OGALAKWENA INVESTMENT ATTRACTION LOCAL ......Mogalakwena Investment Attraction and Retention...

Mogalakwena Investment Attraction and Retention Str ategy

JULY 2011

PREPARED FOR:

MOGALAKWENA LOCAL

MUNICIPALITY

INVESTMENT ATTRACTION AND RETENTION STRATEGY

PREPARED BY:


Mogalakwena Local Municipality

INVESTMENT ATTRACTION & RETENTION

STRATEGY

JULY 2011

Prepared by:

PO Box 13359

Hatfield

0028

Tel: 012 346 4845

Fax: 012 346 0068

E-mail: [email protected]

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Table of Contents Table of Contents Table of Contents Table of Contents ACRONYMS EXECUTIVE SUMMARY SECTION ONE: INTRODUCTION 1.1 Study background and purpose ................. .................................................................................... 1

1.2 Guiding policies and strategies ............... ........................................................................................ 2

1.3 Study area .................................... ...................................................................................................... 6

1.4 Report structure .............................. .................................................................................................. 8

SECTION TWO: BUSINESS RETENTION AND EXPANSION 2.1 Current business environment, trends, linkages & perceptions ..................................... ............ 9

2.2 Existing business support framework ........... ............................................................................... 20

2.3 Business retention and expansion strategy ..... ............................................................................ 26

SECTION THREE: BUSINESS ATTRACTION 3.1 Current business attraction and marketing envir onment ............................................ ............... 40

3.2 Business attraction support framework ......... .............................................................................. 47

3.3 Business attraction strategy .................. ........................................................................................ 49

SECTION FOUR: INVESTMENT INCENTIVES 4.1 Introduction to incentives .................... .......................................................................................... 69

4.2 Legal considerations........................... ............................................................................................ 73

4.3 National investment incentives ................ ...................................................................................... 77

4.4 Investment environment of Mogalakwena Municipal ity ............................................... ............... 89

4.5 Potential investment incentives for Mogalakwena Municipality ..................................... ........... 93

4.6 Guidelines for implementation of incentives ... .......................................................................... 104

SECTION FIVE: INVESTMENT IMPLEMENTATION PLAN 5.1 Marketing plan ................................ ............................................................................................... 110

5.2 Implementation plan ........................... ........................................................................................... 117

SECTION SIX: CONCLUSION AND WAY FORWARD REFERENCES

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Acronyms Acronyms Acronyms Acronyms

BBBEE: Broad Based Black Economic Empowerment BMF: Black Managers Forum CBD: Central Business District CPPP: Cooperatives and Community Public Private Partnerships Programme DBSA: Development Bank of Southern Africa DTI: Department of Trade and Industry EAP: Environmental assessment practitioners EMF: Environmental Management Framework FDI: Foreign Direct Investments FET: Further Education and Training GCI: Global Competiveness Index GDPR: Gross Domestic Product per Region GGP: Gross Geographic Product HDI: Human Development Index IDC: Industrial Development Corporation IDP: Integrated Development Plan IMS : Integrated Manufacturing Strategy ISRDP: Integrated Sustainable Rural Development Programme KPI: Key Performance Indicators LED: Local Economic Development Plan LEGDP: Limpopo Employment, Growth and Development Plan Libsa: Limpopo Business Support Agency Limdev: Limpopo Development Corporation LM: Local Municipality LRAD: Land Redistribution for Agricultural Development LTP: Limpopo Tourism and Parks MAC: Manufacturing Advice and Incubation Centre MERS: The Micro-Economic Reform Strategy MFA: Municipal Finance Act MSA: Municipal Systems Act MTSF: Medium Term Strategic Framework NAFCOC: The National Federated Chambers of Commerce NDA: National Development Agency NEF: National Empowerment Funds NEPAD: New Partnership for Africa’s Development NFLED: National Framework for Local Economic Development NLDTF: National Lottery Distribution Trust Fund NQF: National Qualifications Framework NSDP: National Spatial Development Perspective NTPF: National Industrial Policy, Framework and action Plan PAYE: Pay As You Earn PPP: Public Private Partnerships PR: Public relations R&D: Research and Development RFT: Retirement Funds Tax SABS: South African Bureau of Standards SADC: South African Development Community SANRAL: South African National Roads Agency SAQA: South African Qualifications Authority

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SDA: Service Delivery Area SDL: Skills Development Levy SEDA: Small Enterprise Development Agency SMME: Small Medium and Micro Enterprises TGS: Tourism Growth Strategy THETA: Tourism, Hospitality and Sport Sector Education and Training Authority TIL: Trade and Investment Limpopo TISA: Trade and Investment South Africa UDZ: Urban Development Zone VAT: Value Added Tax WEF: World Economic Forum WHS: World Heritage Site WLED: Waterberg Local Economic Development Plan WSDF: Waterberg Spatial Development Framework

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Executive Summary Executive Summary Executive Summary Executive Summary Kayamandi Development Services (Pty) LTD was appointed by the Mogalakwena Local Municipality to formulate an Investment Attraction and Retention Strategy for the Mogalakwena Local Municipality the aim of which is draw up an implementation plan with development actions to enable the Municipality to embark on focused business retention as well as targeted marketing to pro-actively attract investors. The study entailed developing:

A retention strategy A attraction strategy Development incentives

The business retention and expansion strategic thrust and programmes are as follows:

THRUSTS PROGRAMMES

1. Good economic governance, communication, strategic partnerships, and service delivery

Improved governance Human resources management and institutional

transformation Communication and information interventions Improved service delivery and connectivity Business regeneration and development

The priority actions for the implementation of the retention and expansion strategy are: Attend to water and electricity problems timeously Set reasonable timeframes and keep monthly/weekly track records to effectively evaluate the

progress of all necessary actions. Have a member of council, preferably the LED councillors, focused exclusively on the

implementation of the Strategy Appoint dedicated investment officer Develop a complete business inventory Conduct a annual business survey

� Improve understanding of businesses’ needs and concerns � Addresses businesses concerns in a timely manner � Assist businesses to link with suppliers/distributors � Illustrate pro-business approach of the local government

Launch outreach activities � Meetings with business representatives � Competitions, i.e. “Business of the month“ � Breakfast with the mayor � Trade shows, etc.

Provide assistance to businesses as per the outcomes of the business survey and the outreach activities

The business attraction strategic thrusts and programmes are as follows:

THRUSTS PROGRAMME

1. Market efficiency and innovation

Increase intensity of local competition Reducing red tape Alignment of skills and human resource strategies Promote product, process, marketing and organisational

innovation

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THRUSTS PROGRAMME

2. Leverage growing and strategic sectors to optimise investment opportunities

Key catalytic sector interventions Business development

In order for the implementation of the attraction strategy to take place, the following priority attraction actions have been identified:

Establish a special enquiry point Revise LED forum priorities based on latest LED strategy (2011-2016) Plan and undertake inward and outward missions

� Conduct information seminars on investment opportunities � Undertake ‘know your Municipality’ tours � Develop brochure and CDs of marketing information � Update web with marketing information � Update, print, and distribute more brochures

Establish a municipal services monitor Develop an inventory of investment activities to assist and develop a monitor to track progress. Ensure provision of serviced industrial precinct space Conclude concept, feasibility and business plans Undertake funding applications

The specific investment incentives developed for Mogalakwena Local Municipality entail:

General financial : Improve service rates competitivity � Only if financial capacity exists � Rates & taxes rebates: 45% 1st year, 25% 2nd year, 10% 3rd year � Rebates based on improving: building, BEE, job creation, local business stimulation, FDI � Planning approvals within 90 days

Performance-based : Attract entities with highest revenue/job creation potential � Address investors requirements no wishes of LM � Build trust, confidence, delivery � Erase infrastructure and other developmental constraints � Present on-going business aftercare support

Non-financial : Improve areas image and quality of services � Administrative: expedite permit processing, assist in preparing EIAs, etc � Informative: business directory, sectoral brochure, opportunities portfolio, investors pack

SMME/BEE & secondary economy : Support for entrepreneurs & disadvantaged � Property tax exemption during 1st year and discount on sliding scale over 2nd and 3rd years � Business plan assistance for start-ups � SMME co-operation mechanisms, networks, supply chain linkages � Ease licensing burden and simplification of business registration

Qualifying entities : Target key economic growth sectors � Sustainable rural and niche agricultural projects: livestock/game, poultry, vegetables � Mining development and support entities � SMME support and manufacturing diversification (agro-processing, mineral beneficiation) � Tourism resource developers

This Investment Attraction and Retention Strategy is regarded as a first endeavour to enhance the implementation and realisation of the Municipalities objectives and plans towards mobilising government and the private sector towards accelerated and shared economic growth.

Section one

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Kayamandi Development Services

Kayamandi Development Services (Pty) LTD was appointed by the Mogalakwena Local Municipality to formulate an Investment Attraction and Retention Strategy for the Mogalakwena Local Municipality with a focus on promoting integrated and sustainable development in the local economy. This Section of the report makes reference to:

Study background and purpose Guiding policies and strategies Study area Report structure

1.1 1.1 1.1 1.1 StudyStudyStudyStudy background background background background and purposeand purposeand purposeand purpose The aim of the Investment Attraction and Retention Strategy is to draw up an implementation plan with development actions to enable the Municipality to embark on focused business retention as well as targeted marketing to pro-actively attract investors. The goal of the strategy is to formulate guidelines for municipality for retaining existing businesses, assisting in their expansion, and attracting new investment. The actions of this element are shown in Table 1.1 below.

Table 1.1 Action plan for Investment Attraction and Retention Strategy

IINNVVEESSTTMMEENNTT AATTTTRRAACCTTIIOONN AANNDD RREETTEENNTTIIOONN SSTTRRAATTEEGGYY

Develop retention Strategy: - Retention and expansion of existing businesses and industries - Utilise LOCAL FIELDWORKERS to undertake business surveys - Addressing ‘red-flag’ issues

Develop attraction strategy: - Integrated investment programmes and projects - Investment promotion guidelines

Develop Incentives: - Financial and non-financial incentives - Incentive and concession packages - Aligned to legislation and policies Deliverable : Investment attraction and retention strategy

Final review & comments

Deliverable: FINAL REPORTS

Introduction

SectionSectionSectionSection

Section one

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Overall, the implementation of the strategy provides the following benefits: A clear understanding of the current business retention and attraction requirements Create a working relationship between public sector and local businesses Improve regulatory environment with regard to support of local SMMEs and large companies. Assist in raising the awareness among potential investors of the Mogalakwena Local Municipality Develop and market investment incentives

1.2 Guiding policies and strategies 1.2 Guiding policies and strategies 1.2 Guiding policies and strategies 1.2 Guiding policies and strategies

The relevant national, provincial and local strategic and/or policy documents with which this Investment Attraction and Retention Strategy is aligned, are:

Key National policies and strategies � The Constitution of the Republic of South Africa � The New Growth Path for South Africa � The Medium Term Strategic Framework (2006 to 2009) � Integrated Sustainable Rural Development Programme (ISRDP) � Broad Based Black Economic Empowerment (BBBEE) Strategy � Broad Based Black Economic Empowerment Act � National Industrial Policy, Framework and action Plan (NTPF) � New Partnership for Africa’s Development (NEPAD) � National Spatial Development Perspective (NSDP) � Regional Industrial Development Strategy (RIDS) � Integrated Manufacturing Strategy (IMS) � The Micro-Economic Reform Strategy (MERS) � Co-operatives Act (No. 14 of 2005) � White Paper on Agriculture (1995) � Land Redistribution for Agricultural Development (LRAD) � Small Enterprise Development Agency (SEDA) � Municipal Systems Act (No. 32 of 2000) � National Framework for Local Economic Development (NFLED) � Tourism Growth Strategy (TGS)

Key Provincial policies and strategies � Limpopo Employment, Growth and Development Plan 2009 – 2014 (LEGDP) � Status of Co-Operatives in Limpopo, 2007 � The Impact of Government Procurement on Enterprises, 2007 � The Status of Rural Trade in Limpopo, 2007. � The Limpopo SMME Strategy � Limpopo Co-operatives Strategy � Outcome 9 � Limpopo Province Simplified Standardised Framework for LED � Limpopo Agriculture Development Strategy, 2007

Key District and local policies and strategies � Waterberg Spatial Development Framework, 2009 (WSDF) � The Mining Development Strategy, (2006) � The Waterberg District Municipality Local Economic Development Plan, 2007 � The Waterberg Investment Policy, 2008 � The Waterberg Marketing and Investment Strategy � The Waterberg District Environmental Management Framework (EMF), 2010 � The Waterberg Mining Development Strategy, 2006 � The Waterberg District Agriculture Development Strategy, 2005 � The Mogalakwena Local Municipality Spatial Development Framework, 2009 � The Mogalakwena Tourism Strategy, 2008 � Mogalakwena Local Economic Development Strategy, 2011-2016

Section one

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In the case of a local government in South Africa, the following relevant legislation needs to be considered:

Section 152 of the Constitution assigns the Local Government to promote social and economic development, so as to involve the local communities and organizations in local governance issues;

The 1998 White Paper on Local Government outlines a series of strategies with which to engage local communities and stakeholders in forging relevant strategies;

The Municipal Structures Act of 1995 defines the delineates the structures governing the municipalities, which are bestowed with the authority to initiate developmental activities; and

The Municipal Systems Act of 2000 entrusts local government with developing its communities including the formulation of Integrated Development Plans (IDPs).

The current strategic development context and policy environment for the country, province and Mogalakwena Municipality is characterized by a strong focus on service delivery outcomes, development and job creation. The development of skills and human capital within the country is a major theme throughout national, provincial, district and local level plans and strategies. This becomes apparent when considering the New Growth Path for South Africa, ISRDP, LEGDP and WLED. The focus is on the development of skills to encourage economic growth in areas where economic development is limited and can be facilitated but requires a skilled labour base. The LEDGP also stated that economic growth and development objectives and the achievement of these objectives are largely constrained by the lack of supporting skills to industries and high unemployment rates. Job creation is a major focus point for all spheres of government in order to eradicate poverty, create community upliftment and enable sustainable livelihoods. This has been highlighted by documents such as the MSTF, BBBEEE Strategy, the BBBEE Act, NEPAD, LRAD and the LEGDP. Local level plans such as the WLED and Mogalakwena IDP are focussed on halving unemployment by 2014 by focussing on the major sectors of mining and agriculture. Job creation coupled with skills development are priority issues as a result of its intertwined interaction. The MSA places great importance on the provision of services within historically disadvantaged communities as well as enabling rural development. Services and the provision thereof is a main directive for government in order to enable local communities to gain community upliftment. The district and local level IDP’s focus on the provision of these services to communities throughout the municipality. The focus has also been shifted to the improvement of how services are delivered to these local communities as well as the quality associated with them. The growth and development of the economy within each municipality and the country as a whole is an important facet noted by numerous policies across governmental levels. This is prioritised by the Constitution, NFLED, the New Growth Path, LEGDP, Waterberg District LED, and the Mogalakwena SDF. The New Growth Path has identified that in order to achieve high levels of economic growth a new direction has to be followed to achieve this, thus the growth path focuses on determining where economic development and employment can be grown or newly established and also seeks to provide an institutional and strategic framework for accomplishing this. The LEGDP has determined the most critical economic sectors and have created the approach to encourage value-addition and development in these sectors, as well as to use the economic advantages of these sectors to encourage and assist struggling sectors. The Mogalakwena LED, the SDF and the Tourism Strategy has identified that mining, finance and wholesale are the major role-players in terms of promoting growth and development within the

Section one

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municipality. Other sectors of importance that have potential to become active role-players in the economy are tourism and agriculture. The WMDS (2006) highlighted that platinum mining in the region will become a more important facet to mining and mining development. Platinum mining in Mokopane is a leading driving force to economic development, employment and community skills development and prosperity. The incorporation of this sector in the diversification of the local economy and promoting value-chain development for the purposes of clustering supportive economic functions in a single area will assist in the goals and objectives identified within the Mogalakwena IDP, Waterberg LED/IDP and the LEGDP. The LEGDP has identified that the long term strategic vision of the mining sector should be transformed to become not only a resource-based industry, but should also become knowledge-based industry which collectively creates a conducive environment for value-addition. The WLED identified that Mogalakwena LM has the largest business area and has the largest business activity in the district economy. The WLED suggested that in order to continually grow this sector, the incorporation, expansion and development of SMME’s are a necessary component. Tourism as a potential market for growth and development has been identified by the MTS and the MSDF. The various tourism activities and opportunities that can be facilitated throughout the municipal area and across the economic sectors of the municipality can create an interlinking tourism destination. Tourism in the municipality can be facilitated to incorporate the various communities in the rural and tribal areas, with natural resources such as the Makapan Caves, and industry tourism (mining tours). The MTS aims to create a tourism base within the municipality that grows the number of, and the length of stay and spend of tourists who visit the area from which additional benefits such as employment and contribution to GDP will flow. The LEGDP, WLED, WADS and MSDF have all identified agriculture as a sector which poses opportunities for growth in the development within the local economy. The overwhelming consensus relates to all farming activities not being predominantly suitable for the area, and specific farming activities must be promoted to ensure that optimal advantages are gained from the land. The WADS has proposed the approach of clustering meat and horticultural activities in the promotion of value-addition within the WDM and its inherent municipalities. The WLED and WADS have further identified that various farmers are moving away from traditional cattle farming and concentrating on game-farming. An articulation in broad terms of the strategic priorities of the Limpopo Employment Growth and Development Plan (2009-2014) to which the study needs to be aligned includes:

Ensuring more inclusive economic growth, decent wor k and sustainable livelihoods : The main objective with regard to this priority is to respond appropriately, promptly and effectively so that growth in decent employment and improvements in income security are reinforced, and investment sustained to build up provincial economic capability and improve industrial competitiveness. This has to be conducted in an environment of a stable macro-economy which provides conditions for higher rates of investment and creation of decent jobs.

Economic and social infrastructure: In the period ahead government will continue with the infrastructure investment programme aimed at expanding and improving social and economic infrastructure to increase access, quality and reliability of public services and to support economic activities while also considering environmental sustainability and pursuing maximum employment impact. The aim is to ensure sustained investment growth over the medium-term so as to achieve the target of a fixed investment ratio above 25% of GDP by 2014. Such projects will be spatially-referenced, planned for and implemented in an integrated manner. In addition, we will continue with programmes to provide and maintain health, education, library, sporting, recreation and other social infrastructure.

Section one

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Rural development , food security and land reform: Approximately 40% of the households in Limpopo live in areas that are characterized by extreme poverty and underdevelopment. Recognizing the diversity of our rural areas, the overall objective is to develop and implement a comprehensive strategy of rural development that will be aimed at improving the quality of life of rural households, enhancing the country’s food security through a broader base of agricultural production, and exploiting the varied economic potential that each region of the country enjoys.

Access to quality education : Education has enjoyed the largest share of the national budget throughout the past 15 years. This significant investment in building human capital and capabilities has gradually improved the country’s human resource and skills base. However, progress has not been optimal and the achievements have not taken place at the required scale. The objective is to focus on skills and education system towards the delivery of quality outcomes. The focus will be on, amongst others, learner outcomes, early childhood development (ECD), improving schools management and M&E systems and supporting and developing a high quality teaching profession.

Improved health care : In the current MTSF period the aim is to transform the public health system so as to reduce inequalities in the health system, improve quality of care and public facilities, boost human resources and step up the fight against HIV and AIDS, TB and other communicable diseases as well as lifestyle and other causes of ill health and mortality. The plan includes the phasing in of a National Health Insurance system over the next 5 years and increasing institutional capacities to deliver health system functions and initiate major structural reforms to improve the management of health services at all levels of healthcare delivery, including particularly hospitals.

Fighting crime and corruption : Government is determined to curb levels of crime and corruption. Contact crimes, crimes against women and children and organized crime remain a key focus, and so is the combating of corruption.

Cohesive and sustainable communities : Social cohesion is important if we are to achieve developmental success. However, inequalities of condition and opportunity and weaknesses with regard to a sense of being part of a common enterprise, is placing severe stress and strain on social cohesion. In this MTSF period, we aim to meet our target of halving poverty and unemployment by 2014 and, in conjunction with other priorities, to strengthen human capabilities, promote shared values and social solidarity and strive to reduce overall inequality.

Creation of a better Africa and a better world : Over the medium term, the main goal with respect to this priority is to ensure that our foreign relations contribute to the creation of an environment conducive to economic growth and development domestically, within Africa and in other developing countries. Implementing NEPAD, promoting SADC regional integration, strengthening South-South relations and pursuing a developmental and investment-orientated approach to engagements with the North, are key aspects related to this priority.

Sustainable resource management and use : Like the rest of the world, the provincial economy is vulnerable to the impacts of climate change, biodiversity loss and diminishing water resources. Interventions will include, amongst others, diversification of the energy mix in pursuit of renewable energy alternatives and the promotion of energy efficiency, enforcing a zero tolerance approach to illegal and unsustainable exploitation of resources, supporting local and sustainable food production, and promoting sustainable water use and preserving the quality of drinking water.

A developmental state including improvement of public services : In the previous mandate period, government committed itself to improving the capacity of the state for growth and development. This remains a priority. Whilst progress has been made, the province continues to face significant challenges in transforming the system of governance. Challenges include capacity gaps in local government; poor quality of public services; declining trust and confidence in public institutions and weak planning capacity across the three spheres of government. As the province strives to overcome these hurdles, the long term goal is to the build an effective and accountable state as well as fostering active citizenship.

The Limpopo Government has agreed on 12 outcomes as a key focus of work between now and 2014. Each outcome has a limited number of measurable outputs with targets. Each of the 12 outcomes has a

Section one

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delivery agreement which in most cases involve all spheres of government and a range of partners outside government. Combined, these agreements reflect government’s delivery and implementation plans for its foremost priorities up to 2014. In addition to this, recently on the 30 September 2010, the MECs responsible for local government and Mayors signed the Delivery Agreement for Outcome 9 which is "A responsive, accountable, effective and efficient Local Government System. Government systems and the functioning of these governments and their departments have over the years shown considerable challenges related to poor governance and accountability, weak financial management, high vacancies and in some instances the inability to deliver some of the core functions and municipal services. Outcome 9 has been adopted by the Limpopo Provincial Government to assist in capacity building within the spheres of government throughout the Limpopo Province. Outcome 9 is an outcome based approach which seeks to create responsive, accountable, effective and efficient local government systems through achieving a number of outcomes strictly focussing on departmental coordination, access to services, participatory governance and strengthens the administrative and financial capability of municipalities. The 7 Outputs of Outcome 9 are:

Output 1 : Implement a differentiated approach to municipal financing, planning and support Output 2 : Improving access to basic services Output 3 : Implementation of the CWP Output 4 : Actions supportive of the human settlement outcome Output 5 : Deepen democracy through a refined Ward Committee Model Output 6 : Administrative and financial capability Output 7 : A Single Window of Coordination

The Mogalakwena Investment Attraction and Retention Strategy needs to take the priorities identified in the aforementioned strategies into account and focus on the development and facilitation of activities that increase value addition to primary commodities and promote a broader-based and labour-absorbing industrialization path. The unique strengths and attributes of the area need to be utilized to its full potential and greater awareness created in order to attract both domestic and foreign investors.

1.3 Study area 1.3 Study area 1.3 Study area 1.3 Study area Mogalakwena Municipality, hereafter referred to as the study area, is situated in the western quadrant of the Limpopo Province, within the Western District of Waterberg Municipality, and is boarded by Aganang in the East, Mookgopong to the South, and Lephalale to the North. Refer to Figure 1.1. The Waterberg District is one of five districts that form the Limpopo province and is geographically the largest District in the Province but has the smallest population compared to the other Districts. The District borders on North-West and Gauteng and forms the boundary with Botswana. This implies that it serves as an important conduit between Botswana and the rest of South Africa. Within the Province, the District shares its borders with the Capricorn District Municipality to the North and the Greater Sekhukhune District Municipality to the East. Waterberg District Municipality is a home to six local municipalities namely Bela-Bela, Lephalale, Modimolle, Mogalakwena, Mookgophong and Thabazimbi. There are two national roads that pass through the district. The one is the N1 freeway between Gauteng and Zimbabwe and the other is the N11 that links the Mpumalanga province and Botswana. Apart from Mokopane, the Provincial Growth point identified in the Provincial Perspective, the economic sub-region comprises a number of small settlements such as Mahwelereng (nearby Mokopane), Rebone and Bakenberg (both Municipal Growth points identified in the Provincial Perspective).

Section one

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Figure 1.1: Location of study area

Limpopo Province

Waterberg District

Municipality

Mogalakwena Local

Municipality

Section one

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The Mogalakwena Municipality covers an area of approximately 616,600ha. Mogalakwena has a very well defined and established development footprint. Mogalakwena consists of Mokopane, Mahwelereng and Rebone townships, and another 178 villages. Rebone is the biggest township outside of the urban core. The rest of the settlements are mostly distributed in the area between the N11 and R518. Densities decrease as one move further away from the urban core in the south. The municipal area also covers a range of smaller settlements in the area between Mokopane and Rebone about 100km to the north along the N11 and Marken along the R518. The N1, N11, and R518, together with the Mogalakwena River and mountains provide very strong structural elements that shaped the development in the municipal area.

1.1.1.1.4 4 4 4 Report structure Report structure Report structure Report structure Aside from this introductory section, the remainder of this report is structured into the following sections:

Section 2 : Business retention and expansion Section 3: Business attraction Section 4 : Investment incentives Section 5 : Investment attraction and retention implementation plan Section 6 : Conclusion and way forward

Section two

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Retaining and expanding existing businesses within Mogalakwena is vitally important and is based on the premise that the municipality should firstly focus on working with and supporting existing businesses in the area, prior to attempting to undertake large scale investment attraction of new enterprises. Business retention and expansion is one of the core objectives to facilitate economic development and forms part of creating a thriving business enabling environment in which existing businesses are retained and immense opportunities for business expansion exist. This Section of the report makes reference to:

Current business environment trends, linkages and perceptions Existing business support frameworks Business retention and expansion strategy

2.1 Current business environment, trends, linkages & perceptions2.1 Current business environment, trends, linkages & perceptions2.1 Current business environment, trends, linkages & perceptions2.1 Current business environment, trends, linkages & perceptions As part of the strategy, a business retention and attraction survey was conducted amongst existing enterprises in Mogalakwena aimed at determining the constraints, opportunities, push and pull factors critical in understanding the general business environment in Mogalakwena Municipality. Mogalakwena is one of the largest local municipalities within the Waterberg District Municipality with more than 170 villages. In order to ensure that the business surveys are targeted at formal business areas, the following areas were prioritised in consultation with the LED unit (see Figure 2.1 below):

Mokopane Mahwelereng Mapela Local area Bakenberg local area Rebone local area

Mokopane is the main economic centre with Rebone and Mahwelereng considered as proclaimed towns. Rebone and Bakenberg are the two service centres within Mogalakwena, and Mapela is considered as the mining focus region for the municipality.

The below Table provides an indication of the 21 villages covered per area and the total sample size. The study was focused on formal business and excluded the informal traders such as spaza shops, hawkers, roadside stalls, etc. A total of 285 formal businesses were sampled. The analysis and results presented represent all the businesses per targeted area that were willing to partake in the survey.

Business retention and expansion


Section two

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Figure 2.1: Geographical spread of targeted busines s areas

Source: Kayamandi Development Services, 2011 Table 2.1: Targeted survey areas, villages and surv ey size Main Area Villages Completed Questionnaires

Mokopane � Phola Park � Ext 14,19, 20 � CBD � Industrial Sites

179

Mahwelereng � Mountain View � Mahwelereng � Mitchell � Moshate � Masodi � Ga-Madiba � Sekgagapeng

52

Mapela Local Area � Danisani � Fothane � Mapela � Ga-Mabuela � Mesopotamia � Metapa � Mmahlogo � Ga-mosage

29

Bakenberg Local Area � Bakenberg 13

Section two

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Main Area Villages Completed Questionnaires

Rebone Local Area � Bavaria � Ga-Hlako � Taueatsoala � Strekfontein

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TOTAL 285 Source: Kayamandi Business survey, 2011 As is evident from the above Table, Mokopane the main economic centre had the most number of surveys completed followed by Mahwelereng and its surrounds, Mapela, Bakenberg and then Rebone. Most of the businesses especially in the more rural areas were uneasy about partaking in the study. It is also evident from the above Table that a good geographic representation of business concerns, trends, status, etc was also captured. Figure 2.2 below shows the main economic sectors covered.

Figure 2.2: Percentage distribution of main economi c sectors in Mogalakwena

Source: Kayamandi Business survey, 2011

As evident from the figure above the retail sector is by far the most dominant sector within Mogalakwena that was willing to respond, followed by manufacturing (due in part to the demarcated industrial areas) and personal services. It is however evident that a good representation of business types have been covered throughout the municipality. This ensures that the results are representative of businesses in Mogalakwena and not solely the perceptions of retail sector establishments.

0%

5%

10%

15%

20%

25%22%

13%

12%

8%7% 6%

5% 5% 5% 4% 3% 3% 3%2% 2%

0%

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The main type of business, products and services traded within the economic sectors as indicated by the survey are listed below:

Retailers 54% Wholesaler 6% Finance 23% Other 6% Manufacturing 19% Construction 5% Personal Services 18% Transport 4% Catering 9% Upholstery 3% Education 8% Agriculture/Nursery 3%

As listed above, the majority of the surveyed businesses are retailers. Retailers throughout Mogalakwena mostly trade in a variety of products such as food, clothes, motor spare parts, etc. Financial enterprises mostly include banks, cash loans, insurance and other finance related services. Manufacturing entities in Mogalakwena mostly include bakeries, drilling, tombstones as well as recycling enterprises. Figure 2.3 below provides an indication of the length of trade of businesses in Mogalakwena.

Figure 2.3: Percentage distribution of number of ye ars trading in Mogalakwena


As can be seen from the Figure above, a large portion of businesses have been trading in Mogalakwena for a period of between 1 to 5 years represented by 38%, 23% have been trading in the LM for 6-10 years, 15% traded in Mogalakwena between 16 and 30 years, with an insignificant proportion trading within the municipality for more than 50 years. On average, the enterprises surveyed have been trading in Mogalakwena for 10 years, which shows that a large proportion of enterprises have been in the area for quite some time and are not fly by night type of enterprises.

1-12 months

3%

1year-5 years

38%

6-10 years

23%

11-15 years

10%

16-30 Years

15%

31-50Years

4%

51+

1% unspecified

6%

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With regards to employment size of the enterprises surveyed, approximately 9% of the businesses surveyed within Mogalakwena have one-man owned enterprises, approximately half have between 2-5 employees, followed 6-10 employees represented by 18% and more than 15% of the enterprises have between 10 and 30 employees. A relatively large percentage of enterprises surveyed (6%) have more than 30 employees. On average, the enterprises surveyed employ approximately 7 persons per establishment. The overwhelming majority of businesses appear to be owned by either a single person or a family, with a few large corporations, franchises and mining houses.

Figure 2.4: Percentage distribution of number of em ployees per enterprise


Figure 2.5 below provides an indication of the percentage split of the value of products purchased and sold by the enterprises surveyed. As depicted from the Figure below, a large percentage of business inputs (63%) are obtained from within the Municipality, which shows a relatively high level of interaction between existing business entities and a relatively low leakage of buying power to outside of the municipal boundaries. Three quarters of businesses (excluding large mining enterprises), however sell their products within the municipality. Increased scope for greater exports (other than in the mining sector) thus exists so that greater economic injections into the municipality can be obtained from the purchase of locally produced goods and services. An insignificant proportion of the enterprises purchase and sell their products internationally and within SADC areas. It should be borne in mind that Mogalakwena is in the vicinity of the Groblersburg/ Martin ‘drift Border post to Botswana, which present opportunities for greater export potential.

9%

51%

18%

14%

2%6%

1 Employee 2-5 Employees 6-10 Employees

11-20 Employees 21-30 Employees 31+ Employees

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Figure 2.5: Percentage distribution of Mogalakwena Business Inputs and Outputs


Other than products purchased, a variety of services are utilised from outside the municipality which are not available locally. These are reportedly:

Finance and business related services such as tax services, book keeping, auditors, accountants and debt collectors etc

Variety of materials and supplies Legal services Private health care Recreational facilities Technical services Fleet transport Schools Advertising and promotion agencies.

The above list provides an indication of the local service gaps to be addressed in order to enhance local procurement and business support linkages. On average, businesses surveyed in Mogalakwena have a resource/production capacity utilisation of 66%. Approximately 20% of the businesses surveyed have their current level of resource/production capacity between 91% and 100%, 38% of the businesses have a resource production capacity of between 61% and 90%, followed by 34% with a resource/production capacity between 31% and 60%, and 8% of businesses are below the 30% resource utilisation capacity level. Scope for greater business expansion and support thus exists for increasing current resource/production capacities of enterprises. The below figures provides an indication of the enterprises real growth obtained over the last 5 years as well as the expected growth over the next 1-2 years.

0%

10%

20%

30%

40%

50%

60%

70%

80%

Mlm WDM LIMPOPO SA SADC International

63%

13%10%

13%

0%

75%

11%8%

4% 1% 1%

Inputs Outputs/Sales

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Figure 2.6: Past and expected business growth


As depicted in the Figure above, more than half of the business recorded an increase in turnover over the past 5 years, and nearly three quarters are still expecting increased turnover in the next 2 years. With regards to employment, the majority of enterprises have remained at the same level of employment. Nonetheless, a third of enterprises have recorded an increase in employment and only 12% have experienced decreases in employment over the past 5 years. In the next 2 years, the majority of businesses surveyed are expecting growth in employment in similar proportions to that experienced during the last 5 years. The physical space has largely remained the same for the majority of businesses represented by 68% of businesses surveyed in Mogalakwena over the last five years. One-fifth (22%) of enterprises increased their physical space and only 10% have decreased in physical space over the past 5 years. Only approximately half of enterprises are expecting to remain in the same physical space, while an overwhelming 43% of enterprises are optimistic about physical business space growth expectations in the next 2 years. In general, the business community of Mogalakwena seem positive about the future of their business undertakings, which indicates that businesses are moving away from negative perceptions to a more growth-oriented perspective. An overwhelming percentage of businesses within Mogalakwena (95%) are adamant to continue trading in Mogalakwena and only 5% are planning to relocate from their current trading space. This shows that the business climate in Mogalakwena is rather stable and through support and efforts in a form of incentives from the LM, the 5% could be retained, the existing businesses expanded and more businesses attracted into to the municipality

0%

10%

20%

30%

40%

50%

60%

70%

80%

Increase Same Decrease Increase Same Decrease

Past Growth Expected Growth

58%

28%

14%

74%

17%

9%

33%

55%

12%

53%

39%

22%

68%

10%

43%

49%

8%

Turnover Employment Physical Space

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The main reasons for relocation of enterprises were reported as being due to lack of municipal support, lack of available land within the industrial sites for businesses, high crime, and nepotism. Nonetheless, the majority of those that are considering relocating are consider to move elsewhere within the municipality, with a rather insignificant proportion considering to relocate elsewhere outside the boundaries of Mogalakwena. Reasons for wanting to move to another location within Mogalakwena include:

Areas with better service delivery Areas with greater employment opportunities Areas closer to clientele and markets Areas with better transport networks and facilities

The low percentage of enterprises considering moving out of the municipality is a positive indication of the current business climate. Furthermore, approximately 46% of the businesses surveyed perceive their optimism and confidence in doing business within the municipality as being fair, while 43% of entities with have good/excellent confidence and optimism towards doing business in the area, and only 12% of enterprises are pessimistic about doing business in Mogalakwena. The businesses surveyed were also queried on how they believe that their profitability compares to that of competitors in Mogalakwena as well as competitors within other areas of the Limpopo Province. See Figure 2.7 below.

