eThekwini Micro Enterprise Support – Informal Economy Support Programme (IESP)
Despite the importance of micro and informal enterprises (MIEs) and the informal economy in addressing joblessness and economic growth, there remains a vacuum of programmatic support. The Informal Economy Support Programme (IESP) addresses this gap by providing specialist business support services to micro and informal enterprises (MIEs) along with other structured interventions. It thereby unlocks untapped job creation and enterprise potential across a range of sectors (e.g. manufacturing, specialist retail, services). It is first initiative of its kind in South Africa. The pilot phase is co-funded by the Jobs Fund and eThekwini Municipality. After a successful three-year pilot phase, the IESP is ready for upscaling and funding is being activity sought for this purpose.
Scaling Up – Next Phase:
After a successful three-year Pilot Phase, the IESP is ready for up-scaling with the required methods, tools, collaborations and capacity established. Click here for the IESP Evaluation Report. The current momentum needs to be maintained and fundraising and other preparations for the next phase are underway. Amongst other things, specialist delivery capacity is being strengthened, a web portal is being developed, and the current database of MIEs is being significantly expanded via a survey. A proposal and business plan for the next phase has been developed and engagement with various stakeholders is underway with the intention of establishing readiness prior to the end of the current pilot phase (September 2016).
“Small business is big business.” – President Jacob Zuma, State of the Nation address, 2015. The importance of the informal economy is recognised within the National Development Plan (NDP) and is reflected in the recent establishment of a dedicated National Department of Small Business Development (DSBD).
Goal and Rationale:
Although it is now accepted that micro-enterprises and the informal economy are critical in addressing joblessness and sustainable economic growth, there remains a vacuum of effective support and a range of other barriers. The IESP seeks to provide an improved platform for effectively and sustainably supporting MIEs. The long-term goal is to establish programmatic and functional support. The short term goal in the current (pilot) phase is to create 216 new, permanent jobs and establish the necessary specialist capacity, skills, tools and knowledge resources.
Achievements and Successes of Pilot Phase:
The IESP has met or exceeded all of its key target indicators for the pilot phase in respect of enterprise support, job creation and training. Toolkits and knowledge resources have been developed and the City’s broader informal economy programme has been strengthened. As at 31st March 2016:
- 217 new permanent jobs created with potential of a further 586 in the pipeline
- 53 enterprises assisted in various ways including skills training, business plan optimization and mentorship
- 182 enterprises identified, assessed and screened
- 8 toolkits and 23 case studies developed
- 180 people have received various types of training
- Participative Economic Action Planning (PEAPs) mainstreamed
- Delivery capacity and enabling collaborations established.
Specialist Business Support Services:
Specialist business support services form the core of the IESP. These are provided to each enterprise based on a business development plan and are often provided by specialists. They may include:
- Profitability and cash-flow analysis;
- Record and book-keeping;
- Workspace access and optimisation (e.g. layout);
- Accessing finance for working capital or capital acquisitions;
- Markets and selling: e.g. identifying and accessing new markets, establishing new business collaborations;
- Human resources management and compliance;
- Product/service and production: e.g. refinement, re-development, differentiation, improved manufacturing methods;
- Logistics g. bulk ordering direct from wholesalers, shared transport to market;
- Legal and compliance: e.g. income tax, VAT, health safety etc.;
- Procurementg. of raw materials or input services;
- Training and skills development including ‘Isiqalo’ (basic business skills) and on-site sector skills training (e.g. ‘cut make and trim’, machinist training; product design; factory layout).
NOTE: Funding for the next phase of the IESP is currently being sought. Applications by enterprises for business support services will be considered only once such funding has been secured.
Importance of the Informal Economy:
The importance of the informal economy in its many facets is well recognized. This large and vibrant economy contributes significantly to long term economic growth, job creation and improved livelihoods security. It includes large numbers of micro-manufacturers, retailers, street traders, micro farmers, contractors and crafters. The formal economy on its own cannot address joblessness, especially within the current context of slow economic growth and high structural unemployment. Without effective informal economy support, overall economic growth, poverty, inequality and joblessness cannot be addressed. The informal economy is an important long-term driver of economic growth. It offers significant job creation potential and supports large numbers of livelihoods which are critical for the poorest of the poor. Despite its obvious importance, there remains limited understanding of the informal economy and how it can best be supported. The IESP directly addresses this gap.
Collaborations and Capacity:
The IESP is a collaborative effort. PPT works closely with the Municipality (including the Economic Development and Business Support Units) and other stakeholders. Collaborations are important in establishing the necessary relationships and capacity to successfully deliver the Programme. These collaborations include:
- Productive NGO partnerships are a key and unique feature of the IESP which afford it significant, niche-focussed capability.
- Corporates partners, not only for establishing better backward and forward linkages with MIEs but also because they are a key future client (purchaser of specialist IESP services). Collaborative events will continue (e.g. information exchanges between MIEs and established business to facilitate linkages such as supply chain access or more efficient access to raw materials). Bilateral engagements with particular corporates will also occur (e.g. steel manufacturing).
