sectors includes agriculture, mining, green industries, tourism and the creative arts. In the year ahead, customised sector development plans will be finalised to enable the interim leadership of Leda to analyse the unique dynamics of each sector and advise the provincial government on what stage of the value chain to focus on. Their point of departure will be to identify the low-hanging fruits within each sector, before starting to develop the necessary resources for local people and companies to be involved in the entire value chain.
Explaining the focus of the sector approach, Mafadza says: “In agriculture and agroprocessing the main focus will be on industrialisation as well as finance and marketing support. We are in the process of identifying projects and investment opportunities to establish a pipeline of agroprocessing projects in the province. This will help us identify opportunities for investment and also start developing export markets.
“By expanding agroprocessing activities and encouraging active participation by private-sector companies, we should be able to start making inroads into local markets for processed food. We also believe there are opportunities in the supply chains of big SA retailers and food companies and we need to examine the scope for Limpopo agricultural and agroprocessing projects to penetrate those markets.” Similar plans are being developed for mining and mineral processing, focusing on identifying opportunities for growthand development in the entire value chain.
The customised sector plan for mining will focus on facilitating and encouraging manufacturing and beneficiation across the province, particularly in value-adding activities such as ooling and foundry. Mafadza believes there are good prospects for greater diversity in the provincial economy and more opportunities to expand the province’s share of both domestic and foreign direct investment within the mining and mineral processing sector.
“The province’s export performance will be enhanced as we start exploring more areas of excellence and encouraging enterprise formation in those areas,” he says. “We are optimistic that government will also create an enabling environment for both domestic and foreign investors to invest in the province’s mining and mineral resources sector.”
Massive investments are already happening with or without the involvement of the provincial government and its agencies. However, Mafadza is confident that the new agency will be ideally positioned to facilitate investment and market access across the globe through a more focused and tailored approach that fits the unique dynamics of Limpopo’s economy. The agency will also be able to explore opportunities for twinning with other provinces wherever appropriate.
Mining and related industries also require specific skills at the right level, so the training and development of artisans and technicians will have to receive priority intervention. Such training will involve specific programmes at Further Education & Training (FET) colleges as well as the placement of consultants and coaches in specific companies.
In terms of the green industries, SA has demonstrated seriousness about its obligations as a signatory of the statutes of the International Renewable Energy Agency. Consequently, investments are starting to flow into areas such as renewable energy generation and energy efficiency projects at both household and industry level. For Limpopo this means prioritising the green economy across all sectors by creating jobs in green industries, using technologies such as carbon capture and sequestration. It also means focusing on renewable energy like solar, bio-fuel and waste as energy sources, while promoting energy efficiency in terms of green buildings and lighting, green transport, forestry and retrofitting.
The above sectors are all labour intensive and they present considerable opportunities for enterprise development. Targeted interventions by Leda are therefore expected to yield visible positive results within a short period.
“The province needs a comprehensive enterprise development and finance model that will catapult this sector to take its rightful place in the provincial economy, ” says Mafadza. “Leda needs to ensure that the SMME sector becomes more competitive, profitable and able to create more and better employment opportunities.”
With regard to enterprise development, the main areas of focus will be market development, business development services, value-chain development as well as investment and infrastructure support for SMMEs.
The other important element is enterprise finance because many small businesses fail in their first year of existence because of financial constraints. Mafadza expects that Leda’s role in this regard will be to complement, co-ordinate and monitor financial assistance schemes for small businesses. Such initiatives will include soft loans, equity and venture capital funding as well as grants.
Activities being considered to encourage the growth of the SMME sector include the promotion and co-ordination of SMMEs and cooperatives through promotional activities, regional offices and collation of SMME-related information in a comprehensive database. Technical and advisory support services will be provided in close collaboration with other agencies involved in SMME development in the form of SMME development programmes, an SMME Information & Advisory Centre and an SMME Expert Advisory Panel.
Another area that Leda will be expected to play a leading role in is the facilitation of industrial linkages between SMMEs and large companies and multinational corporations through a carefully co-ordinated Industrial Linkage Programme and a Competitive Supplier Development Programme. In addition, Leda will facilitate the participation of SMME related agencies and SMEs themselves in international and regional co-operation forums, skills enhancement programmes, attachment programmes for employees of SMMEs and placement of foreign experts in selected SMMEs.
Numbers of experts agree that a much stronger SMME sector can play a vital role in alleviating poverty and unemployment in the country at large. There is also a need to create a culture whereby people are given the knowledge and skills to identify gaps in the economy to help them start sustainable businesses.
With an official unemployment rate that stands at just over 25%, SA needs to act fast. A report published in the FM last year (Sept 28-Oct 3 2012) on entrepreneurship puts SA’s entrepreneurial activity at very low levels. In a survey conducted by the Global Entrepreneurship Monitor (GEM) across 69 countries, SA’s total early-stage entrepreneurial activity (TEA) was dismal. TEA, a global standard used by government and private agencies across SA, refers to the number of new businesses starting up in an economy. Rated among comparable economies between 2006 and 2011, SA’s TEA stood at 0%, while that of China increased by 48%, followed by Brazil (28%).
The FM report quotes the GEM as listing the following as critical factors in encouraging entrepreneurship: societal attitudes, well-managed government programmes and business reforms that make it easier to develop and support small businesses.
So, by focusing on the growth sectors, the Limpopo government and its new agency will be better positioned to address the province’s most critical challenges, including the pressing need for more jobs, higher levels of investment and infrastructure development. Stats SA Quarterly Labour Force Survey Quarter 3 2012, lists Limpopo as one of the provinces that had employment gains between the second and the third quarters of last year. In addition, for the year ended September 2012 the province was one of three biggest contributors in increasing employment. However, the unemployment rate in Q3 increased by two percentage points. To make sure unemployment is reduced, Leda will have to work hard on making the province one of the main investment destinations in SA. That will help create more jobs and better opportunities for small businesses, among others.