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   MANDENI
 MUNICIPALITY
 SMME AND INFORMAL TRADERS
MANAGEMENT AND DEVELOPMENT
         STRATEGY



          February 2009




        Submitted To:                Submitted By:
        Mandeni Municipality         Urban-Econ
        Corporate Services and LED   Development Economists
        P. O. Box 144                P. O. Box: 50834, Musgrave 4062
        Mandeni                      Tel 031 2029673
        4490                         Fax 031 2029675
                                     Email Durban@urban-econ.com
                                                                                                                                               2


TABLE OF CONTENTS

TABLE OF CONTENTS ...................................................................................................................2
SECTION 1: INTRODUCTION .........................................................................................................3
   1.1 PROJECT BACKGROUND ....................................................................................................3
   1.2 PURPOSE OF THE STUDY ...................................................................................................3
   1.3 METHODOLOGY ...................................................................................................................5
   1.4 SOURCE OF INFORMATION ................................................................................................7
   1.5 REPORT OUTLINE ................................................................................................................9
SECTION 2: SITUATIONAL ANALYSIS ...................................................................................... 11
SECTION 2: SITUATIONAL ANALYSIS ...................................................................................... 11
   2.1 UNDERSTANDING SMMES AND INFORMAL ECONOMY................................................ 11
   2.2 POLICY ENVIRONMENT .................................................................................................... 43
   2.3 SMME AND INFORMAL ECONOMY INSTITUTIONAL ANALYSIS..................................................... 50
   2.4 MANDENI ECONOMIC PROFILES ..................................................................................... 55
   2.5 MANDENI SMME AND INFORMAL ECONOMY PROFILES .............................................. 60
   2.6 SWOT ANALYSIS .............................................................................................................. 70
SECTION 3: STRATEGY FORMULATION ................................................................................. 74
   3.1 VISION ................................................................................................................................ 74
   3.2 GOALS ................................................................................................................................ 76
   3.3 STRATEGIC FRAMEWORK ............................................................................................... 79
SECTION 4: IMPLEMENTATION FRAMEWORK ....................................................................... 85
   4.1 IMPLEMENTATION PLAN .................................................................................................. 85
   4.2 SITE IDENTIFICATION FOR SMMES AND INFORMAL TRADING ................................... 88
   4.3 FINANCIAL PLAN................................................................................................................ 92
   4.4 INSTITUTIONAL PLAN ....................................................................................................... 97
   4.5 MONITORING AND EVALUATION TOOLS AND MECHANISMS ...................................... 98
   4.5 PROJECTS BUSINESS PLANS ........................................................................................ 100
SECION 5. GENERAL CONCLUSION ....................................................................................... 115
REFERENCE ............................................................................................................................... 118
ANNEXURE 1: MANDENI SMME AND INFORMAL ECONOMY QUESTIONNAIRES ............ 121
ANNEXURE 2: MANDENI DRAFT STREET TRADING BY-LAWS .......................................... 126




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SECTION 1: INTRODUCTION

1.1 PROJECT BACKGROUND

Small businesses have a major role to play in the South African economy in terms of employment
creation, income generation and output growth. They are also often the vehicle by which the
lowest-income people in our society gain access to economic opportunities; therefore, it is
important for small medium and micro enterprises to be part of each municipality‟s Local
Economic Development (LED) Plan.


The informal economy, on the other side, also makes an important contribution to the economic
and social life of most South Africans, including most residents in Mandeni. It developed rapidly
in the 1990s due to deregulation of the economy and the transition to a democratic political
system. The informal economy in Mandeni is heterogenic, ranging from street traders and
shebeen owners to child carers and domestic workers. It is often characterised by its flexibility,
creativity, resilience to absorb shocks, and its ability to adapt to changing external environments.
However, by its very description it falls outside the regulatory environment in which all formal
businesses and their workers operate, increasing the risks faced by informal economy workers
and enterprises, and reducing the support and protection these workers and enterprises can
receive from government.


The characteristics of the informal economy have ensured that it will never disappear, but instead
continues to grow in size and importance. A problem facing officials in Mandeni is that informal
economy activities are spread throughout the municipality, with many of its activities taking place
in rural areas where monitoring is difficult. In addition, by its very nature, the informal economy is
hard to manage and, more importantly, to support its development.


1.2 PURPOSE OF THE STUDY

The importance of the SMME and informal economy for economic development and job creation
has been clearly acknowledged in several development strategies and plans at national and
provincial level. Despite the significance of the SMME and informal trading in the economy, there
have been few detailed research studies on their structures, dynamics and opportunities. In
addition, available national data is unhelpful and even contradictory in terms of estimates of the
size of the SMME/informal economy sector. Because of the poor database and of the limited
nature of recent detailed research on the SMME/informal economy, strategic planning initiatives
are difficult to undertake.


Currently the Mandeni Municipality does not have a clearly defined SMME/informal economy
Development Programme and this is a challenge that requires urgent intervention/s if the
Municipality is indeed going to adhere to its constitutional obligation of promoting socio-economic
development in its area of jurisdiction.



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It is therefore, against that brief background that the Municipality decided to develop a “solution
driven” and an “implementable SMME/informal trading development and management strategy”
within its area of influence. Mandeni recognises the role played by this informal sector in enabling
individuals to sustain their basic needs. The municipality therefore does not intend to prevent
individuals from undertaking such activities in the CBD but seeks rather, to manage the sector to
the benefit of all concerned and create conducive environment for them to trade. This will in turn
assist the facilitation of the future sustainable growth in a regulated environment conducive to
trading purposes. Order and structure within these sectors is essential especially given the
accelerating growth and increasing opportunities that are expected at the King Shaka
International Airport and Dube Trade Port developments unfold.


The SMME/informal trading development and management strategy will guide local officials in the
management and support of the workers in both SMME and informal economy in Mandeni and
will address objectives, which relate to the SMME/informal economy problems identified in
Mandeni. These include:

o   Support the growth and development of the SMME/informal economy to the benefit of the
    overall local and provincial economies.
o   Reduce the vulnerability and risks of informal economy workers and enterprises.
o   Encourage economic and employment growth in rural areas to boost overall development of
    Mandeni.


The strategy provides guidelines on how to manage and support the development and growth of
the SMME/informal economy to the benefit the overall economy of Mandeni. The strategy
responds to the following problems:

o   Clarify the regulatory and legislative environment of the informal economy in Mandeni
o   Define the role and responsibilities of local government regarding informal economy workers
    and enterprises
o   Provide clear guidelines on strategic planning for informal economy interventions and
    subsequent municipal resource allocations
o   Form the basis for common action by different government spheres and departments to
    develop, manage and support the informal economy in rural and urban areas
o   Establish a representative forum for local government to engage with informal economy
    workers in planning and implementing development initiatives in the informal economy
o   Guide actions and initiatives to develop the various sectors within the informal economy and
    to strengthen the linkages with formal economy as shown in figure 1.1
o   Guide support services to informal economy workers and enterprises
o   Advise on the best usage of Municipal Infrastructure Grant (MIG) funding to construct
    appropriate facilities necessary to support the growth and development of the informal
    economy




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Figure 1.1 Progression from second economy to first economy




                    2nd Economy                                1st Economy
      BUSINESS CONTINUUM
                                        Unregistered           Registered
                     Informal                                    Formal
    Informal                             Informal
                     Services                                   SMMES
    Trader                               SMMES
                     Business




1.3 METHODOLOGY

As part of the methodology followed, the project engages with key local stakeholders from the
private, non-governmental and public sectors in the development of the informal economy
strategy. In the implementation of the informal economy strategy, partners will be identified for
each specific project. The project will include a short to medium term implementation plan for
identified activities, as well as proposed system to monitor and evaluate progress. The
SMME/informal economy strategy will be a living document that should change as circumstances
dictate, and will thus be structured so that it can be refined or reworked to resolve problems when
these occur.


The SMME/informal economic strategy will consolidate and add value to the existing strategies
and programmes to facilitate and guide economic development and investment in the Mandeni
Local Municipality. The strategy will be based on identified development needs, opportunities and
comparative advantages that will unlock the latent economic development potential of the area.

Therefore the above goals are grouped into six steps as shown in diagram 1.2


- Step 1: Orientation helps to finalise the project scope in the terms of the goal and objectives to
be achieved and deliverables to be provided with the study. Identification and mobilisation of
SMME/informal economy stakeholders of the municipality is undertaken here.

- Step 2: Undertake situational analysis and review of national and provincial strategies and
policies related to SMME/informal economy. Local Economic Profile Analysis that made easier to


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understand the economic profile of the Mandeni will be analysed.            In-depth assessment of
informal economy in Mandeni through secondary sources, workshops, focus groups and
interviews will be also undertaken. Holistic sector integration allows the gathering of relevant and
up-to-date information and data of the Mandeni Municipality and leads to the SWOT analysis.

- Step 3: Strategy Formulation: identification of trends and patterns needs and key challenges
facing SMME/informal economy. Undertake a detailed analysis of priority issues including
identification of appropriate sites for operation.

- Step 4: Funding Sources Accessibility: Identification of potential national, provincial and local
sources of funding. Review of funding criteria and selection of most suitable funding sources will
be undertaken

- Step 5: Development of the implementation plan. The project will develop a proposed
implementation plan for the Informal Economy Strategy, which would identify specific actions and
projects to be initiated to enhance the expected results and overall objectives. This step will
therefore be used to specify the second axis of the strategic implementation matrix.

- Step 6 Stakeholders‟ interactions: this phase of the project is an ongoing one, and is
incorporated in all the steps above. Interaction with key stakeholders including (but not limited to):
Mandeni municipal officials, informal traders, SMME firms, SEDA, the dti as well as the Mandeni
Municipality Councillors.




Figure 1.2 Project Methodology Diagram appears on the following page




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Figure 1.2 Project Methodology Diagram


                                                                                   Step One Orientation
                                                          o    Final study scope, objectives, and possible dates for meetings.
                                                          o    Collection and Assessment of documentation
                                                          o    Identify specific gaps and shortcomings in the data available.


                                                                            Step Two Situational Analysis
                                                     o   Economic and socio-economic evaluation of the Municipality
                                                     o   In-depth assessment of SMME/ informal economy in Mandeni
                                                     o   Conduct a trend analysis to project population growth and economic
 Step Six: Stakeholders’ Interactions




                                                         development potential.
                                                     o   Workshops and work session with key role-players and stakeholders



                                                    Step Three: Strategy formulation                                 Step Four:
                                        3       o     Stakeholder mobilisation and                         Funding Sources Accessibility
                                                      consultation
                                                o     Integrate the information generated
                                                                                                       o     Identification of potential sources of
                                                      so far and identify sectors potentials,                funding (local, provincial and
                                                      key issues and development                             national)
                                                      opportunities, by means of a focused             o     Review of funding criteria
                                                      sectoral analysis and verified by a              o     Selection of most suitable funding
                                        5             prioritisation workshop. Particular                    sources
                                                      emphasis will be placed on unlocking             o     Preparation of funding request
                                                      economic development potential in a                    outlines
                                                      rural context




                                                                               Step Five: Implementation Plan
                                                                      o   Integrate the different projects into a coherent Informal
                                                                          economy strategy consisting of functional
                                                                          programmes.
                                                                      o   Develop a project implementation plan
                                                                      o   Package selected anchor projects as business plans
                                                                          and evaluating potential funding sources.