Figure 2.7: Business’s profitability compared to co mpetitors in Mogalakwena and Limpopo


As is evident from the above Figure, businesses in Mogalakwena consider their profitability to either compare similarly (45%) and/or better (42%). Whereas only approximately 13% of enterprises believe that they are doing worse than their local competitors. Businesses also either believe that the competitivity of their business is similar (38%) or better (39%) than businesses located elsewhere in Limpopo. However, nearly a quarter of enterprises felt that they are doing worse/much worse than their competitors elsewhere in the Province.

0%

10%

20%

30%

40%

50%

Better Same Worse

42% 45%

13%

39%38%

24%

Competitors profitability in LM Competitor Profitability in Limpopo

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Furthermore, more than two-thirds of businesses perceive the future outlook of businesses within the municipality to be reasonably good or much better. While, 22% of the business consider the future to be bleak. Reasons given for the future outlook of the municipality in order of importance are: Reasons for p ositive business outlook :

Increased profits Closer to market Increased business space Better services More customers/ higher demand Good future Developing mining sector

Reasons for n egative business outlook : Lack of resources Poor turnover Poor municipal performance Lack of job creation High overhead costs Social ills e.g. crime Higher inflation rate Location (Rural area)

Listed below are the top government interventions as per the business community to address issues faced by the various economic sectors in Mogalakwena:

Improved service delivery Government incentives Improved investment potential Greater skills development Address high petrol/fuel prices Legislate on high rental prices Create more business spaces Assist with the development of Makapan Valley WHS

Businesses were also queried on the main reasons for businesses leaving or being ‘pushed’ out of Mogalakwena. Service delivery, crime and the low economy are the three main push factors for businesses out of Mogalakwena. Other push factors that came out strongly during the survey include:

High competition, Lack of resources/infrastructure, Tax/low salaries, Lack of business support Isolated location.

The above should be treated as areas targeted for business improvement. The key reasons for businesses entering or being attracted or pulled into the municipality includes better services, entrepreneurial drive, natural resources (minerals and cultural/natural attractions) and customer services. Other pull factors for locating in the municipality include:

Good communication Cultural diversity, Untapped potential, Good support from the municipality, Stability of the mining sector.

The above identified components need to be actively marketed in order to entice greater business development and attraction. The Table below depicts the reported service quality and effectiveness of service delivery within the municipality.

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Table 2.2: Quality of service delivery rating in Mo galakwena LM Services Bad Fair Good

Electricity 36% 37% 27%

Water & Sewerage 28% 33% 39%

Roads & Storm water 26% 13% 61%

Refuse Removal 37% 33% 29%

Community Service 44% 25% 31%

Health 27% 40% 33%

Education 32% 43% 25%

Finance 38% 19% 43%

Town Planning 41% 22% 37%

Building Plans 41% 21% 38% Source: Kayamandi Business survey, 2011 From the above, it should be noted that town planning and building plans are amongst the first contact for new businesses. However, a large proportion of businesses have reported these as having a negative service delivery rating. One of the key interventions would be for the municipality to improve upon service delivery quality and the negative perceptions of service delivery in the area. The overall efficiency and effectiveness of the Mogalakwena Municipality was rated fair by 47% of businesses surveyed, followed by a third (34%) that was of the opinion that it was good or excellent and only 20% rating it bad. This indicates that the municipality could be moving in a right direction, however, the municipality still needs to work harder to satisfy all businesses so as to ensure they are retained. Constraints, to be addressed, which are faced by the businesses within their sectors relate to:

Marketing Business space Client satisfaction Unreasonable prices Access to finance Lack of government incentives Theft/ crime No/ little government support Distance/poor location Access to training/ Lack of information Skills (shortage of skilled labour) Supplies/ materials High competition Slowing down of economy Poor service/infrastructure delivery

High petrol price Low profit Access finance Lack of equipments /supplies Unreliable staff/ labour laws Population too small/ flooded market Transport/ uncontrolled trucks Lack of customers Insufficient business space Lack of tourist attractions Skilled labour Government support/commitment Lack of medical aid

Gaps and opportunities identified per sector within Mogalakwena include: Trade and Industry related opportunities:

Business support, Trade Infrastructure development, Export assistance Security Banking services Auto services

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Recycling Labour consultants

Tourism related opportunities:

Recreational facilities Accommodation Develop Makapan Valley WHS Restaurants Hunting sector expansion Vehicle rental companies Development of nature reserves Development of theme parks

Manufacturing related opportunities:

Tobacco manufacturing plant Plastic products Wood manufacturing Wool manufacturing Manufacturing of body lotion Manufacturing of disposable nappies Steel manufacturing Packaging materials Brick manufacturing manufacturing of hair products Manufacturing of water pumps and tanks

Mining related opportunities:

Processing of raw materials from the mines Sand mining Pebbles Granite mining Quarrying

Agriculture related opportunities:

Value chain in agriculture Processing of juice and tomatoes Organic farming Increase the types of crops in Mogalakwena. fertilisers for agri-businesses

Other opportunities

Development of shopping centres Tertiary education institutions Housing developments Private hospitals Marketing and billboard in town Value chain in IT Database of service providers Recycling (paper, steel, glass, tin, plastic etc), Catering

The above identified opportunities need to be marketed to existing and potential enterprises.

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The business climate of Mogalakwena shows potential for growth and expansion. Through accurate and suitable business support methods, enterprises could be expanded within the municipality. The significant value of understanding and keeping existing businesses satisfied would ensure that business are retained in Mogalakwena, which would make it easier to attract new business due to positive word of mouth from existing businesses and from service delivery perceptions. Constraints should be addressed as effectively as possible and the negative ratings should be attempted to be improved upon over time.

2.2 Existing business support framework 2.2 Existing business support framework 2.2 Existing business support framework 2.2 Existing business support framework This sub-section outlines some of the support frameworks existing in the country and in the Limpopo Province, and Mogalakwena that aim at supporting business and promoting investment in the region. 2.2.1 Business support organisations 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. These services include details on investment opportunities in the country, guidelines to establishing new businesses, and development of incentive packages to facilitate investment. The aim of the dti is to lead and facilitate access to sustainable economic activity and employment to all South Africans. 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 offers various incentives to potential investors. 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 organizations are examined in more detail below. The Industrial Development Corporation (IDC) The IDC is a self-financing state owned development finance institution whose primary objectives are to contribute to the generation of balanced sustainable economic growth in Southern Africa and to further the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. Numerous sectors are supported by the IDC funding. 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.

Contact details of the dti

Tel (locals): 0861-843-384 Tel (international callers): +27 (12) 394 9500 Fax (locals): 0861 843 888 Fax (international callers): +27 (12) 394 9501 Website: www.thedti.gov.za

Contact details of the IDC

Tel: 0860-693-888 E-mail: [email protected] Website: www.idc.co.za

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The IDC’s primary role is to assist in acquiring finance. In this context, they have developed a wide variety of products, among which are:

Commercial Loans Equity Quasi-Equity Bridging Finance Shareware housing Guarantees Suspensive sales Wholesale Finance Export Finance Import Finance.

Trade and Investment South Africa (TISA) Trade and Investment South Africa (TISA) works under the umbrella of the dti and provides investment facilitation services for inbound investors. 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. The mandate of SEDA is to implement the national government small business strategy in line with the dti’s Integrated Small Enterprise Development Strategy. SEDA also supports, promotes, and grows enterprises with a special focus on co-operative enterprises located in rural areas. In general, SEDA aims at providing information to small business and prospective enterprisers that would encourage them to start and build sustainable businesses.

Contact details of the TISA

Tel: 0861 843 384 Website: www.thedti.gov.za

Contact details of SEDA Waterberg Branch (Modimolle): Telephone: 014 717 1568

Mobile Number: 082 416 3356

E-mail: [email protected]

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Development Bank of Southern Africa (DBSA) The Development bank of Southern Africa (DBSA) is one of several development finance institutions in South and Southern Africa. The core business of the Development Bank of Southern Africa (DBSA) is the support, both financially and in a facilitative role, of the creation of infrastructure to serve South Africa’s needs. Its purpose is to accelerate sustainable socio-economic development by funding physical, social and economic infrastructure. In addition to the primary focus on infrastructure, the DBSA would also attend to the short and medium term rural finance requirements for the foreseeable future. DBSA’s goal is to improve the quality of life of the people of the region. National Development Agency (NDA) The National Development Agency (NDA) is a section 3A statutory organisation, which was established by the National Development Agency Act (Act No. 108 of 1998) in November 1998. Since its inception the National Development Agency (NDA) has distributed millions to various communities located in poor areas in the following sectors: food security, sustainable livelihoods and community health projects. The NDA's interventions are aimed at contributing to job creation and participation of poor communities in the mainstream economy by strengthening their capacity and fostering social entrepreneurship. The National Development Agency are mandated to grant funds to Civil Society Organisations (CSOs) for the purposes of meeting the developmental needs of poor communities, to strengthen the institutional capacity of CSOs for long term sustainability, to proactively source funds for the NDA, to promote consultation, dialogue, and sharing of developmental experiences to debate and influence developmental policy, and to develop strategies to collaborate with local community trusts, foundations and government clusters. Trade and Investment Limpopo (TIL) Trade & Investment Limpopo was established in September 1996 as the official investment and trade promotion and facilitation agency of the Limpopo Provincial Government. TIL is the leading business development network for Limpopo companies seeking to expand operations locally, and into African and other foreign markets. Limpopo Development Corporation (Limdev) LIMDEV is a juristic body and operates as a Provincial Government Business Enterprise, entitled to make profit, as listed in Schedule 3D of the Public Finance Management Act, Act No. 1 of 1999, (as amended by Act No. 29 of 1999). LimDev’s mandate is to provide development finance to Small, Micro and Medium Enterprises (SMME’s) to stimulate the growth and development of the Limpopo economy.

Contact details of DBSA Tel: +27 11 313 3911 Fax: +27 11 313 3086 Website: www.dbsa.org.za E-mail: [email protected]

Contact details of NDA LP Tel: 015 291 2492 Fax: 015 295 7586 Website: www.nda.org.za E-mail: [email protected]

Contact details of TIL

Tel: +27 (0) 15 295 5171 Fax: +27 (0) 15 295 51 97 Website: www.til.co.za Contact Person: Stan Rakumako

Contact details of Limdev Tel: +27 (0) 15 633 4700 Fax: +27 (0) 15 633 4854 Website: www.limdev.co.za

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Libsa Limpopo Business Support Agency provides developmental support focusing on developing and exploiting local business opportunities from within local communities in the mining, agriculture and tourism sectors, as well as the agro-processing and mining beneficiation industry sectors. Support provided includes Business Information, Business Incubation, Business Training and development, Cooperative Development and Business mentoring and counselling. Limpopo Tourism and Parks (LTP) The Limpopo Tourism and Parks Board (LTP) was established under the Northern Province Tourism and Parks Board Act of 2001. The official mandate of the LTP is to promote, foster and develop tourism to and within the Limpopo Province. The main vision of LTP is to make Limpopo into the preferred eco-tourism destination in Southern Africa. Other business support organisations The below Table provides an indication of other support organisations and Departments. Table 2.3: Other business support Departments and O rganisations

COMPANY TELEPHONE

EDUCATION SECTOR

University of Limpopo +27 15 268 2140

FET College Mokopane +27 15 491 8581

AGRICULTURAL SECTOR

Department of Agriculture +27 15 491 5162/ 5163/ 5148

Land Bank +27 12 686 0500

CSIR (Council for Scientific & Industrial Research) +27 12 841 4005

ARC (Agricultural Research Council) +27 12 427 9700

Agricultural Business Chamber +27 12 807 6686

NAFU (National African Farmer's Union) +27 12 663 3111

Department of Rural Development & Land Reform +27 12 312 8911

TOURISM SECTOR

Waterberg Regional Tourism Association +27 14 736 6505

Tourism Enterprise Partnerships +27 11 880 3790

Culture Arts, Tourism, Hospitality and Sport Sector Education and Training Authority (THETA)

+27 11 217 0600

Contact details of LTP (Waterberg) Tel: +27 (0)14 736 4328 Fax: +27 (0)14 736 6668 Website: www.golimpopo.com E-mail: [email protected]

Contact details of Libsa Head Office Tel: 015 297 6473/85 Fax: 015 297 6732 Website: www.libsa.org E-mail: [email protected] Contact details of Libsa Enterprise House Tel: 015 295 3581 Fax: 015 295 3590 E-mail: [email protected]

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COMPANY TELEPHONE

Southern African Tourism Services Association +27 86 127 2872

National Department of Tourism +27 12 310 3911

Tourism Business Council of South Africa +27 12 654 7525

Khula Enterprise Finance +27 11 315 0036/7

Cooperatives and Community Public Private Partnerships Programme (CPPP)

+27 11 313 3065

National Empowerment Funds (NEF) +27 11 772 8000

Business Partners Ltd +27 11 470 3711

National Lottery Distribution Trust Fund (NLDTF) +27 86 006 5383

INFRASTRUCTURE SECTOR

ESKOM +27 11 800 8111

SANRAL Northern Region +27 12 348 1512

DEPARTMENT SECTORS

Limpopo Department of Agriculture +27 15 294 3147

Limpopo Department of Economic Development, Environment and Tourism

+27 15 293 8648

Limpopo Department of Education +27 15 290 7602/9345

Limpopo Department of Health and Social Development

+27 15 293 6005

Limpopo Department of Local Government and Housing

+27 15 294 2000/2142

Limpopo Department of Safety, Security and Liaison +27 15 290 2926

Limpopo Department of Public Works +27 15 284 7000/1

Limpopo Department of Roads and Transport +27 15 295 1006

Limpopo Department of Sport, Arts and Culture +27 15 284 4013

Limpop Department of Provincial Treasury +27 15 298 7124

2.2.2 Business associations and networks

Within the region there are also numerous business associations that promote networking and a coherent approach to business support and development. Currently two business chambers operate in Mogalakwena, namely, NAFCOC and the Mokopane Business Chambers. A Chamber of Commerce and Industry or Business Forum provides the means for a business to be re-integrated into local business communities. They act as an intermediate between the business sector, local government bodies and municipalities. Information flows into and out of business that enables them to react to opportunities otherwise hidden. Business initiatives are designed to assist members in trading on a local and national platform having direct access to industry experts that are able to act as facilitators in gagging new markets decisively.

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The Mokopane Business Chambers is a business support organisation providing business support to its associate members. The chambers business environment is dependent on various components that all have to be integrated to make the wheels of industry turn, small or large. Linking with local municipalities and the sourcing reliable suppliers have become important factors in the way we do business. The need to connect with other business groups and being forced to explore new non-traditional avenues will ensure that we have markets to sell to in future. More than 100 businesses in Mokopane affiliates with the chamber, and it currently operates the tourism office in Mogalakwena. There are two options to join the Mokopane Business chambers, as a joining member or as a free listed member. Chamber members have their own private environment where they log on as secure members. Members enjoy all the benefits and features as subscribing members. These benefits extends that what is offered online only. Members partake in networking sessions, product launches, promotional events, golf days, conferences, workshops, public debates and various business and community projects/charities. Free Listed Members are not subject to any cost. They are afforded an opportunity to list their company name, contact details, category of business on the platform database. This goes a long way for local business in generating a business directory that accurately lists all businesses in that town/city. The most obvious benefit is that when a site visitor or Member seeks to find a supplier on our website, the Free Listed members is also included in the results from that search. This means that Free members have the opportunity to be contacted to provide a quotation or to furbish further information about their business. The National Federated Chambers of Commerce (NAFCOC)’s mission is to develop and promote economic growth amongst existing and new business. Nafcoc has established an office in Mokopane and has its own affiliates. This organisation is a non-profit business support organisation that primarily, but not exclusively serve the interest of Broad-Based Black Economic Empowerment (BBBEE) companies and small and medium sized businesses. NAFCOC also aims to facilitate the growth of the economy by ensuring fast-tracked economic transformation and broad-based empowerment that will result in job creation and poverty alleviation. As well as:

To lead the unification process between black and white business in South Africa To represent the interest of SMMEs and BEE in policy transformation To contribute to economic transformation by building SMME capacity through business support

services, business development and by creating employment opportunities. To enable meaningful business opportunities for members by facilitating joint ventures and

preferential procurement partnership with both private and public enterprises.

The below Table provides a list of other business support organisations. Table 2.4: Other business support organisations

COMPANY BRIEF DESCRIPTION TELEPHONE

FABCOS To promote the interest of small black business

+27 15 597 1651/ 1405

BMF Black Managers Forum +27 15 297 2922

SOPOA Represents the interests of SA commercial property owners

+27 15 291 1678

NYDA National Youth Development Agency 08600 96884

Contact details of Mokopane Business Chamber

Tel: 015 491 8458 Fax: 015 491 8460 Website: www.mokopanebusiness.co.za E-mail: [email protected]

Contact details of NAFCOC in Mogalakwena

Tel: 015 491 6562 Fax: 086 539 3320 Website: www.nafcoc.org.za E-mail: [email protected]

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COMPANY BRIEF DESCRIPTION TELEPHONE

SAWIC South African Women in Construction +27 11 708 4850

SAWIMA South African Women in Mining Association +27 11 834 9039

The list of business support and business associations provided above is not exhaustive and other organisations that have a stake in LED initiatives should be added, including District government departments, and other support organisations. There is also a need for the capacity of the abovementioned organisations to be developed and expanded to better serve Mogalakwena Municipality. Mogalakwena Local Municipality however lacks a structured communication network with the District Municipality and some of the provincial organisations. Poor communication between these governments spheres have detrimental impact on the realisation of local opportunities and business support as this means that the officials in many instances are either not aware of or are not optimally utilising the services that are made available to them through local, provincial and national organisations.

2.3 Business retention and expansion strategy 2.3 Business retention and expansion strategy 2.3 Business retention and expansion strategy 2.3 Business retention and expansion strategy This sub-section presents the Business retention and expansion framework and strategic interventions. This section recommends strategic interventions required to improve the municipal business support environment in a manner that will facilitate business expansion. This section addresses the following components:

Theoretical framework of the retention and expansion strategy Business retention and expansion interventions Priority actions

2.3.1 Theoretical framework of the retention and expansion strategy

Government, economists, international agencies and organisations have reached consensus that the key to development is first the creation of an environment that is conducive to investment. Across the world, development strategies are based on the idea of stimulating competitiveness, seen as crucial to an environment attractive to investors. Only when this environment has been created, can any measure of success regarding specific project implementation be expected. As the process of economic globalization picks up pace, shifts have occurred in the relative importance of critical factors that determine productivity, and hence growth, since productivity lies at the heart of growth. Central to productivity is competitiveness, which consists of the set of factors, policies and institutions that determine the level of productivity of an area. Increased competitiveness, through its impact on the efficiency in the use of available resources, enables productivity levels to be raised. Productivity levels are the key determinant of rates of returns to investment, which in turn determine the rate of growth of an economy. Economies that are more competitive are likely to grow faster in the medium and long term. The relationship between competitiveness, industrial development and growth are illustrated in the below Figure. This strategy is thus located within the framework of the latest competiveness theories, namely the theories underlying the World Economic Forum’s Global Competiveness Index (GCI). The GCI provides guidelines to fundamentals that must be in place to attract investment. Factors that determine the underlying competitiveness of locations are both diverse and numerous. The World Economic Forum (WEF) continually updates its methodology for measuring competitiveness in order to keep up with the changing international environment. Presently, the WEF uses a far-reaching

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measure of competitiveness, developed by Professor Xavier Sala-i-Martin, a leading expert on growth and economic development. The new Global Competitiveness Index (GCI) represents almost two years of collaboration between the Professor, Forum staff, and a broad set of users. It is presently the main competitiveness index used by the World Economic Forum.

Figure 2.1: Relationship between competitiveness an d growth and development The GCI provides a holistic overview of factors that are critical to driving productivity and competitiveness, and groups them into nine strategic thrusts:

Institutions Infrastructure Macro economy Health and primary education Higher education and training Market efficiency Technological readiness Business sophistication Innovation

These thrusts and the factors that underlie them are based on the latest theoretical and empirical research. None of these factors can individually ensure competitiveness. For example, the value of increased spending on education will be undercut if inflexibilities in the labour market and other institutional weaknesses make it hard for new graduates to gain access to appropriate employment opportunities. The most competitive economies in the world are usually those in which concerted efforts are made to structure policies in an all-inclusive manner that recognizes the importance of a broad assortment of factors and their interconnection in a proactive way. The thrusts comprising the GCI will be used as the base for providing guidelines for improving the investment environment in the municipality in such a manner that a solid foundation may be laid for the development and consolidation of business support and expansion activities.

Relationship betw

een Com

petitiveness and G

rowth and D

evelopment

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The Strategy is thus underpinned by theories of competitiveness. Increases in competitiveness allows for improvements in productivity of resources, which in turn improves the rate of return on investment, increasing the attractiveness of investment. The primary goal of this strategy is to formulate guidelines for the Mogalakwena Municipality for retaining the existing businesses, assisting in their expansion, and ultimately attracting new investment. This goal is supported by the following objectives:

To create a clear understanding of the area’s potential To improve the capacity of the Municipality with regard to supporting existing businesses To identify mechanisms to overcome potential obstacles and ensure successful implementation

2.3.2 Business retention and expansion interventions

A favourable investment environment is required for any type of development, regardless of sector or projects details. To a certain degree, the success of specific projects is dependent upon interventions to improve the existing business environment. The business retention and expansion strategy consists of a strategic thrust, each with a number of programmes, representing the key components of each thrust in need of addressing which are largely based on those underpinning the GCI. Finally, a set of functional tasks or actions that are required to implement the programmes will be provided. The thrust and programmes to enable business support are listed in the below Table and detailed upon there under. Table 3.1: Strategic thrusts and programmes

THRUSTS PROGRAMMES

1. Good economic governance, communication, strategic partnerships, and service delivery

Improved governance Human resources management and institutional

transformation Communication and information interventions Improved service delivery and connectivity Business regeneration and development

Good governance focuses on sustainability management, community participation, responsiveness to citizens and co-operative governance. The municipalities role entails the facilitation of local economic development (which is promoted through investment), by creating an enabling environment. The competitiveness of Mogalakwena depends on the strength of its institutions, and for that reason, it is essential that any factors which may be hindering the smooth functioning of the municipal institution in creating an enabling environment must be addressed. Information is also an important determinant of the level of efficiency in a market. Where information is perfect, conditions of perfect competition are attained. The less perfect the flow and availability of information, the more likely the potential for markets to fail to produce optimal outcome. Thus it is important that all (potential) participants should have access to the information that they require to make optimal decisions. Linked to good governance is municipal service delivery. The rationale for strategic investment in key economic infrastructure is that this improves productivity and ‘crowds in’ private sector investment. Firms are better able to compete when the quality of infrastructure they are faced with is high. Improved infrastructure leads to improvements in productive procedures, which increases productivity. Furthermore, locations equipped with high quality infrastructure are more attractive to entrepreneurs

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than those of poor quality. Inadequate infrastructure entails possible cost and time implications for investors that may divert investment to better-endowed areas. The enabling environment created by water, power, rail and road infrastructure may mean that economic activity, such as agri-industry may be established closer to farming nodes than in Mokopane. This may lower the economic hurdle of the production or adding of value to agricultural produce that would not be possible was this infrastructure not in place. This thrust is based on the premise that optimal resource utilisation needs to be ensured. Investment in economic infrastructure and the transport system entails investment into strategic infrastructure which includes aspects such as service delivery improvements, transport corridor, etc. The following programmes, discussed hereunder seek to correct challenges identified:

Programme 1 : Improved governance Programme 2 : Human resources management and institutional transformation Programme 3 : Communication and information interventions Programme 4 : Improved service delivery and connectivity Programme 5 : Business regeneration and expansion

Programme 1: Improved governance ‘Good governance’ principles need to be included in the economic governance structure of the Municipality. Good governance is an important catalyst for growth. Areas that are growing do not suffer from the impact of corruption to the same extent than areas suffering from poor economic performance. Poor governance thus impacts worse on areas already struggling while not necessarily inhibiting growth in areas already performing well. Good governance in weak regions is thus doubly important. Municipal strategic efforts to address the condition of poverty focus on providing basic services and run the risk of crowding out interventions focusing on creating growth. Institutional capacity through which to implement this strategy through government structures is limited and requires consideration of wide-ranging partnerships. Mogalakwena is not well positioned to compete for investment based on location, cheap labour, economies of scale and low cost. It has lost critical economic mass to Polokwane over time. Building a partnership with Polokwane to avoid negative competition in favour of positive co-opetition is desirable. Better government service delivery is required in order to have higher levels of public confidence. The following tasks and initiatives serve as the key aspects in terms of good governance within Mogalakwena local municipality:

Improve intergovernmental relations, co-ordination and planning Develop partnerships (i.e. business sector, NPO’s, NGO’s) and facilitate institutional demarcation

through establishment of economic networks and linkages between entities to ensure coordination of development activities

Strengthen and build a structured ‘co-opetition’ partnerships with Polokwane and other nearby strong regional economic centers

Undertake higher levels of interaction between communities and businesses with quality customer care facilities and better service delivery with high levels of maintenance, cleanliness and law enforcement, with associated high levels of public confidence

Lobby with role players (i.e. public works, international funding organisations, etc) Secure off-municipal budget funding for implementation.

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Where necessary, provide capital budget for the implementation of the programmes and tasks listed in this strategy

Programme 2: Human resources management and institu tional transformation Key initiatives of human resource management focus on the following aspects:

Human Capital Development and institutional capacity building Review and align the organisational structure to strategic objectives Protocols and procedures

The municipality is faced with vacancy rates, staff turnover, as well as insufficiently skilled staff. Mogalakwena has a LED unit, although various positions and additions to the institutional structure have been made in the LED strategy (2011-2016). With these and other municipal departments vacancy rates being filled, these have negative impacts on the effectiveness in performing their functions, as staff is ultimately responsible for carrying out tasks. Where positions are not filled or are filled by persons lacking requisite skills, service delivery is compromised. Due to capacity constraints of the existing LED unit, it is also been advised that a dedicated business support officer be established. In the interim it is also suggested that use be made of the Waterberg Development Agency, one operational. For more details on the restructuring of the organizational structure consult the LED strategy. Human resource developments of officials in the LED units (and even relevant members from LED forums) are a prerequisite. The closest LGSETA accredited LED training provider should be consulted accordingly. Some suggested training avenues include:

Project management Public participation LED Marketing Business support Investment attraction Data management: the value of data, data collection methods and sources, working with data

and data interpretation. Sector Analysis: methodologies, role players, SWOT analyses and sector policy analysis

Human resource development of municipal staff in general (i.e. not just LED unit staff) is also required in order to ensure efficient government service delivery. To ensure that institutional functions are carried out efficiently, it is also considered essential that procedure manuals and job descriptions be developed to streamline delivery. Recommended strategic tasks:

Proactively seek to fill all available positions Undertake staff survey to determine reasons for staff turnover in order to obtain suggestions for

retention and initiate staff retention actions Conduct a staff skills audit to determine skills gaps and required curriculum for training and

undertake vigorous and comprehensive staff training programmes Develop new staff recruitment methods Set up a comprehensive list of municipal level economic tasks, functions, and job descriptions Develop and disseminate procedure manuals for all municipality tasks and functions Assist with getting the Waterberg Development Agency operational and lobbying for

implementation assistance Review and align the organisational structure to strategic objectives

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Programme 3: Communication and information interven tions Improved information flows toward local entrepreneurs and established businesses are essential for the facilitation of business support and investment. It is not only vital that investors are aware of investment opportunities, but that established businesses are regularly updated regarding changes in technology, demand, potential networking and linkage opportunities, etc. Local businesses that are aware of the existence of local suppliers of raw materials they use, will save costs if this information is made available. The communication/information needs entail:

Business support desk Business directory Interactive website Greater interaction, communication, buy-in and support from the LED clusters, specifically the

tourism and industrial clusters are required.

It is also critical that the municipality be able to guarantee the efficient and effective dissemination of information and expansion of LED knowledge and know-how throughout the region. It is thus advised that a business advisory service centre be established. Such a center should:

Assist entrepreneurs with market information, requirements and advice, Support entrepreneurs with the removal of procedural and administrative bottlenecks, Coordinate technological support and finance Organise training programmes and seminars Establish market research facilities Link producers with markets (or buyers), etc.

Furthermore, gaps exist in the data management systems of the municipality as no business confidence surveys get undertaken (institutional capacity is lacking), there are no municipal databases and spatial data has been indicated as being inaccessible. Promotion of the entities within the municipality is also essential. Although mention has been made of databases, it is critical to note that a definitive body of knowledge has been built up (see LED strategy, 2011-2012). The sectoral information contained therein needs to be made available to potential investors. Besides overviews of the sectors, more in-depth profiles of the priority development projects and actions have also been developed. There is thus a lot of data available that needs to be marketed (internet and brochures) to both existing and prospective investors. Lastly, a fully representative system of LED Forum clusters is required, from local through to Provincial level. Recommended Strategic Tasks:

Inventories of all current investment activities, trends, future plans, skills and financial assistance are required.

Establish a Advisory Service Centre and fill the proposed post of the investment officer A business directory should be created and distributed The website requires revision with regard to the contents and information contained therein. Assist with the revitalisation and ensuring continued strength of municipal LED forum clusters by

consulting good working LED Forums and LED Departments as learning organisations. Draw-up a terms of reference and communicate the aims of the LED Forum and align

requirements to this strategy and the LED strategy (2011-2016).

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Programme 4: Improved service delivery and connecti vity

Both community services and infrastructure play a vital role in the development of the local economy of a region. The level of service in both of these categories directly and indirectly affects the ability of a region to attract and retain talented individuals and to compete for business. The following factors should be taken into account when accessing the readiness, or enabling environment of an area:

The quality and extent of hard infrastructure such as road- and rail networks. The sophistication of local telecommunications, banking and finance services similarly impact on

the input and operational costs of doing business. The extent to which spatial and land planning policies and documents are flexible to the needs of

businesses and the relative ease of following land planning processes, such as rezoning applications.

The sophistication of the public sector. The quantity and quality of available labour and training programmes, in relation to the specific

human resource requirements of investors. Quality of life factors, such as the supply of housing and personal lifestyle facilities (such as

educational, cultural and recreational services) also have an impact on the attraction of a particular investment.

Figure 2.2 below provides a physical illustration of key infrastructure of the District.

Figure 2.2: Waterberg District Municipality Infrast ructure framework

Source: Waterberg District EMF, 2010

Good governance also goes hand in hand with good service delivery. Building a vibrant service economy is essential and the single most important economic sector common to weak region turnarounds across the world. This sector is constrained by the limits to government growth. One important approach to both broaden economic participation and increasing economic activity is to acknowledge both the importance of the government in the economy as well as the relative inefficiency of government in the local economy. The municipality could play an important role in building a

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sustainable high employment services economy by unbundling some of its activities to private sector service providers. In particular, municipal services. The Mogalakwena Service Delivery report for the period of 2006-2010 indicate that there has been attempts and improvements in terms of bulk infrastructure and service delivery. Most formal businesses cannot function without a reliable and sufficient supply of electricity. In terms of competitiveness, electricity supply is highlighted as an essential element by the GCI. Furthermore, in the context of growing concern about environmental sustainability, it is not unrealistic to expect that as the more developed countries increase their renewable energy capacity, more and more non-tariff barriers will be erected with regard to the type of energy used in the manufacturing process. Countries and regions that are pro-active in their development of their renewable energy sources will naturally benefit when such conditions come to pass. Here it is also relevant to note that electricity is available, but any major new developments would require considerable upgrade to the supplies. Numerous potential businesses have already been deterred from implementing expansion plans due to non availability of electricity services. Both Eskom and the Council provide electricity in the municipal area. The Council is responsible for the urban core and commercial farming areas. These areas have full access to electricity. Eskom provides the rural areas. Water supply in Mogalakwena LM is supplied through the Glen Alpine and Doorndraai Dams which form part of the Mogalakwena River Catchment that ultimately flows into the Limpopo River. According to the Mogalakwena LM IDP 2010/2011, the urban areas of the municipality forms part of the Doorndraai Water Resource System. The villages are supplied by the following schemes: Safakaola Water Supply Scheme, Glen Alpine Water Supply Scheme, Mapela Regional Water Scheme (25 boreholes), Bakenberg Regional Water Supply Scheme (40 boreholes), Nkidikitlana Regional Water Supply Scheme (15 boreholes), and Salem Regional Water Supply Scheme (12 boreholes). The schemes which supply the villages are all in need of refurbishment or upgrading of the design vs. population capacity as the villages have outgrown the schemes. The only potential for additional water resources within the area is from groundwater. The total groundwater resource is estimated at 55 million m3/a (Waterberg District EMF,2010).

Most water resources in Limpopo are fully developed and water has already been allocated to various role-players. There also seems to very little opportunity for resource development due to the arid climate, unfavourable topography, sandy rivers and a weak potential for more groundwater abstraction.

However, there are various initiatives identified and underway within Mogalakwena Municipality aimed at addressing the issues and gaps identified in terms of service delivery within the municipality. These initiative are funded through government and private sector participation. Water development projects in the district which will also benefit the Mogalakwena Local Municipality as Identified in the Waterberg District EMF 2010, include:

Effluent from Polokwane. A contract was recently concluded between Polokwane Municipality and Potgietersrus Platinum Mines for the supply of 14 mega litres of effluent per day from the treatment works. The role of WDM in this regard is to use all information pertaining to water demand and supply to form an action plan for water provision as one component of the mining development strategy.

Flag Boshielo Transfer. This project entails the raising of Flag Boshielo Dam wall by 5 meters and construction of a new dam (De Hoop) in the Steelpoort River. A pipeline will be constructed in to transfer raw water from Flag Boshielo to Mokopane. This is expected to be completed soon, with a second pipeline in 2025.

