Figure : Recommendation
The graph above is split into three sections:
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Recommend a friend to invest in the manufacturing sector
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Recommend Seda to a friend / colleague
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Would you remain in this sector given the current economic climate?
Recommend a friend or Colleague to Invest in the Manufacturing Sector
Only 37% of respondents indicated that they would definitely recommend friends and colleagues to invest in the manufacturing sector.
27.8% said that they would probably recommend friends and colleagues to invest in the manufacturing sector
16.7% of respondents were unsure and answered maybe while 9.7% of respondents answered probably not and definitely not respectively.
This highlights that over all confidence is high that the manufacturing sector is seen as a profitable and prosperous sector however there are concerns given the global economic climate.
Recommend Seda to a friend/colleague in the Manufacturing Sector
35.2% of respondents profiled indicated that they would recommend Seda to friends and colleagues as a business support unit, while 24.1% indicated that they would probably recommend Seda to friends and colleagues.
22.2% of respondents were unsure and indicated that they would maybe recommend Seda to a friend or colleague, highlighting the point that SMME business owners are not aware of the full range of services that Seda offers.
This indicates that over 50% of respondents have shown high confidence in Seda; however Seda will have to provide clear marketing to inform businesses in the sector of its services and products.
11.1% of respondents would probably not recommend Seda to friends or colleagues while only 7.4% of respondents indicated that they would definitely not recommend Seda to friends or colleagues.
Remain in the Manufacturing Sector
When posed with this question 44.4% of respondents acknowledged that they would definitely remain in this sector and 31.5% indicated that they would probably remain in the manufacturing sector, highlighting the potential of this sector to be profitable as well as stable. 18.5% were undecided and answered maybe.
When moving towards the negative responses, respondents were very clear 5.7% of respondents indicated that they would definitely not remain in the manufacturing sector long term.
SECTION 8: RECOMMENDATIONS AND POLICY INITIATIVES
The following section provides recommendation for Seda as well as broader policy suggestions. The first part looks at the international manufacturing environment followed by the domestic environment and lastly recommendation on Seda’s role to promote manufacturing in SA.
Info and facts: Market Penetrations options and strategies International Markets -
In an effort to open new markets, the dti’s Medium-Term Strategic Framework 2009-2012 clearly stipulates raising the level of exports through equitable global trade as one of its strategic objectives, which will also present export markets for small businesses.
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The dti will also continue contributing to Africa’s development and the southern regional economic integration within the New Partnership for African Development (NEPAD). Due to closer government intervention and closer international relations, NEPAD presents a realistic opportunity for manufacturing small business as a new virtually untapped market.
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Further opportunities need to be explored within the BRICS countries where South Africa is also a member (Brazil, Russia, India, China and South Africa). This must include opportunities for technology sharing, exports of value added products from SA, and not only raw products and commodities.
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South Africa, as is the case in the rest of the southern region, faces serious infrastructure and power supply challenges to support the manufacturing sector and distribution arrangements and channels. An ailing secondary road and rail network is essential for local and regional economic development and activity.
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Competition, from especially Chinese manufacturing, as is shown in figure 2 is increasingly dominating the world manufacturing environment with mass production of cheap and efficiently manufactured consumer goods. This pose challenges to South African businesses, and opportunities need to be explored in niche areas, innovation, and areas of specialisation where SA has a competitive edge. A new attitude of organised labour and a rethink of the utilisation of technology are required. Seda can influence both via government and it Technology Programme.
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Emerging economies such as South Africa are highly volatile due to frequent changes in Government support institutions, industry structure and the macro-economy. The volatility can provide a competitive advantage to firms with strategic flexibility to react to changing circumstances and to grab new business opportunities. SMMEs are potentially better equipped to adjust given less corporate structures, faster decision making abilities and relatively less capital invested in a specific operation (in comparison to larger corporations).
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The institutional frameworks set out in new legislation and National Treasury requirements, may require different ways of interacting with business partners and authorities. ‘Institutional voids’ often inhibit the efficiency of markets and increase business risks. Consequently, firms may internalise markets for intermediate goods and services, such as capital and human capital, and they may rely to a larger extent on personal relationships to interact with others.
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Many of the capabilities needed to compete in emerging economies are context specific. Local firms and individuals develop their capabilities to suit the specific context, which may create major barriers to entry for new local or foreign investors.
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Many industries are highly fragmented, as many small firms compete for a share of the market. With the entry of foreign investors, the market structure may rapidly change, adding to the uncertainty of the market place.
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Due to saturated and over-serviced markets for manufactured products, as well as established supply chains and complicated supplier personal relationships, small manufacturing business face serious challenges in breaking into local markets.
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The South African economy, including the manufacturing sector is also dominated by monopolies who do not always embrace new entrants into the market, as these businesses are used to dominating the regulatory institutions within the sub-sectors as well as high margins and returns. Coupled with a maturing organised labour sectors and transparent auditing institutions and competition tribunal, many opted for capital & technology investment and subsequent less labour oriented processing and manufacturing.
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In the drive to create employment, capital intensive businesses must not necessarily be seen as bad given that the main goal must also be to create sustainable businesses that are competitive in the long-run in the domestic and international markets. A good example can be the SA textiles industry that is very labour intensive (see table 6), but as a result of the high wages, the industry is decreasing in size and is not sustainable in the long run in its current form.
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Financing support is also very important for SMMEs, especially in recessionary periods. Larger companies have access to funds and assets to survive crisis periods, but SMMEs do not. A country like Italy, that has a much larger share of small businesses (see figure 3) is suffering much more during the crisis because (amongst other things) 80% of the economy depends on SMMEs, and if they don’t have the access to finance in order to survive, the economy will struggle.
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Lucrative Government procurement opportunities and dti strategic initiatives have forced big businesses into empowerment ownership Joint-Ventures, but failed to influence supply chain imperatives and beneficiation of the second economy and particularly black small businesses.
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Insufficient incentives to further encourage big businesses to promote supply chain opportunities and partnerships with small business.
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