1.4 SOURCE OF INFORMATION

Information for formulation of this Strategy was sourced from various sources. Key of these was
detailed desktop study, stakeholders‟ consultation, interviews, and surveys.

DESKTOP RESEARCH

The desktop research was undertaken throughout the study to collect international, national,
provincial as well as local information pertaining to the informal economy issues. These include
policies, programmes, projects, and the like.


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The source of information extracted consists of:
o   Internet websites.
o   Legislation related to SMME/informal economy development and support.
o   Publications and research documents concerning SMME/informal economy development.
o   Annual reports and strategic documents of institutions involved in SMME/informal economy
    development and support.
o   Internet correspondence with officials involved in economic development.



STAKEHOLDERS’ CONSULTATION AND WORKSHOP

The process of stakeholders‟ identification and consultation has been assisted by the Mandeni
LED Unit through a number of contacts being facilitated by Mrs. Patience Sibisi, the LED Officer
as part of their in kind contribution to the project. SMMEs representatives, Sundumbili, Gcaleka
and Isithebe informal traders‟ representatives, as well as Municipal officials were part of various
project meetings and contacts organised.

                                                                                                 th
With regards to workshops, a community based pre-workshop took place on Wednesday 19
March in Sibusisiwe Community Hall Sundumbili in Mandeni. The purpose of this pre-workshop
was to explain the objective of the project to the stakeholders and obtain from them preliminary
inputs with respect to the issues constraining the growth and development of SMMEs and
informal economy. Secondly, the purpose of the pre-workshop was to prepare the stakeholders
about the upcoming SMME/Informal economy survey.

                                        th
The second workshop took place on 27 November 2008 at the Municipal hall. More that seventy
stakeholders including SMMEs and informal traders participated in the workshop.



INTERVIEWS AND SURVEYS

Two surveys have been organised in Mandeni Municipality, one for the informal traders and the
other for SMMEs. Sector specific questionnaires were designed for both surveys.

With regard to the informal traders, four fieldworkers were recruited by the Mandeni Municipality
LED Unit to undertake survey that determined the profile of the informal traders in the area.
However, given certain perturbation (including taxi violence in Mandeni), planned for four days,
survey lasted for about two weeks to be completed. This affected the project time programme by
delaying some study‟s steps. However, four hundred and two questionnaires were efficiently
completed.

On the other hand, it should be indicated that Mandeni Municipality does not have a database for
the informal traders as per many other municipalities in the country. However, Mandeni has some
key areas where informal business are regularly taking place including Mandeni, Siqume-
Renkens, Sundumbili, Gcaleka and Isithebe (flea market). Each of these main trading areas in

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was visited by the fieldworkers over the duration of the survey period and the sample of four
hundred traders was unanimously adopted by the project steering committee (PSC) members
(while the field workers surveyed four hundred and two). It should be indicated that the informal
traders interviewed where those available on the day of the survey and those willing to be
interviewed.

The informal traders survey were conducted in the language of preference of the interviewee. The
locally recruited and trained fieldworkers speak isiZulu as their mother tongue and were able to
conduct the interviews in either isiZulu or English. There was no need of the other 7 official
languages of South Africa.


Regarding the SMMEs, four hundred and ten SMMEs of Mandeni Municipality (including
Mandeni, Isithebe and Sundumbili) were telephone-surveyed. A call centre was set up at Urban-
                      th        th
Econ‟s offices from 30 June to 4 July for the telephone surveys. The database for SMMEs from
the Municipality, the white pages and yellow pages telephone directory were used as the basis to
make the calls from and SMMEs were randomly selected. Three field workers conducted
telephone survey with 27 SMMEs contacted on average per day over the five-day period. The
fieldworkers were able to conduct the interviews in either English or isiZulu as preferred by the
interviewee.


It should be indicated that the above-mentioned survey techniques constitute a major source of
SMMEs and informal traders data for this Mandeni study.



1.5 REPORT OUTLINE

The full report will have the following sections:

1. The first introductory section deals with the administration part of the document. Here the
background, objectives and methodology of the project are presented.


2. The second section deals with the Situational Analysis of the Study, including the policy
framework related to the SMME/informal economy. Here a summary of all the relevant legislation
and policy documents at national, provincial and local level that have an impact on the
SMME/informal economy sector are provided. The same section deals also with the economic
profile of Mandeni; this includes the demographic and socio-economic analysis of the
Municipality. The SWOT analysis draws this section to a conclusion by providing the economic
strengths, weaknesses, opportunities and threats of the Mandeni SMME/informal economy.

3. The third section presents the Mandeni SMME and informal economy new vision, goals and
strategies.




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4. The fourth section presents the strategy implementation framework. Apart from the unpacking
of the suggested projects/activities, this section deals also with the following:


o    Site identification for services to be provided to SMMEs and Informal Traders
o    Implementation Plan
o    Financial Plan
o    Institutional Plan
o    Monitoring and Evaluation Mechanisms
o    Projects‟ Business Plans including identification and selection of suitable funding sources


5. The fifth section is made of a general conclusion of the study




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SECTION 2: SITUATIONAL ANALYSIS

2.1 UNDERSTANDING SMMES AND INFORMAL ECONOMY


2.1.1 WHAT ARE SMMES?

The small business sector plays a crucial role in the national economy. The SMME sector is vital
in developing economies, providing a balance between supply and demand in the job market,
bringing competition among businesses that leads to the more efficient utilization of resources,
the development of skills and technology, and thus the overall development of the economy. It is
considered to be one of the major sources for employment creation and community growth. As
identified in the National Small Business Act, No. 102 of 1996, “small business" means a
separate and distinct business entity, including cooperative enterprises and non-governmental
organisations, managed by one owner or more which, including its branches or subsidiaries, if
any, is predominantly carried on in any sector or sub-sector of the economy and which can be
classified as a micro-, a very small, a small or a medium enterprise.

An SMME can be also defined as an enterprise, which is owner operated and functions with the
primary focus of providing a livelihood for the owner and the immediate employees. An SMME
distinguishes itself from „Big business‟ as it typically has a smaller turnover, marginal asset value,
smaller number of employees, simpler organisational structures and generally lower barriers to
entry and less onerous legal obligations and regulative compliance issues. A further
distinguishing element of an SMME, when compared to „Big Business‟ is that often, the growth,
development and ultimate survival of the SMME hinges on the skills level, morality, innovation
and resources applied by its owner. The National Small Business Act (Act 102 of 1996) provides
definitions for various following SMME categories:

Micro-Enterprises


Micro-enterprises have a turnover below the VAT registration limit and have less than 5 paid
employees. These enterprises tend to lack formality in terms of registration for tax purposes,
labour legislation, business premises and accounting procedures. Examples of micro enterprises
are spaza shops, mini taxis, and household industry. In the category of micro enterprises, there
are survivalist enterprises. Survivalist enterprises run with few paid employees and minimal asset
value. The enterprises generate income below the minimum income standard or the poverty line,
and their main aim is to provide minimal subsistence means for the unemployed and their
families. Most entrepreneurs in this category are involved in hawking, vending, and subsistence
farming. This category has great potential for the absorption of unskilled labour, as has been
confirmed by the correlation between the unemployment rate and the amount of self-employed in
unregistered, mainly survivalist enterprises that prevails in informal settlements and rural areas.




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Very Small Enterprises


Very small enterprises employ fewer than 10 paid employees, but in the mining, electricity and
manufacturing and construction sectors, fewer than 20. They operate on the formal market and
usually have access to modern technology.

Small Enterprises


Small enterprises have fewer than 50 paid employees and are more established, with more
complex business practices. Usually, the owner does not manage the enterprise directly, and a
secondary coordinating mechanism has been put in place. Growth from a small to medium-sized
enterprise requires an accumulation of resources as well as a set of appropriate incentives for
enterprise expansion.

Medium Enterprises


Medium sized enterprises are enterprises with up to 100 paid employees; although in the mining,
electricity and manufacturing sectors, up to 200. Although usually controlled by an
owner/manager, the ownership and management structure is more complex. A more complete
separation of ownership and management is often the natural barrier between medium and large
enterprises.


Using the National Small Business Amendment Act (Act 26 of 2003) as a starting point, the
following table summarises the „qualification criteria‟ based on employee numbers and turnover
for SMMEs.

The table below shows various sectors, but there each sector has its own sub-sectors which will
not be mentioned in the table.


Table 2.1: Classification of SMMEs According to the National Small Business Act 102, 1996
Sector or sub-sectors in   Size or       Total full-time   Total annual   Total gross asset
accordance with the        class         equivalent of     turnover       value (fixed
Standard Industrial                      paid employees                   property excluded)
Classification                           Less than:        Less than:     Less than:

Agriculture                   Medium                 100       R 4.00 m              R 4.00 m
                                Small                 50       R 2.00 m              R 2.00 m
                            Very small                10       R 0.40 m              R 0.40 m
                                 Micro                 5       R 0.15 m              R 0.10 m

Mining and Quarrying          Medium                 200       R30.00 m             R18.00 m
                                Small                 50       R 7.50 m             R 4.50 m
                            Very small                20       R 3.00 m             R 1.80 m
                                 Micro                 5       R 0.15 m             R 0.10 m
Manufacturing                 Medium                 200       R40.00 m             R15.00 m
                               Small                  50       R10.00 m             R 3.75 m


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Sector or sub-sectors in      Size or        Total full-time     Total annual      Total gross asset
accordance with the           class          equivalent of       turnover          value (fixed
Standard Industrial                          paid employees                        property excluded)
Classification                               Less than:          Less than:        Less than:

                               Very small                   20         R 4.00 m                R 1.50 m
                                    Micro                    5         R 0.15 m                R 0.10 m
Electricity, Gas and             Medium                    200        R40.00 m                R15.00 m
Water                              Small                    50        R10.00 m                R 3.75 m
                               Very small                   20        R 4.00 m                R 1.50 m
                                    Micro                    5        R 0.15 m                R 0.10 m

Construction                     Medium                    200        R20.00 m                 R 4.00 m
                                   Small                    50        R 5.00 m                 R 1.00 m
                               Very small                   20        R 2.00 m                 R 0.40 m
                                    Micro                    5        R 0.15 m                 R 0.10 m
Retail and Motor Trade           Medium                    100        R30.00 m                 R 5.00 m
and Repair Services                Small                    50        R15.00 m                 R 2.50 m
                               Very small                   10        R 3.00 m                 R 0.50 m
                                    Micro                    5        R 0.15 m                 R 0.10 m

Wholesale Trade,                 Medium                    100        R50.00 m                 R 8.00 m
Commercial Agents and              Small                    50        R25.00 m                 R 4.00 m
Allied Services                Very small                   10        R 5.00 m                 R 0.50 m
                                    Micro                    5        R 0.15 m                 R 0.10 m

Catering,                        Medium                    100        R10.00 m                 R 2.00 m
Accommodation and                  Small                    50        R 5.00 m                 R 1.00 m
other Trade                    Very small                   10        R 1.00 m                 R 0.20 m
                                    Micro                    5        R 0.15 m                 R 0.10 m