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Mogalakwena Municipality is expected to be a primary beneficiary of the Flag Boshielo water transfer, but this transfer will be insufficient to remove the water deficit. Total water requirements for the municipality in 2005 were estimated at 21 million cubic meters of which the bulk (19 million cubic meters) was for agriculture. Mining used a mere 1.5 million cubic meters and household use was 0.2 million. This project is currently underway and is expected to run between 2013 and 2014 (Mogalakwena IDP office, 2011). Transport infrastructure is also of primary importance to economic development as it connects consumers to suppliers and the labour force to places of employment. The requirement is a transport system that drives economic growth. The N1, N11, and R518, together with the Mogalakwena River and mountains provide very strong structural elements that shaped the development in the municipal area. The whole municipal area is well covered by roads. The road net includes links to both the N1 in the south and the N11 running north-south through the area. Where the N11 serves the eastern border region of the municipality, the R518 fulfil this function along the western part of the municipality. There are good lateral links between the N11 and the R518 with further links being upgraded. The N1 links the municipal area to key axis through the province linking all centres north and south of Mokopane. The fact that the N1 bypasses the main urban centre excludes the municipal area from benefiting from passing traffic although it remains the key national and regional link to Mokopane. The N11 runs though the urban core and provides an important link with the north western part of the province and Botswana. The route carries a substantial number of heavy vehicles. This causes problems in Mokopane and is dangerous to the high level modal mix on the N11 between Mokopane to the point where the R518 turns off from the R11. The larger part of Mogalakwena is within two hours from the urban core. The most inaccessible areas in the municipality also coincide with the area with a high conservation potential. The extent of the functional area and the in accessibility of major centres for households in the northern border area might be a motivation for developing Rebone as a service point although it is on the municipal border. However, the low densities in this area will prevent any significant commercial development in this area but government and community services should be focused in a single settlement. It is also relevant to note that the 3 existing business development officers should also preferably be stationed within the three respective service delivery areas (SDAs). Furthermore, according to the Mogalakwena SDF, on request of the mining companies, SANRAL is considering rerouting the N11 to by-pass Mokopane. According to this proposal (indicated in blue on the map) a link will be built between the toll gate to the north of the town and rejoin the existing alignment of the N11 at the current junction of the N11 with the D1501. The proposal should hold several benefits for the urban core. The most important is that it will alleviate the traffic flow through the CBD and especially reducing the number of heavy vehicles passing through the town. The situation can be further improved if a link can be constructed between the current split of the N11 and R518 immediately north of Mahwelereng and the N11 realignment. This will also redirect regional traffic from and to Marken and the N1. The access to an important rail link and the extent of access to rail facilities in the industrial area must also be noted. This is a benefit that can be capitalised on although access to rail services remains limited to the urban core.

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It is important that infrastructure interventions be undertaken as speedily as possible, since the provision of adequate infrastructure crowds in private investment, which will be essential to the development envisioned. The municipality should engage with the District Municipality, National Department of Public Works, Water Services Authorities, the Department of Water Affairs, ESKOM, National and Provincial Department of Transport, etc to determine how the following recommendations and strategic tasks can be implemented:

Establish a municipal services monitor at the Local level, whereby the municipality maintains a clear investment picture to inform planning, prioritisation and decision-making

Identify and prioritise economic concentrations that do not have access to electricity and water services

Consider unbundling state services provision to stimulate a local service industry Launch a municipal-wide infrastructure maintenance and expansion financing strategy towards

building a richer range of infrastructure development alternatives in order to speed up delivery. Utilise existing inter-governmental structures and local economic development forums to lobby

the responsible authorities to prioritise key logistical infrastructure linkage investment benefiting Mogalakwena Local Municipality

Determine current and future strategic roads and conduct an audit on the state of these roads Lobby to reroute the N11 and create better spatial linkages through encouraging SANRAL and

other agencies to reroute the N11 and develop link between the current split of the N11 and R518 immediately north of Mahwelereng and the proposed N11 realignment. This will also redirect regional traffic from and to Marken and the N1.

Lobby to create access to rail links and facilities in the industrial area. This is a benefit that can be capitalised on although access to rail services remains limited to the urban core.

Overcome freight logistical isolation by supporting manufacturing of low volume and high value goods.

Facilitate development of Rebone service point Create a central point per service delivery area where the three SDA officers can be stationed

Programme 5: Business regeneration and expansion

The municipality needs to catalyse the development of new business opportunities (i.e. agri-industry) as well as to expand its existing businesses (i.e. manufacturing) and retain the businesses that are considering relocating outside the municipality in order to realise its vision. This requires Business Development Retention and Expansion. Economic growth is driven by three pillars of economic development. These pillars are:

Existing business, Existing businesses that are expanding, and Newly developed businesses.

Historically, government concentrated on supporting attraction of new businesses. In other words, the majority of government policies aimed at the development of an economy focused on the provision of an environment conducive for new business establishment. Thus, the policies overlooked imperative factors of economic growth, such as expansion and retention of economic activities. Government support of expansion and retention of businesses is, however, crucial in ensuring job creation in the economy as it secures jobs that already exist in the economy and generates new employment opportunities within already established businesses. Government support of the three pillars of economic growth could be achieved through formulation and implementation of the Retention, Expansion and Development Framework. The main objective of the

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Framework is to improve the quality of life and liveability of the area through economic growth that creates jobs, generates wealth and attracts investments. This framework incorporates two strategies that are briefly discussed in more detail below:

Retention Strategy: The existing businesses provide current jobs and constitute a tax base for local government. Their support is, therefore, essential to safeguard the foundation for economic growth. The Retention Strategy aims at improving the competitiveness of the existing businesses by identifying their needs and concerns.

Expansion Strategy: The Expansion Strategy is directly linked with the Retention Strategy as it focuses on the current businesses. Its main purpose is to provide necessary support to the local businesses to build on existing opportunities through their expansion.

The Retention Strategy should focus on the following tasks:

Evaluation of businesses in the area and high priority retention targets Identification of the strengths and weaknesses of the current business climate through the

undertaking of a annual business confidence survey Establishment of assistance mechanisms, including marketing, technology and skills

development Develop commodity working groups and stimulate dialogue over issues and problems within

specific sectors/commodity groups in order to stimulate collective action Support cluster learning networks Show case successful implementation of LED initiatives to stimulate existing business confidence

Here it is also advised that an annual business confidence survey be undertaken. This need not be a costly and time consuming survey, but can simply be done with members of the business chamber and NAFCOC. An example of such as survey is attached in Annexure A.

The main tasks of the Expansion Strategy are as follows: Linkages with the Retention strategy Identification of business expansion opportunities Development of mechanism to communicate the identified opportunities to businesses Formulation and implementation of a business expansion incentive programme. See Section 4

for more detail. Supply chain management development

A summary of the thrust, programmes and actions are provided hereunder: Table 2.1: Summary of business retention and expans ion interventions:

THRUST 1: GOOD ECONOMIC GOVERNANCE, COMMUNICATION, STRATEGIC PARTNERSHIPS, AND SERVICE DELIVERY

PROGRAMMES ACTIONS

Improved governance

Improve intergovernmental relations, co-ordination and planning Develop partnerships (i.e. business sector, NPO’s, NGO’s) and facilitate

institutional demarcation through establishment of economic networks and linkages between entities to ensure coordination of development activities

Strengthen and build a structured ‘co-opetition’ partnerships with Polokwane and other nearby strong regional economic centers

Undertake higher levels of interaction between communities and businesses with quality customer care facilities and better service delivery with high levels of maintenance, cleanliness and law enforcement, with associated high levels of public confidence

Lobby with role players (i.e. public works, international funding

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PROGRAMMES ACTIONS

organisations, etc) Secure off-municipal budget funding for implementation. Where necessary, provide capital budget for the implementation of the

programmes and tasks listed in this strategy

Human resources management and institutional transformation

Proactively seek to fill all available positions Undertake staff survey to determine reasons for staff turnover in order to

obtain suggestions for retention and initiate staff retention actions Conduct a staff skills audit to determine skills gaps and required curriculum

for training and undertake vigorous and comprehensive staff training programmes

Develop new staff recruitment methods Set up a comprehensive list of municipal level economic tasks, functions,

and job descriptions Develop and disseminate procedure manuals for all municipality tasks and

functions Assist with getting the Waterberg Development Agency operational and

lobbying for implementation assistance Review and align the organisational structure to strategic objectives

Communication and information interventions

Inventories of all current investment activities, trends, future plans, skills and financial assistance are required.

Establish a Advisory Service Centre and fill the proposed post of the investment officer

A business directory should be created and distributed The website requires revision with regard to the contents and information

contained therein. Assist with the revitalisation and ensuring continued strength of municipal

LED forum clusters by consulting good working LED Forums and LED Departments as learning organisations.

Draw-up a terms of reference and communicate the aims of the LED Forum and align requirements to this strategy and the LED strategy (2011-2016).

Improved service delivery and connectivity

Establish a municipal services monitor at the Local level, whereby the municipality maintains a clear investment picture to inform planning, prioritisation and decision-making

Identify and prioritise economic concentrations that do not have access to electricity and water services

Consider unbundling state services provision to stimulate a local service industry

Launch a municipal-wide infrastructure maintenance and expansion financing strategy towards building a richer range of infrastructure development alternatives in order to speed up delivery.

Utilise existing inter-governmental structures and local economic development forums to lobby the responsible authorities to prioritise key logistical infrastructure linkage investment benefiting Mogalakwena Local Municipality

Determine current and future strategic roads and conduct an audit on the state of these roads

Lobby to reroute the N11 and create better spatial linkages through

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PROGRAMMES ACTIONS

encouraging SANRAL and other agencies to reroute the N11 and develop link between the current split of the N11 and R518 immediately north of Mahwelereng and the prposed N11 realignment. This will also redirect regional traffic from and to Marken and the N1.

Lobby to create access to rail links and facilities in the industrial area. This is a benefit that can be capitalised on although access to rail services remains limited to the urban core.

Overcome freight logistical isolation by supporting manufacturing of low volume and high value goods.

Facilitate development of Rebone service point Create a central point per service delivery area where the three SDA

officers can be stationed

Business regeneration and expansion

Evaluation of businesses in the area and high priority retention targets Identification of the strengths and weaknesses of the current business

climate through the undertaking of a business database and annual business confidence/climate surveys with Nafcoc and Business chamber members

Establishment of assistance mechanisms, including marketing, technology and skills development

Develop commodity working groups and stimulate dialogue over issues and problems within specific sectors/commodity groups in order to stimulate collective action

Support cluster learning networks Show case successful implementation of LED initiatives to stimulate

existing business confidence Linkages with the Retention strategy Identification of business expansion opportunities Development of mechanism to communicate the identified opportunities to

businesses Formulation and implementation of a business expansion incentive

programme. See Section 4 for more detail Supply chain management development

2.3.3 Priority actions In order for the implementation of the retention and expansion strategy to take place in an effective, efficient and sustainable manner, there are several priority actions that must be taken by the key role-players. These are outlined hereunder:

Attend to water and electricity problems timeously Set reasonable timeframes and keep monthly/weekly track records to effectively evaluate the

progress of all necessary actions. Have a member of council, preferably the LED councillors, focused exclusively on the

implementation of the Strategy Appoint dedicated investment officer Develop a complete business inventory Conduct a annual business survey

� Improve understanding of businesses’ needs and concerns � Addresses businesses concerns in a timely manner

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� Assist businesses to link with suppliers/distributors � Illustrate pro-business approach of the local government



40


Section three Kayamandi Development Services

This Section presents the business attraction framework and strategic interventions. A favourable investment environment is required for any type of development, regardless of sector or economic project. The success of economic initiatives, to a degree, is dependent on investment interventions to improve the investment environment. This section recommends strategic interventions required to improve the environment in a manner that will facilitate investment into Mogalakwena Local Municipality. This section addresses the following components:

Current business attraction and marketing environment Business attraction support framework Business attraction strategy

3.1 Current business attraction and marketing environment 3.1 Current business attraction and marketing environment 3.1 Current business attraction and marketing environment 3.1 Current business attraction and marketing environment In developing a strategy for investment promotion activities, it is necessary to find the appropriate balance between the investment promotion principles and aspects, taking into account important factors such as the investment environment with regards to target market, global developments, and the recognition that these factors change over time. The investment also entails understanding what to promote, where to promote, etc. The following is referred to in this sub-section:

Local target market International target market

3.1.1 Local target market Mogalakwena Municipality is located within the Waterberg District Municipality which is situated in the western part of the Limpopo Province. The Limpopo Province shares borders with three countries: Botswana, Mozambique and Zimbabwe, which makes it a very strategic contact between those countries and South Africa. In turn, Waterberg District Municipality shares its borders with Capricorn District Municipality in the north and Sekhukhune in the east. In the southwestern and southeastern are boundaries with the North West and Gauteng Provinces respectively.

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Mogalakwena functions largely as the interface between Waterberg District Municipality and Capricorn District Municipality. Mogalakwena is surrounded by the following metropolitan and local municipalities:

Lephalale Local Municipality in the North West Province with largely deep rural areas Polokwane Local Municipality the provincial service centre with strong tribal component directly

adjacent to Mogalakwena Lepelle Nkumpi Local Municipality Mookgopong Local Municipality Modimolle Local Municipality

The main entry roads to the District is the N1 (national road) and R101 from Gauteng, N11 from Sekhukhune and R159 and R133 from the North-West. It is linked to Gauteng by one of the best stretches of the N1 in South Africa. Based on the location and main routes to and from Mogalakwena Local Municipality (see below Figure), various local markets have been identified.

Figure 3.1: Mogalakwena Municipality in relationshi p with transport routes and local markets

The N11 runs though the urban core of the Municipality, namely Mokopane and provides an important link with the north western part of the Province and Botswana. According to the Mogalakewna SDF, the functional service area of Mokopane more or less coincides with the eastern and western municipal boundaries. However, the functional services area extends north up to the Botswana border and south beyond the municipal boundary toward Marble Hall and Lebowakgomo. The area has important linkages that are relevant to take note of. It is strongly linked along the Lephalale-Thabazimbi- Rustenburg mining corridor. The N1 running north-south through the east of the Waterberg District forges strong links with Gauteng as the economic heart of South African and the far northern parts of Limpopo and even neighbouring countries to the north. The N1 plays an import role in proving access in national context and exposes the region to direct competition with Gauteng and

42



Polokwane for commercial ventures and investment. In short, the area is in relatively easy reach of the largest market in Gauteng. The north-south link of the N1 is international importance and serves as an export link for especially mining products from Zambia and Zimbabwe. This route bypasses the main urban centre of Mokopane, but Mokopane has an access road to the N1. 3.1.2 International target market An analysis of international trade of the Waterberg District, particularly with regard to the main export partners, assists in identifying countries that create the demand for the local goods and products. These countries are considered to be potential investors as they could be involved in expansion of the local business or investment in new operations in those sectors that produce and manufacture products that are currently exported to these countries. The figure below shows the trade balance for the Waterberg District Municipality between the years 2000 and 2009. Figure 3.2: Waterberg DM International Trade Dynami cs (R'million, current prices)

Source: Quantec Research, Standardised Regional Data, 2010 In 2009, the trade balance within the Waterberg District accounted for 0.63% of the total GDPR. This was slightly lower than 2008 results, which was estimated at 0.77%. The trade balance share as a part of the GDPR of the District between the years 2000 and 2007 has been nominal, accounting for never more than three quarters of a percent. In the backdrop, the South African trade balance has not yet since 2003 shown a positive value, indicating that the Waterberg District does have nominal advantages when considering exported items and the amount imported. The Waterberg District has a limited diversified economy with strong focus on the mining sector as its main driver. In this respect the idea may be formulated around the concept that products and services imported to the district may not be directly imported, but may be purchased from the other Provinces within South-Africa. The imports/exports values for 2009 in the Waterberg District showed that total international trade for the district amounted to R410 million of which 77% were exports and the remaining 23% were imports.

0

50000000

100000000

150000000

200000000

250000000

300000000

350000000

400000000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Trade Balance Exports Imports

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Figure 3.3 illustrates the export regions of the Waterberg District and the share in values per region. Figure 3.3: Waterberg District Municipality export flows

Of the total share of exports to other countries, Europe is the main export region for the Waterberg District with a combined share of 57% of total exports, followed by North America, Africa and Asia with 25%, 10% and 4% of total exports respectively. The remainder of exports from the Waterberg District are distributed to Central and South America and the Oceania regions, which have more nominal shares in exports.

The main export from the Waterberg District during 2009, according to the Quantec Database 2010, is mineral products which accounts for 80% of total exports. Of these mineral products, fluorspar is the main mineral exported followed by granite (rough or cut into blocks). Platinum in this regard is one of the main minerals mined in the area, and is hence distributed from the Mogalakwena LM to refineries elsewhere, from which the end products are then exported. The remainder of the products exported from the district is listed below in terms of its size (importance) in exports. These products are:

Vegetable products, Live animals, animal products, Raw hides & skins, leather and associated products Works of art, collectors pieces & antiques, Machinery & machinery appliances, electrical equipment and associated products, Plastics and articles thereof Base metals & articles of base metals, Products of the chemicals or allied industries, Articles of stone, plaster and associated products, Prepared foodstuff and associated products, Vehicles, aircraft and associated transport equipment, Miscellaneous manufactured articles, Wood and articles of wood, Textiles and textiles articles, Optical, photographic and associated products, Pulp of wood or of other fibrous cellulosic materials, Natural or cultured pearls, precious or semi precious stones and associated products, Footgear, headgear and associated products.

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The table below shows the share of export countries of products from the Waterberg District Municipality. Table 3.1: Share of export countries Country Region Share within country Total Share

Africa

Tunisia 62.1% 6.7%

Total Northern Africa 62.1% 6.7%

Democratic Republic of the Congo 0.7% 0.1%

Malawi 0.3% 0.0%

Mozambique 7.0% 0.8%

United Republic of Tanzania 0.0% 0.0%

Zambia 8.2% 0.9%

Zimbabwe 21.5% 2.3%

Total SADC 37.8% 4.1%

Total Western Africa 0.1% 0.0%

Total Africa 100.0% 10.8%

Americas

Costa Rica 3.1% 0.8%

Total Central America 3.1% 0.8%

Brazil 0.0% 0.0%

Total South America 0.1% 0.0%

Canada 0.5% 0.1%

Mexico 0.1% 0.0%

United States 96.3% 25.7%

Total NAFTA 96.8% 25.8%

Total Americas 100.0% 26.7%

Asia

China 7.9% 0.4%

Hong Kong Special Administrative Region of China 9.9% 0.5%

Japan 47.9% 2.2%

Taiwan Province of China 0.1% 0.0%

Total Eastern Asia 65.7% 3.0%

India 0.8% 0.0%

Kazakhstan 0.4% 0.0%

Total South -central Asia 1.1% 0.1%

Singapore 17.1% 0.8%

Thailand 0.0% 0.0%

Total South -eastern Asia 17.1% 0.8%

United Arab Emirates 5.4% 0.2%

Bahrain 3.8% 0.2%

Israel 0.1% 0.0%

Kuwait 6.7% 0.3%

Total Western Asia 16.1% 0.7%

Total Asia 100.0% 4.6%

Europe

Total Eastern Europe 0.0% 0.0%

Norway 0.2% 0.1%

Total Northern Europe 0.2% 0.1%

Total Southern Europe 0.0% 0.0%

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Country Region Share within country Total Share

Total Western Europe 0.0% 0.0%

Belgium 2.5% 1.4%

Germany 0.2% 0.1%

Denmark 0.5% 0.3%

Spain 9.2% 5.3%

France 1.1% 0.7%

United Kingdom 27.4% 15.8%

Greece 0.2% 0.1%

Italy 30.6% 17.6%

Luxembourg 0.5% 0.3%

Netherlands 26.7% 15.4%

Poland 0.4% 0.2%

Sweden 0.3% 0.2%

Total European Union 99.7% 57.5%

Total Europe 100.0% 57.7%

Oceania

Australia 96.5% 0.2%

New Zealand 3.5% 0.0%

Total Australia and New Zealand 100.0% 0.2%

Total Oceania 100.0% 0.2%

Total 100.00% Source: Kayamandi calculations from Quantec Research, Standardised Regional Data, 2010 From the table it can be deduced that the following regions, listed in terms of importance, play the largest roles in the exportation by the Waterberg DM. These regions are:

The United States Italy The United Kingdom The Netherlands Tunisia Spain Zimbabwe Japan Belgium

Each of the countries listed above have some product that is imported from the Waterberg DM. Each of the product categories for export from the Waterberg DM is listed in the table below along with the countries who import the products. Table 3.2: Export partners of local products Exporting Item Destination

Live animals, animal products Argentina, Austria, Bahrain, Belgium, Canada, Czech Republic, Denmark, France, Germany, Hong Kong, Hungary, Israel, Kuwait, Luxembourg, Mauritius, Mexico, Portugal, Singapore, Slovakia, Spain, Sweden, United Arab Emirates, United Kingdom, United States, Zimbabwe

Vegetable products Andorra, Belgium, Canada, Democratic Republic of the Congo, France, Netherlands, Spain, United Kingdom, Zambia, Zimbabwe

Prepared foodstuffs; beverages, etc Belgium, Malawi, Netherlands, Norway, Zambia, Zimbabwe

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Exporting Item Destination

Mineral products Belgium, Costa Rica, Greece, India, Italy, Japan, Mozambique, Netherlands, Poland, Spain, Tunisia, United Kingdom, United States, Zimbabwe

Products of the chemical or allied industries Singapore, Zambia, Zimbabwe

Plastics & articles thereof; rubber & articles thereof

Australia, India, Italy, Mozambique, United States, Zambia, Zimbabwe

Raw hides & skins, leather, etc Argentina, Austria, Belgium, Canada, Croatia, Denmark, Finland, France, Germany, Japan, Kazakhstan, Mauritius, Mexico, Netherlands, New Zealand, Norway, Portugal, Reunion, Russian Federation, Spain, Sweden, Thailand, United Arab Emirates, United Kingdom, United States, Zambia

Wood & articles of wood, etc France, Mozambique, Spain, United States, Zimbabwe

Pulp of wood or of other fibrous cellulosic material, etc

Canada, United States

Textiles & textile articles Mozambique, Zambia, Zimbabwe

Footwear, headgear, etc Zambia

Articles of stone, plaster, etc Australia, Belgium, Canada, China, Congo, Cote d’Ivoire, Germany, Ghana, New Zealand, Nigeria, Portugal, Spain, United Kingdom, united States, Zimbabwe

Natural or cultured pearls, etc India, United States

Base metals & articles of base metal Australia, Belgium, Congo, Luxembourg, Mozambique, Romania, Switzerland, United Kingdom, United States, Zambia, Zimbabwe

Machinery & mechanical appliances; electrical equipment; etc

Germany, Malawi, Mozambique, Netherlands, Taiwan, United Republic of Tanzania, United States, Zambia, Zimbabwe

Vehicles, aircraft, vessels & associated transport equipment

Democratic Republic of the Congo, Mozambique, Zambia, Zimbabwe

Optical, photographic, etc Belgium, Germany, Zambia, Zimbabwe

Miscellaneous manufactured articles Belgium, Canada, Denmark, France, Spain, United States, Zambia, Zimbabwe

Works of art, collectors' pieces & antiques Argentina, Australia, Austria, Belgium, Brazil, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, India, Italy, Kazakhstan, Mautirius, Netherlands, New Zealand, Norway, Poland, Portugal, Reunion, Russian Federation, Slovenia, Spain, Sweden, Switzerland, United Arab Emirates, United Kingdom, United States

Source: Kayamandi calculations from Quantec Research, Standardised Regional Data, 2010 The countries, products and contribution to the export market of the Waterberg District should be taken into consideration, during the compilation of target markets. The table below provides an indication of destination and main exporting items which can respectively be referred to as, possible investors and potential products. Table 3.3: Potential international target markets Destination Main Exporting Item

Tunisia Prepared foodstuffs; beverages, etc

Zimbabwe

Live animals, animal products Vegetable products Prepared foodstuffs; beverages, etc Mineral products Products of the chemical or allied industries Raw hides & skins, leather, etc Pulp of wood or of other fibrous cellulosic material, etc Footwear, headgear, etc Natural or cultured pearls, etc Base metals & articles of base metal Machinery & mechanical appliances; electrical equipment; etc Vehicles, aircraft, vessels & associated transport equipment

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Optical, photographic, etc

United States

Live animals, animal products Prepared foodstuffs; beverages, etc Products of the chemical or allied industries Plastics & articles thereof; rubber & articles thereof Raw hides & skins, leather, etc Wood & articles of wood, etc Footwear, headgear, etc Articles of stone, plaster, etc Natural or cultured pearls, etc Base metals & articles of base metal Optical, photographic, etc

Japan Prepared foodstuffs; beverages, etc Plastics & articles thereof; rubber & articles thereof

Belgium

Live animals, animal products Vegetable products Prepared foodstuffs; beverages, etc Plastics & articles thereof; rubber & articles thereof Footwear, headgear, etc Natural or cultured pearls, etc Vehicles, aircraft, vessels & associated transport equipment Optical, photographic, etc

Spain

Live animals, animal products Vegetable products Prepared foodstuffs; beverages, etc Plastics & articles thereof; rubber & articles thereof Raw hides & skins, leather, etc Footwear, headgear, etc Optical, photographic, etc

United Kingdom

Live animals, animal products Vegetable products Prepared foodstuffs; beverages, etc Plastics & articles thereof; rubber & articles thereof Footwear, headgear, etc Natural or cultured pearls, etc

Italy Prepared foodstuffs; beverages, etc Products of the chemical or allied industries

Netherlands Vegetable products Prepared foodstuffs; beverages, etc Plastics & articles thereof; rubber & articles thereof Base metals & articles of base metal

The above countries are considered to be potential investors in the region, as they could be involved in expansion of the local business or investment in new operations in those sectors that produce and manufacture products that are currently exported to these countries. Apart from specific target markets (as per above Table) that could be identified for each project or product in the region, the following stakeholders should also be included in marketing initiatives:

National : Brokers, Developers, Investors, Professional organizations, Government (local and national), Chambers of commerce, Trade unions, Statutory bodies, Local communities.

International : Investment brokers, Governments, Trade missions, Ambassadors, and Investors. The reason for including the above range of stakeholders lies in the fact that one of the objectives of the strategy is to inform people of what the area has to offer.

3.2 Business attraction support framework 3.2 Business attraction support framework 3.2 Business attraction support framework 3.2 Business attraction support framework The purpose of this Section is to review the investment support framework in the Municipality. This Section is aimed at analysing the capability of the municipality in attracting new investment. Marketing of the municipality is also an essential part of the success of investment attraction. Potential investors are unaware of the business perspectives offered by the municipality, mostly because of the limited knowledge they have on all the opportunities in the area which decreases the effectiveness of

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investment promotion programmes. A component of any investment attraction strategy should thus be to increase the awareness of local opportunities. Table 3.4 below provides a summary of the staff component of Mogalakwena local municipality in relation to investment promotion. Table 3.4: Summary of marketing and LED staff

Component Mogalakwena LM

Number of posts in LED unit 5

Number of vacant posts 0

Number of proposed posts 1 tourism officer

Posts dedicated to marketing and investment attraction/promotion

0 LED strategy (2011-2016) proposes 1 post for investment officer

LED forum 4 cluster forums

Incentive Package No

Promotional material Local advertisements

Database of potential investors No

Website Yes, but with limited to no investment related information

Budget for marketing R0

The important observation flowing out of the institutional profile is that the lack of a dedicated post for business support and investment attraction points to a lack of capacity to implement ambitious marketing and investment programmes and projects, especially when these initiatives fall outside the scope of normal routine municipal service delivery. Furthermore, none of the posts in the LED unit are currently dedicated to LED implementation. The municipality has four LED forum clusters, although the tourism and industrial cluster are not as active as the agriculture and SMME cluster. Nonetheless, none of the clusters are productive with proven implementation of business support, business development, or investment attraction. The following also needs to be noted:

Proposals are underway for upgrading the tourism information centre No expos are attended such as the annual Durban Indaba trade expo, Gauteng NEPAD Summit,

National Tourism Day celebrations, Provincial tourism day celebrations, Local product promotion only of art at the annual Kierieklapper art festival No outreach programmes such as local business breakfasts, know your region campaigns,

SMME expo’s, entrepreneur of the year competitions, etc are undertaken Limited to no advertising is undertaken The municipality does not have a investment promotion centre/desk No incentive packages and promotional material The municipal website contains limited information required by potential investors A database of existing enterprises and potential investors does not exist The municipality has no dedicated budget for LED implementation and for marketing

As is noted from the above there is thus a lack of capacity to undertake research, draw up marketing materials, undertake investment promotion and project implementation, etc. The municipality does not have a database of potential investors, lacks promotional material, and marketing activities are generally limited to an annual art festival.

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Information regarding potential projects is contained within the LED strategy (2011). Potential projects need to be packaged into a business plan format, which is not usually possible for all priority projects identified in the LED Strategy due to the financial constraint. Ideally, the LED unit officials should be formulating the business plans themselves. However, this is not possible due to both capacity and limited skills. Another issue identified as a constraint for efficiently marketing the municipality is poor communication between other government spheres and organisations. It is identified that the local municipality is not adequately equipped to market the area and does not have the human resource capacity, as well as financial capacity to support such investment promotion initiatives as incentives packages, marketing activities, investment promotion centres, etc. It was also identified that besides the capacity problem, Mogalakwena municipality lacks a structured communication network with the District Municipality and provincial organisations. Poor communication between these governments spheres have detrimental impact on the realisation of local opportunities as this means that the municipality in many instances is not aware of services that are made available to them through local, provincial and national organisations. The above highlights that the municipality is in need of the following support:

Capacity building and training related to business development, identification of business opportunities, development of business plans, and investment promotion.

Establishment of a structure of communication between the Local Municipality, District Municipality and provincial organisations

Financial assistance with regard to development of incentive packages and promotional material Preparation and, if possible, participation in the inward and outward Provincial missions

3.3 Business attraction strategy 3.3 Business attraction strategy 3.3 Business attraction strategy 3.3 Business attraction strategy A favourable investment environment is required for any type of development, regardless of sector or economic project. The success of economic initiatives, to a degree, is dependent on investment interventions to improve the investment environment. This section recommends strategic interventions required to improve the environment in a manner that will facilitate investment in the municipality.

This section addresses the following components: Theoretical framework of the attraction strategy Business attraction interventions Priority actions

3.3.1 Theoretical framework of the attraction strategy

The ultimate aim of the investment attraction strategy is to attract new development and direct investment to Mogalakwena Municipality. The objectives can be summarised as follows:

To target both South African and foreign investors To improve and promote the Mogalakwena Municipality image within the investment community

as a favourable location for investment with government workforce dedicated to address the needs of potential investors. I.e. entails image-building activities and promotion as a pro-business environment.

Create awareness of the areas locational advantages with Mokopane being the main town of the district and access to various local markets.

Make potential investors and stakeholders aware of competitive advantages and potential business opportunities in the municipality in order to generate investment directly in such sectors as (i.e. investment-generating activities): � Rural and agricultural development � Mining development

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� Manufacturing diversification: agro-processing and mineral beneficiation � Tourism � Retail, trade and services

To provide services to prospective and current investors and create an environment conducive for their business development. I.e. entails investment- service activities.

3.3.2 Business attraction interventions

The business attraction strategy consists of two strategic thrusts, each with a number of programmes, representing the key components of each thrust in need of addressing. The thrusts and programmes to enable business development and investment attraction is listed in the below Table and detailed upon there under. Table 3.5: Strategic thrusts and programmes

THRUSTS PROGRAMME

1. Market efficiency and innovation

Increase intensity of local competition Reducing red tape Alignment of skills and human resource strategies Promote product, process, marketing and organisational

innovation

2. Leverage growing and strategic sectors to optimise investment opportunities

Key catalytic sector interventions Business development

THRUST 1: MARKETING EFFICIENCY AND INNOVATION

Market efficiency depends on a number of factors, many of which Municipalities are unable to control, for example, trade barriers, foreign ownership restrictions, and the efficiency of the legal framework, as these are strictly within the scope of the national government. However, there are certain factors related to market efficiency that municipalities have the ability to influence. These include the level of competition intensity in the local market, the time required to start a business, skills leakage, and ease of access to funding and finance. Job descriptions, procedural manuals and staff training as recommended in business support will facilitate the process of red tape reduction. Mogalakwena local municipality requires market efficiency interventions aimed at improving the competitiveness of the business environment. The focus of these interventions should be on enlarging the consumer and supplier market, improving access to information, reducing barriers to entry, and improving quality to enable increasing substitutability of established products. Innovations result in product, technology, and trade development. Technological advances allow for cost reductions that imply lower prices, increased demand, and possibly new trade relations as consumers switch to the purchase of lower priced products. New technology leads to product improvements and differentiation that have the potential to extend demand. One of the best methods for stimulating innovation is the promotion of competition. When competition is fierce, firms go all-out to develop mechanisms that will distinguish their production and products from the masses. In the context of continued globalization of economic activities, those localities that are able to continually innovate will become the choice destination of international investors, since innovation is synonymous with cost savings, the development of niche markets, and higher returns on investment.

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The programmes aimed at achieving greater market efficiencies and innovation are:

Programme 1.1: Increase intensity of local competition Programme 1.2: Reducing red tape Programme 1.3: Alignment of skills and human resource strategies Programme 1.4: Promote product, process, marketing and organisational innovation

Programme 1.1: Increase intensity of local competit ion The development of any sector depends on the demand for its products. Economic theory teaches that the most significant determinants of demand include price, consumer tastes and preference, and (disposable) income. Supply is derived from demand; actions must be taken to modify prices, income, tastes, and preference to stimulate additional demand. Prices are primarily influenced by the stimulation of competition. When firms compete for sales, they are compelled to charge as low a price as possible. In general, there exists a positive relationship between price and monopoly power. Thus, the intensification of competition leads to a reduction in price, which stimulates demand. Competition also indirectly influences disposable income: when prices are reduced, the purchasing power of income increases, and hence consumers are able to purchase more goods and services with the same amount of money they possessed before price cuts, which further stimulates the demand for commodities. Since tastes and preferences are subjective, these determinants are more difficult to change. However, marketing and advertising campaigns that expose consumers to new and/or different products, may affect the consumers tastes. Promoting competition reduces prices, which increases demand. Perfect competition refers to the state in which individual producers have no control over the price that they charge to consumers. This prevents potential exploitation of monopoly power that could adversely affect society. Perfect competition occurs when the following conditions are simultaneously attained:

Too many consumers to allow any individual consumer to have an influence over price; Too many suppliers to allow any single producer to have an influence over price (implicitly: no

collusion); Perfect information regarding all aspects of production and sales; The absence of barriers to entry; Homogenous products.

