Address by Dr Rob Davies, Minister of Trade and Industry at the launch of The Soshanguve Manufacturing Technology Demonstration Centre (SMTDC).

Address by Dr Rob Davies, Minister of Trade and Industry at the launch of The Soshanguve Manufacturing Technology Demonstration Centre (SMTDC).

Thank you for inviting me to join you today at this important event. The launch of this demonstration centre here in Soshanguve represents a milestone in our ongoing efforts to support sustainable small business. In combining the efforts of national and local government with the expertise of an institution of higher learning in the area of manufacturing technology, we are beginning to address the challenge of working smarter and more cohesively to support SMME development. In the past our efforts have often been too disparate and to haphazard. Now we are beginning to cluster initiatives in a way that results in greater coordination for better efficiency and efficacy. It is particularly important that we are now beginning to coordinate small business support in the area of manufacturing. The more small businesses become, beneficially integrated into the manufacturing value-chains, the greater the chance of growing the number of sustainable small businesses and growing the number of decent jobs.

The framework for this approach was set out in the National Industrial Policy Framework (NIPF) which laid out Government’s broad approach to industrialization. The key objective defined then and repeated in our election manifesto was to promote a more labour-absorbing industrialization path with a particular emphasis on stimulating more labour intensive tradable goods and services through promoting economic linkages that catalyze employment creation.

Guided by the NIPF, we adopted our second Industrial Policy Action Plan earlier this year. IPAP2 seeks to build on the first 2007/8 IPAP, which has largely been implemented, with one of the lead sector interventions being the fast-tracking of cocoordinated and integrated support for the Forestry, Pulp and Paper, and Furniture Sector. In this regard, one of the outputs of this IPAP intervention was the establishment of a furniture incubator in the Eastern Cape. The establishment of this incubator was driven by the dti in consultation with Furntech, and after just over a year of being fully operational, the Furntech Annual Report records that incubator has resulted in the establishment of 13 new SMME’s and approximately 160 direct an indirect jobs.

Another incubator, the Mpumalanga Stainless Initiative (MSI), in partnership with the Department of Science and Technology’s Tshumisano programme, is planning to produce stainless steel components that are used in the petrochemicals industry. This intervention, if successful, can save nearly R20 million per annum in foreign exchange resources that would otherwise have flowed out of the economy. Certainly, these are relatively modest outcomes in light of the challenges we face to provide decent work but I daresay our efforts are producing results that appeared beyond our reach a few years ago.

IPAP1, we focused on the easier to do things. In IPAP2 we have raised the ambition to focus on a number of challenging but necessary things we need to do to place us on a new more labour absorbing growth path.

Ladies and gentlemen, if we accept as a fact that in recent years formal employment growth has come predominantly from the services sector – and in particular from the wholesale, retail and business service sectors, we also need to note that the key drivers of this growth were in fact massive and unsustainable private sector credit extension.

The fact is that consumption driven sectors grew approximately twice as fast as production sectors. This is unsustainable. It meant amongst others that we sucked in imports and that we could never reduce unemployment to less than 23% even when we were growing well. This being the case, IPAP2 argues that sustainable increases in employment – in all sectors of the economy, need to be underpinned by higher growth in the production sectors of the economy – led by manufacturing.

Whilst there are many reasons for the relatively low profitability of the manufacturing sector in SA, every measure that seeks to address or remove the barriers to increased efficiency and activity in the manufacturing sector needs to be welcomed.

I am therefore very pleased by what I have seen and heard is being undertaken by the Shoshanguve Manufacturing Technology Demonstration Centre (SMTDC) here in Soshanguve. I have been told that the SMTDC is currently working with the South African Post Office (SAPO) to support and develop small enterprises than can ultimately supply the SAPO with some of the products that are consumed by them on a large scale each year.

This supplier-development intervention has the potential to put millions of Rands in the hands of small enterprises that would otherwise be excluded from participation in the mainstream economy. This co-operation between State-Owned Enterprises and business support agencies is exactly the kind of intervention that we need to encourage and support wherever we see opportunities for closer co-operation between Business and small enterprises. In addition, I am also particularly pleased to hear that the kind of skills training and business development support that is being provided by the SMTDC to entrepreneurs and small businesses, is being done in consultation with the City of Tshwane, where the training of these individuals and businesses is creating skills that are aligned with the broader social development objectives of the City of Tshwane.

Notwithstanding the difficulties experienced by small business during the recent recession, 16% of the SMMEs assisted by SEDA with business development services reported an increase in their number of employees. This is testimony to the dynamic and flexible nature of this sector. Whilst many small businesses have terminated their operations over the past two years, many others have seized the opportunities that are being created in the economy, and it is therefore imperative that we all work closely together to provide a better support environment for small enterprises.

Whilst the IPAP has been one specific intervention that seeks to increase the level of coordination and cooperation amongst different stakeholders in the economy to achieve a specific objective, the Department of Trade and Industry has a host of different interventions and support programmes to support small enterprises. Driven by our mission of seeking to support the achievement of greater growth, equity and employment in the economy, we are committed to working with SEDA and the other COTII institutions, to create an environment that is conducive to the growth of private enterprise.

In this regard, the dti, through the SEDA Technology programme is supporting various business incubators and technology demonstration centres country-wide. Finally, to the SMTDC Board, Centre Manager and staff of the SMTDC, I would like to congratulate you on the work done so far, and wish you all the best for the road ahead.

Thank you.