Transport, Storage and           Medium                    100        R20.00 m                 R 5.00 m
Communications                     Small                    50        R10.00 m                 R 2.50 m
                               Very small                   10        R 2.00 m                 R 0.50 m
                                    Micro                    5        R 0.15 m                 R 0.10 m

Finance and Business             Medium                    100        R20.00 m                 R 4.00 m
Services                           Small                    50        R10.00 m                 R 2.00 m
                               Very small                   10        R 2.00 m                 R 0.40 m
                                    Micro                    5        R 0.15 m                 R 0.10 m

Community, Social and            Medium                    100        R10.00 m                 R 5.00 m
Personal Services                  Small                    50        R 5.00 m                 R 2.50 m
                               Very small                   10        R 1.00 m                 R 0.50 m
                                    Micro                    5        R 0.15 m                 R 0.10 m
Source: Schedule 1 to the National Small Business Act of 1996, as revised by the National Small Business
Amendment Bill of March 2003




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                                                        1
CONSTRAINTS FACING THE SMME SECTOR


There can be no doubt that, compared to big business, small businesses face a wider range of
constraints and problems and are less able to address problems on their own, even in effectively
functioning market economies. The constraints relate, among others, to the legal and regulatory
environment confronting SMMEs, the access to markets, finance and business premises (at
affordable rentals), the acquisition of skills and managerial expertise, access to appropriate
technology, the quality of the business infrastructure in poor areas and, in some cases, the tax
burden. In the South African context for example, the constraints have been particularly hard on
entrepreneurs in rural areas and on women. In addition to sector-specific differences of
constraints, the legacy of apartheid constitutes an important factor in the inability of black owned
or controlled small enterprises to face business development constraints.

Much has been written about these issues over the past few years and debated at public forums
internationally as well as in South Africa.

This study deals specifically with Mandeni Municipality and specific challenges faced by SMMEs
in this area will be presented in the sub section dealing with Mandeni‟s SMME profile.



FACTORS INFLUENCING SMMES PERFORMANCE2

The active promotion of SMMEs depends on the interaction of a wide range of actors in an
equally wide range of support areas at national, provincial as well as local levels. It ranges from
self-help activities of groups of small enterprises and the abolition of regulatory obstacles for
more effective co-operation between small and bigger enterprises. Major national factors that
influence SMMEs performance include: legal framework; regulatory conditions; access to
information and advice; access to marketing and procurement; access to finance; the physical
infrastructure; training in entrepreneurship, skills and management; industrial relations and the
labour environment; access to appropriate technology; encouraging joint ventures; capacity-
building and institutional strengthening; and differential taxation and other financial incentives.

CREATING AN ENABLING LEGAL FRAMEWORK

In order to formally recognise the importance given to the small-enterprise sector in the process
of economic reconstruction and development, and to facilitate policy implementation in different



1
  These general and broad SMME constraints are sourced from various documents from DTI, ILO, Government gazette,
referenced in the back of this document.
2
  Sourced from Department of Trade and Industry (DTI), 2004, Review of ten year of small business support in South
Africa 1994-2004, Entrepreneurial Empowerment, Job creation, and Equity facilitated An Analysis of the evolution of
public sector support for small enterprises in South Africa.




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areas, the government is committed to passing a number of enabling acts. The experience from
other (semi) developed countries in Europe, Asia and Latin America shows that properly
designed acts can play a positive role, as long as the purpose and principles are clear and
phasing-out dates are set for affirmative changes. It is too early at this stage to detail the number
of key acts needed to create an enabling legal framework. Besides, in some cases changing
market behaviour in anticipation of legal steps may obviate formal legislation. The following
areas, however, warrant serious attention.

STREAMLINING REGULATORY CONDITIONS

Inappropriate or unduly restrictive legislative and regulatory conditions are often viewed as critical
constraints on the access of small enterprises into the business sector and as obstacles to their
growth. Since government at national, provincial, sub-regional and local level is responsible for
the legislative and regulatory framework and its ongoing adjustment, it is also its role to assure
the appropriateness of these rules and regulations for the small-business sector.

All over the world, and certainly also in South Africa, there is discussion and frequently
disagreement about the proper degree of regulation and deregulation in the business scene.
Unduly strict regulations often harm small and, in particular, emergent enterprises and benefit the
larger, established ones, whereas less regulation may lead to aggressive competition between
market entrants, to the neglect of worker interests, or to health hazards and environmental
destruction.

ACCESS TO INFORMATION AND ADVICE

Lack of access to appropriate, relevant and understandable information and advice is one of the
most important problems of small enterprises, in particular micro-enterprises, survivalists and
small start-up enterprises. Due to past discrimination and lack of opportunities, this problem is
most severe among black entrepreneurs. Some progress has been made with the preparation of
information material relevant for small enterprises and the dissemination of information and
advice. Yet, to date the number of enterprises effectively reached remains small, compared to the
vast number of people involved in self-employment in both urban and rural areas.

ACCESS TO MARKETING AND PROCUREMENT

Small enterprises usually regard market constraints and the inability to sell their products and
services as one of the most serious obstacles to the establishment of businesses and growth
beyond mere subsistence level. This perception is paralleled by many studies nationally and
internationally, which view market access as a critical factor in business growth, in particular in
the case of entrepreneurs from disadvantaged communities.


Responsibility for steps to overcome this constraint falls upon many different groups: individual
entrepreneurs and groups of small businesses, which have to compete with others for the same
clients; local government and business associations, who should reconsider regulations hindering

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market access of newcomers; the established business community, who should practise what
they preach by opening up competition rather than controlling markets; and public-sector
departments as well as big enterprises, who should re-orientate procurement towards small-
enterprise suppliers and subcontractors.

ACCESS TO FINANCE

In surveys among small enterprises, access to finance comes out as one of the most urgently felt
needs. This remains true even though other problem areas (like marketing, technical skills, poor
product quality, weak management, etc.) often aggravate the financial position of small
enterprises and hamper their access to funds.

The financial needs of different types of SMMEs vary widely, with access problems particularly
severe in rural areas, among start-up micro-enterprises and among those owned or controlled by
women as well as other formerly disempowered groups, and in certain higher-risk business
categories.

THE PHYSICAL INFRASTRUCTURE

The development and financing of business and industrial premises (shops, offices, factories,
market stands, hawker shelter, etc.) and infrastructure facilities, including the supply of electricity,
water, telecommunication connections, sewage, street lights, parking facilities, etc., is usually
seen as the responsibility of either the private sector or local authorities, rather than the
government. Yet, due to the past neglect of the needs of black townships and emergent
enterprises, a serious backlog of even basic facilities has emerged in both rural and urban area
and has been identified in the RDP as one of the areas deserving special attention. Here we refer
to the supply of electricity to businesses, basic services and the road infrastructure in commercial
and industrial areas, facilities for fresh produce and other markets, industrial incubator structures,
telecommunications, postal delivery services and appropriate business zoning and planning
processes.


TRAINING IN ENTREPRENEURSHIP, SKILLS AND MANAGEMENT

The acquisition of relevant vocational, technical and business skills is generally regarded as one
of the critical factors for success in small enterprises. In addition, literacy and entrepreneurial
awareness are seen as particularly important to enable people to advance from survivalist
activities into larger and better earning enterprises. With the rapid expansion in the range and
number of small enterprises all over the country, South Africa faces a daunting challenge in the
sphere of small-business-orientated education and training. Responsibility for education, training
and experience transfers rests on a wide range of institutions, including the central and provincial
tiers of government, NGOs, parastatals and the private sector. This also applies to the sphere of
entrepreneurship sensitising, the training in skills relevant to small enterprises in different sectors
and industries, and the acquisition of management experience by small-business owners and
staff.


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INDUSTRIAL RELATIONS AND THE LABOUR ENVIRONMENT

The relationship between labour and small enterprise is complex and open to frequent
misunderstanding. At one level, among survivalist activities and the majority of micro-enterprises
there is little difference between the worker and the enterprise; earnings generated by the
enterprise, net of direct expenses for material and other inputs, are identical with the
remuneration of the operator, who is usually also the owner and the only worker. In fact, the
majority of these micro-enterprises employ no outside labour; at best they engage other family
members and relatives, with individual rewards entirely dependent on earnings and the needs of
the household. Any improvement in the business will improve net income and the earnings of the
household. With respect to small and medium enterprises there is widespread belief that the
relationship between labour and enterprise is adversarial, i.e. Owners/operators want to keep
labour's remuneration as low as possible in order to be able to compete with larger enterprises.

ACCESS TO APPROPRIATE TECHNOLOGY

Just like training, finance and business premises, technology is often seen as an important factor
influencing the success of small enterprises, but is not always accessible to them. This applies to
both ends of the technology spectrum, viz. sophisticated technology needed for the
competitiveness of small enterprises in the modern manufacturing and services sectors, and
“appropriate” technology for small enterprises operating in the labour-intensive, low-skill spheres.
Both these areas deserve more attention and may justify some government support.

ENCOURAGING JOINT VENTURES

The needs of small and medium enterprises are often so complex that even a comprehensive
range of support services cannot do justice to all the requirements. The most effective way to
acquire experience and skills, enter new markets, structure additional financing and meet market
competition is quite often a joint venture with an experienced local or foreign partner. This can
happen among small numbers of co-operative partners, it can be a black/white partnership, a big
business/small enterprise link-up, a franchise relationship or some three-pronged foreign/local
venture. In other developed countries, such joint ventures are far more prevalent than in South
Africa, where racial segmentation, oligopolistic exclusiveness and sanctions, as well as
disinvestment, have prevented such developments in the past. Lack of experience and the effect
of economic stagnation have also strengthened distrust around joint ventures in the past.

CAPACITY-BUILDING AND INSTITUTIONAL STRENGTHENING

As in other areas of the socioeconomic development process, organised business has an
important role to play in the strengthening of small business interests. This relates as much to
business organisations operating at a national and sectoral level, as it applies to those focusing
on the provincial and local level. Of particular concern are those organisations that represent the
interests of emergent small, medium and micro-enterprises. Compared to the more developed


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countries, South African business organisations are financially weak, and most of them have a
very limited capacity to actually support and strengthen small businesses. A high degree of
fragmentation further weakens these institutions, with the legacy of apartheid all-pervasive.

DIFFERENTIAL TAXATION AND OTHER FINANCIAL INCENTIVES

Over many years, representations have been made for the differential treatment of small
enterprises in order to reduce their tax burden and facilitate the reinvestment of small enterprise
profits, which are often the only basis for new investments or the expansion of existing small
enterprises.


To sum up, this sub-section detailed SMME in terms of definition, SMMEs best cases and factors
influencing SMME performance. The National Small Business Act, No. 102 of 1996, defines it as
a separate and distinct business entity, including cooperative enterprises and non-governmental
organisations, managed by one owner or more which, including its branches or subsidiaries, if
any, is predominantly carried on in any sector or sub-sector of the economy and which can be
classified as a micro-, a very small, a small or a medium enterprise.


Worldwide, SMMEs play a major role in the economy in terms of employment creation, income
generation and output growth. They are also often the vehicle by which the lowest-income people
in our society gain access to economic opportunities.