Perfect competition is rarely if ever achieved. However the closer an environment moves toward its simulation the more likely the benefits of such a state will be achieved. Recommended tasks that can be taken to promote a movement toward the conditions of perfect competition within the municipality are:

Address the most pertinent barriers to new business development Address the type of information required by businesses and potential investors Determine the most appropriate products to form the basis of export promotion and import

competition Enlarge the consumer market: export promotion to increase international consumer based and

labour intensive industries to increase the number of persons with access to income, thus increasing the domestic consumer market

Promote entrance of new businesses: promote entrepreneurship and ensure an adequate source of funding

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Improve access to information: potential investors should be able to access marketing information with regard to development potential in all sectors in the municipality. The development of a business investment guide should be considered. Consult the LED Strategy (2011) for sectoral information

Reduce barriers to entry: largely of a financial nature by improving availability of information regarding funding and assisting in completing funding applications

Programme 1.2: Reducing red tape Red tape or needlessly time-consuming bureaucratic procedures decelerate the pace of development. Where the municipality is able to contribute to the reduction of such procedures, every effort should be made to do this as lengthy procedures are likely to divert investor interest to areas that have less cumbersome procedures. Proven approaches frequently adopted by governments to reduce and streamline administrative procedures include simplification of permits and license procedures and time limits for decision-making. Recommended strategic tasks include:

Take stock of all procedures and regulations related to investment and determine where efficiency improvements and/or changes are required

Plans should be developed to implement required efficiency improvements and/or regulations as speedily as possible

Programme 1.3: Alignment of skills and human resour ces strategies Strategies supporting inter-generational economic mobility are crucial. Investing in people and their ability to engage economic opportunities is a priority. Inter-generational economic mobility means ensuring that every generation is better off than their parents, it also means that opportunities need to be created whereby people can incrementally move from the 2nd to the first economy through a ladder of opportunity. The alignment of skills and human resource development strategies is mainly concerned with industry-based skills training, improving the intermediate level skills base of the municipality as well as labour market training for target groups (focusing on the unemployed, retrenched workers, youth, women, people with disabilities, etc), The area is also faced by ‘brain-drain’ to Polokwane and Gauteng as a result of a lack of tertiary educational facilities. An adequately and appropriately skilled workforce is essential for the competitiveness of an area. Technology breakthroughs are to an extent dependent upon the possession of an adequately and appropriately skilled labour force. Given the extent of low education and skills levels amongst the current potential economically active population as well as the increasing pace at which the technology changes, it is essential that employers provide on-the-job training. Mogalakwena local municipality’s investment attraction strategy should thus focus on:

Addressing the lack of accredited tertiary institutions Expanding and retaining tertiary educational facilities Developing a database of unemployed and their skills levels Develop a database of employment opportunities, compiled with information regularly provided

by businesses

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Assist labour market efficiency by developing a public recruitment agency, that matches appropriately skilled unemployed individuals with employers who are in the market for hiring

Encourage business to integrate skills strategies into business strategies and plans Promote mentoring programmes in which ‘veterans’ team up with ‘rookies’ to guide them through

their initial period of employment Ensure an increase in municipalities base’s skills profile, through registered accredited training

linked to the National Qualifications Framework (NQF), Improve the relevance (align with industry needs), effectiveness and cost of skills development

The skills profile of an area affects the mix of economic activities that it may pursue. Therefore, it is essential that education and training programmes be initiated quickly and on a continuous basis, in line with developmental goals. The municipality should engage with the National Department of Education, Provincial Department of Education, the District Municipality, Local businesses and mining houses, research institutions and SEDA, to implement the recommendations made. Programme 1.4: Promote product, process, marketing and organisational innovation Product innovation entails improvements in existing products and/or the development of new products. One of the best ways for stimulating such innovations is the promotion of competition. When competition is fierce, firms endeavour to develop product characteristics that will set their product apart from the masses. Process innovation entails improvements in the techniques of production. Two principal sources of process innovation are improvements in labour and improvements in capital. Improvements in the quality of labour may permit the workforce to work more efficiently, which ultimately improves the efficiency of production. Improvements in production techniques require new technology. Process innovation is promoted by an incubator environment that hosts a number of similar and related firms. Knowledge transfers and sharing are more likely in such conditions; which improves the possibility of discovering new production techniques. Marketing plays a large role in the strategic positioning of industries in the local, provincial, national, and global arena. More effective marketing campaigns lead to a greater awareness of product markets and new business opportunities that lead to new business attraction and wider demand markets. Organisational innovation entails improvements in the manner in which firms or collections of firms are structured. Organisational innovations in the form of cluster complexes have huge potential benefits based on savings generated by the close proximity of supportive and related firms and industries. Recommended strategic tasks include:

Continuous research of trends in consumer demand through subscribing to an appropriate economic database and relaying information to businesses and investors

Communication of changes in trends to businesses and investors Develop innovative mechanisms for attracting research institutions to the area Improve businesses’ knowledge of the availability of funding for research and development by

compiling and distributing an inventory of available R&D funding relevant to businesses in the study area

Promote collaboration between tertiary education facilities, industries and funders such as SEDA Host international trade exhibitions Increase the quantity and quality of scientific research institutions by developing innovative

mechanisms for attracting research institutions to the area Any new projects should be implemented in a manner that promotes the development of clusters.

Multiple projects should link with each other and every effort should be made to contain all stages of production within the boundaries of the Municipality, where financially feasible.

Compile an inventory of all inputs required by industries operating in the municipality, which provides details of suppliers

Develop a clear spatial vision of economic development

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Actively promote innovation by continuously engaging with the DTI, local municipalities, local businesses, research institutions and educational facilities.

THRUST 2: LEVERAGE GROWING AND STRATEGIC SECTORS TO OPTIMISE INVESTMENT In order to promote investment, certain sectors have been identified as needing special priority focus. These rapidly growing sectors possess economic growth and development as well as business development and employment opportunities. The municipality has recently revised its LED strategy. This thrust thus only touches on key investment related components of economic development. This thrust underlies the importance of promoting both local and international investment in the economy and is comprised of the following two programmes:

Programme 2.1: Business development Programme 2.2: Key catalytic sector interventions

Programme 2.1: Business development In addition to business retention and expansion, the municipality also needs to support the development of new business opportunities. The steps to be covered when implementing investment projects are illustrated in Figure 3.4 below. STEP 1: Integration and Prioritisation Numerous business opportunities were identified in the LED strategy (2011-2012). The Provincial Growth Strategy, IDP documents, Waterberg District strategies, etc also have recommended projects that would assist economic development in the Municipality. For this reason the identified projects needs to be integrated and prioritised in order to effectively allocate municipal resources and maximise the economic growth and output potential. The aforementioned has been undertaken in the reviewed LED strategy. All identified projects cannot be implemented simultaneously. As a result certain projects need to be prioritised. Nonetheless the proposed Officer should continue to function as a one stop business referral desk too. I.e. the Officer should be responsible for any potential business investment opportunities as the opportunity arises from the marketing drive undertaken. Project prioritisation can be undertaken by engaging stakeholders in the municipality. The LED forum and business chambers should be allowed to suggest additional opportunities and to evaluate the projects already identified. Typical criteria that can be used to prioritise projects are provided in the Table below: Table 3.6: Project prioritization criteria

CRITERIA DESCRIPTION

ECONOMIC DEVELOPMENT POTENTIAL

Sectoral Linkages The extent of significant backward and forward linkages, as well as the extent of linkages with other projects.

Multiplier Effect

The size of the multiplier effect is examined in terms of GGP. It indicates the extent to which the project contributes to GGP, household income and business sales.

Labour Intensity Number of sustainable employment opportunities (jobs) created.

SOCIAL DEVELOPMENT POTENTIAL

New skills development This is evaluated on the basis of techniques used and products manufactured, e.g. organic cotton is a new skill to teach old farmers.

Mobilization of existing skills The extent to which existing skills are utilised by the project.

Potential for BEE The extent of growth in the Human Development Index (HDI).

Potential for SMME SMME involvement and sustainable SMME development and support.

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CRITERIA DESCRIPTION

PROJECT SUSTAINABILITY AND IMPLEMENTATION

Environmental Impact The environmental impact of the project on the environment.

Funding and incentives The availability of funding and incentives for project development.

Implementation readiness A measure of the extent of studies, lobbying, etc required before the project can be implemented.

Figure 3.4: Business implementation process

STEP 8: Project handover and marketing

STEP 1: Project prioritisation and integration

STEP 7: Enabling environment and labour market

STEP 6: Municipality budgeting and funding

STEP 2: Identification of location

STEP 4: Partnership identification and project matchmaking

STEP 3: Pre-feasibility and detailed feasibility studies

STEP 5: Development of business plan(s)

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STEP 2: Identification of location Once the project to be implemented has been identified and prioritised, the next step would be to identify possible locations for the project and compare the best alternatives to identify the ideal feasible location for the proposed project (development). Taking into consideration the local municipality to operate in, as well as the city or town and suburb within the town, the following factors should be taken due cognizance of:

the cost of land location of the target market (end user) sources of raw material and other inputs available resources for production such as utilities and labour availability of transport for workers, raw materials and final produce marketability, networking and accessibility existing activities in that area and agglomeration advantages possibility of aligning or complementing already-existing programmes

Thereafter, the availability of land is taken into consideration as well as the aspect of land ownership. STEP 3: Pre-feasibility and detailed feasibilities studies A pre-feasibility study indicates actions that are the precursor to a feasibility and design study. Its main purpose is to ensure there is a solid basis for undertaking a feasibility and design study. There are two key applications of a prefeasibility study:

Implementation Design - The most common application indicates the first step in activity preparation after activity identification is complete. Therefore a pre-feasibility study is undertaken for selected projects to prepare a design for implementation.

Activity Identification - The second application of a pre-feasibility study indicates application as part of activity identification. This would typically occur when enough is already known about the development situation to enable an identification mission to carry its analysis and reporting through to the standard pre-feasibility study level. In this case the pre-feasibility study undertakes the basic analysis and option development work of an activity identification mission as well as information gathering, design analysis and activity description to the pre-feasibility stage.

The tasks and terms of reference will vary somewhat between these two cases, with the pre-feasibility study during identification usually needed to start from an earlier stage of analysis and to spend more time on basic definition and assessment of the initial activity options. After the pre-feasibility study, a feasibility study is conducted to analyse the viability of an idea or project in more detail. A feasibility assessment is essentially comprised of the following factors:

location analysis initial environmental assessment market research (which is a demand and supply analysis) identification and quantification of income streams identification of potential funding sources

Following the feasibility assessment the development concept is refined and the concrete concept designing specifics and planning is conducted.

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STEP 4: Partnership identification and project matc hmaking With the completion of project and location identification as well as feasibility assessments, existing or potential partnerships should be identified as it could support advantages of agglomeration through networking and marketability. The purpose of this step is thus to identify possible partnerships that can be formed. It will also identify the parties that will be involved with implementing projects. The correct stakeholders, beneficiaries and project leaders need to be identified. This step is generally comprised of the following actions:

Hosting an opportunities awareness campaign. This campaign will assist the Municipality to find interested parties, who will be willing to run with the project by bringing various quotas of the Municipal population into contact with each other;

Project-specific workshops can follow the initial one to ensure that the interested parties identified understand the project. At this stage the training requirements, if any, are identified;

Investment matchmaking. The campaigns will also assist to match investors to projects that are already running in the district, and also to the identified but not yet implemented projects.

The involvement of the private sector should be regarded as a high priority with establishing sustainable partnerships and matching similar projects of both the public and private sectors. The LED forum can be utilised as a tool in private sector involvement. Private sector involvement can be regulated and managed by means of the LED forum that acts as a communication medium and mediator between the municipal government and the private sector. The LED forum could also be involved in the matching of similar private sector projects that will provide mutual advantages to both projects. STEP 5: Development of a business plan Business plans are developed for two purposes: Firstly to provide a project roadmap i.e. to map out how a project will be executed and secondly, they are required with the application for funding. Business plans provide details about the project that give funders the liberty to decide whether they want to invest their money in a specific project. A business plan should have the following key components:

Description of the Proposed development project Operational plan – to give a concise, clear and understandable description of the input and capital

requirements, production, operational and logistical strategies and systems that will be applied by the proposed development

Impact assessment – to assess the project’s impact on levels of economic activity, the increase in production (GGP) in Rand terms, how the general market will be affected and to analyse potential risks

Organisational, management and staffing plan – This will show how many people are required to run the project/business. It will also clarify at what levels they will work, e.g. managerial, administrative, or operational

Financial plan – Analyses envisaged income and expenditure of the project Implementation and action plan - to provide clear, functional guidelines with respect to implementing

the preferred development concept Monitoring, evaluation and mitigation framework – This highlights Key Performance Indicators and

remedial actions to take should KPI’s fail to be achieved

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STEP 6: Municipal budgeting and funding The Municipality LED department is also tasked to procure and provide funding for the promotion of economic development. Support structures to be addressed in this sub-section are financial assistance and SMME support. One of the most common challenges faced by entrepreneurs and government departments alike is the access to funding. There are various institutions that have funds allocated specifically to support economic development initiatives. To obtain capital funds from banks many requirements, such as credit-worthiness, entrepreneur’s assets, time of operation, viability of the business and so forth should be met. Furthermore, banks charge the prime rate plus a margin. These margins vary from bank to bank and they also depend on the entrepreneur’s relationship with their bank. As a result many emerging entrepreneurs are unable to source sufficient funding from mainstream financial institutions. In this section possible funding options available for businesses in the formal sector, as well as SMMEs, besides those offered by commercial banks and merchant banks are analysed. When considering funding sources, the municipality or the entrepreneur needs to look at the following factors:

Project focus - available funding is normally allocated to strategic industries which assist government to attain goals such as economic development, job-creation, skills enhancement etc. Industries indentified to best meet these goals in the South Africa context are clothing and textiles; capital equipment manufacture and metals beneficiation; chemicals, pharmaceuticals and plastic manufacture; and forestry and downstream industries that flow from it like paper and furniture manufacture (IPAP, 2007)

Determine available funds and the shortfall - a business plan is required in order to convince funders that the project is not a fly-by-night project. Business plans give details about the project that give funders the liberty to decide whether or not they want to invest their money in the project. The entrepreneur should have some equity in order to give evidence of their commitment to the project. This can be in the form of personal funds, savings, or capital equipment.

Small and small to medium enterprises are known for their potential to generate job opportunities. The SMME sector is also one of the key sectors earmarked for growth by the South African Government. Therefore, the Mogalakwena Municipality needs to be in a position to give mentorship to such enterprises or at least to direct them to where they can receive assistance. The following mentorship and funding enterprises listed below are available to provide support to SMME’s in the Mogalakwena Municipality:

The Small Enterprise Development Agency (SEDA): SEDA is a government agency and a member of the dti group. The mandate of SEDA is to implement the national government small business strategy in line with the dti’s Integrated Small Enterprise Development Strategy. SEDA also supports, promotes, and grows enterprises with a special focus on co-operative enterprises located in rural areas.

The Department of Labour : The Department of Labour provides support to employers including SMMEs through legislature that guides employment conditions

Business Partners : Business Partners is a specialist investment company providing debt and equity investment, mentorship and property management services to especially SMME’s in South Africa

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Independent Development Trust (IDT): The Independent Development Trust is a development agency which supports government in managing the implementation of development programmes that are directed at poverty reduction, employment creation, and local economic development. The IDT also acts as a link between poor communities and government in meeting resource needs and invests in enhancing institutional capacity for programme delivery and for sustainable development.

Business Referral and Information Network (BRAIN): The Business Referral and Information Network provide up-to-date information for business owners on aspects ranging from guidelines on starting a small business, to where to find finance. The Business Referral and Information Network locate news on tenders and advise on how to find out about drawing up a business plan.

Council for Scientific and Industrial Research (CSI R): The CSIR, located in Tshwane, Gauteng assists business owners who want to improve on or develop a product with market-related research and product testing.

The National African Federated Chamber of Commerce (Nafcoc): The National Federated Chamber of Commerce represents the interests of black businesses and provides networking and lobbying for small business members.

The South African Bureau of Standards (SABS ): The SABS assists small businesses with accreditation of products and services with a 50% subsidy from the government.

Small Business Project : The Small Business Project provides assistance to small businesses through their Linkage Programme with link-ups and joint ventures with corporate business.

STEP 7: Enabling environment and labour market The environment indicates the surrounding social and economic activities that have the potential to influence a specific business. For this reason an enabling environment describes an environment that is external to a business or any other entity which promotes a sustainable trajectory of market development. While most businesses can control internal matters such as finance and human resources, certain outside factors cannot be changed by private entities. The availability of sufficient quantity and quality of the following production inputs is required for an enabling environment that is conducive to business development and expansion:

Skilled labour : For a business to function well, the local population and potential labour market should be well skilled. This can be achieved if there are sufficient schooling and training in the area to ensure emerging businesses and entrepreneurs that aim to start a business in the area have sufficient access to well skilled labour.

Water and sanitation : The availability of sufficient clean and usable water for both human consumption and industrial uses is imperative. The provision of adequate sanitation facilities goes hand in hand with the provision of clean water. Water-borne sanitation systems are known to be the most efficient. However, other sanitation methods that require less water usage are also available to be utilised in areas where water is not as readily available such as bucket latrines and chemical toilets. Bio-augmentation products may be used at the sewerage works plant in order to reduce the amount of water required. The Integrated Algal Ponding System (IAPS), a method of treating sewerage, can be used in the sparsely populated rural parts of the municipality.

Transport Infrastructure : Efficient road linkages are required to develop an effective distribution network internal and externally to link businesses and production activities with the rest of the country. Therefore required road upgrades and maintenance should regularly be investigated to ensure the transport infrastructure is adequate and conducive to business development and expansion.

Public Transport : The provision of effective, reliable and affordable public transport systems along key linkage routes is required. The public transport could be implemented to transport labour from residential areas to places of work as well as raw products (inputs) and final produce between various locations.

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The municipality needs to ensure that these abovementioned factors are sufficiently addressed to provide an enabling environment conducive to business development. The municipality hast a vast rural area with mostly agricultural, tourism and selected mining activities. In addition, the business opportunities identified will require a sufficient skills base without which the projects cannot take off. Further, existing businesses need to enhance the skills of the current workforce. This part of the report, seeks to highlight ways of ensuring that the labour force is appropriately skilled. In South Africa, SETAs (Sectoral Education and Training Authorities) have the mandate to fulfil JIPSA objectives, i.e. to ensure that crucial skills are acquired. They are regulated by the Skills Development Act no. 97 of 1998. There are 23 SETAs in South Africa. However, not all are expected to be fully active in the Waterberg District or Mogalakwena Municipality. The below Table shows identified projects and the skills required for the projects listed as well as for the already present economic activity within the District. The SETAs expected to be operational in the District are also shown in the Table, together with other stakeholders that may provide further training or advice. Table 3.7: Skills requirements in Mogalakwena Distr ict

BUSINESS OPPORTUNITIES SKILLS REQUIRED TRAINING STAKEHOLDERS

AGRICULTURE AND AGRO-PROCESSING

· Poultry cluster · Livestock improvement, marketing and

processing cluster · Horticulture and crops cluster · Hydroponic and organic farming methods

with less water intensity and niche products cluster

· Bee farming and honey production cluster linked to deciduous fruit farming

· Aquaculture cluster · Revitalisation of irrigation schemes · Agricultural produce trade market · Agricultural

implements/equipment/tools/transport/fertilisers and other input retailers

· Training for farm workers · Rural community economic development co-

operatives: agricultural gardens, financial banks, bakeries, crèches, etc.

· Red and white meat processing · Establish a poultry processing co-operative. · Grape, citrus, and marula juice processing · Leather tannery · Animal/pet feed factory using crops and

wastage from restaurants, abattoirs, taxidermies and de-boning and meat-processing facilities.

· Tobacco processing

· Irrigation techniques · Produce-grading · Landscaping · Horticulture · Greenhouse production · Hydroponics production · Food technologists · Electricians · Processing Skills · Machine Operating

Skills · Quality Controlling · Artisans & Mechanics · Research Science &

Technology Chemistry and Bio-chemistry theory and application

· Separation processes (i.e. extraction of simple compounds from organisms for use in industry and medicine)

· Agriculture Sector Education and Training Authority (AGISETA)

· Department of Agriculture

· Experienced farmers · Civil and Mechanical

Engineers · Food and Beverages

Manufacturing Industry Sector Education and Training Authority (FOODBEV)

· South African National Halaal Authority

· Clothing, Textiles, Footwear and Leather Sector Education and Training Authority (CTFL)

· South African Health Products Regulatory Authority

· Manufacturing, Engineering and Related Services Sector Education and Training Authority (MERSETA)

MINING & MINERAL BENEFICIAT ION

· Mining development and beneficiation support hub

· Revitalisation of existing stagnant mining

· Surface Mining · Occupational Health · Electrical Engineering

· Mining companies already operating

· Mining Qualifications

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operations · Small-scale mining initiatives: clay,

limestone, granite, fluorite, tine, diamonds · Regional mining supplier park focusing on

manufacturing of mining inputs · Local cleaning and catering services SMMEs · Clay, granite, tine, fluorite processing

· Mechanical Engineering · Metallurgy · Surface Mining · Rock Engineering · Small scale mining · Financial Management

Skills · Health and Safety skills

Authority (MQA) · Department of Minerals

and Energy · Financial and

Accounting Services Sector Education and Training Authority (FASSET)

· The Accounting Standards Board

· South African Institute of Chartered Accountants

· Chemical Industries Education and Training Authority (CHIETA)

· Manufacturing, Engineering and Related Services Sector Education and Training Authority (MERSETA)

TOURISM

· Development of Makapan Valley WHS: lodge, rural accommodation, etc

· Museum upgrade and curator · Township tours, special interest tours,

tourism routes, hiking circuits, mountain biking trails

· Curio artefacts outlets · Day visitor facilities, fishing/picnic spots,

family resort/day visitor activities · Soft & hard adventure activities and outdoor

adventure survival/boot camp · Nature reserve development: game viewing,

overnight facilities, guided trails, teambuilding/conferencing/bosberaad, etc

· Budget accommodation associated with adventure tourism

· Tea gardens/kiosks with light meals at various nature reserves

· Leisure train trips · Edu-tourism · Game hunting safari hub, cluster, and

hunting packages · Birding tourism · Mining tourism · Agri-tourism, farm-based tourism and farm

stays

· Tourism marketing · Understanding tourist

market · Development of tourism

packages · Organisational skills · Hospitality skills · Tour guides · Travel agents · Tour operators · Banking and finance · Health services · Safety and security · Legal services

· Tourism, Hospitality and Sport Education and Training Authority

· Tourism and Hospitality SETA (Theta)

· South African Tourism · Limpopo Tourism and

Parks · Local tourism

associations and tourism boards

· Tourism product owners · Tourism departments

RETAIL, TRADE AND OTHER SERVICES

· Construction workers association. · Develop a one-stop business shop in

Bakenberg offering business logistical services

· Develop the northern industrial area to function as an Industrial Precinct

· Irrigation techniques · Electricians · Processing Skills · Machine Operating

Skills · Artisans & Mechanics

· Clothing, Textiles, Footwear and Leather Sector Education and Training Authority (CTFL)

· Manufacturing,

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· Develop Manufacturing Advice and Incubation Centre (MAC)

· Establish candle and soap-making cooperative

· Establish a bakery, biscuits and sweets processing cooperative.

· Plastics, containers and bottles manufacturing

· Manufacturing of farm equipment · Fertilisers and pesticides manufacturers · Building material manufacturing co-

operatives (bricks, bio-degradable materials, and utilisation of district resources such as limestone, copper, manganese and iron ore to manufacturing building materials, etc)

· Art and Craft Production · Unique Restaurants · Cleaning and Catering services · Insurance Companies · Soft Mining Services · Hard Mining Services · Manufacturing and trade of Agricultural and

mining necessities

· Research Science & Technology Chemistry and Bio-chemistry theory and application

· Electrical Engineering · Mechanical Engineering · Financial Management

Skills · Caterers · Cleaners · Machine repair skills · Machine operating skills · IT Skills · Fitters and turners · Electricians · Plumbing · Civil engineering · Banking and finance · Safety and security · Legal services

Engineering and Related Services Sector Education and Training Authority (MERSETA)

· Construction education and training authority

· Information systems, electronics and telecommunications technologies

· Insurance sector education and training authority

· Wholesale and retail sector education and training authority

STEP 8: Project handover and mentoring Initially, the LED Unit will assist with initialising projects as discussed above. If appointed, the Business support, Investment and Marketing Officer should undertake this. The idea is that after a year or so, the project should be operated independently by the private sector, with continued public sector support where necessary and/or applicable. Therefore, project leaders and the project team should be encouraged to register the project as a business venture. This means that the role of the Municipality will gradually become a supportive and mentorship role. Mentorship can also be provided with the establishment of support structures and support from established private sector businesses. The role of the local and district municipality is to ensure that the environment is conducive to business development and expansion providing the municipality with the opportunities to attract new investors as well as retaining the existing businesses. The final step in the implementation process of a project includes the progress and performance monitoring of the project and the final handover. The purpose of step will be to establish indicators/proxies for monitoring the development by the new business partners. An indicator can be defined as a generally acceptable expression that is seen as being representative (quantitatively and qualitatively) of the aspects that need to be addressed. Once the requirements are met with, the projects will be handed over. However, ongoing support will be provided in terms of:

Providing key focus areas for future intervention, Intervention priorities that will require implementation in the event of pre-identified risks transpiring Sustainability guidelines

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Likely future growth forecasts The priority future needs of the business Realistic general performance indicators, etc Important milestones will be identified as well as timeframes

Furthermore mentoring should be continuously provided after handover. This implies that continuous monitoring should occur and as soon as any problems are noted, key specialists should be appointed to attend to the specific problem within their field of specialisation. This will ensure that problems are identified and rectified as soon as possible before serious problems are encountered such as business closure and/or failure. In short, the business development strategy aims at attracting new business in the local economy and maintaining a business climate conducive to future investments. The development strategy should be focused on the following tasks:

Continuous identification of new business opportunities, including cluster development Develop a marketing strategy Supply chain management development Skills development Infrastructure development

Programme 2.2: Key catalytic sector interventions This programme focuses on growing certain identified economic sectors, in order to attract investment into the specific growth clusters. In so doing the municipality will develop businesses, increase trade levels, increase sustainable job opportunities and promote economic development. It is recommended that business attraction in the municipality is geared towards attracting businesses that can capitalise on the local opportunities and create clusters of competing, connected, and complementary industries. The biggest benefit of clustering is the establishment of linkages between the interrelated companies, increased competitiveness between the competing industries, and improved productivity resulting from these relationships. Clustering of economic activities involves the establishment of an economic infrastructure including the provision of industrial estates with serviceable sites, financial assistance, and consulting services. It is also important for the municipality to ensure that permit application processes are dealt with efficiently. Time taken in issuing various development approvals is the indication to potential investors of the dedication of the local government to economic development and their interest in attracting new investments. Timely response with regard to permit applications should be viewed as one of the key components of local government’s investment strategy. In this context it is recommended that strict competitive deadlines for permit approvals be adopted and adhered to by the Municipality. This refers to the following permits:

Town planning approvals Site development plan approvals Building plan approvals Development approvals Development agreement signage

In order to assist expediting approvals at local municipality level it is suggested that the Municipal SDF and the District Environmental Management Framework (EMF) be utilised to provide guidance to government departments, environmental assessment practitioners (EAP’s), as well as developers, as to

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how and where development is desirable or undesirable within specific regions (priority areas) as well as establish the status quo in terms of environmental, social and economic attributes. With regards to incentives, the following activities are proposed:

Pilot investment incentive by firstly focusing on non-financial incentives Compare incentive schemes with those offered by other municipalities being identified as

competing locations Consult the Section 4 for investment incentives for consideration by the municipality.

Firms in the municipality don’t operate in isolation from global and national forces and the value chains in which they find themselves embedded strongly inform opportunities for growth and development. Understanding these value chains is also important in respect of attracting new investments and identifying further value added opportunities. The following key catalytic sector opportunities, in no particular order, have been identified as those with the highest potential to attract investment:

Agricultural and rural development clusters : Agriculture can contribute significantly to the local economy as a source of livelihood and a profitable business for farmers, ranging from subsistence to commercial level farming. Mogalakwena Municipality is a relatively dry area, which lends itself to stock farming in the form of cattle, game, poultry, pigs and goats. The municipal area also has some crop, horticulture and deciduous fruit (including citrus) production. A large portion of the municipal area is also under land claims and many of the opportunities relate to the formation of co-operatives and clusters for land claim beneficiaries. Due to the large rural area, opportunities for rural development and support also exist. Opportunities for agricultural and rural development clusters could include:

� Poultry cluster � Livestock improvement, marketing and processing cluster � Horticulture and crops cluster � Hydroponic and organic farming methods with less water intensity and niche products cluster � Bee farming and honey production cluster linked to deciduous fruit farming � Aquaculture cluster � Revitalisation of irrigation schemes � Agricultural produce trade market � Agricultural implements/equipment/tools/transport/fertilisers and other input retailers � Training for farm workers � Rural community economic development co-operatives: agricultural gardens, financial banks,

bakeries, crèches, etc.

Mining development and promotion –mines possess enormous purchasing power, which the municipality should attempt to tap into. Efforts should be made to secure contracts for the provision of inputs currently imported. The mining sector is one of the major contributors to the economy and as such plays the role of the dominant economic driver and contributes more than a quarter (27%) to the total GDP output of the Municipality. The significant importance of the mining sector as an economic driver and main revenue creator must be harnessed to enable the formation of linkages between the mining sector and other sectors such as beneficiation, retail and trade, etc to encourage growth and development and the diversification of economic activities. The mining sector in Mogalakwena suffers from a lack of forward and backward linkages, whereby, limited input suppliers exist within the municipality. The same can be said for forward linkages in terms of beneficiation and product development. The opportunity exists to grow the mining sector based on the various minerals available for mining. The main mineral mined in Mogalakwena is platinum and the platinum group metals (as well as copper and nickel as by-products) along the Mokopane Platinum Belt. This places great focus on platinum and platinum mining as a main role-player within the local economy and communities in Mogalakwena. Aside from platinum, numerous other minerals also exist within the municipality posing various other mining opportunities which can be exploited.

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The other minerals that exist within Mogalakwena are granite, limestone, clay, tin and fluorite. Mining sector opportunities could include:

� Mining development and beneficiation support hub � Revitalisation of existing stagnant mining operations � Small-scale mining initiatives: clay, limestone, granite, fluorite, tine, diamonds � Regional mining supplier park focusing on manufacturing of mining inputs � Local cleaning and catering services SMMEs

Manufacturing, beneficiation and local value-adding : Limited local value-adding processes take place and scope for greater agro-processing and mineral beneficiation exist to expand the economy. Various SMME expansion and support opportunities also exist. Mogalakwena also has an industrial area in need of expansion and management. Manufacturing sector opportunities could include:

� Construction workers association. � Develop a one-stop business shop in Bakenberg offering business logistical services � Develop the northern industrial area to function as an Industrial Precinct � Develop Manufacturing Advice and Incubation Centre (MAC) � Establish candle and soap-making cooperative � Establish a bakery, biscuits and sweets processing cooperative. � Red and white meat processing � Establish a poultry processing co-operative. � Grape, citrus, and marula juice processing � Leather tannery � Animal/pet feed factory using crops and wastage from restaurants, abattoirs, taxidermies and

de-boning and meat-processing facilities. � Tobacco processing � Plastics, containers and bottles manufacturing � Manufacturing of farm equipment � Fertilisers and pesticides manufacturers � Clay, granite, tine, fluorite processing � Building material manufacturing co-operatives (bricks, bio-degradable materials, and

utilisation of district resources such as limestone, copper, manganese and iron ore to manufacturing building materials, etc)

Tourism – Mogalakwena Municipality has a significant and diverse tourism resource base. Some of the features which make Mogalakwena an attractive tourism proposition include the Mogalakwena River, the Makapan Valley World Heritage Site, the Waterberg Biosphere and its environs, various nature reserves, natural areas, unique scenery and aesthetic quality, and diverse cultures. Tourism sector opportunities include:

� Development of Makapan Valley WHS: lodge, rural accommodation, etc � Museum upgrade and curator � Township tours, special interest tours, tourism routes, hiking circuits, mountain biking trails � Curio artefacts outlets � Day visitor facilities, fishing/picnic spots, family resort/day visitor activities � Soft & hard adventure activities and outdoor adventure survival/boot camp � Nature reserve development: game viewing, overnight facilities, guided trails,

teambuilding/conferencing/bosberaad, etc � Budget accommodation associated with adventure tourism � Tea gardens/kiosks with light meals at various nature reserves � Leisure train trips � Edu-tourism � Game hunting safari hub, cluster, and hunting packages � Birding tourism � Mining tourism � Agri-tourism, farm-based tourism and farm stays

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The recommended tasks and actions include: Show case successful implementation of LED initiatives to stimulate business confidence (for

both existing and potential enterprises) Disseminate sector and trade intelligence information Market Environmental Management Framework (EMF) for the District and the SDF in order to

expedite approvals Establish agro-processing parks Undertake attraction of businesses operating within the targeted sectors (agriculture, tourism,

manufacturing, mining) Promote the municipality as a favourable location for the targeted businesses and create an

awareness of various development opportunities in the area Respond efficiently to proposed new development Promote and plan the establishment of clusters Modify and undertake council adoption of incentives and support measures Ensure sufficient provision of serviced industrial space/estates for potential investors Address inaccessibility of information regarding sector opportunities

From the above it can be concluded that the investment Strategy is build upon a number of strategic interventions that will have a positive impact on the investment environment.

A summary of the thrust, programmes and actions are provided hereunder: Table 3.8: Summary of business attraction intervent ions:

THRUST 1: MARKET EFFICIENCY AND INNOVATION

PROGRAMMES ACTIONS

Increase intensity of local competition

Address the most pertinent barriers to new business development Address the type of information required by businesses and potential

investors Determine the most appropriate products to form the basis of export

promotion and import competition Enlarge the consumer market: export promotion to increase international

consumer based and labour intensive industries to increase the number of persons with access to income, thus increasing the domestic consumer market

Promote entrance of new businesses: promote entrepreneurship and ensure an adequate source of funding

Improve access to information: potential investors should be able to access marketing information with regard to development potential in all sectors in the municipality. The development of a business investment guide should be considered. Consult the LED Strategy (2011-2016) for sectoral information

Reduce barriers to entry: largely of a financial nature by improving availability of information regarding funding and assisting in completing funding applications

Reducing red tape

Take stock of all procedures and regulations related to investment and determine where efficiency improvements and/or changes are required

Plans should be developed to implement required efficiency improvements and/or regulations as speedily as possible

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Alignment of skills and human resource strategies

Addressing the lack of accredited tertiary institutions Expanding and retaining tertiary educational facilities Developing a database of unemployed and their skills levels Develop a database of employment opportunities, compiled with

information regularly provided by businesses Assist labour market efficiency by developing a public recruitment agency,

that matches appropriately skilled unemployed individuals with employers who are in the market for hiring

Encourage business to integrate skills strategies into business strategies and plans

Promote mentoring programmes in which ‘veterans’ team up with ‘rookies’ to guide them through their initial period of employment

Ensure an increase in Municipalities labour base’s skills profile, through registered accredited training linked to the National Qualifications Framework (NQF),

Improve the relevance (align with industry needs), effectiveness and cost of skills development

Promote product, process, marketing and organisational innovation

Continuous research of trends in consumer demand through subscribing to an appropriate economic database and relaying information to businesses and investors

Communication of changes in trends to businesses and investors Develop innovative mechanisms for attracting research institutions to the

area Improve businesses’ knowledge of the availability of funding for research

and development by compiling and distributing an inventory of available R&D funding relevant to businesses in the study area

Promote collaboration between tertiary education facilities, industries and funders such as SEDA

Host international trade exhibitions Increase the quantity and quality of scientific research institutions by

developing innovative mechanisms for attracting research institutions to the area

Any new projects should be implemented in a manner that promotes the development of clusters. Multiple projects should link with each other and every effort should be made to contain all stages of production within the boundaries of the Municipality, where financially feasible.

Compile an inventory of all inputs required by industries operating in the municipality, which provides details of suppliers

Develop a clear spatial vision of economic development Actively promote innovation by continuously engaging with the DTI, local

municipalities, local businesses, research institutions and educational facilities.