- Development Finance Institutions (DFIs) are regarded as important. The Programme already collaborates with SEFA in respect of assisting MIEs to apply for SEFA finance. SEFA have expressed interest in establishing a dedicated IESP MIE mechanism/facility.
- Expanded Panel of Specialist Service Providers as the IESP’s panel key to its business model. It includes a range of specialist individuals and private sector entities with specific skills sets e.g. accountants/CAs, business coaches, procurement, HR, contracting, legal etc. The Panel will be significant expanded in the next phase.
For enquires please email Tanya (PPT Project Officer) at: email@example.com
IESP Pilot Phase (2013-2016) – Selected Enterprise Profiles
The business manufactures traditional three legged aluminum pots of various sizes. The business owner is Ms. Ester Masinga who has been operating the enterprise for over 10 years. The business is well located at the Westrich premises in Newlands West. The business sells to customers from Durban and surrounding areas and has managed to expand to clients in KZN, Eastern Cape and as far as Mozambique. The aluminium is sourced from various scrap suppliers. Read More
Makholeka Trading CC
The enterprise is solely owned by Ntombizethu Meyiwa. She runs and manages the business on a full-time basis. The office premises are
situated in Hammersdale Township. Makholeka Trading focuses on road verge maintenance and primarily deals with grass cutting, working along the N2 south and N3 Freeways, on a sub-contract to the South African National Roads Agency Limited (SANRAL). Read More
Akubeziyesuka is a block manufacturing co-operative, and is also involved in other entrepreneurial activities. There is a increasing demand for their high quality blocks. PPT has provided basic ‘isiQalo’ business skills training, drafted letters to potential clients and contractors and assisted in preparing a business plan to access Small Enterprise Finance Agency (SEFA) finance in order to support expansion plans. Read More
Eyekhethelo Furniture Co-operative
Eyekhethelo designs and manufactures high quality furniture and provides a furniture repair service. The organizations skilled workers in carpentry, upholstery and spray painting are located in an abandoned building in the Adams Mission School, Amanzimtoti. The business
has been operating for 8 years, has a strong local customer base and is owned by the members of a registered cooperative. Read More
Craft Sector Collaboration
The Udumo and Khumalo crafters are being supported via a PPT-Africa!Ignite collaboration to improve their product quality, gain access to new markets and develop a stronger business model. Basic ‘isiQalo’ business skills training has been provided by PPT. 28 new jobs have been created. The crafters are located in Kwa Ngcolosi and Ntshongweni. Read More
The Nhlanhla’s Steelworks specialises in manufacturing high quality mild steel gates, stainless steel, gates balustrades, palisade fencing, razor wire, carports gate automation and intercom. The enterprise is owned by Nhlanhla Mchunu and has been operating for 21 years. Read More
Overview of Pilot Phase Methodology
Enterprise identification, assessment and selection:
Only enterprises which meet specific pre-conditions are eligible for support. These include enterprise viability, job creation potential and entrepreneur commitment. Eligible enterprises are evaluated and on this basis structured support offered up to a maximum budget per enterprise.
Business plan development and optimisation:
Collaboratively PPT and the enterprises focus on identifying practical actions and supports which can catalyse growth and optimisation. Enterprises must ‘own’ and ‘drive’ their plans to avoid dependency.
This includes assisting the entrepreneur to identify and resolve challenges on an ongoing basis, identifying specific areas where specialist assistance can catalyse change, distinguishing short versus long-term plans, as well as ongoing encouragement and acting as a ‘sounding board’.
Targeted business development support services:
A range of specific support services are provided to each enterprise based on a business development plan. These are often provided by specialists and may include: Profitability and cash-flow analysis; Record and book-keeping; Workspace access and optimisation (e.g. layout); Accessing finance for working capital or capital acquisitions; Markets and selling: e.g. identifying and accessing new markets, establishing new business collaboration; Human resources management and compliance; Product/service and production: e.g. refinement, re-development, differentiation, improved manufacturing methods; Logistics e.g. bulk ordering direct from wholesalers, shared transport to market; Legal and compliance: e.g. income tax, VAT, health safety etc.; Procurement e.g. of raw materials or input services.
Training and skills development:
This may include ‘Isiqalo’ (basic business skills) training (e.g. to improve cash-flow management, understanding profitability, matching product to market etc.) or on-site sector-specific skills training focussed, for example, on production efficiency (e.g. ‘cut make and trim’, machinist training, work-space layout) or product design and development.
Micro-grower support linked to Agri-hubs:
80 micro-growers in three hubs are being supported to improve agricultural practices, optimise crop mix and quality, link with other Agri-hubs, and access new and better markets.
Participative Economic Action Planning:
PEAP is a structured, local planning process, driven and owned by local economic actors, which identifies priority (catalytic) actions or initiatives which can produce change.
Enabling LED actions:
E.g. the provision of affordable manufacturing space or enabling infrastructure such as water supply or access roads.
Monitoring, evaluation, learning and toolkits:
M&E is undertaken on an ongoing basis to ensure learning and methodological refinement. Impact is evaluated, key learning extracted and feedback given to key stakeholders. Existing knowledge resources and practical toolkits are refined and new ones created where necessary.