Factors influencing SMMEs performance encompass: legal framework; regulatory conditions;
access to information and advice; access to marketing and procurement; access to finance;
physical infrastructure; training in entrepreneurship, skills and management; industrial relations
and the labour environment; access to appropriate technology; encouraging joint ventures;
capacity-building and institutional strengthening; and differential taxation and other financial
incentives.

2.1. 2 THE INFORMAL ECONOMY EXPLAINED

Unemployment is one of the major macroeconomic challenges facing South Africa. Many workers
who are not able to find employment in the formal sector of the economy can expect to find an
income from work in the informal economy. Some people are stuck in the unemployed category
for a long period of time. Eventually they do not have any other choice than to venture into the
informal sector of the economy to raise income or be dependent on other income earners for
survival

The informal economy is a broad term used to describe a very large and growing sector of the
global economy where the worlds' working poor earn a living. The term seeks to capture the
reality of the large share of the global workforce that remains outside the world of full-time, secure
stable and protected jobs and in many cases with no form of social protection.




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Informal work traverses many occupations, including self-employed and own-account workers,
migrant, casual and temporary workers in an increasingly globalising world economy. The
informal economy also comprises different sectors - apart from street vendors, informal market
vendors and hawkers, there are also waste collectors, home-based, informal transport and
agricultural workers.

                                           3
In his publication, Antonio Ocampo pointed out that a precise definition of the term “informal
economy” is hard to pin down, though there have been numerous attempts over the years to
arrive at a working definition. Without a common definition, however, it is important to bear in
mind that measurements will vary according to the way the term is defined.


Essentially, the informal economy can be described in terms of those who work in it (employment
status or population) and means informal employment; or in terms of the activities that take place
                                                                                 4
in it (type of economic activity or production) meaning informal sector .


Informal employment is a population-based definition. It includes informal wage employment
outside informal sector. To be precise, casual workers in formal sector, employers in informal
enterprises, own account workers in informal enterprises, unpaid family workers both in formal as
well as informal enterprises. Informal sector as production-based definition includes employment
and production that take place in small and unregistered enterprises.


It is important to note that people in the informal economy are often excluded from various legal
protections and they are unable to access the basic benefits or enjoy the fundamental rights
granted to those in the formal economy. These unprotected conditions often include unsafe and
unhealthy working conditions, long working hours with insufficient and unsteady compensation,
low skill and productivity levels, and a general lack of access to information, markets, finance,
training and technology.

It should be noted that for the purpose of this report a 3-pronged definition of the informal
economy will be adopted:

LEGAL APPROACH

In terms of legal approach the informal economy includes all illegal and unregistered businesses.

ECONOMIC APPROACH

The informal economy here concerns all micro businesses in all sectors as defined by the
National Small Business Act, No. 102 of 1996.



3
  Sourced from Antonio Ocampo, J. 2005 “The inequality predicament: Report on the world social situation 2005,”
Produced by the United Nations Department of Public Information United Nations publication.
4
  Jeemol Unni, 2006 “Informal employment and informal sector,” Commission for Enterprises in the Unorganised Sector,
India, statistics discussion group, WIEGO General Assembly, Durban

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Table 2.2: Classification of SMMEs According To the National Small Business Act, 1996
Sector or sub-sectors in accordance    Size or class     Total      full-time Total annual    Total gross asset value
with the Standard Industrial                             equivalent of paid turnover          (fixed         property
Classification                                           employees            Less than:      excluded)
                                                         Less than:                           Less than:

Agriculture                            Micro             5                    R 0.15m         R 0.10m

Mining and Quarrying                   Micro             5                    R 0.15 m        R 0.10 m

Manufacturing                          Micro             5                    R 0.15 m        R 0.10 m

Electricity, Gas and Water             Micro             5                    R 0.15 m        R 0.10 m

Construction                           Micro             5                    R 0.15 m        R 0.10 m

Retail and Motor Trade and Micro                         5                    R 0.15 m        R 0.10 m
Repair Services

Wholesale Trade, Commercial Micro                        5                    R 0.15 m        R 0.10 m
Agents and Allied Services

Catering, Accommodation and Micro                        5                    R 0.15 m        R 0.10 m
other Trade

Transport,   Storage             and Micro               5                    R 0.15 m        R 0.10 m
Communications

Finance and Business Services          Micro             5                    R 0.15 m        R 0.10 m

Community, Social and Personal Micro                     5                    R 0.15 m        R 0.10 m
Services
Source: Schedule 1 to the National Small Business Act of 1996, as revised by the National Small Business
Amendment Bill of March 2003

It should be noted that Micro and survivalist enterprises involve owner, some family members and
one or two employees as well as activities by people unable to find a job. The Act recognises that
the survivalist businesses have a large number of women and therefore they might be considered
as an opportunity to support the advancement of women.

SOCIAL APPROACH

According to the social approach the informal economy consists of all disenfranchised and
socially unprotected businesses.
The ILO Declaration on Fundamental Principles and Rights at Work articulates values enshrined
in the ILO Constitution, to which States subscribe when they join the Organization. Unlike
Conventions, which when ratified give rise to specific legal obligations, the Declaration, which is
not subject to ratification, reaffirms broad principles. It recalls that the guarantee of fundamental
principles and rights at work “enables the persons concerned to claim freely and on the basis of
equality of opportunity their fair share of the wealth which they have helped to generate and to
achieve fully their human potentials”. It targets in particular “the problems of persons with special

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social needs”. Informal workers, who do not enjoy their basic rights and who have limited access
to voice and social protection, clearly have such needs. Moreover, among informal workers,
special attention needs to be given to particularly vulnerable groups – women, child workers,
youth, persons with disabilities, migrants and ethnic minorities – who are often socially excluded
and subjected to discrimination, exploitation or forced labour.

The Government policies and legislation are key elements in determining the enabling or
disabling environment for organization and representation of those in the informal economy. The
voice deficit in the informal economy cannot be effectively and sustainably addressed in the
absence of a supportive legal framework and governance.


The most important role of governments in this regard is to guarantee the freedom of all workers
and employers, irrespective of where and how they work, to form and join organizations of their
choosing without fear of reprisal or intimidation.


THE INFORMAL ECONOMY AND THE SECOND ECONOMY

In August 2003, President Mbeki introduced the idea of South Africa being characterised by a
„first economy‟ and a „second economy‟ operating side by side. In November of the same year, in
an address to the National Council of Provinces the president stated: “The second economy (or
the marginalised economy) is characterised by underdevelopment, contributes little to GDP,
contains a big percentage of our population, incorporates the poorest of our rural and urban poor,
is structurally disconnected from both the first and the global economy and is incapable of self
                                     5
generated growth and development.”


In the absence of a coherent conceptualisation of and any systematic data on the second
economy, we focus, in this paper, on one important element of the second economy – the
informal economy.

However, the informal economy is not structurally disconnected from the formal economy, large
numbers of workers may be moving regularly between the formal and informal economy. At the
household level, there seems to be an important link between household members‟ access to
employment in the formal economy and informal economy activities.


FACTORS INFLUENCING THE INFORMAL ECONOMY6




5
 Sourced from Skinner, Caroline & Valodia, Imraan (2006) Two Economies? A Critique of the Second Economy Notion in
Recent South African Policy Discussions . Centre for Civil Society Colloquium on the Economy, Society and Nature: 1-10.
6
  Sourced from the International Labour Organisation: Fundamental Principles and Rights at Work and Globalization:
Where Do We Stand? Presentation by Stephen Pursey (IPG), Decent Work – Issues and Policies, ILO Staff Conference,
Turin 1-2 October 2001

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According to the International Labour Organisation (ILO: 2001), there are important forces at work
that are expanding the size and changing many of the characteristics of the informal economy
and linking the informal and formal economies. These include:
LEGAL AND INSTITUTIONAL FRAMEWORKS

Given that informality has often been described as those activities outside or on the margins of
the law, it is essential to examine the legal and institutional framework in a country. Three types
of legislation and regulations are important: commercial or business regulations governing the
establishment and operation of enterprises; the laws pertaining to property rights, which could
affect the ability to transform assets into productive capital; and labour legislation governing
employment relationships and the rights and protection of workers.

What needs to be understood is whether existing laws and institutions are poorly or well designed
in terms of their influence on the costs and benefits to enterprises and workers of becoming and
staying formal or informal. “More emphasis needs to be placed on an analysis, from the
perspective of persons trying to develop a small enterprise, of the costs of and the barriers to
being regulated; and, from the perspective of wage workers hired under informal contracts with
no protection, of the costs to them when their employers avoid labour regulations”.

Informality is often the response of operators who are unable to comply with difficult, irrelevant or
prohibitive rules and regulations or who do not have access to market institutions. The rules and
regulations that impact on economic activities determine transaction costs. “Where such rules
and regulations are cost effective, are predictable and provide the requisite business information,
people are more likely to conform to and pay for them. Rules which are poorly designed, are
burdensome and involve dealing with corrupt and inefficient bureaucracies increase transaction
costs, discourage compliance, impede economic participation and encourage endemic corruption,
thus preventing entrepreneurs from participation in the formal economy.

Simplifying business rules and procedures and reducing transaction costs would promote
entrepreneurship and facilitate formalization. Simplifying laws and regulations does not mean
total deregulation. It is important to remember that laws do not only constrain entrepreneurship
and formalization, they can also play a facilitating or enabling role and serve to enforce
fundamental principles and rights. An enabling legal system can offer security, incentives,
safeguards and protections, limit liabilities, provide rules of succession and allow debt conversion.
Informal enterprises at present do not have access to these enabling laws and therefore do not
enjoy the benefits enjoyed by formal enterprises.



ECONOMIC GROWTH AND EMPLOYMENT CREATION

One of the key factors explaining the informal economy is related to patterns of economic growth.
Some countries have experienced little or no growth in recent decades, while others have
concentrated on capital-intensive growth, resulting in “jobless growth”. In both contexts, not
enough jobs are created for all those seeking work, forcing people to find employment or to

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create their own work in the informal economy. Many developing countries have adopted policies
favouring foreign investment, large companies and manufacturing industries and have neglected
the agricultural sector – but most of their population is still in rural areas and still largely
dependent on agriculture. In countries experiencing “high-tech” growth, the demand for high skills
relegates most of those without such skills to the informal economy. On the other hand, in some
countries or industries there can be “growth from below”, where micro- and small enterprises are
very dynamic and create more jobs than the formal economy.

ECONOMIC RESTRUCTURING AND ECONOMIC CRISIS

Another set of factors has to do with economic adjustment related to economic reforms or
economic crises. It is now widely acknowledged that the stabilization and structural adjustment
policies of the 1980s and 1990s, which in many countries resulted in growing poverty,
unemployment and underemployment, contributed to the spread of the informal economy. The
main authors of these policies, the international financial institutions, are therefore now
emphasizing poverty eradication and sustainable development, although they still fail to give
adequate attention to the employment implications of their policies.