THRUST 2: LEVERAGE GROWING AND STRATEGIC SECTORS TO OPTIMISE INVESTMENT OPPORTUNITIES

Business development

Continuous identification of new business opportunities, including cluster development

Develop a marketing strategy Supply chain management development Skills development Infrastructure development

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Key catalytic sector interventions

Show case successful implementation of LED initiatives to stimulate business confidence (for both existing and potential enterprises)

Disseminate sector and trade intelligence information Market Environmental Management Framework (EMF) for the District and

the SDF in order to expedite approvals Establish agro-processing parks Undertake attraction of businesses operating within the targeted sectors

(agriculture, tourism, manufacturing, mining) Promote the municipality as a favourable location for the targeted

businesses and create an awareness of various development opportunities in the area

Respond efficiently to proposed new development Promote and plan the establishment of clusters Modify and undertake council adoption of incentives and support measures Ensure sufficient provision of serviced industrial space/estates for potential

investors Address inaccessibility of information regarding sector opportunities

3.3.3 Priority actions

In order for the implementation of the attraction strategy to take place in an effective, efficient and sustainable manner, the priority attraction actions include:

Appoint investment officer Establish a special enquiry point Revise LED forum priorities based on latest LED strategy (2011-2016) Plan and undertake inward and outward missions


Establish a municipal services monitor Develop an inventory of investment activities to assist and develop a monitor to track progress. Ensure provision of serviced industrial precinct space Conclude concept, feasibility and business plans Undertake funding applications

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Section four Kayamandi Development Services

The purpose of this section is to outline the available incentive schemes and programmes on a national level and highlight the prospects for investment incentives in the Mogalakwena Local Municipality. Potential financial and non-financial incentives, which could be introduced in the area to attract new businesses, are also listed. This section is structured according to the following elements:

Introduction to incentives Legal considerations National Incentives Investment environment of Mogalakwena Municipality Potential investment incentives for Mogalakwena Municipality Guidelines for implementation of incentives

4.1 INTRODUCTION TO INCENTIVES

The word ‘incentive’ is not clearly understood and thus sometimes used in different context by different people. Generally, economic incentives are referred to as cash payments or ‘tax breaks’, however, the word itself has a broader meaning: ‘Incentive is the direct or indirect cost or benefi t used by government that changes behaviour by motivating a decision or action by consumers, busin esses or other participants in the economy

which would not otherwise have taken place in order to attract and retain companies and facilities for the purpose of promoting development of the economy and increasing social

welfare’.

The different kinds of taxes paid in South Africa include: Income tax, Capital gains tax, Value Added Tax (VAT), Customs Duty, Excise Duty, Transfer Duty, Estate Duty, Stamp Duty, Skills Development Levy (SDL), Unemployment Insurance Fund, Donations Tax, Fuel Levy,

Investment Incentives


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Environmental Levy, Pay As You Earn (PAYE), Retirement Funds Tax (RFT),

A brief description of the most applicable tax forms follows in the following figure, but more information could be acquired from the South African Revenue Service’s. Figure 4.1: Applicable tax forms

Source: SARS, 2008

Advantages of investment incentives include: The offering of investment incentives and business retention measures is a worldwide practice in

both developed and developing countries, provinces and cities Governments use this tool to attract and grow investment, to steer investment into favoured

industries and/or regions, or to influence the character of an investment, use investment incentives, e.g. labour-intensive investment

On the other hand governments often introduce business retention measures to either (a) keep a business from leaving or (b) try to keep a facility from shutting down, i.e. to assist business in distress

Incentives attract new investment to priority disadvantaged areas, with the aim to accelerate job and business opportunities

Incentives are supplementary to the wider range of initiatives to develop areas

•Companies = taxed at a rate of 29%

•Secondary tax (STC) = levied on companies at a rate of 10% as from 01 October 2007 on all income distributed by way of dividends

•A formula tax applies to gold-mining companies

•Small-business corporations (those with an annual turnover of less than R14-million) = graduated tax rate of 0% on the first R43 000 taxable income, 10% from R43 001 to R300 000 taxable income and R25 700 + 29% in excess of R300 001 taxable income, and can write off certain investment expenditure in the year in which it is incurred.

Income Tax

•Introduced in October 2001

•Forms part of the income tax system and includes in taxable income capital gains made on the disposal of assets

Capital Gains Tax

•Standard rate of 14% on all goods and services

•Certain supplies are subject to a rate of zero or are exempt from VAT

Value Added Tax (VAT)

•Levies charged when goods are imported into or exported from South Africa

•South Africa is a signatory to the Southern African Customs Union (SACU) agreement, as are Botswana, Lesotho, Namibia and Swaziland.

•SACU countries apply the same customs and excise legislation, the same rates of customs and excise duties on imported and locally manufactured goods, and the same import duties on imported goods

•This simplifies trade within the SACU common customs area.

Customs Duty

•Payable by individuals when they acquire property at progressive marginal rates between 0% and 8%.

•Property acquired by a company or trust is subject to transfer duty payable at a rate of 10%.

•All transactions relating to a taxable supply of goods that are subject to VAT are exempt from transfer duty.

Transfer Duty

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Government uses different kinds of incentives to attract foreign and domestic investment. In this context, incentives can be divided into two major groups:

Incentives based on their application scale : These incentives are grouped in terms of the scale of their applications. It is divided into three major groups: � National incentives are offered by government and applicable anywhere in the country.

Generally, they are in the form of funds and aimed at providing support during the company’s start-up. National incentives are offered either directly to companies, or could be in the form of funds allocated to local governments that are then transferred to the companies by local municipalities by means of local incentives.

� Provincial incentives are offered by the Province to facilitate development in a particular region or economic sectors. They are available only within the provincial boundaries. Provincial incentives are generally provided by the provincial government organizations or parastatals established to facilitate economic development in the region.

� Local incentives are offered by the local municipalities. These incentives are guided by the local government mandate, i.e. local municipalities could offer incentives with regard to the services they are in control of. In this context, local incentives are related to rebates on electricity and water tariffs, sewage and waste removal tariffs, property tax, government land sales, and assessment rates.

Targeted economic incentives : These incentives are defined by the objective they aim to achieve. It could be either to attract a particular industry in the area, or uplift a particular region in the area, or to maintain the current businesses in the area. In other words, they differ in terms of the entity they target and the ultimate goal they wish to achieve.

A company’s main criterion in site identification however, is usually the long-term profitability that the community offers. An area which fails to meet this criterion will not be able to attract investors by merely providing additional investment incentives. At the same time, when a few sites are relatively similar with regard to the long-term profitability criterion, the provision of investment incentives can slant the decision of the managers to choose one locality over another. In this case, general financial investment incentives are provided in order to increase competitiveness of the area compared to similar regions. General investment incentives involve provision of discounts on service rates (water, electricity, waste disposal, etc.), grants, loans, equity financing, etc. In some cases, when a company’s benefit from incentives is relatively small, investment incentives have an appeal of emotional satisfaction. In this case, the incentives can be not only financial but also non-monetary. Examples of such incentives are a provision of services to the industries, fast tracking of approvals, etc. These types of incentives not only indicate that the new business is welcome in the area and that the community will be responsive to its needs, but also improve the image of the area. In practice, concerns with regard to quality of investment precede concerns over quantity of investments. It happens mainly because quality investments are more sustainable and provide long-term benefits. In the case when the city/region attracts investors that fall under their priority sectors, it is highly likely that the benefit from investment incentives would be bigger than the gain if funds were spent on public projects. In this case, regions/cities offer performance-based incentives to businesses that potentially have a bigger spill-over effect in the area. The other issue regarding effectiveness of investment incentives is its potential negative effect on the existing businesses that are put to a competitive disadvantage. Therefore, when a decision to introduce an investment incentive package is made, government needs to ensure that it does not discriminate against existing businesses. Poverty alleviation and integration of primary and secondary economies are high on the national agenda. These issues also find their way in the Provincial Growth and Development Strategies and

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Integrated Development Plans. Investment incentives should be aligned with the growth and development strategy of South Africa and, therefore, should address the needs of the BEE companies and SMMEs in the area.

The above-mentioned groups of incentives are integrated with each other as shown below.

Figure 4.2: Integration between targeted incentives and incentives based on application scale

As illustrated in the Figure above, the targeted economic incentives overlap with the application scale incentives. It means that on each of the application levels, i.e. national, provincial, or local, there are incentives that can be grouped according to their target or purpose. The set of available incentives identified through case studies and literature survey are classified according to the following categories (SA Cities Network, 2008) as shown below.

Figure 4.3 Incentive categories

Source: SA Cities Network, 2008

NATIONAL PROVINCIAL LOCAL

GENERAL FINANCIAL

NON-MONETARY

PERFORMANCE-BASED

SMME AND SECONDARY ECONOMY TARGETED

INCENTIVES

DIRECT BENEFITS INDIRECT BENEFITS

FINANCIAL FISCAL MONETARY (risk sharing) BENEFITS

NON-MONETARY (risk sharing)

BENEFITS

Operational grants &

subsidies

Capital grants and subsidies

Tax credits

Rate and service charge

rebates

Financing instruments

Guarantees

Technical assistance

Institutional

Facilitation

Policy

Regulatory

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4.2 LEGAL CONSIDERATIONS

This sub-section highlights some of the legal considerations and requirements that local authorities should be aware of when considering activities related to economic development, such as proposing investment incentives. In South Africa, the Constitution (1996) clearly defines the respective competencies and roles of all three spheres of government. This investment promotion and incentives policy falls within the ambit of the local government and therefore its competencies and responsibilities. The policy therefore focuses on those areas that Council can influence directly. Furthermore, there are funding mechanisms and financial regulations that guide the intergovernmental relationships. The investment promotion & incentive policy also needs to comply with the principles of Municipal Finance Management Act (2003), as well as various other legislation that has direct impact on the function of local government, such as Municipal Systems Act (2000). Guiding acts which need to be noted with regards to financial management include the Public Finance Management Act (PFMA), 1999 (as amended by Act No. 29 of 1999) and the Municipal Finance Management Act (MFMA), No. 56 of 2003 (MFMA). The PFMA is one of the most important pieces of legislation passed by the first democratic government in South Africa. The Act promotes the objective of good financial management in order to maximise service delivery through the effective and efficient use of the limited resources. The key objectives of the Act may be summarized as being too:

Modernise the system of financial management in the public sector; Enable public sector managers to manage, but at the same time be held more accountable; Ensure the timely provision of quality information; and Eliminate the waste and corruption in the use of public assets.

The PFMA adopts an approach to financial management, which focuses on outputs and responsibilities rather than the rule driven approach of the previous Exchequer Acts. The Act is part of a broader strategy on improving financial management in the public sector. The Public Finance Management Act (PFMA), 1999 (Act No. 1 of 1999) must be read together with the Public Finance Management Amendment Act (Act No. 29 of 1999). The PFMA gives effect to section 216(1) of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996). This requires national legislation to "establish a national treasury and prescribes measures to ensure transparency and expenditure control in each sphere of government, by introducing:

Generally recognised accounting practice Uniform expenditure classifications Uniform treasury norms and standards

The Act also gives effect to other sections in Chapter 13 of the Constitution. These sections are:

Section 213 that limits exclusions and withdrawals from the National Revenue Fund through an Act of Parliament;

Section 215 which notes that budgets and the budgetary process "must promote transparency, accountability and the effective financial management of the economy, debt and the public

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sector" and for national legislation to "prescribe" budget formats for all the spheres of government;

Section 217 on procurement to be "in accordance with a system which is fair, equitable, transparent, competitive and cost-effective;

Section 218 on the conditions for the issue of guarantees by a government in any sphere; Section 226 that limits an exclusion from a provincial revenue fund through an Act of Parliament; Sections 100 and 216 on intervention by the national government when an organ fails to perform

an executive function related to financial management, and circumstances under which funds may be withheld.

This Act applies to the national and provincial spheres and public entities under their ownership control. Parliament, provincial legislatures and independent institutions established by the Constitution are also covered in this Act. The Municipal Finance Management Act, No. 56 of 2003, covers the local government. The National Treasury has played a pivotal role in the introduction of financial management reforms across government since 1994 and in local government since 1996. The cornerstone of the reform initiative has been implemented through the Municipal Finance Management Act No. 56 of 2003 (MFMA), which became effective in July 2004 and supported by the annual Division of Revenue Act. These pieces of legislation have been aligned with other local government legislation, such as the Structures Act, Systems Act, Property Rates Act and their regulations, to form a coherent package. National Treasury's primary objective is to secure sound and sustainable management of the financial affairs of government, national, provincial and local, and to lead such policies and reforms. This entails supporting the development of a coherent approach that assists in the improvement of delivery of services to communities. The MFMA aims to modernise budget, accounting and financial management practices by placing local government finances on a sustainable footing in order to maximise the capacity of municipalities to deliver services to communities. It also aims to put in place a sound financial governance framework by clarifying and separating the roles and responsibilities of the council, mayor and officials. The MFMA is required by the Constitution, which obliges all three spheres of government to be transparent about their financial affairs. It also forms an integral part of the broader reform package for local government, as outlined in the 1998 White Paper on Local Government. MFMA provisions and implications relevant to incentives:

Avoidance of financing of recurrent expenditure through borrowing Extensive reporting requirements Formal and open budget development processes Requires development of complex skills-set Abolition of RSC levies:

� Income from RSC levies equivalent to 41-56% of property tax, and were more buoyant � R24 billion has been appropriated from the national budget to replace the RSC levies during

an interim three year phase, but this should not become long-term

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The MFMA, in section 14, states the following with regards to disposal of capital assets: Municipality may not transfer ownership as result of sale of capital asset needed to provide the

minimum level of basic municipal services Municipality may transfer ownership, but only after municipal council, in meeting open to public:

� Decides on reasonable grounds that the asset is not needed to provide minimum level of basic municipal services

� Has considered fair market value of the asset and economic and community value to be received in exchange for asset

Any transfer of ownership must be fair, equitable, transparent, competitive and consistent with supply chain management policy

According to the South African Cities Network (2008) municipal partnership options have been severely constrained by the MFMA. The MFMA has had certain unintended consequences regarding the ability of local governments to work in partnership with the private sector to facilitate complex property developments. Many recent township investments have taken place as a result of partnership agreements and institutional arrangements which were concluded prior to the MFMA and would not be currently possible. However, according to the South African Cities Network (2008) municipalities should relax their interpretation of section 14 of the MFMA, particula rly when the projects under consideration have significant public benefit . The intention of the legislation was perceived to proscribe the entrepreneurial use of public land by preventing the sale of land below market value and prohibiting one-on-one transactions through joint ventures. Yet the MFMA does not necessarily have to be a prohibitive constraint. This view is supported by a recent court decision (Waterval JV Property Company (Pty) Ltd v City of Johannesburg, 2008) which found that the sales price of public land should only be informed by market prices , rather than being determined by it. In the judgement the court found that the intention of section 14 (2) is to authorise council to deal in property owned by it, provided that certain norms are used to determine the decision-making process. Provided that council complies with these norms, a valid sale takes place. The court maintained that is it incurred to state that there is a generalised prohibition against selling land at less than market value. All that is required is that the council consider the fair market value when weighing up whether or not to sell the asset, and if so, for how much. Section 14 (2) is broad enough to authorise a council to donate property if though that some commensurate community value will be derived from doing so. National economic policies and programmes have shifted focus from major industrial growth towards smaller industries, such as SMMEs as an option for economic growth and employment creation. Although the focus has shifted, it does not mean that developments of larger scale are not sought. The White Paper on Local Government points strongly to the increasing role that local authorities have to play in economic development. It is therefore important to note that some legal considerations arise. These are outlined hereunder:

Land : In terms of the Local Government Ordinance, municipal land cannot be sold below its market value. However, the local authority can apply to the Premier for special permission to reduce the cost of its land in a specific development. The South African Cities Network research also recommends that local authorities must relax the interpretation of the MFMA as it relates to the disposal of public land to achieve desirable urban development outcomes. The sale of public land must consider, but not necessarily be determined by, market value. Local Authorities can donate land to certain non-profit organisations. It can also lease its land and property at a nominal rate to certain types of organisations.

Planning Legislation : Currently, local authorities are working within Town Planning and Townships Ordinance. The Development facilitation Act (Act 67 of 1995) paves the way for

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drastic changes with regards to the traditional approach to economic development. More specifically, the DFA can be characterized by: � “fast track” approach to development � bypassing apartheid legislation � initiating developments � rapid resolving of conflicts � fundamental review of planning systems The implications of the DFA are that the local authorities can implement new processes which will be better equipped and more streamlined to cope with potential investments.

Zoning : The zoning of an area is regulated in terms of the Town Planning Scheme. Any amendments of applications for rezoning have to follow lengthy and time-consuming procedures (often as long as two years). The DFA now offers a fact track process of approximately 4 months. Historically, zoning has been characterized by single usage – areas for residential or commercial purposes. In their efforts to amend their Town Planning Schemes, the local authority may want to explore more flexible and economically efficient mixed-use zoning schemes.

Investments : A local authority can invest or take equity in a company, provided that one of the objectives of that company is related to the functions or services provided by the municipality. However, local authorities are not allowed to take equity in businesses that fall outside of their functions.

Loans/Start-Up/Venture Capital : Under existing legislation, local authorities are not permitted to grant loans, start-up or venture capital. However, Section 218(1) of the Constitution provides for the different spheres of government, including local authorities, to guarantee loans if the guarantee complies with the condition set out in the legislation.

Health and Safety by-laws : Local authorities have by-laws on health and safety. In relation to the emerging and new forms of economic activities, some of these by laws are considered inappropriate. For example, food-handling by-laws set strict requirements and standards in relation to restaurants yet have a different set of standards for food vendors. The local authority should review these by-laws to ensure a proper balance between development needs and general public interest. The local authority can furthermore make these by-laws available to the general public in order to assess the validity of these laws.

Other guiding frameworks that have an influence on the policy include:

The rules of the World Trade Organisation (WTO): South Africa subscribes to rules and conducts of the WTO. The WTO has introduced a multilateral trading system aimed at removing restrictions to trade, i.e. removing import tariffs (free market access) and abolishment of export subsidies. For example, if the Council charges certain companies “less than cost price” for services rendered it will constitute a subsidy under the WTO agreement.

National and Provincial Policies and Strategies : It is imperative that the incentive policy is aligned with other government policies and strategies. Some of these include, inter alia, the Expanded Public Works Programme, National Skills Development Strategy, the Limpopo Employment Growth and Development Plan, etc.

Department of Trade & Industry (DTI) incentives : The National Department of Trade and Industry, in co-operation with the Industrial Development Corporation, offers over 90 incentives, loans and rebates to attract investment and to support business development.

Integrated Development Plans (IDPs): The IDP is a key strategic document for municipalities. It serves as a guide for both the citizens and municipal officials. The IDP also clearly sets out the strategic objectives and strategies of the Council over a 5-year period. The need for an investment promotion & incentive policy is a further effort to achieve equitable socio-economic development within Mogalakwena Local municipality.

The following sections describe the incentives in more detail.

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4.3 NATIONAL INVESTMENT INCENTIVES

South Africa is open for investment in all business sectors without required government approval. To facilitate the inflow of foreign investment and increase the activity of domestic investors, the Department of Trade and Industry (the dti) and its partners offer a number of incentives to potential investors. They are grouped according to the following schemes:

Investment support Small Business Development Technology and Innovations Support Increasing competitiveness Export Assistance Sector-Specific Support

The following sections provide a more detailed overview on the type of incentives available within each of these groups, which at the same time are applicable to the Mogalakwena Local Municipality. The section also outlines the developing bodies that offer incentives or support businesses in acquiring them. 4.3.1 Developing bodies The South Africa government has established a number of developing bodies to offer incentives to the potential investors or assist them in applying and acquiring them. The main government organisations in this field are:

The Department of Trade and Industry (the dti): The dti offers variety of services to companies planning to invest in South Africa. These services include details on investment opportunities in the country, guidelines to establishing new businesses, and development of incentive packages to facilitate investment. The aim of the dti is to lead and facilitate access to sustainable economic activity and employment to all South Africans. This will be achieved through attracting higher levels of investment, increased access to local products and services in the international markets and creating competitive markets 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. The organizations are examined in more detail below. � The contact details of the Customer Contact Centre are: � Tel (locals): 0860 843 384 � Tel (international callers): +27 (12) 394 9500 � Fax: 0861 843 888 (locals) or +27 (12) 394 9501 (international callers) � Website: www.thedti.gov.za

The Khula Enterprise Finance Limited : The Khula Enterprise Finance Limited is a limited liability company with the dti as a major shareholder. Khula facilitates the provision of loan and equity capital to small, medium and micro enterprises through the medium of Retail Financial Intermediaries. Khula’s Operations are divided into two divisions: Loans and Credit Guarantees1. Khula Enterprise Finance Limited (Khula) mission is to ensure improved availability of loan and equity capital to Small, Medium and Micro enterprises (SMMEs) by offering in a sustainable manner Loans, Guarantees, and Seed Funds to Retail Financial Intermediaries (RFIs) in need of capital and capacity. Over the past five years, Khula has disbursed over R1 billion directly into the SMME sector. During the 2003/04 financial year alone, disbursements

� The Department of Trade and Industry official website� www�thedti�gov�za

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increased by 40% to R280 million. The number of beneficiaries also increased by 21% to 110 000 during the same period.2 The contact details are: � Tel: (012) 394 5560 / 5900 � Fax: (012) 394 6560 � Toll free help line: 0800 11 88 15 � Email: [email protected]

The Industrial Development Corporation : The IDC is a self-financing state owned development finance institution whose primary objectives are to contribute to the generation of balanced sustainable economic growth in Southern Africa and to further the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC has four Strategic Business Units, each of which has a specific area of expertise and is divided into smaller units based on the projects or sectors.

Table 4.1: IDC Strategic Business Units 3

SBU Sub-units Objective

Industrial

Sectors

Division

Metals, Transport

and Machinery

Products

To stimulate development and sustainable global competitiveness in the chemical,

textile and allied industries in Southern Africa.

Chemicals, Textiles

and Allied Industries

To develop and support viable downstream metal producers, with a focus on the

automotive, other transport, structural and fabricated metal, as well as the machinery

sectors.

Wood, Paper and

Other Industries

Support emerging industries within the forest products sector through partnering with

entrepreneurs.

Services

Sectors

Division

Agency Development

and Support (ADS)

Promote and develop economic potential of local and regional economies.

2010! SWC Business

Funding

Facilitate investment in 2010 related business activities.

Franchising To provide finance to franchised businesses.

Healthcare and

Education

To support and develop businesses in both the healthcare and education sectors in

South Africa and the rest of the African continent. These include the financing of

greenfield projects, expansions and acquisitions and the combination thereof.

Media and Motion

Pictures

To promote investment in and the development of the media sector and related

industries, including printing, publishing, radio, television and motion pictures.

Techno Industries To facilitate the provision of ICT related investments in southern Africa with the major

emphasis on job creation and sustainable empowerment.

Tourism To finance either new or existing tourism businesses throughout Africa in addition to

supplying equity finance for BEE partners wishing to purchase shareholding in viable

tourism businesses.

Transportation,

Storage, Financial

Services and Other

To facilitate the provision of finance for sustainable service related projects and

investments in South Africa and the rest of the continent.

Project

Division

Food, Beverages and

Agro-Industries

To facilitate the establishment of commercially viable, high developmental impact, job

creating and value adding agricultural based ventures in South Africa and the rest of

the continent.

Mining To promote the expansion of Africa’s mining base, thereby improving the

competitiveness of the African economy and generating sustainable growth.

Public Private

Partnerships

This SBU supports projects in the Energy, Telecommunications and IT, Transportation,

Bulk Water and Solid Waste Management and e-Government sectors. It also facilitates

the creation of related infrastructures and promotes sustainable economic

development in Africa.

Professional

Services

Division

Support Programme

for Industrial

Innovation

SPII promotes technological innovation in the South African manufacturing industries.

International Finance Responsible for a diverse range of activities, this SBU has is tasked with providing

short-term and long-term export and import finance to international projects, and

� The Khula Enterprise Finance Limited official website� www�khula�org�za

$ The Industrial Development Corporation official website� www�idc�co�za

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SBU Sub-units Objective

providing guarantees and local short-term finance for procurement opportunities. Its

activities for local short-term finance are geared towards BEE companies and SME’s.

Research and

Information

This SBU masterminds our internal operations. It also assists the South African

government with policy formulation, offers a consultancy service and disseminates

research information to the public.

Risk Capital Facility Established in 2002 in response to the Euro 58.9 million granted by the European

Commission to the South African Government. The IDC was identified as the

implementing agency to co-manage the grant funds together with European

Investment Bank (EIB).

Corporate Structured

Finance

To participate in valuing, structuring and negotiating developmental funding

transactions involving complex risk profiles such as project finance, equity investments

and leveraged corporate finance transactions; and providing advisory services to both

internal and external clients. We also ensure IDC adherence to internal and industry

best practice.

The IDC’s primary role is to assist in acquiring finance. In this context, they have developed a wide variety of products, among which are: � Commercial Loans � Equity � Quasi-Equity � Shareware housing � Guarantees � Suspensive sales � Wholesale Finance � Export Finance � Import Finance

The contact details are:

� Tel: 0860 693 888 � Email: [email protected] � Website: www.idc.co.za

Trade and Investment South Africa : Trade and Investment South Africa (Tisa) works under the

umbrella of the dti and provides investment facilitation services for inbound investors. Tisa focuses on promoting sectors of the South African economy that show the greatest growth potential and marketability and co-ordinates 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.

� Customised Sector Programmes . It comprises programmes for the development of priority sectors in support of the dti’s Integrated Manufacturing Strategy and government’s Microeconomic Reform Strategy. Sector development is related to the identification and facilitation of the removal of blockages to sector development. In this context this will be done by any means within the direct control of government, such as legislation, regulations, and strategic direction. Therefore, the primary role of this business unit is to lead the development and implementation of customized sector programmes in all priority sectors of the dti.

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Tisa has identified the following areas for investment on the basis of their ability to promote local economies and create new jobs. Table 4.2: TISA Priority sectors and support

The contact details of the customer care centre are:

� Tel: 0861 843 384 � Website: www.thedti.gov.za/thedti/organisation1f.htm

4.3.2 Investment support incentives

Investments facilitate the increase in demand for goods and services by means of increasing domestic expenditure and enlarging the production base through formation of the installed capital. In addition, investments allow modernisation of existing technologies and research of new technologies that positively affect the productivity levels. High productivity levels increase the competitiveness of the industries on the national, as well as on the international arenas. This shows that investment is the driving factor of the economic development. One of the ways to attract more investment in the region is to offer incentives for the potential investors. The following table outlines the major incentive programmes that form part of the dti’s Investment Support Scheme. Table 4.3: Investment Support Incentives

Incentive Description

Black Business Supplier Development Programme (The Enterprise Organisation)

The Black Business Supplier Development Programme (BBSDP) is an 80:20 cost-sharing, cash grant incentive scheme, which offers support to black-owned enterprises in South Africa. The scheme provides such enterprises with access to business development services that assist them to improve their core competencies, upgrade managerial capabilities, and restructure their process to become more competitive. The beneficiaries of the Grant are black firms that have acquired tenders, enterprises that are majority black owned (fifty plus one share) and have a significant representation of black managers on their management team, and enterprises with the maximum annual turnover of R12 million per annum. The maximum grant amount that a single project can qualify for is limited to R100 000. The requested amount should not exceed 25% of the entities previous year’s turnover. All fees related to the rendering of business

Customised Sector Programme

Investment Promotion and Facilitation Export Development and Promotion

Investment Enquiries Service

Customised Investor Service

Export Development Service

Customised Exporter Service

• Agro-processing Investment Information

Investment Recruitment Programme Investment Facilitation Aftercare

Export Information Trade Opportunities

Export Promotion

• Metals • Capital Equipment

• Chemicals and Allied Industries

• Textiles, Clothing and Footwear

• Automotives • Aerospace, Rail and

Marine

• Crafts and Film

• Tourism

• Electro-technical • BPO

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development services, including travel and subsistence costs, qualify for cost-sharing assistance. Enterprises exercise their own choice in selecting service providers, whoever it is subject to acquiring at least three competitive bids. The firm does not have to select the lowest bid, however, if the most expensive bid is chosen motivational letter from the applicant for the grant is to be submitted.

Critical Infrastructure Fund (The Enterprise Organisation)

The Critical Infrastructure Fund (CIF) is a cash grant incentive for projects that are designed to improve critical infrastructure in South Africa. The beneficiaries are entities owned by the provincial and local governments, and private investors in economic and infrastructure projects. The incentive covers up to 30% of the cost of development costs in qualifying infrastructure.

Foreign Investment Grant (The Enterprise Organisation)

The Foreign Investment Grant (FIG) is a cash incentive scheme for investors who invest in new manufacturing businesses in South Africa. The beneficiaries of the Grant are foreign investors, manufacturers and SMMEs. The foreign entrepreneur is compensated for the qualifying costs of moving new machinery and equipment (excluding vehicles) from abroad. The FIG will cover up to 15% of the costs of moving new machinery and equipment, to a maximum amount of R3 000 000 (three million rand) per entity. It also offers additional industrial investment allowance to a maximum of R600 million.

4.3.3 Small business development incentives

Small business development forms an integral part of the South African economy growth. It has been defined that in order to achieve a 6% annual growth, the South African economy has to expand its SMME sector and generously invest in the emerging entrepreneurs. A special agency of the dti - the Khula Enterprise Finance Limited - has been established to facilitate the development of the Small, Medium and Micro Enterprises (SMMEs) by means of assisting in acquiring finance and information. The incentives offered under the Small Business Development Scheme are partially provided through Khula Enterprise Finance Limited, while others are facilitated by the dti itself. The following table outlines the major incentives available within this scheme.

Table 4.4: Small Business Development Incentives


Danida Business to Business Programme, Credit Guarantee Scheme

The objective of the Business-to-Business programme is to develop and strengthen business opportunities and create jobs for eligible entrepreneurs from the previously disadvantaged communities. This is achieved through support to the development of commercially viable businesses, based on formation of business partnerships between South African and Danish companies.

Emerging Entrepreneur Scheme, Credit Guarantee Scheme (Khula)

The Emerging Entrepreneur Scheme provides up to R75 000. It is accessible to entrepreneurs with assets of less than R2 million before financing.

Empowerment Scheme, Credit Guarantee Scheme (Khula)

The Empowerment Scheme provides cover up to R5 million of bank facility at 60% cover. The maximum term if five (5) years. It is accessible to SMMEs that require bank finance but lack collateral.

Individual Guarantee, Credit Guarantee Scheme (Khula)

The purpose of the individual guarantee scheme is to enable an entrepreneur to access funding from a participating bank or other financial institution. The scheme enables the entrepreneur to access funding for purposes of establishing, expanding or purchasing a business. Facilities secured under the Khula guarantee scheme often include term loans, bank overdraft, revolving credit, installment sale, bank guarantees as well as construction performance guarantees. The maximum facility is R1 million and the maximum term is five (5) years.

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Micro Credit Outlets (KhulaStart)

KhulaStart uses the group solidarity methodology (gives loans to groups - not individuals). Individuals select themselves into groups of 3 -10 members and need to meet the criteria established for group participation. Most importantly, the group has to be a cohesive one The loans are disbursed on an incremental basis from R300 - R3 500 per member within a group. The group decides, based on the activity of the individual businesses, how much each member has to receive, and will subsequently stand surety for the full amount owed by the group as a whole.

Regional equity funds

The need for risk capital (venture capital/private equity) to support Small and Medium Enterprises (SMEs), especially those sponsored by historically disadvantaged entrepreneurs, is not in doubt. Many banks and financial institutions have introduced equity funding into their product mix.

Retail Financial Intermediaries (RFI, Khula)

Business and Capitalisation Loans are provided by Khula, which are loans given to RFIs to enable RFI's to lend to entrepreneurs for business purposes. Entrepreneurs must approach RFIs directly and not Khula. Only companies that want to access these products and become RFI can apply to Khula. Loan amounts for less experienced RFIs range from R1 million to R10 million, and t=for the experienced RFIs – From R5 million to R10 million.

Standard Scheme, Credit Guarantee Scheme

The Standard Scheme provides cover up to R1 million of the bank facility at 80%, with the fee payable at 3% p.a. in advance. The duration of the scheme is 36 months initially, but can be extended twice for periods of 12 months each time. Normal criteria apply.

Dutch funds available for investments in South Africa

South Africa is a new market that is expanding rapidly. This provides opportunities for businesses to expand investments and trade relations. The Dutch Ministry of Foreign Affairs finances companies who wish to invest in South Africa, together with a local South-African company. These companies can receive a contribution of 50 percent of the total project costs.

The Land Reform Credit Facility (LRCF, Khula)

The Land Reform Credit Facility is a wholesale finance facility at Khula Enterprise Finance Ltd, whose aim is to stimulate and encourage private sector participation and involvement in the Land Reform process. The LRCF is funded by the Department of Land Affairs and the European Union. The facility achieves its objective by incentivising commercial banks and other high credit rated institutions to invest in high value agricultural and ecotourism joint ventures, thereby unlocking private sector investment into the agricultural, agribusiness and ecotourism sector. The ceiling for mortgage projects is R600 000 per participating beneficiary, an R400 000 per participating partner for equity-share projects.

4.3.4 Technology and innovation support incentives

Technology and innovation is one of the key drivers of economic development. Investment in innovation and technology facilitates development of the wealth-creating technological innovations, subsequently resulting in economic growth and improved quality of life. South Africa has not yet realised its full potential in technological innovation largely being dependant on the imported technologies. The significant contribution of the manufacturing sector in the national economy creates the demand for new technologies in production that would increase the productivity and result in cost savings, thus creating conducive environment for research. Investment in technology and innovation has a positive impact on the economic development, and highly important, on the international competitiveness of the domestic products and services. It relates to investing in skills development, knowledge base accumulation, and new technology development. Understanding significance of investment in technology and innovation, the South African government has committed to support companies in this field by means of incentives. The following Table outlines the key incentives available to the companies in the technology an innovation industry.

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Table 4.5: Technology and innovation incentives


Technology and Human Resources for Industry Programme (THRIP)

The Technology and Human Resources for Industry Programme (THRIP) is a partnership programme that challenges companies to match government funding for innovative research and development in South Africa.

Support Programme for Industrial Innovation (SPII)

Support Programme for Industrial Innovation (SPII). This is the dti's innovation support programme that is administered by the Industrial Development Corporation (IDC).

National Technology Transfer Centre (NTTC)

The National Technology Transfer Centre (NTTC) is an initiative by the dti to facilitate technology transfer and diffusion to SMMEs with a specific focus on the Second Economy.

GODISA The GODISA Trusts is helping South Africans to cultivate their innovations and business ideas, and in the process uplifting and empowering individuals and their communities.

The Down Stream Aluminum Centre for Technology (DACT)

The Down Stream Aluminium Centre for Technology (DACT) is a dti-funded project. DACT is set to gain stature in the casting industry for sound financial, social and environmental management. Providing a sound training and incubating facility and establishing successful small businesses to benefit the community in which it operates.

FURNTECH

The Government, through its National Skills Development Strategy (NSDS), identified training and skills development as significant drivers of international competitiveness and organisational development. In response to these requirements, the Department of Trade and Industry (the dti) funded the establishment and operationalisation of FURNTECH as a world-class service provider to South Africa’s wood products and furniture industries in the fields of incubation, training, technology transfer and technology demonstration.

National Fibre, Textile and Clothing Centre (NFTCC)

As a technology partner to industry, the National Fibre, Textile and Clothing Centre (NFTCC) of CSIR Manufacturing and Materials Technology, promotes the growth and global competitiveness of the South African textile pipeline. Through awareness of relevant technological developments globally and the acquisition or development of technologies, the centre aims to be the best provider of knowledge and innovative solutions to the textile pipeline in Southern Africa.

