Seda could influence export and tax incentives and for manufacturing small businesses coupled with export education programmes available from the dti.
Qualifying Seda clients could be fast-tracked in the selection process for participation in international trade missions.
Seda must align itself with the dti’s Key Action Programme and present opportunities identified to manufacturing small business especially where a demand exist in the local and international markets, within the NEPAD framework. The feasibility of already identified areas where Seda is expected to contribute must be quantified and explored.
One of the key barriers for manufacturing small businesses is meeting industry quality standards, and this is also the case for approval of products manufactured for the export markets. Seda must incorporate practical assistance with Quality Standards and Systems to small businesses into its product portfolio, to facilitate and gauge successes of these businesses in the international markets.
Seda must prioritise labour intensive manufacturing sub-sectors within the main economy, including the agricultural and mining value chains for high level interventions. Continue to use platforms and relationships with the COTII and the dti to identify opportunities in national or major sector projects.
While some big companies and corporations are making serious efforts to redress imbalances of the past via CSI projects, Seda through its Provincial and Branch network must align co-operatives and community owned enterprises to such opportunities as a catalyst for job creation and social upliftment, especially in rural SA.
In order to make small businesses more competitive, Seda must review its Technology Transfer Programme by focusing on established manufacturing and small businesses, to challenge big businesses with aggressive and foothold market entry tactics.
Seda, through its branch network should also actively mobilise small business clients within the regions (after business profiling and segmenting clients) and with the support of political principals, influence LED IDPs to include local investments in Business Improvement Districts and ultimately support its Incubation Programme to provide the necessary physical infrastructure to stimulate small business growth and job creation.
Seda must identify and provide support at major fairs and exhibitions at a national and provincial level where manufacturing small business can showcase their products and services as a direct marketing effort. The Seda marketing team could play a pivotal role in ensuring a competitive presence that would attract the attention of potential investors and partners.
Seda can encourage and facilitate Joint-Ventures for manufacturing small businesses especially for projects identified with large firms. This will be strategic since many big firms view small businesses as costly with high risk profiles, and through a joint-venture the small business can build a rapport and direct relationship with the guidance and mentoring of the JV partner. This seems to be a preferred and acceptable approach, as it is more difficult to influence procurement managers who are incentivised to minimised risk and cost. Large firms seem to prefer Social (Health, Education, & Sports) CSI projects to honour BBBEEE legislation rather than Code 600, which aims to address small business development.
A goal must be to grow the SA manufacturing share as a percentage of the international manufacturing output, as is shown in section 2 in dollar terms, seeing that the SA manufacturing output has decrease from 0.61% in 1990 to 0.5% in 2010. This will imply that the exchange rate depreciation is not the main goal, but rather a stable currency, but with increasing productivity in the manufacturing sector.
The profitability in the manufacturing sector is falling, as expressed by the gross operating surplus. This is clearly shown in table 3 and 4 in section 3. Increases in labour cost have increased much faster than profit in the manufacturing sector. This results in labour layoffs and in less investment in the manufacturing sector. Entrepreneurs and investors will invest in industries where there is a profit potential and if the profitability is relatively lower, they will either not invest or invest in other sectors or countries. It will be important for the long-term sustainability of the sector that productivity increases and wage increases goes hand in hand.
Table 5, section 3 shows the industries that are currently receiving big large investments. These are the motor vehicles and parts, special machinery, electrical machinery, office machinery, medical appliances, engines and turbines and general machinery. These sectors will be important as future growth sectors given the investments with potential opportunities for SMMEs.
SMMEs can either play a role in the domestic supply chain by supporting other companies or government, or can become export orientated or can substitute imported products through local production. Table 7 (section 3) provides an overview of manufacturing exporting and importing activity. SA exported for example more fruit and nuts as part of Agro processing, but imported more meat than what is exported. This can be an opportunity to investigate what meat products are being imported, and if these imports can be replaced through domestic meat production. The table provides a number of potential areas where the domestic market can be extended. SA export also for example a lot of iron and steel product, but import for example tanks and products, bearings and gears and ships and boats that are mainly steel dominant. It is recommended that Seda have further research done using manufacturing export and import data to determine potential export or import substitution opportunities. The dti can also consider having an import and exporting strategy that can support the whole manufacturing sectors including SMMEs.
Given the detail data shown in the appendix, and as part of the supply-use matrix, further analysis and research can also be done on identifying opportunities for SMMEs using this information.
Data from table 10 and 11 and figure 14 and 15 shows that especially the metals, metal production, machinery and equipment and furniture, tobacco other manufacturing and recycling sectors are the sectors that involve a large number of SMMEs (looking at employment and turnover). These are sectors that can be supported by Seda where a large number of SMMEs seems to operate on a sustainable basis. The textiles, clothing, leather and footwear shows a very large employment creation possibility, but given the increasing wages this sector, in its current form will struggle to be sustainable in the long run (recent changes to government policy in the textile industry is not yet included in the data).
Policy alignment must be in place to support initiatives and identified industries. A good example of where this has worked is the automotive supplier park in Rosslyn in Pretoria where there was policy support to export motor vehicles and the development of the value chain through various initiatives including the training and alignment of tertiary program for example of engineers to support the industry. If for example if the identified sector is ship building, engineers at the top universities need to be able to take courses in ship building engineering and be able to do on the job training in this field to support the sector. However, there must also be additional initiatives like support the SA flag on a SA ship or preferential rates for SA ships to dock in the harbours.
SMMEs have got the potential to create more jobs relatively to larger enterprises as is shown in table 12 in section 3. This shows the importance of SMMEs in the economy to create jobs, and the need for support to SMMEs, but also hinted that SMMEs could struggle to survive if labour costs are too high, given that large share of labourers in comparison to large enterprises.