The financial crisis in the second half of the 1990s in many Asian economies was also an
important underlying factor. ILO research showed the informal economy expanded under the
impact of the financial crisis, which reversed the previous gains of the working poor resulting from
the tight labour market situation created by the rapid economic growth of earlier years in the East
and South-East Asian countries. The swelling of the informal economy during the financial crisis
reflects the “growth of more marginal economic activities and involvement of increased number of
workers with lower average productivity and income”


For instance, the restructuring of state owned enterprises in China, where some 9 million workers
were laid off in urban areas, has been an important reason behind government policies to
promote flexible informal employment as the most important means of solving employment
pressures. In many developing countries, wages in the public sector are insufficient to support a
family, and workers (or family members) are forced to supplement their incomes by finding work
in the informal economy. This is a widespread pattern in Africa, but is not limited to the
developing countries.

POVERTY

Being poor means not being able to afford to be openly unemployed, and almost any job may
seem to be better than no job. Hence, increasing poverty is one of the underlying reasons for the
growth of the informal economy. However, the links between working informally and being poor
are not always simple. On the one hand, not all jobs in the informal economy yield paltry incomes.
The statement above indicated that many in the informal economy, especially the self-employed,
in fact earn more than unskilled or low-skilled workers in the formal economy. On the other hand,
being in the formal economy is no guarantee of escaping poverty. Sadly, many formal workers



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never break out of extreme poverty, especially in developing and transition countries, where
remuneration in the civil service and state-owned enterprises may not constitute a living wage.


However, there is no denying that it is poverty that forces most people to take up unattractive jobs
in the informal economy, and the low incomes that such jobs yield create a vicious cycle of
poverty.

DEMOGRAPHIC FACTORS AND THE INFORMAL ECONOMY

In trying to understand the growth of the informal economy, we cannot ignore demographic
trends. Especially in developing countries, the growth of the informal economy is linked to issues
of surplus labour; it is therefore important to have background information on the size and growth
of the labour force, the education and skills of those entering the labour market, rural-urban
migration and the rate of urbanization.

In many countries, an important contributory factor is escalating rural-urban migration; migrants in
search of often non-existent formal jobs end up in the informal economy. The evidence from
developed countries also shows that cross-border migrants, especially those who have recently
arrived in the country and do not speak the language, or women who are dependants of the
primary migrant, tend to concentrate in the informal economy because there are few other jobs
open to them and therefore are most vulnerable to exploitation and abuse.

The HIV/AIDS pandemic has had devastating effects on families and social support structures,
especially in Africa, and surviving family members, including children, may have no other option
but to seek informal work to survive.

GLOBALIZATION

Globalization has often been cited as a major reason for the proliferation of the informal economy.
The inference tends to be negative – that globalization is to blame. However, this can be
misleading and is not helpful, especially for strategy purposes. What is more useful is to
determine how the different globalization processes affect employment opportunities and the
welfare of workers – there can be both positive and negative impacts, and much will hinge on
domestic and international policies.
Where the informal economy is linked to globalization, it is often because a developing country
has been excluded from integration into the global economy. It is the failure or inability of
countries to participate in globalization processes (whether because of their own domestic
policies or because of international barriers), rather than globalization per se, that contributes to
preventing these countries from benefiting from trade, investments and technology.


Of course, it is also true that the pressure of global competition and technological advances have
increasingly LED transnational corporations (TNC) to subcontract or outsource the production of




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components and inputs to first-, second- and third tier suppliers, many of whom are in micro-
enterprises or are home-based in the informal economy in developing countries.


The impact of global competition also encourages formal firms to shift formal wage workers to
informal employment arrangements without minimum wages, assured work or benefits, and to
encourage informal units to switch from semi-permanent contracts with their workers to piece-rate
or casual work arrangements – also without assured work, minimum wages or benefits.
Globalization also often leads to shifts from secure self-employment to more precarious self-
employment, as producers and traders lose their market niche. With these shifts, as more and
more men enter the informal economy, women tend to be pushed to the lowest-income end of the
informal economy, often as industrial outworkers or petty traders.

FLEXIBLE SPECIALISATION AND GLOBAL CHAINS

The recent expansion of the informal economy has been linked not only to the capacity of formal
firms to absorb labour but also to their willingness to do so. Instead of production using a regular
workforce based in a single large registered factory or workplace, more and more firms are
decentralizing production and organizing work along the lines of “flexible specialization”, i.e.
forming smaller, more flexible specialized production units, some of which remain unregistered or
informal. As part of cost-cutting measures and efforts to enhance competitiveness, firms are
increasingly operating with a small core of wage employees with regular terms and conditions
(formal employment) based in a fixed formal workplace and a growing periphery of “non-
standard” or “atypical” and often informal workers in different types of workplaces scattered over
different locations. These measures often include outsourcing or subcontracting and a shift away
from regular employment relationships to more flexible and informal employment relationships.

THE LINKS BETWEEN THE FORMAL AND INFORMAL ECONOMIES

Global commodity and value chains are clear examples of how the formal and informal
economies are linked across the borders of many countries, influencing decent work for workers
depending on which segment of the chain they are in. The lower down the chain, the more likely
employment relationships are to be informal and the larger the decent work gaps. But it is not
only in the case of global chains involving cross-border relationships internationally and
subcontracting relationships nationally that the formal and informal economies are linked even in
more traditional activities, links can be traced. For example, there are the women forced to work
from their homes under subcontracting arrangements because the employer will not hire them
under more secure work arrangements, the workers in a sweatshop producing garments for lead
firms on the other side of the world, the street vendors selling on commission for formal firms, or
even the janitor who cleans the offices of formal firms under a subcontracting arrangement. There
are also informal providers of food, transport and clothing at affordable prices and other basic
services such as garbage collection and street cleaning for workers in the formal economy.




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ROLE AND ADVANTAGE OF INFORMAL ECONOMY

According to the National Strategy for the Development and Promotion of Small business in
              7
South Africa , the informal economy makes an important contribution to the economic and social
life of majority of South Africans. These trends apply also to the majority of residents in Mandeni
Municipality. Among other contributions the informal economy:

o   Absorbs workers who would otherwise be without work or income. Most people enter the
    informal economy not by choice but out of a need to survive. Especially in circumstances of
    high unemployment, underemployment and poverty, the informal economy has significant job
    and income generation potential because of the relative ease of entry and low requirements
    for education, skills, technology and capital, but the jobs thus created often fail to meet the
    criteria of decent work.


o   Helps to meet the needs of poor consumers by providing accessible and low priced goods
    and services.


o   Could serve as an incubator for business potential and an opportunity for on-the-job skills
    acquisition. In this sense, it can be a transitional base for accessibility and graduation to the
    formal economy, if effective strategies are put in place.


o   Apart from job creation, economic growth and equity created by informal economy. A key
    underlying assumption, however, is that the informal economy provides a relatively easy entry
    point into the first economic activity for those previously excluded.


CHARACTERISTIC OF THE INFORMAL ECONOMY SECTOR

Persons active in the informal economy experience specific disadvantages and problems that
vary in intensity across national, rural, and urban contexts. The following constitute the
characteristics used to contextualise the informal economy according to the International Labour
Organisation:

o   Workers in the informal economy include both wageworkers and own-account workers. Most
    own-account workers are as insecure and vulnerable as wageworkers and move from one
    situation to the other. Because they lack protection, rights and representation, these workers
    often remain trapped in poverty.

o   The majority of workers and enterprises in the informal economy produce legal goods and
    services, albeit sometimes not in conformity with procedural legal requirements, for example
    where there is non-compliance with registration requirements or immigration formalities.



7
   Sourced from The White Paper on National Strategy for the Development and Promotion of Small Business in South
Africa 1995

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    These activities should be distinguished from criminal and illegal activities, such as
    production and smuggling of illegal drugs, as they are the subject of criminal law, and is not
    appropriate for regulation or protection under labour or commercial law.

o   There are gray areas where the economic activity involves characteristics of both the formal
    and informal economy, for instance when formal workers are provided with undeclared
    remuneration, or when there are groups of workers in formal enterprises whose wages and
    working conditions are typical of those existing in informality.

o   Workers and economic units in the informal economy often have a large entrepreneurial
    potential. Workers in the informal economy also have a reservoir of skills. Many people
    working in the informal economy have real business acumen, creativity, dynamism and
    innovation, and such potential could flourish if certain obstacles could be removed.

o   There are often linkages between changes in the organization of work and the growth of the
    informal economy. Workers and economic units are increasingly engaged in flexible work
    arrangements, including outsourcing and subcontracting; some are found at the periphery of
    the core enterprise or at the lowest end of the production chain, and have decent work
    deficits.


o   Decent work deficits are most pronounced in the informal economy. From the perspective of
    unprotected workers, the negative aspects of work in the informal economy far outweigh its
    positive aspects. Workers in the informal economy are not often recognized, registered,
    regulated or protected under labour legislation and social protection, for example when their
    employment status is ambiguous, and are therefore not able to enjoy, exercise or defend their
    fundamental rights. Since they are normally not organized, they have little or no collective
    representation vis-à-vis employers or public authorities.

o   Work in the informal economy is often characterized by small or undefined workplaces,
    unsafe and unhealthy working conditions, low levels of skills and productivity, low or irregular
    incomes, long working hours and lack of access to information, markets, finance, training and
    technology.

o   Persons active in the informal economy may be characterized by varying degrees of
    dependency and vulnerability. Although most at risk and therefore most in need, most
    workers in the informal economy have little or no social protection and receive little or no
    social security, either from their employer or from the government.

o   Persons active in the informal economy are usually without social protection in such areas as
    education, skill building, training, health care and childcare, which are particularly important
    for women. The lack of social protection is a critical aspect of the social exclusion of workers
    in the informal economy.



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o   While some people in the informal economy earn incomes that are higher than those of
    workers in the formal economy, workers and economic units in the informal economy are
    often characterized by poverty, leading to powerlessness, exclusion, and vulnerability.

o   Most workers and economic units in the informal economy do not enjoy secure property
    rights, which thus deprives them access to both capital and credit. They have difficulty
    accessing the legal and judicial system to enforce contracts, and have limited or no access to
    public infrastructure and benefits. They are vulnerable to harassment, including sexual
    harassment, and other forms of exploitation and abuse, including corruption and bribery.


o   Women, young persons, migrants and older persons active in the informal economy are
    especially vulnerable to the most serious decent work deficits in the informal economy.
    Characteristically, child workers and bonded labourers are found in the informal economy.

o   Persons and enterprises in the informal economy often do not pay taxes, and do not receive
    benefits and entitlements to workers, thus posing unfair competition to other enterprises.
    They do not always contribute to the tax system, although often because of their poverty.
    These situations may deprive the government of public revenue thereby limiting government‟s
    ability to extend social services.


o   Persons active in the informal economy are often view in negative terms and opportunities for
    livelihood and entrepreneurship are destroyed.

o   The growth of the informal economy can often be traced to inappropriate, ineffective,
    misguided or badly implemented macroeconomic and social policies, often developed without
    tripartite consultation; the lack of conducive legal and institutional frameworks; and the lack of
    good governance for proper and effective implementation of policies and laws.
    Macroeconomic policies, including structural adjustment, economic restructuring and
    privatization policies, where not sufficiently employment-focused, have reduced jobs or not
    created adequate new jobs in the formal economy.