Venture Capital

The Venture Capital fund is an initiative that would primarily focus at financing the first two stages of development of new technology-based firms: that is the seed stage (which involves concept development, prototyping, and product development) and early stage (marketing, production of goods and/or services), with some investment in later stages. Venture Capital is considered funds invested in a venture at high risk to the investor, usually in situations where the venture is unable to secure the required funds from traditional lending sources, such as commercial loans from a bank, or the public equity market.

Technology Linkages

The objective of the programme is to facilitate the establishment of industrial sector needs and offer support as required by the dti sectors. The Unit (Innovation & Technology), together with Trade and Investment South Africa (TISA), interacts with industry on integrated manufacturing strategies and technology issues such as:

4.3.5 Increasing competitiveness incentives

South Africa’s population and spending power are relatively small when compared to some other developing and developed countries. Therefore, the country has to attract the spending power from the foreign countries in order to facilitate economic growth: the demand for domestic products and services will increase the production capacity of the local companies, subsequently boosting the demand for factors of productions and resulting in the economic growth. However, in order to ensure the consistent increase in demand for local products and services by the international companies, the South African products and services have to be internationally competitive. They have to offer competitive prices and comparatively good quality. Among the factors that determine capability are:

Labour productivity Access to technology Efficient to cost effective infrastructure.

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The South African government has emphasised the need for increasing the competitiveness of the domestic products in the global village through Presidents’ Addresses to the Nation, strategies development and provision of incentives. Competitiveness, as was mentioned above, is determined by a number of factors, one of which is access to technology. The incentives presented in the previous section that form part of the Technology and Innovations scheme are, therefore, part of the scheme that aim at increasing competitiveness, too. In general, any incentive that aims at facilitating skills development, investment in research and technology, infrastructure development, or small business development are incentives aiming at increasing the competitiveness of the domestic products and services. Some of the other national government incentives that aim at increasing competitiveness of the local products and services are presented in the Table below. Table 4.6: Increasing competitiveness incentives


Sector Partnership Fund

The Sector Partnership Fund provides financial assistance to partnerships consists of five or more firms/organizations in the manufacturing, agro-processing or ITC industries to define and implement collaborative projects related to production and marketing that will enhance their productivity and international competitiveness. The fund will support the development of such partnerships through the provision of 65:35 grants, 65% from the SPF and 35% from the partnership with a cumulative ceiling of R1 million for each approved partnership.

Skills Support Programme The Skills Support Program (SSP) is a cash grant for skills development with the objective of encouraging greater investment in training and creating opportunities for the introduction of new advanced skills.

4.3.6 Export assistance incentives

South Africa’s relatively distant location from its major international partners, i.e. Europe and Asia, is one of the constraints to achieving competitiveness of the domestic products and services on the international market. This relates to comparatively high transportation costs, which subsequently increase costs of delivering the product to the market. In order to address the issues of access to market, the dti has compiled an incentive package that assists companies in exporting their products. See below Table. Table 4.7: Export Assistance Incentives


Export Marketing and Investment Assistance Scheme (The Enterprise Organisation)

The purpose of assistance under the EMIA scheme is to partially compensate exporters for costs incurred in respect of activities aimed at developing export markets for South African products and services and to recruit new foreign direct investment into South Africa.

The beneficiaries of the Scheme qualify for assistance if they are operational for more than one financial year. The following enterprises can apply for the support:

• South African manufacturers of products • South African export trading houses representing at least three

SMMEs or HDIs owned businesses • South African commission agents representing at least three

SMMEs • South African Export Councils, Industry associations and Joint

Action Groups representing at least five entities. The beneficiaries can receive the following:

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• Individual exhibition assistance air ticket o HDIs 100% to a maximum of R10 000 o SMMEs 80% to a maximum of R8 000 o Subsistence allowance - R1 350 per day maximum of 15

days o Transport or promotional assistance to a maximum of

R3 000 • Primary market research ticket

o HDIs 100% to a maximum of R10 000 o SMMEs 80% to a maximum of R8 000 o Other sized business 50% to a maximum of R5 000 o Subsistence allowance - R1 350 per day maximum of 15

days o Transport or promotional assistance to a maximum of

R1 000 o Marketing materials to a maximum of R10 000 per annum

• Individual inward bound mission air ticket o HDIs 100% to a maximum of R10 000 o SMMEs 80% to a maximum of R8 000 o Other sized business 50% to a maximum of R5 000 o Subsistence allowance - R800 per day maximum of five

(5) days o Rental of vehicle - R200 per day to a maximum of five (5)

days

Productive Asset Allowance

The purpose of this offering is to reduce the amount of vehicle platforms and models locally assembled coupled with increased investment and exports with increased local content. The offering will save the customer money by using the rebate certificate to offset import duties on built up vehicle imports.

4.3.7 Sector specific incentives

In addition to the broad-ranged incentives that have been outlined earlier in this section, the dti provides sector-specific incentives that aim at supporting the development of the particular industries. The incentives that could be applied to the Mogalakwena Local Municipality context are presented in the following Table. Table 4.8: Sector specific incentives


Motor Industry Development Programme (MIDP)

The MIDP has been in effect since 1995 and has recently been extended from 2007 until 2012. The aim of the Programme is to promote motor vehicle and related components exports. The incentive is based on the promotion of exports through the issues of Import Rebate Credit Certificates. The MIDP is applicable to motor vehicle assembly and component manufacturers.

Steel rebates and concessions This incentive aims at promoting the export of beneficiated South African steel products. It is applicable to exporters of fabricated steel products with at least 25% value-added. The rebates are based on the value of exports.

The Fuel levy rebate (National treasury)

This incentive offers a 40% rebate on general fuel levy for biodiesel producers. Plant and machinery used to produce biofuels (and other renewable energy sources such as wind, solar and hydro) qualifies for a 50:30:20 per cent write-off over a 3-year period.

Renewable energy subsidy Focus is to develop strategies and co-ordinate studies to support biofuels for job creation in the second economy and to use the first economy as a market for biofuels

Film Incentive

The Film Incentive if the Larger Budget film and television production rebate scheme. The beneficiaries of the scheme are local and domestic film producers. The Scheme offers 15% tax rebate on Foreign film production expenditure, or 25% tax rebate on qualifying South African production expenditure. The maximum tax rebate per application is R10 million. The tax rebate is tax exempt.

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Co-operative incentive scheme (CIS)

The scheme is a direct cash grant offered on a matching grant basis of qualifying entities. CIS is an incentive for co-operative enterprises in the emerging economy to acquire competitive business development services. The beneficiaries of the scheme should qualify the following criteria:

• Be incorporated and registered in South Africa in terms of the Co-operatives Act of 1991

• Must be operating or will operate in the emerging sector (black owned and poor sectors)

• Projects must fall within the manufacturing, agriculture, retail, and services sector

• Adhere to co-operative principals • Emerging co-operatives owned by HDIs • Rural and semi-urban biased.

Social co-operatives engaged in social welfare activities are not eligible for the scheme. The eligible co-operatives receive a 90:10 matching grant, where the dti contributes 90% of the approved costs of project activities. The maximum grant that can be offered is R300 000. The minimum that can be applied for is R10 000.

Duty Credit Certificate scheme In terms of this scheme, exporters get a duty credit of R25 for every R100 worth of goods they export. Exporters could acquire credit certificates on exports which they could exchange for custom duty rebates on imports

4.3.8 Summary of national incentives

The dti provides numerous incentives to potential investors. Incentive schemes are grouped into six categories:

Investment support Small business development Increasing competitiveness Innovation and technology Export assistance Industrial development zones

Some of these schemes and their programmes are described in more detail in the Table below. Table 4.9: Summary of dti incentives


Investment support scheme

Black Business Supplier Development Programme (The Enterprise Organisation)

The Black Business Supplier Development Programme (BBSDP) is an 80:20 cost-sharing, cash grant incentive scheme, which offers support to black-owned enterprises in South Africa. The scheme provides such enterprises with access to business development services that assist them to improve their core competencies, upgrade managerial capabilities, and restructure their process to become more competitive. The beneficiaries of the grant are black firms that have acquired tenders, enterprises that are majority black owned (fifty plus one share) and have a significant representation of black managers on their management team, and enterprises with the maximum annual turnover of R12 million per annum. The maximum grant amount that a single project can qualify for is limited to R100 000. The requested amount should not exceed 25% of the entities previous year’s turnover. All fees related to the rendering of business development services, including travel and subsistence costs, qualify for cost-sharing assistance. Enterprises exercise their own choice in selecting services providers, whoever it is subject to acquiring at least three competitive bids. The firm does not have to select the lowest bid, however, if the most expensive bid is chosen motivational letter from the applicant for the grant is to be submitted.

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Critical Infrastructure Programme (CIP)

The Critical Infrastructure Programme (CIP) is a non-refundable, cash grant that is available to the approved beneficiary upon the completion of the infrastructure project. The scheme covers between 10% and 30% of the total development costs of the qualifying infrastructure.

Business Process Outsourcing and Offshoring (BPO and O)

The BPO and O Investment incentive comprises an investment grant ranging between R37 000 and R60 00 per seat and a training support grant towards costs of company specific training up to a maximum of R12 000 per agent. The incentive is offered to local and foreign investors establishing projects that aim primarily to serve offshore clients. The objective of the incentive is to attract BPO and O investment that creates employment opportunities. The BPO Investment incentive is effective from 06 December 2006 to 31 March 2011.

The Sector Specific Assistance Scheme (SSAS)

No info

The Co-Operative Incentive Scheme (CIS)

The Co-operative Incentive Scheme is a 90:10 matching cash grant for registered co-operatives. The maximum grant that can be offered to one co-operative entity under the scheme is R300 000 (three hundred thousand Rand). The CIS is an incentive for co-operative enterprises in the emerging economy to acquire competitive business development services.

Small business development

DANIDA Business to Business Programme, Credit Guarantee Scheme

The objective of the Business-to-Business programme is to develop and strengthen business opportunities and create jobs for eligible entrepreneurs from the previously disadvantaged communities. This is achieved through support to the development of commercially viable businesses, based on formation of business partnerships between South African and Danish companies.

Emerging Entrepreneur Scheme, Credit Guarantee Scheme (Khula)

The Emerging Entrepreneur Scheme provides up to R100 000 with the fee payable at 4% p.a. in advance. The duration is 24 months initially but can be extended three times for periods of 12 months each time. The conditions are mentorship of the loan.

Empowerment Scheme, Credit Guarantee Scheme (Khula)

The Empowerment Scheme provides cover up to R5m of bank facility at 60%, with the fee payable at 2.5% p.a. in advance. Duration is 36 months initially but can be extended twice for a period of 12 months each time.

Individual Guarantee, Credit Guarantee Scheme (Khula)

The purpose of the individual guarantee scheme is to enable an entrepreneur to access funding from a participating bank or other financial institution. The scheme enables the entrepreneur to access funding for purposes of establishing, expanding or purchasing a business. Facilities secured under the Khula guarantee scheme often include term loans, bank overdraft, revolving credit, instalment sale, bank guarantees as well as construction performance guarantees.

Institutional Guarantee, credit Guarantee Scheme

The Institutional Guarantee Scheme caters for institutions that on lend to the SMME and are able to source such capital from the commercial banks. Agreements are signed between Khula and the commercial banks to enable utilisation of the Scheme. Finance has to be approved by the financial institution and in the case of a lack of collateral by the borrower; the bank would then apply to Khula for a guarantee. The qualifying criteria is as follows:

• Retail Financial Institution on lending to SMME's • Business to be conducted within the RSA, to South African citizens • Guarantees limited to 70% of the financing provided by the bank, such

limit not to exceed 10% of Khula capital.

Micro Credit Outlets (KhulaStart)

KhulaStart uses the group solidarity methodology (gives loans to groups - not individuals). Individuals select themselves into groups of 3 -10 members and need to meet the criteria established for group participation. Most importantly, the group has to be a cohesive one The loans are disbursed on an incremental basis from R300 - R3 500 per member within a group. The group decides, based on the activity of the individual businesses, how much each member has to receive, and will subsequently stand surety for the full amount owed by the group as a whole.

Regional equity funds

The need for risk capital (venture capital/private equity) to support Small and Medium Enterprises (SMEs), especially those sponsored by historically disadvantaged entrepreneurs, is not in doubt. Many banks and financial institutions have introduced equity funding into their product mix.

Retail Financial Intermediaries (RFI, Khula)

Business and Capitalisation Loans are provided by Khula, which are loans given to RFI's to enable RFI's to lend to entrepreneurs for business purposes. Entrepreneurs must approach RFI's directly and not Khula. Only companies that want to access these products and become RFI can apply to Khula.

Standard Scheme, Credit Guarantee Scheme

The Standard Scheme provides cover up to R1m of the bank facility at 80%, with the fee payable at 3% p.a. in advance. The duration of the scheme is 36 months initially, but can be extended twice for periods of 12 months each time. Normal criteria apply.

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Dutch funds available for investments in South Africa

South Africa is a new market that is expanding rapidly. This provides opportunities for businesses to expand investments and trade relations. The Dutch Ministry of Foreign Affairs finances companies who wish to invest in South Africa, together with a local South-African company. These companies can receive a contribution of 50% of the total project costs.

SEDA Technology Programme (STP)

STP was created to provide technology and business development support services to small enterprises as an integral part of its mandate to drive the national technology and business incubation agenda. It provides a range of services that enable industry and in particular small enterprises in the second economy to access and transfer technology. There are two main areas in which STP provides support:

• Technology Transfer Division that manages the Technology Transfer Fund (TTF). The main purpose of the TTF is to specifically fund defined components of the process of transferring available technology to entrepreneurs, communities and existing South African businesses, focusing on the second economy. The TTF will provide funding to enable technology transfer for the second economy as a grant with no payback up to a maximum of R500 000 per project.

• Technology Business Incubation. It is designed to strengthen technology diffusion and harness the entrepreneurship of the science and technology community in South Africa. Incubation provides support to South African enterprise.

The Land Reform Credit Facility (LRCF, Khula)

The Land Reform Credit Facility is a wholesale finance facility at Khula Enterprise Finance Ltd, whose aim is to stimulate and encourage private sector participation and involvement in the Land Reform process. The LRCF is funded by the Department of Land Affairs and the European Union. The facility achieves its objective by incentivising commercial banks and other high credit rated institutions to invest in high value agricultural and ecotourism joint ventures, thereby unlocking private sector investment into the agricultural, agribusiness and ecotourism sector.

Increasing competitiveness and innovation and techn ology

Technology and Human Resources for Industry Programme (THRIP)

The Technology and Human Resources for Industry Programme (THRIP) is a partnership programme that challenges companies to match government funding for innovative research and development in South Africa.

Support Programme for Industrial Innovation (SPII)

Support Programme for Industrial Innovation (SPII). This is the dti's innovation support programme that is administered by the Industrial Development Corporation (IDC).

National Technology Transfer Centre (NTTC)

The National Technology Transfer Centre (NTTC) is an initiative by the dti to facilitate technology transfer and diffusion to SMMEs with a specific focus on the Second Economy.

GODISA The GODISA Trusts is helping South Africans to cultivate their innovations and business ideas, and in the process uplifting and empowering individuals and their communities.

The Down Stream Aluminium Centre for Technology (DACT)

The Down Stream Aluminium Centre for Technology (DACT) is a dti-funded project. DACT is set to gain stature in the casting industry for sound financial, social and environmental management. Providing a sound training and incubating facility and establishing successful small businesses to benefit the community in which it operates.

FURNTECH

Government, through its National Skills Development Strategy (NSDS), identified training and skills development as significant drivers of international competitiveness and organisational development. In response to these requirements, the Department of Trade and Industry (the dti) funded the establishment and operationalisation of FURNTECH as a world-class service provider to South Africa’s wood products and furniture industries in the fields of incubation, training, technology transfer and technology demonstration.

National Fibre, Textile and Clothing Centre (NFTCC)

As a technology partner to industry, the National Fibre, Textile and Clothing Centre (NFTCC) of CSIR Manufacturing and Materials Technology, promotes the growth and global competitiveness of the South African textile pipeline. Through awareness of relevant technological developments globally and the acquisition or development of technologies, the centre aims to be the best provider of knowledge and innovative solutions to the textile pipeline in Southern Africa.

Venture Capital

The Venture Capital fund is an initiative that would primarily focus at financing the first two stages of development of new technology-based firms: that is the seed stage (which involves concept development, prototyping, and product development) and early stage (marketing, production of goods and/or services), with some investment in later stages. Venture Capital is considered funds invested in a venture at high risk to the investor, usually in situations where the venture is unable to secure the required funds from traditional lending sources,

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such as commercial loans from a bank, or the public equity market.

Technology Linkages

The objective of the programme is to facilitate the establishment of industrial sector needs and offer support as required by the dti sectors. The Unit (Innovation & Technology), together with Trade and Investment South Africa (TISA), interacts with industry on integrated manufacturing strategies and technology issues.

Export assistance

Export Marketing and Investment Assistance Scheme (EMIA)

The purpose of assistance under the EMIA scheme is to partially compensate exporters for costs incurred in respect of activities aimed at developing export markets for South African products and services and to recruit new foreign direct investment into South Africa.

This scheme includes:

• Primary Export Market Research and Foreign Direct Investment Research Scheme

• Individual Inward Bound Mission

• National Pavilions

• Individual Exhibitions

• Outward Selling Trade Missions

• Outward Investment Recruitment Missions

• Inward Buying Trade Missions

• Inward Investment Missions

• Sector Specific Assistance.

Productive Asset Allowance

The purpose of this offering is to reduce the amount of vehicle platforms and models locally assembled coupled with increased investment and exports with increased local content. The offering will save the customer money by using the rebate certificate to offset import duties on built up vehicle imports.

In addition to the incentives offered by the Dti, municipalities have access to the following infrastructure grants:

Municipal Infrastructure Grant (MIG) administered by the Department of Local and Provincial Government

National electrification Programme administered by the Department of Mineral resources Public Transport Infrastructure and Systems Grant administered by the Department of Transport Neighbourhood Development Partnerships Grant (NDPG) administered by National Treasury

4.4 INVESTMENT ENVIRONMENT OF MOGALAKWENA MUNICIPALITY

In understanding the investment environment, it is important to understand business risks in South Africa, as well as in Mogalakwena Local Municipality. Investment risks in Mogalakwena are largely related to the composition of South Africa’s economy, as well as its political, labour, and social environments. In addition, local aspects, such as infrastructure, also affect the investment climate of the local economy increasing the risk of doing business in the area. The following paragraphs outline a number of risk factors and constraints that need to be taken due cognisance of.

Labour market : According to the World Economic Forum’s “Global Competitiveness Report” 2006-2007, the main problems of the labour market in South Africa are related to the increasing brain drain, short supply of skilled labour, low labour productivity, and lack of labour market flexibility. On the latter, South Africa was ranked 123rd out of 125 countries. Extremely low labour market flexibility, as shown by the rank, is usually associated with high rates of unemployment and lower GGP per capita. The problem of low labour flexibility is complex. Employers are discouraged to adopt labour-intensive practices due to low productivity of labour, particularly unskilled and low-skilled labour in South Africa. At the same time, the unemployed are unable to gain more experience and increase their productivity due to relatively high minimum wage levels prescribed by the law, which are seen by employers to be unjustified. Resulting from this is a deepening cycle of unemployment and poverty where the unemployed cannot work for a lower

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wage due to the labour policy, their human capital value decreases and they continue to be unemployed often resorting to crime, prostitution, and violence. Based on the 2007/2008 GCI rankings, labour market flexibility, hiring and firing practices, flexibility of wage determination, and worker-employee relations remained the biggest obstacles to South Africa’s competitiveness. To address the issue of an inflexible labour market, the South African government made amendments to the labour legislation that involves collective bargaining and bargaining council’s dispute resolutions, rights and responsibilities of employers and workers in the case of retrenchment, transfers of businesses and insolvency, and conditions of employment and contract resolutions.

HIV / AIDS: The HIV/AIDS pandemic has enormous economic costs. They are usually related to high health care costs, reduced economic growth, and a decline in investment rates. HIV/AIDS negatively affects the labour force in the country leading to its lower productivity and drastic decline of skilled labour. According to the ‘National HIV and Syphilis prevalence Survey’ of 2007 completed by the South African Department of Health, the HIV/AIDS prevalence among antenatal clinic attendees was 29.1% in 2006, with confidence limits of 28.3% and 29.9%. The distribution of HIV/AIDS prevalence among the age groups indicates that it is the people of prime working age who are predominantly affected by this pandemic. Furthermore, the number of deaths caused by AIDS is increasing at a rapid pace. This raises a concern, as economic development is reliant on the continuous supply of a healthy labour force. It is predicted that HIV/AIDS will put tremendous pressure on the South African economy in the near future. According to the Development Bank of Southern Africa’s ‘Provincial Population Projections 1996-2021: High HIV/AIDS Impact’ the following could be expected in the near future: � Rise of adult HIV prevalence to 25% in 2010 � Increase in the number of AIDS orphans to 1 900 000 in 2010 � Increase in number of deaths caused by HIV/AIDS related diseases to 1 100 000 in 2010 � Decline in life expectancy from 60 years to 40 years in 2010 � Loss of 20% of the labour force � Increase in insurance costs � Loss of productivity, in particular in the mining and transport sectors � A slowdown in the demand, in particular in the construction sector.

Although the above projections are estimated based on the high HIV/AIDS impact, it is clear that the pandemic will continue affecting the country’s economic development for many years to come. From an investor’s perspective, high HIV/AIDS prevalence among the working age population means higher expenditure on health costs for the employees, lower productivity levels, shortage of skilled labour, etc. To address the issue of the HIV/AIDS pandemic, the South African government implements a number of initiatives including: � Creation of enabling environment for HIV/testing. � Implementation of interventions aimed at reducing HIV infection rate (prevention programme,

knowledge dissemination programmes, mother-to-child transmission services). � Comprehensive care programmes offered to the infected population. � Strengthening Community Basic Health Care Programmes. � Research and development in the field of HIV vaccine.

Crime : According to the World Economic Forum’s “Global Competitiveness Report” 2006-2007, South Africa scores very low in terms of security. In the 2006/2007 report, its rank in terms of security dropped from 90 to 94. Lack of security is deemed to be one of the most damaging factors in business development as it negatively affects costs of doing business in the country and access to highly skilled labour. The crime per 100 000 population ratio in South Africa was 69.1 in the 2007/2008 financial year. This is a noticeable decrease compared to the 140.2 rate in 2002/2003. To address the crime problem in the country a number of national initiatives have been launched including: � Missing children programme � Business against crime

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� Eblockwatch that connects neighbourhood watch, police task teams, specialized industrial support teams, security companies and police reservists, South African Women's Agricultural Union with its 10,000 members scattered across South Africa, Township patrols, and over 55 000 ordinary South Africans.

� Neighbourhood watches � Police forums � National Crime Prevention Strategy with programmes aiming at:

- Making the criminal justice system more efficient and effective - Designing systems to reduce the opportunity for crime and increase the ease of detection

and identification of criminals - Changing the way communities react to crime and violence - Improving the controls over cross border traffic related to crime and reducing the refuge

which the region offers to international criminal syndicates. Land reform : The main objective of land reform is to provide access to land to the previously

disadvantaged communities. Approximately 80% of arable land in South Africa belongs to white farmers. The Land Reform aims at redistributing the land in such a way that 30% of the arable land in the country belongs to black farmers by 2014. It has been reported that 95% of land restitution claims in the country have been settled already by the end of the 2006/2007 financial year. Many of the outstanding claims will not be settled in the near future due to their complexity which relates to conflicts among traditional leaders on issues such as jurisdiction, land ownership, and boundary disputes between communities, disputes with current landowners on land prices or validity of the claim, and claimants who could not be traced.

Permit processing time : Processing time required for many development approvals is one of the risk factors that need to be taken due cognisance of. This particularly refers to the Environmental Impact Assessments that need to be undertaken for various types of developments, but also relates to approvals of various permits that have to be issued at the local level, such as town planning, site development plan, building plans, and other approvals. The need to take an Environmental Impact Assessment bears direct and indirect costs related to hiring an environmental practitioner and the team of specialists, as well as costs associated with potential delay in decision making, appeal, or a review process challenging the environmental authorisation. Delays in issuing local permits are also associated with costs and can increase significantly if they continue for months. Although the changes to the EIA process in South Africa that were officially launched in 2007 are aimed at reducing the backlog of EIAs and provide clear timeframes for steps in the process, certain delays in the process still occur. While giving environmental authorisation of the development is the responsibility of the provincial government, provision of town planning and other approvals is the task of the local government. A small delay in issuing a local approval might not on its own affect the decision of potential investors with regard to the development. A hold-up in local approvals or a small delay of a local approval on top of the already belated environmental authorisation could, on the other hand, have a detrimental impact on the decision and result in investors leaving the country or the Province to search for more hospitable investment grounds. Of course, delays in approvals will always be considered against potential return on investment, and this situation might not be applicable to such activities as mining, but will definitely be applicable to the so-called “footloose” industries that are not dependent on the supply of natural resources. Examples of these are manufacturing and business services sectors.

Decision to locate in a new business environment is usually taken by potential investors through the assessment of the economy on the basis of a set of key criteria. Some of the criteria that companies use to evaluate regions to select a number of potential sites are as follows:

Areas image Location of suppliers and markets Cost of energy Transportation costs

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Cost, size and quality of available land Cost of capital Availability and cost of housing Agglomeration economies

Foreign investors will usually first evaluate different countries in terms of a set of strategic considerations. When the decision is made to locate in South Africa, the potential investor will then assess different regions. The set of criteria applied by a foreign investor and South African investor, in this case, is believed to be very similar. However, the set of criteria will differ depending on the sector the potential investor is planning to open his/her business in. For example, investment in mining is largely determined by the availability of natural resources and issues surrounding land claims, while investment in manufacturing is generally foot-loose and mostly determined by the proximity to suppliers and markets. The following table outlines sets of key criteria applicable to each sector against which the local economy is expected to be evaluated by potential investors. For each sector, the table indicates the level of importance of each criterion in the decision-making on the scale of low, medium, and high. It also provides information on the level of performance of the Mogalakwena LM with regard to each criterion, thus providing information on the weaknesses and strengths of the local economy.

Table 4.10: Investment Assessment rating

Set of criteria Level of importance in decision making

Mogalakwena scorecard Agric. Mining Manuf. Other

Availability of skilled labour Low Medium High High Low

Availability of serviced sites Low Low High Medium Medium

Availability of land High High Medium Medium Medium

Access to electricity High High High High Low

Access to water High High High High Low

Access to telecommunications Medium High High High Medium

Access to railroads Low High High Low Low

Access to ports (air, sea, inland) Medium High High Low Low

Transportation network Medium Medium High High Medium

Proximity to markets Medium Low High High Medium

Access to raw materials/suppliers Low High Medium Low Low

Conducive climate High Low Low Low Medium

Availability of schools, clinics, etc Medium High High High Medium

Entertainment/shopping Low Low High High Medium

Quality of life Medium High High High Medium

Availability of incentives High High High High Low

Co-operation of government Low High High Medium Low

Given the information presented in the above table, it can be summarised that Mogalakwena LM needs to concentrate on addressing the following constraints:

Availability of incentives Co-operation of government Access to raw materials/suppliers Access to railroads

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Access to ports (air, sea, inland) Access to electricity Access to water Availability of skilled labour

It is however also relevant to analyse the capability of Mogalakwena Municipality in supporting local businesses and attracting new investment. Mogalakwena Municipality has no incentive packages, no investment promotion centre, municipal tariffs do not distinguish between different businesses and do not offer discounts to local businesses, no database of potential investors exists, effective promotional material is lacking, and marketing activities are generally limited to exhibitions and summits. Mogalakwena Municipality is thus considered unable to offer support to local businesses, attract new investors, and to market the area properly. 4.5 POTENTIAL INVESTMENT INCENTIVES FOR MOGALAKWENA MUNICIPALITY

In addition to the national incentives, the Mogalakwena Local Municipality could consider providing the following local incentives grouped into the following categories:

General financial investment incentives that would make the municipality competitive with regard to service rates in the region

Performance-based investment incentives that would attract businesses and industries which have the highest potential to create new revenue streams and generate new employment opportunities

Non-financial investment incentives that would improve the image of the municipality and make it more competitive in the region

SMME and secondary economy investment incentives Targeted sector specific investment incentives

The proposed incentives fulfil the following objectives:

To retain and expand existing business To attract new business investment To provide support for business/firms at different stages in their lifecycle and from different

economic bases (e.g. start up SMEs, established formal business)

The proposed incentives scheme also targets key economic growth sectors and targets economic development within priority areas in the Municipal area. The following sub-sections describe the proposed incentives for Mogalakwena Local Municipality in more detail. 4.5.1 General financial investment incentives

At the onset, it should be noted that if Mogalakwena Local Municipality does not currently have the financial capacity to provide financial incentives to possible investors, it is suggested that the Municipality firstly focus on providing non-financial investment incentives. General financial investment incentives are discussed subsequently if the municipality develops the capacity to provide this support. Changes that foster an environment that is internationally competitive, encourages investment and leads to economic growth are important, and this has been the aim of the government in recent years. It is however particularly important to note the strong drive within government to move away from “harmful” tax practices (attraction of foreign investment by offering tax holidays and other “ring-fenced” incentives not available to local companies) and to rather offer acceptable incentives that do not distort the market. These acceptable incentives may include incentives such as a lower corporate tax and accelerated depreciation.

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General financial investment incentives should be provided to increase competitiveness of the Mogalakwena Municipality in the Waterberg District and the Limpopo Province. These incentives should offer competitive service rates to businesses or industries that have made a decision to relocate in the Mogalakwena Local Municipality. The following incentives could be offered to businesses:

A basic rebate on rates and taxes which is effective on date of issuing an occupation certificate for new building/alterations, and which decreases per annum with for instance a maximum of 45% rebate on property tax and tariffs for the first year; a maximum of 25% rebate on property tax and tariffs for the second year; and a maximum of 10% rebate on property tax and tariffs for the third year.

Rebate adjustments based on the value of improvement of the building, BEE principles, job creation potential and local business stimulation

Relaxation of bulk services contributions: reduces development costs Land sale or availability agreements: revenue maximising option for local municipality, expedites

development, marketing and selling operations through profit-driven developer, no up-front land purchase required from developer

Land value write-down: critical for social or public benefit land-use Urban Development Zone (UDZ): Accelerated depreciation cost of capital, makes marginal

projects feasible Land packaging: swaps and twining of strategic marginal sites: viable and marketable land

entities, focuses public and social investment Rebates for Foreign Direct Investments (FDI) for 5 to 10 years for the first year decreasing per

annum afterwards Planning approvals within 90 days Discount on assessment rates according to a sliding scale Discounts on water services per kilolitre Reasonable discount on electricity charges to industries and businesses

4.5.2 Performance-based investment incentives

The performance-based incentives have the following underlying principles:

Address investors’ requirements and not wishes of the Municipality They are about trust, confidence and delivery Make the place attractive for the investor Indicate that the Municipality understands its economic environment, thus, exerting confidence

and trust towards the investor Erase infrastructural and other developmental constraints Provide conducive environment for augmentation of economic linkages and agglomeration

potential Do not threaten current businesses Present an on-going support to the business, i.e. aftercare

The performance-based incentives are financial investment incentives provided to the investors who satisfy the criteria of the most advantageous project to the community. This ensures that the projects undertaken within the Mogalakwena Municipality has long-term spill over effects through improvement of the area’s image, economic growth, job creation and poverty alleviation.

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4.5.3 Non-financial investment incentives

The non-financial investment incentives are non-monetary support that the Mogalakwena Local Municipality should offer to businesses and industries. These incentives aim at improvement of the area’s image and quality of services. The non-financial investment incentives can be divided between those that offer administrative support and those that provide information. The purpose of these incentives is to indicate the local council’s commitment to a development of the local economy and its openness to new businesses. These are detailed upon hereunder.

The recommended administrative non-financial incentives could be as follows: National, provincial and local government investment in public facilities: public investment signals

public sector prioritisation and attraction of fees Neighbourhood development partnership grant in township areas: Public infrastructure

investment in key to feasibility and investor certainty Management associations such as Section 21 City Improvement District: Provision of high impact

safety and public space maintenance is key to competition Expedited permit processing Market research and feasibility studies: lowers business risk and is essential to secure funding Assistance in preparation of business plans and Environmental Impact Assessments Prompt assistance with regard to provision of information for business development in the area Urban management measures: improves perceptions Urban renewal programme: creates profile and government attention, focuses provincial and

national resources by raising the status Political champion (investment facilitator) and provincial investment: executive intervention can

avoid costly delays, attract support, and resolve conflict and one main management committee facilitates vertical and horizontal coordination

Focus on core aspects of good governance: The municipality should continue to pursue the goal of creating a positive business environment within which existing businesses operate and to which new business is attracted. This will occur in terms of the IDP through: � Considered public spending on municipal infrastructure; � Effective basic service delivery; � Effectively exercising its regulatory authorities and creating an enabling institutional

environment (including building relationships with key stakeholders); � Liaising and where necessary lobbying other spheres or agencies of government to intervene

to support positive preconditions for investment.

Non-financial incentives that provide information could be the following: Business Directory Brochure : to provide a detailed directory of local businesses, imposing

business networking of existing businesses in the area. The target market of the brochure should mainly be businesses that plan to expand or establish a new company in the area, and therefore, need to identify suppliers and buyers, as well as to know their competitors. The brochure should contain the following information: � Brief introduction to the Mogalakwena Local Municipality � Regional road and local street map � Sector and resources allocation map � Details of the local businesses grouped according to economic sub-sectors. The

details should contain information such as postal and physical address, email, website, contact numbers, operating hours, and main, secondary and intermediately products or services offered.

It is also suggested that advertising space be sold to cover the costs incurred. Such a brochure should however be updated regularly to ensure that it is not outdated.

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Mogalakwena Local Municipality Brochure and busines s investment guide : this brochure should provide social and economic information about the Municipality in brief. It should assist potential investors in comprehending the area, its economic drivers, social structure, infrastructural development, etc. Such as brochure should contain the following information: � Map of the area � Background to the area � Population statistics and labour force � Economic background � Industrial sectors details � Infrastructure information � Land � Supporting infrastructure � Quality of life � Accessibility to markets � Incentives � Agglomeration economies � Tax environment � Place marketing � Tourism information � Institutions located in the area � Outline of incentives offered � Detail on doing business in the Mogalakwena LM

Business opportunities portfolio : supplying information on quality investment and partner opportunities such as flagship or status projects in the area galvanises public and private sector commitment. The business opportunities portfolio consists of brief profiles of business prospects in the LM. The business opportunity marketing sheets developed in the LED strategy can be used to market the area to potential investors. Each profile serves as a preliminary concept plan that can be given to an investor to indicate the local opportunities with regard to specific industries and businesses. The content of the business profile should include, inter alia: � Opportunity � Scope � Envisaged products/services � Expected location � Nature of project � Dominant economic sectors involved � Marketing focus � Rationale for this venture � Motivation for the venture � Attractiveness assessment � Industry attractiveness � Perceived demand-supply gap � Long-term growth prospects � Competitive forces � Implementation time � Alignment with national and provincial strategies � Key competitive advantages � List of comparative advantages of the proposed venture � Potential economic impact � Anticipated annual wealth creation � Expected number of employment opportunities � Anticipated sources of capital � Investment already made � Linkages (Upstream and Downstream) � Support infrastructures � Contact details � Venture status (scope, planning, raising of finance or implementation) � Anticipated capital requirements � Anticipated Return on investment � Anticipated employment creation

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Networking, business information and investor suppo rt : The municipality should strive toward improving levels of access to information and support for investors and local business.