2.1.3 BEST PRACTICES IN BUSINESS SUPPORT SERVICES AND FACILITIES


BEST PRACTICES IN BUSINESS SUPPORT SERVICES

                                                                   8
Research into global best practices in business support services has identified the following key
principles in providing business support services to SMMEs:




8
 (UN Economic Commission for Europe, 2000), (UN Economic Commission for Europe, 2001)
(European Commission, 2001)

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o   Business support services must be driven by the needs of client SMMEs, i.e. not just in
    principle, but the processes and structures of the organisation must be client orientated.


o   Support services for SMMEs must be easily accessible, i.e. geographical accessibility as well
    as access to the necessary support required by the client (institutional accessibility).

o   Support service providers should move beyond the concept of the “one-stop-shop” to a
    regionally coherent and coordinated range of support services to avoid confusion and reduce
    waste of clients‟ valuable time, e.g. coordinating the operations and support of public
    institutions with that of private business institutions such as chambers of commerce and
    industry associations. In addition, core and specialised support services should be based on
    a common methodology centred on assisting enterprises to build their own management
    capacity on an on-going basis.

o   Type of support should take account of the different needs of different clients, i.e. distinct
    packages of services for different target groups, but with packages also including continuous
    support for clients. For example, while generic business training and skills development is
    suitable for start-ups, more targeted and technical training and skills development support is
    often required for established SMMEs to face the challenges of the market, which will require
    the continuous input from SMMEs into the design and development of support programmes.


o   Assist clients to be more strategic in their operations to realise their growth potential by
    supporting them to develop strategic plans to assist them survive and grow in the constantly
    changing modern economy, e.g. develop strategic HR development plans to ensure
    continued capacity improvement within SMMEs.

o   The modern economy requires businesses to continuously gather business and market
    information (i.e. business intelligence). Thus, it is vial that SMMEs collect data about sales,
    clients, new markets, suppliers, technology improvements, etc in order to analyse the
    information so that it could assist the growth and development of the enterprise.


o   Support services should assist clients in adopting ICT in their operations, but it could also act
    as a means of providing clients with the necessary support.

o   Business support centres and institutions must have the necessary resources and training
    available to provide professional support services, including IT resources, professional
    business support services training and culture, quality assurance and client satisfaction
    systems, to name but a few.

o   Effective marketing and promotion of support services must be undertaken on a consistent
    basis and be well-targeted with coherent and transparent pricing policies for different
    categories of support.



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o   To reduce the financial risk associated with providing finance for SMMEs, private-public
    venture capital funds could be established to support SMMEs, with the equity share in the
    SMME giving the financial institution incentive to ensure the SMME are more likely to
    succeed.

BEST PRACTICES IN BUSINESS FACILITIES

Defining a Business Incubator


A Business Incubator/Innovation Centre Offers rooms for lease, start-up consulting and business
planning as well as shared office services to (technology based) innovation companies and
entrepreneurs. Such a centre aims at promoting local and regional economic development, the
transfer of technology and innovation as well as the creation of jobs. The main types of institution
that offer, among others, business incubation services are as follows (UN, 2001):


o   Classical business incubators could be a nursery and start-up unit; a community or enterprise
    workshop. They provide small start-up firms with premises, infrastructure, and a range of
    services that can improve their ability to initiate and run their operations during the early
    development period;


o   Industrial estates offer a dynamic approach to regional economic development, local
    municipalities and regional development agencies;


o   Export processing zones can be very useful for the development of export and foreign trade
    potential and, in general, have a better linkage with the international community, although
    they have shown little potential to strengthen the local economy. However, through facilitating
    business services, providing access to infrastructure and providing tax incentives, they aim at
    attracting foreign direct investment. They also generate employment and contribute to
    improving the balance of payments;


o   Science (technology) parks provide a creative environment for attracting and promoting
    research commercialization, and technology-based enterprises;

o   Virtual business incubators (technology parks) make services available in cyberspace. They
    connect companies with one another, customers, suppliers, partners, as well as the operating
    management of the virtual incubator through the Internet, electronic data interchange,
    videoconference capabilities, etc.;

o   Clustering and networking During the 1990s clusters and networking have been increasingly
    important for the development of SMMEs. Through clusters and networks, SMMEs can
    access skilled and highly educated labour and pooled business services including business
    incubation services. Clusters are an agglomeration of SMMEs, working in geographic
    proximity to one another and in the same sector where appropriate clustering of
    complementary businesses is more efficient and sustainable than business incubators with

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    different single businesses. These opportunities permit specialisation; build technological
    capability, adaptability, innovation, and competitiveness.

Guiding Principles


Building on the practical experience of different economies, the following principles were
discussed:


o   One of the frequent issues of debate in an incubator is how long the incubation period should
    last. Should it be limited, and if so, what would be the optimal duration of the incubation?
    Many local business advisory centres receive start-up support for a few years and are then
    expected to sustain themselves indefinitely. The start-up support should probably go on for at
    least three to five years for optimal sustainability;

o   When developing entrepreneurship both in advanced market economies and countries in
    transition it is necessary to build on the experience of incubators to encourage new
    enterprises. There is now sufficient experience with business incubators and how they fit into
    the process of economic development, and what their core services are. A decision to start a
    business incubator thus requires careful planning and preparation and should be based on a
    thorough and objective analysis;


o   The members of the management team should represent the local Government, local private
    business organizations, community organizations and local educational institutions. This team
    generally consists of up to 10 people. One person should be designated as the leader;

o   The management team has to determine the purpose of the incubator. Business incubators
    may have a multitude of purposes, among which the following are possibly the most
    important:
                Job creation
                Establishment of start-up companies
                Modernization, transfer of technology
                Use of new scientific discoveries
                Business incubators can also be created for specific purposes, such as helping
                 women, immigrants, or minorities
                The economic growth of a region
                The diversification of the region‟s industry
                The multiplication of the sponsor‟s investment
                The increase of the region‟s economic activity


o   The team will determine the types of tenant the incubator will house and the conditions for
    entry. For SMMEs the conditions for entry to a business incubator could be the following:
                The entrepreneur should have a conception about his/her future business;
                The entrepreneur should have a business plan;

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               The entrepreneur has to be a beginner in his/her business.

o   The team has to possess information regarding the employers in the region, the types of
    business located in the community, general income and earnings, local taxation, the
    availability of reasonably priced office space, leasing, infrastructure and the transportation
    system. To know what type of services and programmes are available can be very useful to
    small start-up firms in the local community;

o   Based on an analysis of the information the team has to design the future business incubator.
    It has to finally determine the purpose and the tasks of the incubator, the type of tenant it will
    house, and the type and location of the incubator. The team has also to make a business
    plan for the incubator;

o   The team will need to define the resources available to start the incubator and must also find
    a site. The incubator building has to be large enough to produce rent revenue to generate
    cash flow, and break even or cover losses by other revenues. Donation funds and sponsors
    may also need to be identified, too;

o   Considerable care should be taken in selecting the management. The manager or director
    has a key role in the success of the incubator. The success or failure of an incubator may
    depend on the qualities and performance of its director and also the amount of time he or she
    is able to spend with client businesses. An incubator director should be chosen especially for
    his or her ability to work with entrepreneurs and to help them grow their companies. The
    director should in particular be fully familiar with entrepreneurship and business development.
    Usually a business incubator also needs a secretary, a part-time custodian, bookkeepers,
    lawyers, an insurance agent, and a banker;

o   Creating a business incubator takes from one to two years. Once the business incubator is
    operating, the revenue from the tenants should cover the running costs. Some services and
    training can be offered to entrepreneurs outside the incubator, thereby generating additional
    revenue. Any surplus earned should be reinvested in the centre;

o   The criteria of sustainability can be divided into two categories: the management of the
    premises (real estate) and the support to tenants and reaching of maturity; o The
    management of the premises is a commercial matter and an undertaking in itself. An
    incubator has to be operated in such a way that the common expenses are recovered
    through rent and other service charges. Since most business incubators are established for
    the development of local areas, it is crucial to gain financial, moral and public support from
    local municipalities and communities;


o   The estimation of capital and operating costs should be based on a realistic assumption of
    expenses and revenue to enable the business incubator to break even after the initial start-up
    period. From a financial point of view, practice shows that it takes from three to five years for


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    a business incubator to become self-sustainable. It appears that best practice in business
    incubators occurs when start-up enterprises and existing companies are mixed. This
    encourages mutual learning and provides a stimulating environment for beginning
    enterprises;

o   The effectiveness of business incubators should be evaluated based on the number of
    successful companies that reach maturity and continue doing business outside the nurturing
    premises. The success of emerging companies creates a positive view of entrepreneurship
    and contributes to the creation of a new enterprise culture. Thereby, business incubators
    aspire to have a positive impact on their community‟s economic health.

International Best Cases


In many countries, especially those in Africa and Asia, the micro-enterprise sector constitutes the
majority of the working population. A few statistics illustrate the key role that micro and small firms
play in generating overall employment:

o   Firms of five or fewer employees account for half of the non-farm workforce in Latin America
    and two-thirds of the non-farm workforce in Africa.
o   Informal sector firms generate three out of every four new, non-farm jobs in Thailand and half
    of all new jobs in Indonesia.
o   In Indonesia, firms with five or fewer employees account for almost half of total manufacturing
    employment, while small firms account for an additional 18 percent.
o   In Thailand, micro and small enterprises comprise more than 97 percent of all firms in the
    manufacturing and trade/service sectors. Micro firms generate 71 percent of total
    employment in the trade/service sector.
o   Many USAID-assisted micro-enterprise development programmes have broad impacts on
    poverty as income from the enterprise increases and stabilises household income. But the
    benefits are not just enterprise-related. Families often gain access to a range of financial
    services. For instance, specially tailored loans for school fees, medical emergencies, wedding
    and funeral expenses, insurance products, and remittance services that enable them to
    receive funds sent from abroad faster, and at lower cost. Access to financial services is
    critical in helping poor households build up assets, cope with shocks, and seize new
    economic opportunities.

A 2002 study by the Consultative Group to Assist the Poor (CGAP), a 29-donor consultative
group for microfinance, cited examples of diverse benefits in a range of countries.

o   In El Salvador, for instance, the weekly income of Foundation for International Community
    Assistance (FINCA) clients increased on average by 145 percent.
o   In India, half of SHARE (a non-profit organization offering survivor-led support to those
    affected by breast or ovarian cancer to ensure that no one faces breast or ovarian cancer
    alone) clients graduated from poverty.


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The CGAP study revealed equally impressive gains in education, health, and nutrition:


o   In Vietnam, clients of a Save the Children partner organization, reduced food deficits from
    three months to one.
o   In Botswana, the SMME sector is not well documented, so there is uncertainty over the
    number of SMMEs in existence and the sector's economic importance. However, as a rough
    estimate, SMMEs account for 50% of private sector employment, and 15-20% of GDP.
o   In Bangladesh, nearly all girls in Grameen Bank-client households received schooling,
    compared to 60 percent of girls in non-client households.


Firms of five or fewer employees generate a substantial share of GDP in many countries:

o   No fewer than 90 percent of workers in India owe their livelihoods to informal sector
    employment. These workers contribute 60 percent of net domestic product and 70 percent of
    domestic income.
o   More than half of the economically active population in the Philippines is employed in micro
    and small businesses.
o   Mexico looks to micro-enterprises for 32 percent of its gross domestic product and 64 percent
    of its total employment.
o   Approximately 49 percent of GDP in Peru and 70 percent in Nigeria and Egypt come from the
    micro-dominated informal economy.
o   In Ukraine, 2.6 million businesses and 87 percent of all businesses in that country are self-
    employed individuals who produce, distribute, and/or sell goods in the local marketplace.
o   In Honduras, micro-firms account for 30,000 of 40,000 horticultural firms that emerged in the
    wake of Hurricane Mitch and again in Bangladesh, more than 90 percent of the firms
    engaged in the $350 million shrimp export business are micro-businesses.

Micro-enterprises may also be integral to the success of key economic sectors. In South Africa,
for example, the construction sector generates a third of GDP and includes 90,000 firms, of which
87,000 are micro- and small-scale. Outsourcing by large construction firms to specialized, small
subcontractors is a very common feature of the industry.

South African Case


All over the world it has been recognised that the small business sector plays an important if not
critical role in the economic and social development of a country. This also applies to South
Africa, where the small business sector has been neglected during much of the century following
the discovery of diamonds and gold, and the establishment of a modem, capitalist economy with
almost exclusive western control. While the importance of large industrial, mining and other
enterprises for the growth of the economy cannot be denied, there is ample evidence that the
labour absorptive capacity of the small business sector is high, the average capital cost per job



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created is usually lower than in big business and its role in technical and other innovation is vital
for many of the challenges facing South Africa's economy.


Statistics at the national-economy level show that there are more than 800,000 small, medium
and micro-enterprises in the country, absorbing about a quarter of the labour force of 15 million
people. Small businesses play and have a major role to play in the South African economy in
terms of employment creation, income generation and output growth. They are also often the
vehicle by which the lowest-income people in our society gain access to economic opportunities.
In the current macroeconomic context, it is imperative that significant investment is made in
SMMEs, in order to create both short and long-term capacity for labour absorption and output
growth, as well as to improve income generation and redistribution. These objectives were firmly
recognized in the main development and macroeconomic strategies adopted by this government,
the RDP and GEAR.

Given South Africa's legacy of big business domination, constrained competition, unequal
distribution of income and wealth, and other obstacles of the past, the SMME sector is still under-
developed. But the small business sector need to be seen as an important force to generate
employment and more equitable income distribution, to activate competition, exploit niche
markets (both internally and internationally), enhance productivity and technical change, and
through all of this stimulate economic development. Taking into account the very large micro-
enterprise segment of the small business sector, as well as those struggling in survivalist
activities, it should be clear that the small business sector plays a crucial role in peoples efforts to
meet basic needs and help marginalised groups like female headed households, disabled people
and rural families, and to survive during the current phase of fundamental structural changes
where the formal economy is unable to absorb the increasing labour supply, and social support
systems are grossly inadequate.

Some key South African best occurrences include the following:

Community Self Employment Centre, Port Elizabeth (Comsec)


Background


The Community Self-Employment Centre (Comsec) was established in the mid-1990s by local
community and business leaders, under the stewardship of the Eastern Cape Job Creation Trust.
Comsec secured a twenty-year lease of abandoned Spoornet buildings in PE with a R3.2 million
loan from the Development Bank of South Africa (DBSA). The buildings were renovated and
restored to house a number of small and medium business size industrial workshops and offices.
As buildings were completed, entrepreneurs were housed in workshops and provided with
entrepreneurial support, guidance and business skills training programmes, in a typically small
business incubation format.




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Comsec has had ten years of successful service delivery in small business development. It now
has an extensive network of key role players from every sector of society and a mushrooming
complex of small factories, workshops and offices. Both small business advisors and
entrepreneurs are working and training at Comsec. Key organizations that supported Comsec
over the years include the CSIR, Shatterprufe, Deloittes, East Cape Training Centre, MCI, SBDC,
Spoornet, the ANC, and the Port Elizabeth City Council among others.

The project started with 3 employees and 2 small businesses, a knitting project of the CSIR and
Zama Engineering. It has grown over the past ten years to 31 employees with offices established
in both East London and Umtata. It services plus minus 70 small development services. Comsec
is known nationally and internationally as a small business development centre of renown. It is
the only institution of its kind in the country to hold an ISO 9001/2000 accreditation for quality
systems and is currently in the process of achieving the accreditation for investors in people. The
institution is managed and staffed by a one hundred percent previously disadvantaged
individuals, (PDI's). It is driven by sound business principles and is managed and operated with
superb systems and policies and also headed up an individual with many years of management
experience in the corporate sector. The staff consists of a group of young driven people with an
average age of 32 years many of whom have come through the institutions unique 2 year
practical graduate internship program.


The organisation consistently adapts itself to the changing small business environment that
requires innovative methods to create impact. It constantly reinvents itself and now consists of
four key silos of operation, which are Comsec BDS, Comsec Consult, Comsec Property and
Comsec Finance and Administration. It serves as an allocating agency for the Umsobomvu Youth
Fund Voucher Program, a lead Service Provider for some of Seta's and utilizes its experience in
the Consult Division for the replication of the project throughout South Africa.

The Swedish International Development Agency (Sida) provides Comsec with funding for some of
the development and training programmes as well as valuable institutional guidance and
exposure to international methodology and benchmarks.


Table 2.3 Business Support Services Provided
   Service                                          Description
                 This integrated package of services in support of entrepreneurship and business
                 development is performed by full-time, multi-skilled business counsellors.
                 Services include:
Business
                 o   Assistance with feasibility studies
development
                 o   Assistance with marketing plans
services
                 o   Development of business plans
                 o   Business mentoring and advice
                 o   Facilitating access to finance (Sizanani and Kuhla)
Consulting       The excellence developed in the Comsec model has led to us being contracted


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   Service                                         Description
services        for:
                o Replication
                o   Consulting
                o   Facilitation
                o   Capacity building
                o   Project Management
                All training is conducted in a fully equipped training facility located on site. The
                array of needs based training courses provided by accredited, full time
                facilitators at Comsec include:
                o   International Labour Organisation (GYBI and SIYB Programme)
Business        o   Business Skills South Africa (BSSA)
Skills Training o   Practical Tendering Skills (BSSA)
                o   Export Promotion (BMS Global Competitiveness)
                o   Export Orientation (EU TIDP) Course
                o   Pronet (Manufacturing business Improvement Course)
                o   Service Excellence
                The accounting services portfolio actively assists small businesses with the
                following:
                o Year end financials
Accounting
                o   Statutory returns
Service
                o   Monthly processing
                o   Business registrations e.g. CC's and VAT
                o   Financial planning and training
                The TAC provides tender related support to SMMEs‟ procuring from parastatals,
                government and corporates by:
                o   Information dissemination
                o   Identification of business opportunities
Tender Advice
                o   Completion of tender documents
                o   Costing (clients to provide relevant rates)
                o   Pre and post tender counselling
                o   Compliance with statutory requirements
                Services for internal and external clients include:
                o Typing and photocopying
Administration o    Telephone and Facsimile
               o    Internet and Email
                o   Secretarial Services
                The IT Department assists clients with the following:
Information     o   PC installation
Technology      o   Software advice and installation
                o   Hardware advice and installation


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    Service                                        Description
                  o   Web design and maintenance
                  Comsec provides accommodation and small business support to small
             businesses on our site measuring 10 000 square meters. This includes:
Workshop and
             o Industrial and Office space
Office
             o Utility Services
Premises
             o Security
                  o   Maintenance
                  Comsec also renders its support services to surrounding townships on a daily
Business
                  basis by means of a mobile office. This service will be extended to surrounding
Outreach
                  rural towns in the near future. Information transfer using the hub and spoke
Programme
                  model provides the catalyst for the successful implementation of this programme



Governance and Stakeholders


Comsec is governed by a board of trustees representing the Eastern Cape Job Creation Trust,
which hold a Section 18 (a) and 10 (1) F status.


The Executive of the Trust is elected biannually and consists of a Chairperson, Vice-Chairperson,
3 additional members, the Executive Director and the Finance Manager. The trust meets four
times a year inclusive of an Annual General Meeting midyear. The Executive Management
committee meets at least once a month but very often twice a month.

The operation of Comsec is lead by a Management team headed up by the Executive Director.
This team has a planning and reporting meeting once a week. The team consists of the Executive
Director, Deputy Director, Finance and HR Manager, Business Development Services Manager
and the Property Manager.


The Eastern Cape Job Creation Trust has strategic alliances with both ECMA (Eastern Cape
Manufacturing Advisory Centre) and BFPA (Business Finance Promotions Agency). Other
strategic partners include:

o   Umsobomvu Youth Fund
o   Sida
o   National Development Agency
o   Business Finance Promotion Agency (BFPA)
o   SEDA
o   East Cape Training Centre (ETC)
o   Nelson Mandela Metropolitan Council
o   Nelson Mandela Metropolitan University (NMMU)
o   Business Chambers (PERCCI, Business PE, NAFCOC)


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o   Nedbank
o   MTN
o   Khula
o   Cacadu and Kouga Municipalities
o   ECDC

The Business Place


Background


The Business Place is a national network of walk-in entrepreneurial centres, where the relevant
support services are clustered under one roof with an information centre at the core (one-stop
shop). It provides information and assistance to anyone wanting to start, improve or expand a
business. It is designed to make life easier for entrepreneurs through providing an accessible
one-stop shop and a place where people can explore ideas, its potential and implementation in
an unintimidating environment. Therefore, its specific aims are to plant the seeds of
entrepreneurship, stimulate local business, keep people in their communities and reduce
dependency on the government.

Governance

The Business Place initiative is a pre-package model based on its prior learning and experience,
but is flexible, replicable and adapts well to local economic realities and requirements. The major
benefit of being part of the network is that it eliminates the cost of developing a comparable
initiative. The Business Place is operating in three different areas in SA, each owned by a diverse
range of local stakeholders: Cape Town, King Williams Town, and Johannesburg. It is
investigating opportunities for The Business Place in other centres around the country.

Table 2.4 Strategic Partners of the Business Place
            Location                                    Strategic Partners
                                o   Investec
Johannesburg                    o   City of Johannesburg
                                o   UNISA
                                o   Investec
                                o   City of Cape Town
Cape Town
                                o   Sekunjalo Investments
                                o   Provincial Government of the Western Cape
                                o   Investec Bank Ltd
                                o   Steve Biko Foundation
King Williams Town
                                o   Department of Social Development
                                o   Buffalo City Municipality




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The initiative has demonstrated success in:


o   Local participation and ownership through the pooling of resources (business, government
    and non-governmental organisations);
o   Providing measurement and reporting for all stakeholders; and
o   Addressing high unemployment rates, especially amongst the youth.