Investment promotion and place marketing : The municipality should, in partnership with other stakeholders, pursue the marketing and promotion of the municipality and business opportunities to prospective investors.

4.5.4 SMME and secondary economy investment incentives

In addition to the above-mentioned investment incentives, the Mogalakwena Local Municipality could provide additional support to SMMEs and the secondary economy. In this regard the following tailored investment incentives are recommended to be provided for BEE companies and SMME’s:

Exemption from property tax for start-up companies during the first year and a discount on a sliding scale over the 2nd and 3rd operational years.

Property tax rebates to the existing companies on a sliding scale. Assistance in developing a business plan for start-up companies or companies that want to

expand. Promotion of mechanisms for co-operation between SMME’s, through further use of the SMME

association system and by studying optimum mechanisms for co-operation among SMME’s to meet contemporary needs.

Assistance in establishing SMME networks that lead to competitive advantage, cost savings, market access and knowledge exchange. The emphasis should be on establishing supply chain linkages with the large companies outsourcing costly, inefficient services to small companies that could better perform those services.

Easing the licensing burden through simplification of business registration procedures for SMME’s.

Review the procurement policy in order to accommodate and support SMME's. Organise the small business fraternity to speak as a single voice and to work towards the

amalgamation of all business towards a united and single business chamber Waiving of planning application and building plan approval fees: big impact for small developers

4.5.5 Targeted qualifying entities and sector incentives

Entities who can apply for assistance include the following: Companies (Private and Public), Close Corporations (CC’s), Co-operatives (Co-ops), Sole Proprietorships, and Partnerships. Valid incorporation certificates or partnership agreements, where applicable, must accompany applications. It is also regarded relevant that key economic growth sectors be targeted within priority areas in the Municipality in accordance with the Local Economic Development Plan, Spatial Development Framework, Environmental Management Framework, etc. See below Figure. The LED of the Municipality provides the Municipality with development directives regarding Economic Development Nodes and Economic Growth Potential of areas. The Figure above indicates that areas for agro-processing, mining beneficiation, tourism, etc. The Environmental management zones of the Mogalakwena Local Municipality are shown in Figure 4.5 below. The Figure clearly reveals the following zones which are applicable to Mogalakwena: 1,2,3,6,7,9,10,11. The implications of these zones are described hereunder.

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Section four

Figure 4.4: Economic Development focus areas

Source: Mogalakwena Local Municipality LED (2011-2016)

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Figure 4.5: Environmental management zones

Source: Waterberg District EMF, 2010 The Figure clearly reveals the following zones which are applicable to Mogalakwena:

Zone 1: Protection of natural vegetation, scenic la ndscape and rock paintings areas, with limited appropriate tourism: mostly towards to the S.W border of the municipality and the area to the East of Mokopane. This zone represents areas with a generally high natural, visual and cultural quality that provides the core natural and cultural resource base for the establishment of the Waterberg as a conservation (even wilderness) destination. It is large and unique in form and character where the protection of the area as a whole is important. Conservation is the priority land-use in this zone and should be promoted as the core activity in every instance. Limited, low impact tourism facilities may be allowed in this zone provided that it does not have a negative impact on the conservation priority. Existing tourism facilities that do not comply to this zone may continue, provided that such activities are not expanded. Game and cattle farming in this area must conform to the conservation requirements for this zone including the carrying capacity and the suitability of game species. Business and retail is not desired in this zone and should be limited to existing facilities. Conservation of nature in protected areas in terms of the National Environmental Management: Protected Areas Act are preferred in this zone.

Zone 2: Nature and cultural tourism focus areas wit hin a high quality natural setting: mostly the northern eastern quadrant of the municip ality . This zone represents areas with a generally high, natural, visual and cultural quality that has significant potential for the development of nature and/or culture based tourism. It also forms the area from which the conservation use in zone 1 can be explored. This zone represents areas with a generally high, natural, visual and cultural quality that has significant potential for the development of nature and/or culture based tourism. It also forms he area from which the conservation use in zone 1 can be explored. Preferred activities: Conservation of nature in protected areas in terms of the National Environmental Management: Protected Areas Act; and tourism facilities that make use of the surrounding natural and cultural environments as the main attractions place in a manner that: Limits disturbance to natural vegetation to the minimum possible after undertaking an environmental assessment as required in terms of Government Notice No. R. 564 of 18 June 2010; does not consume additional natural resources; and does not impact negatively on the

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sense of place of the area, being particularly sensitive to not breaking the skyline or impeding on views; recycles its waste products; and treats its sewage before release into natural streams.

Zone 3: Game and cattle farming (including hunting) areas with commercial focus: the south eastern quadrant towards the border of the municipality. This zone represents areas with largely natural vegetation that is used extensively for grazing by game and/or cattle. Preferred activities: Keeping of game and/or cattle for commercial purposes in a responsible manner that makes sustainable use of the natural vegetation cover of the area; and Tourism facilities, including hunting lodges in a manner that: limits disturbance to natural vegetation to the minimum possible after undertaking an environmental assessment, does not consume additional natural resources; does not impact negatively on the sense of place of the area, being particularly sensitive to not breaking the skyline or impeding on views; recycles its waste products; and treats its sewage before release into natural streams.

Zone 6: Restricted mining focus areas in aesthetic and/or ecological resource areas : the area directly to the west of the N11. Within this zone water utilisation should be kept to a minimum. Ecological water requirements should be met at all times. Conservation of ecological and/or aesthetic resources should be a prerequisite to mining and industrial development in the area. Tourism should be encourages as a secondary activity especially in respect to cultural tourism. Agriculture is not desired in this zone. Game and cattle farming is a secondary activity in the areas. Preferred activities: mining of minerals that is done in a well planned manner that will ensure that it will not cause widespread and unacceptable damage to the aesthetic and/or ecological values of the area; and keeping of game and/or cattle for commercial purposes in a responsible manner that makes sustainable use of the natural vegetation cover of the area in parts where mining is not possible or where mining will only become a factor in the medium to long term.

Zone 7: This zone represents areas that have been d esignated as the areas that form the urban development boundaries as defined by the rele vant local spatial development frameworks (sdf): Mokopane and immediate surrounds. This zone represents areas that have been designated as the areas that form the urban development boundaries as defined by the relevant local Spatial Development Frameworks (SDF). Preferred activities: all urban functions in accordance with the relevant SDF and tourism facilities that serves the region with specific emphasis on cultural and historical elements within towns.

Zone 9: Agriculture focus areas with a tourism comp onent: small strip along the S.W boundary of the municipality. This zone represents areas with a strong rural agricultural character that is surrounded by areas of generally high natural, visual and cultural quality that has significant potential for the development of nature and/or culture based tourism in addition to agriculture. It also forms the area from which the conservation use in zone 1 can be explored and experienced (especially in areas that lies below the escarpment). Limited tourism facilities on farms should be encouraged in this zone. Commercial agriculture is the main focus of this zone. Preferred activities: agriculture activities (livestock keeping and cultivation); and Tourism facilities at homesteads or on land that is not suitable for cultivation that makes use of the surrounding natural and cultural environments as the main attractions.

Zone 10: Agriculture areas with a commercial focus: to the north and North West of Mokopane . This zone represents areas with a strong rural agricultural character and is important for food production, food security and the employment opportunities that are linked to the agricultural activities. Agriculture is the main activity that occurs in these areas. Preferred activities: agriculture activities with an emphasis on dry land as well as irrigated crop cultivation; and infrastructure that support agricultural production, including agro-industries.

Zone 11: Major infrastructure corridors: to the nor thern tip of the municipality along the R518. Zone 11: This zone represents areas where the concentration of linear infrastructure proposed in order to prevent the unnecessary large impact that uncoordinated infrastructure location would have on the district.

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The qualifying activities (target sectors), discussed hereunder along with proposed incentive targets include:

Sustainable rural and niche agricultural products Mining development and support entities SMME support and manufacturing diversification entities Tourism resource developers

Sustainable rural and niche agricultural products

The focus within this sector is on enabling start-up developments in water scarce new product development, supporting land claim beneficiaries in intensive agriculture (crops), livestock and game farming within the rural areas, and supporting emerging and small-scale Black Farmers. Niche agricultural products are identified growth targets with a strong emphasis on new technological practices that include labour intensive practices such as organic farming, biotechnology and hydroponics. Mogalakwena Municipality is a relatively dry area, which lends itself to stock farming in the form of cattle, game, poultry, pigs and goats. The municipal area also has some crop, horticulture and deciduous fruit (including citrus) production. A large portion of the municipal area is also under land claims and many of the opportunities relate to the formation of co-operatives and clusters for land claim beneficiaries. Due to the large rural area, opportunities for rural development and support also exist. Opportunities for agricultural and rural development clusters include:

Poultry Livestock improvement, marketing and processing Horticulture and crops Hydroponic and organic farming methods with less water intensity and niche products Bee farming and honey production linked to deciduous fruit farming Aquaculture Revitalisation of irrigation schemes Agricultural produce trade market Agricultural implements/equipment/tools/transport/fertilisers and other input retailers Training for farm workers Rural community economic development co-operatives: agricultural gardens, financial banks,

bakeries, crèches, etc.

Mining development and support entities

The focus of this target sector is on development and support for small-scale Black owned mines, and mining supplier development. The significant importance of the mining sector as an economic driver and main revenue creator must be harnessed to enable the formation of linkages between the mining sector and other sectors such as beneficiation, retail and trade, etc to encourage growth and development and the diversification of economic activities. Mining sector opportunities could include:

Mining development and beneficiation support hub Revitalisation of existing stagnant mining operations Small-scale mining initiatives: clay, limestone, granite, fluorite, tine, diamonds Regional mining supplier park focusing on manufacturing of mining inputs Local cleaning and catering services SMMEs

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SMME support and manufacturing diversification enti ties

Mogalakwena Municipality should identify the right mix of niche manufacturing areas, aiming for high value low volume products and targeting these for the right mix of incentives. Within the manufacturing sector Mogalakwena Local municipality should consider infrastructure concessions which involves the provision of serviced industrial and commercial sites or special efforts to develop infrastructure and services in selected commercial areas in response to the needs of prospective investors. The implications of these infrastructure concessions are that the investor will be attracted, if the local authority is flexible and sensitive in amending its development/delivery schedule to accommodate the investors’ needs. The focus of this target sector is on SMME development, development of the Mokopane Industrial Precinct, agro-processing and mineral beneficiation. Opportunities in this target sector include:

Construction workers association. Develop a one-stop business shop in Bakenberg offering business logistical services Develop the northern industrial area to function as an Industrial Precinct Develop Manufacturing Advice and Incubation Centre (MAC) Establish candle and soap-making cooperative Establish a bakery, biscuits and sweets processing cooperative. Red and white meat processing Establish a poultry processing co-operative. Grape, citrus, and marula juice processing Leather tannery Animal/pet feed factory using crops and wastage from restaurants, abattoirs, taxidermies and de-

boning and meat-processing facilities. Tobacco processing Plastics, containers and bottles manufacturing Manufacturing of farm equipment Fertilisers and pesticides manufacturers Clay, granite, tine, fluorite processing Building material manufacturing co-operatives (bricks, bio-degradable materials, and utilisation of

district resources such as limestone, copper, manganese and iron ore to manufacturing building materials, etc)

Tourism resource developers

The desired location of tourism activities is to be spread out throughout the rural areas, rivers and the heritage tourism, eco-tourism, game viewing and hunting, conservation, river-based tourism, and agric-tourism or farm tourism. All tourism infrastructure developments (e.g. development of accommodation, unique attractions, etc) development should be targeted as well as start-ups in tourism products and services as well as the attraction of tourism business. Expansion and retention of existing catalytic tourism attractions should also be promoted. The focus of this target sector is on developing Makapan Valley WHS as a tourism ‘icon’ and combine related historical/cultural assets, developing the Waterberg Biosphere and its environs as an adventure and eco tourism destination, special Interest tourism development, and destination marketing, branding, promotion and awareness.

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Tourism sector opportunities include:

Development of Makapan Valley WHS: lodge, rural accommodation, etc Museum upgrade and curator Township tours, special interest tours, tourism routes, hiking circuits, mountain biking trails Curio artefacts outlets Day visitor facilities, fishing/picnic spots, family resort/day visitor activities Soft & hard adventure activities and outdoor adventure survival/boot camp Nature reserve development: game viewing, overnight facilities, guided trails,

teambuilding/conferencing/bosberaad, etc Budget accommodation associated with adventure tourism Tea gardens/kiosks with light meals at various nature reserves Leisure train trips Edu-tourism Game hunting safari hub, cluster, and hunting packages Birding tourism Mining tourism Agri-tourism, farm-based tourism and farm stays

The proposed target sector incentives include: Consider a 45% reduction in municipal service contribution cost (water, electricity, sewage,

refuse) for the first year, 25% for the second year and 10% for the third year for: � Tourism infrastructure development/expansions/start ups and new catalytic tourism firms

investing in tourism nodes and corridors � Start ups in agriculture ventures � Start ups in mining ventures � Start ups and new manufacturing firms investing in industrial and rural areas � Community entities e.g. co-operatives in rural settlements

Consider municipal property rates rebates/exemption (for the first three years of operation) for: � Tourism infrastructure development/expansions/start ups and new catalytic tourism firms

investing in tourism nodes and corridors � Start ups in agriculture ventures � Start ups in mining ventures � Start ups and new manufacturing firms investing in industrial and rural areas � Community entities e.g. co-operatives in rural settlements

Consider developing unique or ‘special’ structured investors start-up pack or business investment guide (by utilising information contained in the sector analysis and opportunities marketing sheets developed for the LED of Mogalakwena (2011-2012) with joint financing of catalytic projects (collaboration between District) for ‘pioneer firms’ and catalytic firms in unique agriculture, tourism, manufacturing, services, mining support industries, green and brown industries, etc. The Municipality should be prepared to structure an incentives package for a particular business or type of business that has been identified by the municipality as a high priority target to support long term sustainable economic growth and development. Incentives could include, inter alia: � Subsidised municipal infrastructure provision to enable development � Land assembly assistance (e.g consolidations and subdivisions), � Fast-tracking applications for gaining appropriate rights, etc � Facilitating public private partnership arrangements

An examples of a specialised incentive packages is shown below:

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Investment programme Proposed incentive package

Promotion of agro-processing activities

a. Assistance with application for IDC’s Chemicals, Textiles and Allied Industries financing

b. Assistance with application for IDC’s Food, Beverages and Agro-industry financing

c. Competitive rates and taxes policy to be investigated

d. Expedited permit and application approval processing

e. Assistance in preparation of feasibility studies, business plans and EIAs

f. Maintaining a portfolio of business opportunities in agro-processing and making it available to potential investors

g. Compiling list of local suppliers to the agro-processing industry (agricultural producers) to help establish business linkages between producers and processing activities

Establish land concession and serviced industrial sites on municipal land for new business in

industrial areas. Here it is relevant to note that land in Mogalakwena is difficult to obtain. This is not because it is limited in geographical terms but because of its expensiveness and due to the large amount of land claims. To ensure the success of Mogalakwena as a competitor in the Limpopo Province, something drastic should be done to make land available at a more affordable price. Land cost concessions on municipal land for land reform projects where the aim is commercial agricultural development should be considered as well as serviced industrial sites (expansion of existing industrial areas) on municipal land for new business in industrial. These should be in line with the proposed SDF identified priority areas for targeted urban development interventions.

Mogalakwena Municipality should assist local businesses (operating within the municipality) as well as prospective business investors to access incentives offered by national and provincial government and their agencies including the Dti and IDC and other bodies identified. Facilitate access to grant/loan funding offered by: � DTI (e.g. TEP, SMEDP for tourism, tourism development finance). � Land Bank (e.g. Agri BEE Fund, MAFISA), Department of Land Affairs (LRAD and CASP). � DTI and IDC (e.g. CIF, SIP, entrepreneurial mining and beneficiation, agro industrial

development finance). 4.6 GUIDELINES FOR IMPLEMENTATION OF INCENTIVES

A financially robust local government system has two principle sources of revenue streams, namely own revenue sources, as well as nationally raised revenue. Many municipalities are still grappling with such challenges as redressing significant levels of service delivery backlogs, high levels of municipal infrastructure backlogs, as well as overcoming the problems caused by the shortage of financial and project management skills. Currently, eligible businesses can apply for national incentives as summarised above. The challenge for the Municipality is however to create a supportive environment for industries to access these schemes successfully. As such information dissemination, application support, business mentoring and after-care are required. The municipality should thus play a facilitating role to ensure that businesses and prospective investors can have access to these incentives. Key tasks include:

Undertake information dissemination by advertising and promoting National incentives,

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Provide necessary support for applications such as to provide application forms to businesses and prospective investors

Provide the contact details of the respective responsible officers at the dti Provide mentoring, follow-up and after-care support to the businesses

The municipality should thus be in a position to optimize grants and incentives offered by Government. Assistance is needed for the full project life-cycle, starting from the pre-feasibility study stage, and seeing it through for as long as needed after commissioning of the project to ensure the grant and incentive benefits are optimised. When a entity embarks on new or expanded operations, the municipality should be able to assist them to secure and maximize the various grants on offer from National, Provincial and Local Government. The approach required is:

Step 1: Initial review: Interviews with relevant officials and assessment of grant allocations and spending to identify opportunities to maximise grant funding.

Step 2: Detailed assessment : Detailed assessment on current situation and recommendations to optimise grant funding as well as identification of additional opportunities for funding.

Step 3: Implementation: Preparation of grant funding applications, development of management capacity, design of systems for effective monitoring and reporting. Avoiding duplication across the different government departments, ensuring that all statutory requirements are met, and provide training and knowledge transfer.

Step 4: Project Management : Specialised project management ensuring effective project implementation and accounting.

It is vitally important that administration of incentives take the following into consideration: Financial sustainability and affordability : Incentives awarded should be financially

sustainable. If any revenue is forgone in awarding incentives, this should be clearly outweighed by benefits accruing from the enterprises taking up the incentives. The costs of implementing the incentives should not compromise the ability to deliver on services.

Administrative feasibility : The incentives scheme and resultant administration of the scheme should be feasible within the constraints of the municipality: the incentives should focus on what the municipality has influence over; the incentives should operate in an uncomplicated manner that does not place undue burden on the municipality’s administrative capacity, bearing in mind the resources available; the institutional arrangements should be considered that would best be suited to implementing the scheme and linked strategies. Administrative feasibility will also ensure quick turnaround times for applications (urgency and speed is essential to attract and retain investment).

Transparency : Incentives should be awarded in a manner that is transparent and according to criteria and conditions in line with legislative and policy requirements. It is imperative that the investment incentives are aligned with other government (all three spheres) policies and strategies. These include, inter alia, the following: Integrated Manufacturing Strategy, Micro-economic Reform Strategy, Advance Manufacturing Technology Strategy and Development Framework, Provincial Strategic Infrastructure plan, Provincial Spatial Development Framework, National Skills Development Strategy and Expanded Public Works Programme, CDS, SDFs, LUMS, etc. The application of Investment Incentive policies should thus happen in the context of other measures adopted by the three spheres of government.

Strategically targeted : The incentives scheme should be strategic and targeted at supporting key economic sectors and geographical areas (in line with the LED and SDF) as priorities for economic development.

Harmony and alignment : The incentives scheme should operate in a manner that reinforces the actions of other spheres of government as well as the policies of the municipality itself: the she scheme should be driven by and responsive to strategic public policy concerns; the incentives scheme should reinforce and support the incentives offered by other spheres of government; the

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incentives should be modest and not result in destructive competition in terms of unsustainable escalation of incentives amongst competing locations.

Other key requirements of incentives include, inter alia: They must be accessible and user friendly Local packaging and integration capability must be developed Land release must be facilitated Dedicated officials must lead interventions Clear and responsive investment frameworks are needed Poor inter-governmental coordination must be addressed Over regulation (land use and municipal finance) must be addressed A local, neighbourhood-or community or project-level institution to bring communities,

government and the private sector together is essential Partnership structures are essential to: target and package the most effective mix of incentives;

lobby for state resource, service and regulatory commitments; facilitate communication between business, government and the community

Incentives need to be clear, measurable, dependable and well-timed

The following conditions to award the incentives are deemed necessary: Conditions for property rates and service contribut ion incentives: � This incentive is intended for the business owner and should the business owner be different

from the property owner it is necessary that a clause in the lease agreement be included to ensure that the business owner will receive benefits commensurate to the value of the incentive.

� The incentive is not transferable and cannot be sold with the business or property � The incentive should be made available until an annual agreed upon cap or at the discretion of

council. � Land on which the business operates should be appropriately zoned

Conditions for discretionary structured incentive p ackages � Packages only to be offered if the applicant can show that the return to the municipality will be

greater than the full cost of awarding and administering the incentive. � Firm/s should make a significant contribution to job creation and investment inflows (i.e. sales

out of the Municipality) to ensure economic injection into the Municipality. In general, firms will be considered for this type of incentive if they correspond to the employment and turnover characteristics of medium (or larger) size enterprises as defined in terms of the National Small Business Act, although exceptions could be made, specifically where business is aligned in terms of the sector thrusts of the LED strategy. By the end of the investment benefit period a measure to be used could entail ensuring that one full-time job for each R1 million of cost of assets in respect of the project (not taking into account amounts above R500 million) should be created.

� Firms should either be aligned to sector thrusts of the LED strategy or be classified as medium (or larger) size enterprises as defined by the dti in terms of the National Small Business Act

� The municipality will not provide direct funding (e.g. capital grants) to the business from its revenues or any of its own funds (received from grants, service charges or other sources).

� Expenditure in respect of the cost of training should at least equal to an average of two per cent of the enterprises annual wage bill

� Expenditure is likely to result in the upgrading of skills, taking into account only training that is accredited by the South African Qualifications Authority (SAQA)

� The award of such an incentive is entirely at the discretion of the municipality � The award of such an incentive will be subject to any existing policies or bylaws of the

municipality as well as the provisions of national and provincial legislation Conditions for land � Municipal-owned land required for land reform (where the aim is to utilise land for commercial

agriculture, tourism or mining) will be transferred to the beneficiaries of the land reform project for a nominal amount.

� Municipal-owned land within industrial areas shall be offered to prospective targeted investors in green and brown industries at the market rate determined by the municipality, however

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transfer and registration costs could for instance be borne by the municipality as well as free approvals of building plans, rezoning, legal contracts, etc. The local authority can also apply to the Premier for special permission to reduce the cost of its land in a specific development

� 1st 6 months free rental of office space to municipal property, which are not presently occupied for three months or more

� Non serviced land under 100m2 could be given at a nomimal fee or leasehold. Connection fees for services can be negotiated.

� The local authority can donate land to non-profit organisations There are also various legal considerations and requirements that Mogalakwena Local Municipality should be aware of when considering activities related to economic development, such as proposing investment incentives. These have been identified in sub-section two of this Section. The following aspects should also be considered in implementing the incentive scheme:

The Municipality should consider both positive and negative impacts of the incentives on economic development.

The municipality should use a trial period (initially two years) to evaluate the financial and administrative impacts of the incentives in real terms; i.e. actual data should be used and not estimates and assumptions.

The relevance and effectiveness of the incentive should be assessed; i.e. what role did it play in the investment decision? Did the incentive cause an increased flow of investment to the targeted areas?

The outcomes of the above should give clear guidance to Council regarding future offering of incentives.

The Municipality needs to champion the incentives scheme both within and outside of the Municipality.

The Municipality needs to coordinate role players to ensure a smooth process of application for incentives and involvement of relevant departments to facilitate a recommendation for awarding incentives.

The Municipality needs to ensure approval/award of incentives in an expedited manner by reviewing municipal regulatory practices that may have a negative impact on business development.

The Municipality needs to monitor awarded incentives and the performance of the scheme to ensure that incentives are achieving intended impacts and are not subject to abuse.

The Municipality needs to promote the incentives scheme and the local business environment to potential investors.

The Municipality needs to strengthen institutional capacity to provide services in terms of the incentives scheme (e.g. facilitating access to national incentives) as well as broader investor support (through enabling business networking, and providing support to potential investors). This requires the appointment of the proposed Investment Officer.

The incentive scheme should commence on its date of adoption by council. It will thus not apply retrospectively. Council may further determine any deviations to the scheme. Application for incentives contained in the scheme shall be made in terms of the agreed processes. The award of an incentive shall only commence once a contractual agreement has been signed between council and the relevant legal applicant. The LED unit (and specifically the proposed investment officer) is responsible for promoting- and managing the Investment Incentives in the Municipality. However to fulfil this role properly the Directorate should work in partnership with other functional areas, other spheres of government and organised business in the various sectors of the economy. The Directorate: Finance is responsible for

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facilitating the process to absorb this Investment Incentive into the Rates Policy. This Directorate will introduce the necessary accounting system to accommodate these Incentives.

The incentives application process should involve following: Information dissemination and preliminary discussions with Investors Completion of the application form Screening of the application Report to Joint Committee in the Municipality Evaluation and recommendation to mayoral committee Decision (Approval/Disapproval) Implementation and administration Monitoring and review

Mogalakwena also needs to have a system through which public entrepreneurs can be developed along with their capacity to package projects for funding. This should be factored into funding and recruitment processes as suggested in the organisational structure of the LED unit. It is critical that Mogalakwena assemble an accessible team of officials to consult, to facilitate site visits, with enough time allocated to share information with and facilitate trips with interested investors. Ultimately, sustained leadership at political and official levels is needed to maintain priorities and ensure officials move in the same direction. This is more important than any incentive. In summary the following types of incentives should be considered (see below Table):

Property rates rebates/exemptions targeting business start ups in specific areas (township business areas, rural settlements, and industrial areas) and sectors. Application in this regard is likely to have a more significant impact on profitability of business start ups and limited impact on municipal revenue

Reductions in municipal service contributions again targeting business start ups in specific areas (township business areas, industrial areas) and sectors. Application in this regard likely to have a significant impact on profitability of individual business and limited impact on municipal revenue

Municipal land cost concessions for certain new businesses investing in target areas (industrial areas, rural areas – linked to land reform projects)

Performance based investment incentives Administrative support incentives Networking, business information, investment promotion and investor support incentives SMME, BEE and second economy support investment incentives Facilitation services in order to access provincial and national incentives ‘Special discretionary incentives’ or structured packages to be defined in consultation with certain

‘pioneer firms’ that will catalyse development in targeted key sectors Table 4.11: Summary of incentives per area

Priority LED area Development incentives available Detail – target sector and timeframe 1. Industrial areas • Property rates rebates • Available to SME start up business primarily

engaged in: o Agri-value chain activity, o Niche agricultural products, o Manufacturing and beneficiation entities, o Services orientated entities, o ‘green’ and ‘brown’ industries’ o Community owned entities e.g. co-operatives

in rural settlements • Available for the first three years of operation. • Councils discretion – suggestion: 45% reduction

first year, 25% reduction 2nd year and 10% reduction 3rd year

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Priority LED area Development incentives available Detail – target sector and timeframe • Reduction in municipal service

charges • Available to SME start up business primarily

engaged in activities as detailed above. • Councils discretion – suggestion: 45% reduction


• Land concession • Land offered at market rate • Municipality to subsidise transfer and registration

costs, approvals of building plans, rezoning, and legal contracts, etc

• Available to new business primarily engaged in activities as detailed above.

2. Mokopane and o ther township and business areas in Mogalakwena

• Property rates rebates • Available to SME start up business primarily engaged in: o Tourism infrastructure development start-ups o New catalytic tourism firms o Community owned or PPP retail and services

orientated entities o Mineral and agricultural beneficiation o SMME development and support

• Reduction in municipal service charges

• Available to SME start up business primarily engaged in activities as detailed above.

• Councils discretion – suggestion: 45% reduction first year, 25% reduction 2nd year and 10% reduction 3rd year

• Land concession • Free 1st 6 months free rental of office space to municipal property, which are not occupied for three months or more

• Donate land to non-profit organisations 3. Rural settlements • Property rates rebates

• Available to SME start up business primarily

engaged in: o Agri-value chain activity, o Niche agricultural products, o Manufacturing and beneficiation entities, o Community owned entities e.g. co-operatives

in rural settlements o Tourism infrastructure development start-ups o New catalytic tourism firms and tourism

activities • Available for the first three years of operation. • Councils discretion – suggestion: 45% reduction


• Reduction in municipal service charges

• Available to SME start up business primarily engaged in activities as detailed above.

• 50% reduction in first year of operation and 25% for following two years.

• Councils discretion – suggestion: 45% reduction first year, 25% reduction 2nd year and 10% reduction 3rd year

• Land concession • Municipal land required for land reform to be transferred to beneficiaries of land reform project for nominal amount.

• Non serviced land under 100m2 could be given at a nominal fee or leasehold. Connection fees for services can be negotiated.

• Donate land to non-profit organisations All areas • Municipal facilitation of access to

incentives offered by national and provincial government and their agencies.

• Information service available to all potential investors – focus on target sectors.

• Structured package depending on requirements

• Firm has a significant contribution to make in terms of job creation and investment inflows.

110 Section five Kayamandi Development Services


In developing an implementation plan for investment promotion activities, it is necessary to find the appropriate balance between the investment promotion principles and aspects, taking into account important factors such as the investment environment, the comparative advantages of the Mogalakwena Municipality, global developments, and the recognition that these factors change over time. The implementation of the Investment Promotion Strategy also entails understanding what to promote, where to promote, and how to tailor and time the message to achieve maximum impact. This section addresses the following components:

Marketing plan Implementation plan

5.1 5.1 5.1 5.1 Marketing plan Marketing plan Marketing plan Marketing plan Marketing is an essential part of the success of the Investment Strategy. Potential investors are unaware of the business perspectives offered by the municipality, mostly because of the limited knowledge they have on all the opportunities in the area which decreases the effectiveness of investment promotion programmes. A component of any Investment Strategy should thus be to increase the awareness of local opportunities. The following is referred to in this sub-section:

Branding and positioning Marketing tools Public relations

5.1.1 Branding and positioning

Image building and positioning constitutes a critical factor in the investment promotion pipeline. The investment officer should utilise marketing materials and be guided by this Investment Promotion Strategy to re-brand the municipality as a favourable investment destination, mainly through the utilisation of the following ten marketing techniques:

1. Advertising in Mass Media: The merits of advertising in mass media such as local newspapers, radio, television, magazines, etc. should be exploited to the advantage of branding the investment officer.

2. Participating in Investment Exhibitions: This method of branding yields to higher success, especially because of human interaction and relationships that are forged between encounters of people in the events.

Investment Implementation Plan




3. Advertising in Sector and Industry Media: Advertising is a good tool to build a brand. This should consist of the Investment Promotion Management Body proliferating information in a form of magazines, newsletters in companies and other targeted sectors.

4. Conducting Investment Seminars: This method is crucial and it presupposes that the Investment Promotion Management Body facilitates investment opportunities to the region.

5. Developing a business investment Website: The municipality has a website although no body of knowledge regarding business investment opportunities. It is advised that a separate dedicated marketing website be developed. The website should be very informative and will embody all interests and values of the proposed investment officer. The website on its own will not be suffice to market the officer and must therefore be supplemented by other relevant marketing material developed

6. Image Reputation: Marketing should concentrate progressively on developing strong brand reputations to build equity and ownership.

7. Uniqueness Reputation Management: While naturally having a unique and self-contained context-brand, the investment officer should acknowledge several factors at the national context and translate them where possible into a marketing strategy at local context.

8. Management Informal Modes of Communication: Verbal communication and information propagated through conversation and informal modes impact on how the Investment officer will be perceived by prospective clientele and potential investors. This approach entails motivating the municipality’s residents of the importance of the area's image and reputation. For example, attracting tourists, or delegates who come to the area for official purposes such as conferences, research, etc. should be instilled with positive feelings and are able to give strong recommendations on return to their home countries. However, if they return with negative experiences or perceptions, their word-of-mouth comments will severely affect the municipality’s reputation.

9. Creation of Investors Friendly Climate: From an investment perspective, is critical to turn raw data into intelligence for strategic decision-making and identification of key industries and opportunities. A critical success factor to prospective investor is the provision of reliable information and research. The easier to access reliable information the quicker to make decision to invest on the part of potential investors.

10. Follow-up Processes: This entails devising follow-up mechanisms to revive all investment pledges and economic development treaties agreed upon.

All the branding and positioning aspects as outlined above are necessary for a successful Investment Promotion Strategy in order to ensure that the Investment officer develops a unique reputable brand. 5.1.2 Marketing tools The following sub-sections provide the Mogalakwena Municipality with tools to use in order to market the area with the target markets identified. The initial focus of this Section is on promotional information that the municipality can use to make investors more aware of the area. These promotional tools should be directed to the target markets identified previously. Introductory Brochure

The purpose of this brochure is to provide social and economic information about the municipality. A high quality brochure is the first step in showing potential investor’s government’s dedication in pro-active approach to business development in the area, professionalism, and high standard of service offered.



The information required for the brochure includes: Socio-economy at a glance : demographics, economic indicators, labour/employment & education,

household income, bulk infrastructure and access to municipal services, accommodation, health, shopping and lifestyle, safety and security

Education (with links to public, private and post-secondary education) Recreation (with information and links to community sports, leisure and clubs within the area) Doing business in Mogalakwena : Why invest in SA, Limpopo Province, Waterberg District and

Mogalakwena Local Municipality, Comparative advantages, business trade performance, landuse, natural resources, superior infrastructure, quality labour pool, business incentives, banking and foreign exchange, attractive cost competitiveness, regulatory environment.

Business Zone (with links to small, medium and large business information and references for key contacts: like building permits etc)

Strategic economic growth sectors : Agriculture and agro-processing, mining and mineral beneficiation, tourism, and retail, trade and other sectors,

Business opportunities : Agriculture and agro-processing, mining and mineral beneficiation, tourism, and retail, trade and other sectors.

Comprehensive support structures : Business support structures, business associations and networks, government departments

Publications (links to all city publications under the same links as the main links of the website)

The proposed document needs to be compiled into a brochure with copyright obtained for maps, pictures and photographs, fancy layouts, special messages (e.g. from the mayor, Business chamber, etc), as well as advertisers, etc. The guide to be developed is for investors who wish to have ready-made information, which can be used in investment-making decisions. The guide should also provide practical guidelines on how government will support investors. It should provide detailed information on sectors and business investment opportunities per sector in the Mogalakwena Municipality for potential investment. To be effective the brochure must have three fundamental qualities:

It must contain information that the target market wants to know . Too often brochures say more about the creative skill of their designers than about the information that will assist the reader. The literature has however been produced on sound knowledge of market needs and this is thus not a concern.

It must be purposefully distributed into the hands of the target market . Thousands of expensive brochures and leaflets lie on dusty shelves out of sight of those who need them, or else are scattered wastefully as junk mail in “mail drops” or press inserts. Before any brochure is produced, the method of its effective distribution must be planned and later executed.

It must be accurate and up to date . For this reason long print runs should be avoided even if they appear to present cost savings; they are a false economy. Short print runs also give the opportunity to refresh the appearance of the literature and sustain the interest of those who read and distribute it.

Sectoral Studies and Business Opportunities

The main purpose of the sector studies is to provide detailed information on priority industries in the Mogalakwena Municipality, their competitive advantages, and business opportunities. This information should assist potential investors to differentiate the Mogalakwena Municipality from other localities in the District, Province and country. Sectoral studies and business opportunities are included in the Mogalakwena LED (2011-2016).



Each sector should be packaged in such a way in the business guide that the following information is available per sector:

Overview of sector Economic overview Availability of Land and Water Economic linkages Availability of Labour Main Features Development constraints Business opportunities

Business Opportunities Portfolio

A business opportunity portfolio needs to be designed to support sector studies and supply information on quality investment and partner opportunities in the area (see business opportunities in Mogalakwena LED, 2011-2016). The business opportunities portfolio consists of a collection of brief profiles of business prospects in the Municipality for each priority industry. It needs to be used to market the area to investors. Each profile serves as a preliminary concept plan that can be given to an investor to indicate the local opportunities with regard to specific industries and businesses. Business Directory Brochure

It is also suggested that a business directory brochure be designed. This purpose of which is to provide a detailed directory of local businesses, imposing business networking of existing companies in the area. The target market of the brochure should mainly be businesses that plan to expand or establish a new company in the area, and therefore, need to identify suppliers and buyers, as well as to know their competitors. The brochure should contain the following information:

Brief introduction to the District and Municipality Regional road and local street maps Sector and resources allocation map that would show spatial distribution of economic sectors in the

Municipality and location of mineral resources and other natural resources and major infrastructure, etc

Details of the local businesses grouped according to the sectors. The details should contain information such as postal and physical address, e-mail, website, contact numbers, operating hours, main-, secondary- and intermediate products or services offered.

It is suggested that advertising space be sold to cover the costs incurred. The brochure should be updated on a regular basis (yearly if possible). Electronic media

The business investment information developed (see separate business investment guide) can also be put on the Internet and CDs. For the internet, a dedicated website needs to be developed that would include a summary form of the proposed marketing materials to be developed, extracts from sector studies, and a database of local businesses. This portal could also be used to update the business database by allowing new business and existing businesses to enter or amend their information. The website could also be used for communication with potential investors requesting them to submit their enquiries.



The website content should be displayed and navigated under the heading as suggested in the business development guide suggested and should also include the following sections:

Home (main page) Socio-economy at a glance Education Recreation Doing business in Mogalakwena Business Zone Strategic economic growth sectors Business opportunities Comprehensive support structures Publications (links to all city publications under the same links as the main links of the website) Feedback (a link to all relevant email and contact information for the key sectors defined above as

that makes the user feel as if they can be part of community, as well as being able to contact key personnel with questions, comments, complaints, etc.)

Making contact: key contact details and links to other websites Search (an availability to search is central to the site as it will allow users to search for specific

information) It is however important to recognise that the internet has become both friend and foe in the marketing battle, as the internet can both allow you to expand the breadth of your marketing skills or prove detrimental if it’s not done effectively. Some key aspects to consider for the website design and data:

Set-Up/Aesthetics : Stick to the KISS (i.e. keep it simple stupid) rule and don’t try to appear too ‘high-tech’ and ‘modern’. Include a vertical orientation of the main content bars (as per content section) that when a mouse is placed upon would outline the choices available to the user according to that category. In terms of colour schemes, it would obviously be most beneficial to play into the Municipalities existing colour scheme if possible and create a symbol that reflects the agricultural, mining and tourism background.

Target Audience: Half the battle in creating an effective website is the recognition of who your audience is and how to target for them. Prospective businesses that fit in within the current business goals need to be targeted and not the ‘it’ sector but the sector that will result in the best fit with the Municipality.

Visuals : Because of the need to make the site dynamic, the use of graphics, photos, web cams, etc is suggested to provide unobtrusive and interesting visual displays of the Municipality in the past, and in the present. Charts of relevant statistical data (like education backgrounds, average salary, etc.) should also be used in order to make the numbers ‘pop’ and come to life.

Engagement : Finally, in order to make the site participatory and engaging, which is two key elements that are important for local economic development, and extensive feedback section as well as a fun element to the site, like a daily trivia question, a video link, the daily weather, or a joke written by a local resident should be included.

Electronic CDs containing investment information could also be developed. The CD should include complete information contained in the brochure, sector studies, business opportunities portfolios, and business database and should be properly organised with a menu that links specific items on the CD. Other promotional tools

Various marketing and promotional tools are available. Factors such as budget, time, visibility, appropriateness in terms of reaching targeted market segments, etc. provide an indication as to which methods and tools should be utilised.



Using a variety of media will enhance the dissemination of information that will position the Municipality in good prospects, thus shaping its image and attract potential investors and clientele. The fundamental principle in this regard is advertising the municipality as a unique region on its own right. A mix of media is ideal for the purpose of marketing the Municipality as an investment destination. The type of audience as well as the cost of the marketing mediums should however be kept into consideration. For example, newspapers, as compared to radio, are cost-effective in terms of printing costs but ineffective in terms of reaching the audience in previously disadvantaged areas. On the other hand radio would be far more effective, yet expensive in terms of time and costs. The following table provides an overview of the advantages and disadvantages of basic promotional tools available. Table 5.1 Promotional tools

MARKETING METHODS ADVANTAGES DISADVANTAGES

NEWSPAPERS

Print advertising is an effective way to reach the audience. The ad has size and shape, and can be as large as necessary to communicate as much of a story as you care to tell. The distribution of your message can be limited to your geographic area. Free help is usually available to create and produce your advertisement.

Have to compete with other ads. Poor photo reproduction limits creativity. A price-orientated medium. Short-shelf life. The day after a newspaper appears it is history.

MAGAZINES

Higher reader involvement means more attention will be paid to your advertisement. Less waste circulation. You can place your ads in magazines read primarily by buyers of your product or service. Better quality paper permits better photo reproduction and full-colour ads. The smaller page permits even small ads to stand out.

Long lead times (generally 90 days) mean you have to make plans long in advance. Higher space costs plus higher creative costs.

RADIO

A good medium for targeting audience. Universal medium that’s accessed at home, work, while driving. Most people listen to the radio at some point during the day. Permits you to reach the illiterate audience. Permits you to target your advertising funding to the market most likely to respond to your offer.

Because radio listeners are spread over many stations, to totally saturate your market you have to advertise simultaneously on many stations. Radio is a background medium. Advertising costs are based on ratings.



MARKETING METHODS ADVANTAGES DISADVANTAGES

Rates can generally be negotiated.

BROCHURES

Brochures can be distributed at target locations i.e. indabas, municipal offices, etc. Provides in-depth information to interested prospects. Can be kept for reference.

Can be expensive and unnecessary if distributed to people who haven’t expressed interest. Can require vigilance to continually update its look and feel, pricing and product information.

WEBSITES

International as well as domestic audience can be reached via the medium. Websites are important tools from a target marketing perspective. Combines text, graphics, sound and movement to provide information. Interesting, useful sites build loyalty.

Website must be marketed so investors know is exists. Regular updates required. Can be relatively expensive.

OUTDOOR ADVERTISEMENT

Low cost. High reach and frequency for general audiences. Can be hard to ignore.

Extremely limited message length. Best when paired with another medium. Production cost can be expensive.

ROUTE SIGNAGE

“Branded” on and off site signage will create awareness and ease visitor movement through the area.

This tool is only effective once visitors are already in the area.

PUBLIC RELATIONS

Exceptionally useful and cost effective where most segments of the domestic market is concerned. TV and Radio is a powerful medium to create general awareness. Builds credibility with investors. Provides feedback about the initiatives image and position.

Faulty PR efforts can hurt the initiative and Municipality. Can be time consuming.

5.1.3 Public relations Information about Mogalakwena Local Municipality is very limited and potential investors are not necessarily aware of its business opportunities. To address this problem, it is recommended that the Municipality conducts a public relations campaign to generate favourable publicity. The public relations campaign could be a cost-effective method of raising awareness about the local economy and it’s potential. In this regard it is proposed that the following activities are implemented:

Domestic PR Campaign : The target market that the Mogalakwena Municipality should attract to the area includes South African and foreign investors. South Africa has headquarters of numerous international corporations. Thus by conducting a domestic PR campaign, the municipality will not only target potential domestic investors but also foreign investors that have already established their businesses elsewhere in the country.



International PR campaign : International PR Campaign is aimed at improving business relationships with the countries that were identified as the target market. This campaign is run through international media. During inward and outward missions, the municipality should capitalise on the opportunity to talk to the journalists and give them details of one or two major investment projects taking place in the area.

Furthermore, inward and outward missions include various activities that involve participation in domestic and foreign seminars, conferences, and exhibitions the purpose of which is to establish business contacts and promote local business opportunities. Since the municipality does not necessarily have financial capacity to conduct these missions on its own, it is recommended that they actively participate and synchronise marketing initiatives with District and Provincial initiatives and missions organised by the District and Province. This also entails being fully prepared for these missions in terms of having complete information packages about the Mogalakwena Local Municipality. It is also recommended that the Municipality undertake ‘know your Municipality tours’. Often tour operators and product owners outside the municipality are unfamiliar with the offerings of the area, which lead to the ineffective marketing and promotion of tourism in Mogalakwena. It is often believed that ‘seeing is believing’, meaning that in order for tour operators to know , understand and market the area they first need to explore, witness and experience the offerings of the area so that they would be able to refer tourists and spread positive word of mouth. Equally important is to raise awareness in tourism orientated communities to ensure that the local communities are part of tourists experience and understand the value and significance of having tourists in their areas. Tourism road shows could be arranged at various communities and public exhibition of some attractions could be facilitated. Familiarisation tours to existing and proposed tourism attractions should be facilitated inviting tour operators outside the municipality.

5.2 Implementation plan 5.2 Implementation plan 5.2 Implementation plan 5.2 Implementation plan The task of marketing the Municipality is a task that occupies much of the time of many economic development officials. It is only by making people and business leaders aware of your community’s assets, skills and resources that will allow growth and development to occur. This Investment Attraction and Retention Strategy is the start of providing guidance towards mobilising government and the private sector towards accelerated and shared economic growth, as well as realising the vision and mission of Mogalakwena Local Municipality, through a developmental system of local government and the rendering of efficient, effective and affordable services. This Section provides strategic guidelines for the implementation of the Investment Attraction and Retentions Strategy and includes recommendations regarding the appropriate institutional framework for implementation as well as priority investment and marketing actions for implementation of priority projects. The following sub-sections form part of this Section:

Institutional framework Implementation guidelines Action plan Monitoring and evaluation plan

5.2.1 Institutional framework Institutional arrangements are extremely important to ensure the successful coordination, implementation, management and monitoring of initiatives that support investment. Certain structures,



networks and organisational arrangements therefore need to be established as mechanisms through which the Investment Attraction and Retention Strategy can be successfully implemented. The Investment Attraction and Retention Strategy provides a sufficient basis for future investment promotion functioning and operational framework, but can however not be effectively implemented without a dedicated body, such as a Investment Promotion Agency/officer, with the sole responsibility of steering the process of promoting investment opportunities within the Mogalakwena Municipality. It is critical that the Municipality be able to guarantee the efficient and effective dissemination of information and expansion of LED knowledge and know-how throughout the region. It is thus advised that an advisory service centre or investment promotion centre be established. Such a center should:

assist entrepreneurs with market information, requirements and advice, support entrepreneurs with the removal of procedural and administrative bottlenecks, facilitate investment, Coordinate technological support and finance, Organise training programmes and seminars Establish market research facilities Link producers with markets (or buyers), etc.

Based on the local investment capacity overview, it is deemed necessary that a dedicated investment promotion body be developed. This can take a number of forms, but based on the unique situation in Mogalakwena, it is deemed that the best option would be to have Investment Officer that could act as a designated implementation officer for local economic development in the Municipality. The officer should have the following key focus areas:

The planning and implementation of catalytic economic projects that will contribute to economic growth and diversification across all economic sectors

Marketing and promotion of the economic opportunities in the area, including investment promotion, research, brokerage/matchmaking and aftercare

The provision of Business Support Services In addressing these focus areas, the officer will be responsible for the identification, planning, conceptualisation, packaging, implementation, facilitation, development and monitoring of economic projects and initiatives that are commercially viable and sustainable. The Investment Marketing Officer can thus assist with:

Attracting new business and promoting investment in all sectors of the economy Enhancing inward investment Promoting and developing business efficiencies and competitiveness Implementing projects identified in the LED Strategy, IDP, and any other strategy or programme that

Council deems necessary Identification, prioritization, planning facilitation and implementation of projects (large and small) Advising potential business owners on their business proposals Facilitating funding attainment of projects Facilitating partnerships Marketing Preparing financials and business plans for business owners

Once up and running the proposed officer could obtain support from the Waterberg Economic Development Agency .



For more detail on where the proposed officer sits within the organisational structure of the municipality, consult the Mogalakwena LED (2011-2016). It is deemed vitally important that the proposed officer should function as a Autonomous champion and as a business support desk and should thus be available at all times and hence not tied up in bureaucratic meetings and administrative tasks. The task of the Investment Officer is to strengthen the capacity of the current LED system and resources in place within the municipal area, without using a semi-external body. The officer is envisaged to be the focused driver of the investment promotion agenda. It is also critical that a collaborative approach is applied for investment promotion. No organization or person exists in isolation. Provincial governments, municipalities, state-owned entities and civil society must join forces to work on behalf of continued growth and prosperity. The misaligned planning that exists between national, provincial and local government must be addressed. The proposed Investment Officer and the LED unit of Mogalakwena Local Municipality cannot undertake economic development in isolation, particularly in view of capacity and budget constraints. Better working partnerships need to be forged between the local LED units, the District LED unit and the Provincial LED unit. Partnerships with support organisations also have a vital role to play and have the capacity to support local economic development. Another key partnership is the LED forum clusters. More detail regarding the revitalisation of the aforementioned is provided in the Mogalakwena LED (2011-2016). The LED Forum clusters should also be involved in the implementation of projects, the monitoring, evaluation and adjustment of the LED Strategy as local circumstances change, the identification of further opportunities as they arise, identifying and finding solutions for problems constraining local economic development, etc.

5.2.2 Implementation guidelines

The purpose of this sub-section is to provide guidelines for investment promotion. Promotion can be defined as the coordination of all seller-initiated efforts to set up channels of information and persuasion to sell certain goods and services or promote an idea. Marketing includes the use of promotional techniques in order to provide information to potential investors, creating an attractive image of the Mogalakwena Municipality as a place to invest, as well as providing services to prospective investors. The marketing techniques that must be used by the proposed investment officer to promote investment opportunities are shown below. From the below it is evident that in order to ensure the most effective technique for generating investment directly, the investment promotion body should focus on direct contact with specific firms within the identified industries as well as including emphasis on personal selling techniques. The proposed officer should also engage in all three types of investment promotion activities to varying degrees most of the time, initial focus should however be on image-building activities, where after the officer should focus on investment generation techniques and finally on the investment services techniques.



Figure 5.1: Promotional techniques for business sup port and investment attraction officer

Promotional Technique 1. Advertising in general financial media 2. Participating in investment exhibitions 3. Advertising in industry- or sector-specific media 4. Conducting general investment missions from source country to host country or from host country to source country 5. Conducting general information seminars on investment

opportunities

Promotional Technique 6. Engaging in direct mail or telemarketing campaigns 7. Conducting industry- or sector-specific investment missions

from source country to host country (or vice versa) 8. Conducting industry- or sector-specific info seminars 9. Engaging in firm-specific research followed by "sales" presentations

Promotional Technique

10. Providing investment counselling services 11. Expediting the processing of applications and permits 12. Providing post investment services

The shift from a focus on image building should be when the investment officer feels that appropriate images of the municipality has been built, in the minds of the larger investment community, as well as in those of the targeted groups of investors. Once the investment officer has shifted from a focus on image-building activities to a focus on investment-generating activities, the use of more closely targeted promotional techniques should be utilised. As the Business support, marketing and investment officer moves from an emphasis on image building to an emphasis on investment generation, the audience of the investment promotion program becomes more sharply focused. It is also important to realise that the challenge in selling and marketing concepts and technical information pertaining to development opportunities in the Municipality is to interpret the information for the potential investor. Only one key audience, namely potential investors, will determine the scope, impact and pace of the implementation of development. While the investment officer’s (and support organisations and public in the wider sense) cooperation and support will be crucial for the project’s success, the catalyst for development remains INVESTMENT. Prioritised projects have been packaged as opportunities for marketing and implementation (see LED strategy, 2011-2016). However, these can be taken to the next step such as feasibilities and business plans. A critical element of this action is to initiate the process of Investment Brokerage, by the investment officer including the interpretation and the translation of marketable projects into implementable action plans. The process of project brokerage can be described where business plans are prioritised for implementation on an ongoing basis, therefore ensuring a continuous flow of investment information on bankable opportunities in the area. See below Figures.

Phase 2: Investment Generating

Phase 3: Investment

Service

Phase 1: Image

Building



Figure 5.2: Investment Brokerage and Matchmaking

Figure 5.3: Providing information to target audienc e

Other key investment guidelines include:

Business retention and expansion guidelines: � Identifying needs and concerns of the local businesses � Removing obstacles that prevent existing firms from continuing their operations or expanding � Reducing costs and risks of doing business in the local economy � Improve competitiveness of the local businesses � Enhance market opportunities for the local businesses � Improve business infrastructure for the local businesses, and � Generally creating an environment that would improve businesses’ survivability and create a

sustainable community through implementation of a defined set of actions Business attraction guidelines: � Attraction of businesses operating within the targeted sectors (agriculture, tourism,

manufacturing, etc) � Promote the Municipality as a favourable location for the targeted businesses � Creating an enabling environment for business development � Encourage both local and foreign investment � Create an awareness of various development opportunities in the area � Create a fair, efficient, and competitive market place � Diversify the economy and improve its sustainability

Translate opportunities into marketable projects

Initial Interaction: potential investors

Focused Matchmaking

Initiate joint venture formulation (PPPs)

Translate opportunities into marketable projects

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� Foster economic development and growth Co-operative development guidelines : The rural nature makes tourism and agriculture an

important sector in these economies. Therefore, most potential for growth in the municipality lies within the agricultural sector and related activities, which highlights the importance of facilitating the development of co-operatives in order to capture maximum benefits from the competitive advantage, which the municipality has in these sectors. The co-operatives act should be used to establish co-operatives in the municipality in order to improve local economic development in the area.

Formation of joint venture guidelines : In order to promote local investors as joint-venture partners and other forms of enterprise-to-enterprise co-operation, the following activities will need to be undertaken: � Identify potential local partners and obtain information about their company: size, products,

technology, markets, financial position and investment interests � Compile a joint-venture profile in the form of a booklet. The investment prospects can be

amplified in individual project profiles describing the investment proposal and giving enough information to allow a prospective partner to decide whether the venture is worth investigating and pursuing. Profiles might describe the economic and market dimensions of the proposed project (scale of the project, range of products, available or proposed markets, competitors and suppliers, import-export conditions and the foreign resources needed)

� Prepare profiles of those projects likely to be of greatest interest to overseas partners � Local partners should prepare fact sheets on their companies and investment interests � Targeted promotion of high potential projects – identify companies likely to be interested in a

project, contact them, and invite them to visit the municipality � Brokering agreements between partners – bring potential partners together and then help, if

necessary, to form an agreement. SMME development guidelines : In order to ensure the successful SMME development and an

operational second economy, it is imperative to ensure the following: � Easy access to business support service � Access to work opportunities � Assistance in development of assets and resources � Skilled human resource development. The range of services required by SMMEs consists of the following: � Business idea development � Business plan development � Financing (loans and incentives) � Grants and investment recruitment � Technology � Sourcing and procuring inputs � Operational skills � Management skills and HRD � Quality management � Packaging logistics � Export and import processes � Tender application skills � Legal advice � IT advice � Accountable advice � Marketing (domestic and global export) � Client care.

Rural development guidelines: The Integrated and Sustainable Rural Development Strategy identifies the following complementary measures to support rural development: � Human resource development � Land reform � Community-based income generation programmes � Social assistance � Rural finance Other actions that should be considered by the municipality to ensure rural development include: � Develop a separate human resource development strategy to increase the skills base in rural

areas, both at the community and local government levels.



� This Rural Human Resources Development master plan should also include adult basic education (ABET) and the development of technical skills –supported by the provisions provided for by the Skills Development Act--, as well as a social plan to manage retrenchments and job losses affecting rural areas.

� Supplement existing skills levels through deployment, or transfer of personnel to rural areas, targeting both hard and soft skills

� Identify resources required for community-based income generation projects � Determine skills required to implement these projects and conduct a skills audit to determine

gaps in existing skills � Determine expected outcomes of these projects and monitor continuously � Undertake an audit to determine if intended benefits are reaching the rural poor within specific

rural areas � Establish safety-nets for vulnerable groups � Facilitate and co-ordinate financing of rural development programmes

Overcoming key challenges to mobilise private capit al investment: CHALLENGE TECHNIQUE KEY TAKS FOR PROJECT MANAGERS

Understandability Build a shared vision and plan � Establish a working partnership at the outset. � Base projections on realistic, quantifiable

outcomes. � Address why businesses would want to invest in

the area. � Develop data-backed understanding of the

area’s potential, competitive advantages, whether markets work, etc.

� Draft basic communications strategy. � Describe markets and opportunities in the

targeted areas in a prospectus format. Risk Reduce risk perception � Take steps to enhance safety and security.

� Show public sector’s capacity to broker binding agreements with local stakeholders.

� Ensure credibility, consistency and predictability of public processes (e.g. tender processes, statutory approvals).

� Ensure sound land use management systems, effective by-laws, effective enforcement agencies.

� Maintain and operate public spaces and infrastructure near the investment.

Profitability Support profitability of the desired investment

� Pay attention to pricing of public land and structure of payment terms.

� Secure bulk infrastructure provision (e.g. roads, storm water systems).

� Secure complementary private investments to draw in additional capital.

Timing Get the timing right � Be aware of the cyclical stages of investment in the specific environment, and design components accordingly.

� For example, a recession period can be used for land assembly, securing statutory clearances up front, market research, preparing the investment offering etc.

� A pre-recovery period can be used to execute communications with the private sector, engage investors in planning, prepare offerings for the market.

5.2.3 Action plan

This sub-section provides the following actions plans:

Preliminary action plan Medium to long-term action plan

Preliminary action plan

In order for the implementation of the Investment Attraction and Retention Strategy to take place in an effective, efficient and sustainable manner, there are several actions that must be taken by the key role-



players. To ensure optimal stimulation of economic development, job creation, poverty alleviation, SMME development, human living improvement, etc., the following are essential actions to be taken:

Attend to water and electricity problems timeously Ensure that the Municipality has capacity to operate and function effectively before commencing any

investment project implementation through the appointment of a dedicated investment Officer Have a member of council, preferably the LED councillors, focused exclusively on the

implementation of the Investment Attraction and Retention Strategy Ensure that all necessary financial sources, equipment, human resources, etc. are in place and

available prior to starting with the implementation of a programme and/or project Set reasonable timeframes and keep monthly/weekly track records to effectively evaluate the

progress of all necessary actions. Develop a complete business inventory Conduct a annual business survey

� Improve understanding of businesses’ needs and concerns � Addresses businesses concerns in a timely manner � Assist businesses to link with suppliers/distributors � Illustrate pro-business approach of the local government



Establish a special enquiry point Revise LED forum priorities based on latest LED strategy (2011-2016) Plan and undertake inward and outward missions


Establish a municipal services monitor Develop an inventory of investment activities to assist and develop a monitor to track progress. Ensure provision of serviced industrial precinct space Conclude concept, feasibility and business plans. Undertake funding applications and utilise expert networking to obtain sufficient funding sources

The Table below provides key immediate actions for the successful implementation of the Investment Attraction and Retention Strategy for the Mogalakwena Municipality. The light pink shaded blocks indicate the actions that need to be investigated or researched further, whereas the darker green shaded blocks indicate when the actions should be implemented.

Actions Year 1 Year 2 Year 3

1 2 3 4 1 2 3 4 1 2 3 4

Preparation and launch

Appoint investment Officer and set-up special investment enquiry point for all enquiries concerning investment policies, applications to invest, general business enquiries, etc




1 2 3 4 1 2 3 4 1 2 3 4

Develop and disseminate procedure manuals for all municipality tasks and functions and the need for LED forums

Assist with the establishment and revitalisation of LED forum clusters by consulting good working LED Forums and LED Departments as learning organisations and lobby for more roleplayers and regular attendance.

Public relations: i mprove intergovernmental and public relations, co -ordination and planning

Hold and attend quarterly LED forum cluster meetings and attend all district LED forum meetings

Conduct general information seminars on investment opportunities in order to market opportunities, identify additional opportunities, and add value to existing opportunity write-ups

Undertake ‘know your Municipality’ tours with LED forum and other key stakeholders and roleplayers to identify and market business strengths, weaknesses, attractions, offerings, etc.

Undertake continued lobbying with role players (i.e. public works, international funding organisations, etc)

Marketing strategy

Develop glossy a brochure and CDs with business investment information and distribute to target market

Update web with marketing information and contact details and awareness of investment officer/ enquiry point in order for potential investors as well as existing investors/businesses to know who to contact for assistance

Plan and undertake inward and outward missions such as investment promotion tours and conferences

Update, print, and distribute more brochures and CDs of the marketing information developed

Business retention and expansion

Undertake a business audit and annual business confidence survey and develop/update a complete business database. Utilise the investment Officer to undertake this or consider using consultants.

A business directory should be created based on the audit and uploaded on the Municipalities web-site. The businesses should be able to enter the




1 2 3 4 1 2 3 4 1 2 3 4

database make changes to their own business profile so that the database is continuously updated and maintenance free. The database should also indicate input requirements by industries operating in the municipality and provide details of suppliers.

Based on audit outcomes investigate which required business inputs could be locally manufactured and include in investor opportunities for marketing.

Launch business outreach activities as informed by the needs of the business audit

Develop a unemployed skills register

Assist labour market efficiency by providing recruitment services that matches appropriately skilled unemployed individuals with employers who are in the market for hiring

Continuous research of trends in consumer demand through subscribing to an appropriate economic database and relaying information to businesses and investors.

Investment brokerage

Take stock of all Municipal level procedures and regulations related to investment and determine where efficiency improvements and/or changes are required (.e.g. infrastructure and services provision, permit approvals, etc)

Establish a municipal services monitor, whereby the municipality maintains a clear investment friendly picture to inform planning, prioritisation and decision-making

Attend to water and electricity problems timeously

Modify and ensure council adoption of incentives and support measures

Undertake inventory of all current investment activities, trends, future plans, skills and financial assistance required so as to identify where to assist and to develop a monitor to track progress. No existing or future potential investors should be left in the dark in which event they may decide to locate elsewhere where they obtain better and prompt assistance.

Undertake municipal land audit and




1 2 3 4 1 2 3 4 1 2 3 4

available rental industrial space (include rental costs, building size, land size, etc) so that this can be made available without delay to potential investors and enable speedier decision making. Ensure sufficient provision of serviced industrial space for potential investors and identify areas, land and service requirements for agro-processing parks and other investor opportunity requirements.

Conclude concept plans, feasibility plans and business plans for potential investors or priority investment opportunities and undertake funding applications.

Medium to long-term investment attraction and retention strategies

Ongoing marketing and facilitation of investment in economic opportunities is needed for effective, efficient and sustainable implementation of the Investment Attraction and Retention Strategy for the Mogalakwena Municipality. The following long-term actions to ensure investment facilitation need to be taken:

Promote accessibility and transparency in the formu lation and administration of investment-related policies. Specific actions include: � Make available all investment-related regulations in clear simple language, preferably in

languages commonly used by business. � Make available to investors all rules and other information relating to investment promotion and

incentive schemes. � Ensure transparency and clarity in investment-related laws. � Encourage on-line enquiries and on-line information on all investment issues. � Publish and/or make available screening guidelines for assessing investment proposals. � Maintain a mechanism to provide timely and relevant advice of changes in procedures, applicable

standards, technical regulations and conformance requirements. � To the extent possible, provide advance notice of proposed changes to laws and regulations and

provide an opportunity for public comment. Establish stability of investment environments, sec urity of property and protection of

investments. Specific actions include: � Establish timely, secure and effective systems of ownerships registration and/or property use

rights for land and other forms of property. � Create and maintain an effective register of public or state owned property. � Ensure costs associated with land transactions are kept to a minimum. � Foster the dissemination of accurate market reputation information including creditworthiness and

reliability. � Encourage and facilitate the use of arbitration and other means of alternative dispute resolution

for the settlement of international commercial disputes between private parties. � Facilitate commercial dispute resolution for foreign investors by providing reasonable cost

complaint-handling facilities, such as complaint service centres, and effective problem-solving mechanisms.

Improve the efficiency and effectiveness of investm ent procedures. Specific actions include: � Simplify and streamline application and, registration, licensing and taxation procedures and

establish a one-stop authority, where appropriate, for the lodgement of papers.



� Simplify and reduce the number of forms relating to investment and encourage electronic lodgement.

� Shorten the processing time and procedures for investment applications. � Promote the use of “silence is consent” rules or no objections within defined time limits to speed

up processing time, where appropriate. � Ensure the issuing of licenses, permits and concessions is done at least cost to the investor. � Simplify the process for connecting to essential services infrastructure. � Establish and disseminate widely clear and simple instructions and explanations concerning the

application and registration process. � Facilitate availability of high standard business services supporting investment.

Build constructive stakeholder relationships. Speci fic actions include: � Promote backward investment linkages between businesses, especially foreign affiliates and

local enterprises including through the promotion of industry clusters. � Build strong relations with the Waterberg District and the Waterberg Economic Development

Agency (once operational) � Build strong relations with the Provincial LED Unit and Forum

Enhance international co-operation. Specific action s include: � Make use, where appropriate, of international and regional initiatives aimed at building

investment facilitation and promotion expertise, such as those offered by the World Bank, UNCTAD and OECD.

� Ensure measures exist to ensure effective compliance with commitments under international investment agreements

� Review existing international agreements (if it exists), to ensure their provisions continue to create a more attractive environment for investment.

5.2.4 Monitoring and evaluation

Lastly, any strategy requires a monitoring and evaluation plan so that monitoring and evaluation of how well the local economy is performing against set benchmarks can be undertaken. A favorable investment environment is required for any type of development, regardless of sector or projects details. To a certain degree, the success is dependent upon interventions to improve the investment environment. In other words interventions focusing on the creation of an enabling business environment that provides a supportive platform for businesses to develop and existing businesses to grow and expand is required. Here it is relevant to note that monitoring and evaluation of the Investment Attraction and Retention components have been incorporated into the Monitoring and Evaluation Plan developed as part of the Mogalakwena LED plan (2011-2016). The following indicators are used as a proxy for measuring investment attraction and retention:

Total employment growth compared to the Province Total GDPR growth compared to the Province Diversification of economy: Tress Index for GDPR compared to the Province Number of enquiries at the tourism information desk/office (both telephonic and at the office) Number of visitors to the museum Number of members of the business chamber and NAFCOC Current level of utilisation of resources/production capacity Percentage not considering to relocate The degree of optimism (good and excellent) of doing business in Mogalakwena Rating of overall efficiency and effectiveness (good and excellent) of Mogalakwena Number of jobs created through EPWP projects The number of successfully hosted LED forum cluster meetings



Number of people attending LED forum cluster meetings The number of investment events hosted/attended The number of existing businesses assisted/supported/attracted The number of land claim projects successfully supported The number of projects facilitated for S&LPs The number of new co-operatives, PPP, business entities registered/implemented The number of LED development facilitation actions successfully facilitated The number of direct permanent and temporary employment created

As part of the Monitoring and Evaluation Tool developed an economic monitor, hereafter referred to as an economonitor, has also been developed. The purpose of the economonitor is to assess and graphically present the state of the economy and to describe changes over time in relation to District, Provincial & National changes as well as in relation to other Provincial Growth Points. This economonitor essentially entails a model with graphs that has been set-up to enable automatic statistical calculations and graphical representation based on readily available and reliable annual data. The information from the economonitor needs to be relayed to businesses annually.

130 Section six Kayamandi Development Services


This Investment Attraction and Retention Strategy is regarded as a first endeavour to enhance the implementation and realisation of the Municipalities objectives and plans towards mobilising government and the private sector towards accelerated and shared economic growth. The Investment Attraction and Retention Strategy as well as the separate LED strategy developed (see separate document) provides a sufficient basis for future investment and marketing functioning, but can however not be effectively implemented without a dedicated body, such as the proposed investment officer with the sole responsibility of steering the process of business support and promoting business investment opportunities within the Mogalakwena Municipality. The successful implementation of this strategy is also dependant on the coordination and integrated co-operation between the proposed investment Officer and the various departments within the Municipality. The proposed officer should not work in isolation towards the investment goals, but capacity building and teamwork should be promoted. This will ensure speedy, improved and streamlined processes, procedures and approvals.

Conclusion & way forward



Broad Based Black Economic Empowerment (BBBEE) Strategy Broad Based Black Economic Empowerment Act Co-operatives Act (No. 14 of 2005) Industrial Policy Action Plan, 2007 Integrated Manufacturing Strategy (IMS) Integrated Sustainable Rural Development Programme (ISRDP) Land Redistribution for Agricultural Development (LRAD) Limpopo Agriculture Development Strategy, 2007 Limpopo Co-operatives Strategy Limpopo Employment, Growth and Development Plan 2009 – 2014 (LEGDP) Limpopo Province Simplified Standardised Framework for LED Mogalakwena Local Economic Development Strategy, 2011-2016 Mogalakwena Service Delivery report for the period of 2006-2010 Municipal Systems Act (No. 32 of 2000) National Framework for Local Economic Development (NFLED) National Industrial Policy, Framework and action Plan (NTPF) National Spatial Development Perspective (NSDP) New Partnership for Africa’s Development (NEPAD) Quantec Research, Standardised Regional Data, 2010 Regional Industrial Development Strategy (RIDS) Small Enterprise Development Agency (SEDA) South African Cities Network, 2008. The impact and effectiveness of urban development incentives

in selected South Africa Cities. Status of Co-Operatives in Limpopo, 2007 The Constitution of South Africa (Act 108 of 1996) The Impact of Government Procurement on Enterprises, 2007 The Limpopo SMME Strategy The Medium Term Strategic Framework (2006 to 2009) The Micro-Economic Reform Strategy (MERS) The Mining Development Strategy, (2006) The Mogalakwena Local Municipality Spatial Development Framework, 2009 The Mogalakwena Tourism Strategy, 2008 The New Growth Path for South Africa The Status of Rural Trade in Limpopo, 2007. The Waterberg District Agriculture Development Strategy, 2005 The Waterberg District EMF, 2010 The Waterberg District Municipality Local Economic Development Plan, 2007 The Waterberg Investment Policy, 2008 The Waterberg Marketing and Investment Strategy The Waterberg Mining Development Strategy, 2006 Tourism Growth Strategy (TGS) UNCTAD, 2007. World Investment Report Waterberg Spatial Development Framework, 2009 (WSDF) White Paper on Agriculture (1995) www.businesspartners.co.za www.idc.co.za www.khula.org.za www.sars.gov.za www.thedti.gov.za

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OGALAKWENA INVESTMENT ATTRACTION LOCAL ......Mogalakwena Investment Attraction and Retention...

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