THE BUSINESS PLACE MODEL


The Business Place Network is unique in that:


o   It operates in diverse contexts, each with its own challenges, key learning‟s are captured and
    shared;
o   Each site has a database on small business client progress which provides a learning
    foundation for research;
o   A national platform increases the opportunity to engage key strategic national partnerships
    and to become a delivery platform for other national initiatives;
o   Best practice in each site is shared amongst the network and collective solution finding and
    knowledge sharing is encouraged;
o   Annually the Business Places gathers for a forum to build on existing relationship, to revisit
    and consolidate core values and philosophies, and to share experiences;


The Business Place engages with interested stakeholders: business, government, community
based organisations (CBOs) and NGOs who have a common purpose and service a common
target market, in order to pool and leverage the scarce skills and resources. By clustering
business support services, The Business Place aims to avoid duplication of services and
encourage competition, synergies and referrals between co-locating tenants. This ensures that
service providers focus on their core business within the cluster, which improves service levels
and improves their long-term sustainability. Each collocated partner has the opportunity to
contribute to the strategy and overall philosophy, and benefits from being associated with the
Business Place.

The Business Place offers

o   Walk-in information centre – no appointment needed;
o   One-on-one consultation with knowledgeable navigators;
o   Relevant information, free resources and referral to credible service providers;
o   Affordable workshops – ideas and relevant topics;
o   Access to business training appropriate to the individual‟s stage of development;
o   Networking opportunities;
o   Free internet access;
o   Use of meeting rooms and boardrooms at no cost;
o   Free accounting and legal services.


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Relative to the costs of operating a Business Place, the impact is high. The Business Place in
Johannesburg sees an average of 5 000 visitors a month.

Sedichem


Sedichem is a South African Business and Chemical Technology Incubator funded by the
Gauteng Provincial Government through the Sedibeng District Municipality and supported by
SEDA Technology Programme. It is a registered non-profit company (Section 21) with strategic
partnerships with Chemin, Sedibeng District Municipality, Vaal University of Technology,
Bio/Chemtek at the CSIR, and other business service organizations and large companies within
the southern Gauteng area. It attributes its continuing success on the following factors:

o   Establishing and sustaining a nurturing environment for clients;
o   Assessment of client needs prior to agreeing entry and on a regular basis thereafter;
o   Adoption of extensive screening process to select clients that can benefit from value added
    services;
o   Provision of organisational resources, basic facilities such as service and leasable space to
    client;
o   Development of suitable, objective, milestone based, graduation criteria for clients;
o   Monitoring of client progress and obtaining client feedback on the value of services;
o   Facilitation of client access to pool of experts with a range of technical and professional skills;
o   Ensuring that stakeholders are informed by regular communication and networking to
    increase the number of stakeholders interested in supporting Sedichem;
o   Networking to create good relationships with large corporations and fund providers;
o   Making seed funding available for clients to assist with business start-ups;
o   Ensure costs are to a certain extent recovered through external revenue avenues;
o   Encouraging mentoring by developing a pool of volunteers who have managed / run a
    venture;
o   Ensuring that existing partnerships with Universities, Scientific Institutions and Councils are
    significant in the area of technology transfer and commercialisation; and
o   Negotiating access to student interns, employees, equipment, databases, researchers and
    financing.

SediChem provides the following types of services to its clients:


o   Supports entrepreneurs in starting and growing their chemically related businesses by
    offering innovative products and services backed by a network of partners and associates.
o   Focuses on the needs of early phase entrepreneurs, by providing hand-holding techniques
    and capacity building.
o   Help to manage risks inherent in new business opportunities.
o   Assist in establishment of centralized support service, office and factory/laboratory space and
    equipment, Internet and e-mail facilities


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o   Facilitate access to analytical services, quality and environmental audits, process
    optimisation, technology access, business plan evaluations and access to seed and early
    start-up financing
o   Mentoring, accounting and tax compliance, raw material sourcing, marketing and growth
    planning.
o   Brings together key elements for successful entrepreneurial activity, namely: opportunities,
    investors, capital and entrepreneurs

Synopsis

UN Economic Commission for Europe 2000 and 2001as well as the European Commission have
identified a number of key principles in providing business support services to SMMEs as
highlighted above. Two levels of the best practices in business facilities were presented including
the international and the South African.

Best Cases at the international level show that the micro-enterprise sector in many countries
constitutes the majority of the working population. E.g. Firms of five or fewer employees account
for half of the non-farm workforce in Latin America and two-thirds of the non-farm workforce in
Africa.

As it has been recognised all over the world that the small business sector plays an important if
not critical role in the economic and social development of a country. This also applies to South
Africa, where more than 800,000 small, medium and micro-enterprises absorb about a quarter of
the labour force of 15 million people.




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2.2 POLICY ENVIRONMENT

2.2.1 SMMES POLICIES

The following policy instruments have been identified during the research as the most important
for SMMEs.

WHITE PAPER ON THE DEVELOPMENT AND PROMOTION OF SMMES.

The white paper on small business published by the Department of Trade and Industry was
tabled in parliament on 20 March 1995. The main objective of this Act is to regulate, stimulate and
promote small business activities in South Africa. Throughout the world it has been found that
SMMEs are playing a critical role in absorbing labour, penetrating new markets and generally
expanding economies in creative and innovative ways. The Act states that small, medium and
micro-enterprises (SMMEs) represent an important vehicle to address the challenges of job
creation, economic growth and equity in South African society. The stimulation of SMMEs must
be seen as part of an integrated strategy to take South African economy onto a higher road - one
in which the economy is diversified, productivity is enhanced, investment is stimulated and
entrepreneurship flourishes.

THE BUSINESSES ACT OF 1991 (SINCE AMENDED BY ACT NO. 186 OF 1993)

The Business Act prevents the conduct of a business without possession of a requisite license.
Categories covered by the Act include mainly those engaged in food and perishable food trade,
entertainment and health facilities. The rationale for the requirement of regulation of these trade
activities is in order to maintain norms and standards on health and safety. The Act provides for
the designation of municipalities as Licensing Authorities by the then Provincial Administrator. It
further stipulates conditions for the issuance and refusal of licenses.

NATIONAL SMMES ACT 102 OF 1996

In order to simplify the regulatory procedures of the small business sector, the National Small
Business Act was passed in 1996. This National Small Business Act had the following objectives:

     The establishment of the National Small Business Council;
     The establishment of the Ntsika (currently SEDA) Enterprise Promotion Agency; and
     The provision of guidelines for state departments to promote small business in South
        Africa.

NATIONAL SMMES AMENDMENT BILL, 2003

The National Small Business Amendment Bill has the purpose of amending the National Small
Business Act. Changes to the Act include the creation of a voice for small businesses. Due to the



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closure and liquidation of the National Small Business Council (NSBC), it is necessary that such a
voice be established and that the NSBC be removed from legislation.


The amendments to the Act will also ensure that the mandate of Ntsika Enterprise Promotion
Agency is more focused and that some of the functions provided by this institution, which overlap
with other organisations, are removed.

Other technical amendments allow for the extension of the due date for the tabling of the Annual
Small Business Review in Parliament, as well as streamlining the process of appointing directors
of Ntsika, and enhancing information on the schedule of the Act with regard to definition of small
business.

NATIONAL SMMES AMENDMENT ACT 29 OF 2004

This Act amends the National Small Business Act, 1996, so as to repeal all provisions pertaining
to Ntsika Enterprise Promotion Agency; and provides for the establishment of the Small
Enterprise Development Agency (SEDA). The Act makes provision for the incorporation of the
Ntsika Enterprise Promotion Agency, the National Manufacturing Advisory Centre and any other
designated institution into SEDA as well as to provide for the necessary transitional arrangements
to this effect.


ACCELERATED AND SHARED GROWTH INITIATIVE FOR SOUTH AFRICA (ASGISA)

ASGISA marks a departure from GEAR and the prior RDP focus by placing emphasis on both
growth and redistribution. An important point to note is that accelerating growth and the rate of
productive investment goes hand in hand with:


o   Promoting opportunities and improving the livelihoods of marginalised communities;
o   Maintaining and improving social security, community services and human development;
o   Improving state capacity in service delivery and crime prevention; and
o   International partnerships for growth and development.

In attempting to bridge the growth/redistribution divide, it emphasises the phasing of interventions
e.g. job creation can be promoted in the short-term through the expanded public works
programme, but investments in economic infrastructure and an effective competition strategy are
needed for sustained economic growth. Within the social sector, housing infrastructure can be
accelerated, but it must be better aligned to spatial plans, job creation and community services.

Increased Investment


The one emphasis of ASGISA is increased investment from a current level of 16% to 25% by
2014. This is to be promoted in the private sector through maintaining and improving the
environment of investment growth (through moderate inflation, effective capital markets,


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revitalisation of training institutions, technology incentives etc. Public sector investment will focus
on public transport systems, ports and rail infrastructure and will involve private sector capacity
through public private sector partnerships. Priority will also be given to health, education, road,
housing, water and electricity infrastructure and services. Critical success factors for such
investment include improved alignment of local regional and national investment plans and the
streamlining of procedures for the registration of businesses and the approval of plan is
streamlined.

Facilitating economic activity within the Informal Economy


There is a clear emphasis on increasing mobility between the formal and informal economy
through measures such as skilling people in the informal sector, extending job creation and public
services through the expanded public works programme, boosting micro-enterprise and providing
more effective support programmes for land reform recipients and agriculturalists.

Social Services Income Support and Human Development


There is recognition that dependence on social security will not be diminished in the short term
prioritising the need to improve delivery in these areas through improving the social grant system
(in part through establishing a single Social Security Agency), the reorientation and overhaul of
welfare services (and partnerships with NGOs), the modernisation of tertiary health services and
the renewal of the primary school nutrition programme. In the long term compulsory contributory
social insurance is seen as contributing to current dependence on social services.

Improving State Capacity


The above measures clearly depend on improved state capacity, which is envisaged through:

o   A support programme to improve municipal financial and economic planning;
o   Measures to enable easier movement of civil servants between the three spheres of
    government;
o   Improve e-government capabilities and step up multi-purpose community centres (MPCC)
    and the use of community development workers;
o   Extend monitoring and evaluation systems across government;
o   Reinforce Batho Pele principles; and
o   Improving remuneration of police and educators

This national initiative is routed in local level implementation. The shared growth strategy has
been designed to help eradicate inequality and poverty, which are the desired outcomes of the
local economy development including the second economy.


The core objective of ASGISA is to halve poverty and unemployment by 2014. It responded to a
range of constraints that included skills shortages and the challenges faced by small medium and


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micro sized enterprises and emphasised partnerships with business, labour as well as civil
society. Selected interventions would address challenges related to infrastructure, sector
strategies, education and skills, the second economy, public administration as well as macro-
economic issues.

Throughout ASGISA, Government is supporting efforts to establish new venture funds for
SMMEs. The R1 billion programme recently announced by the IDC and the National
Empowerment Fund‟s venture fund will make a considerable impact on the growth of small
businesses. These large interventions will be supported by the development of the Small
Enterprise Development Agency based at the DTI, which is rolling out its services, making a
stronger operational distinction between small and medium business and micro businesses.
Additionally, ASGISA has chosen three priority sectors, specifically tourism, business process
outsourcing and off-shoring (BPO & O) and bio-fuels.

THE NATIONAL LOCAL ECONOMIC DEVELOPMENT FRAMEWORK

Objectives of the framework include the following:

o   To shift towards a more strategic approach to the development of local economies and
    overcome challenges and failures in respect of instances where municipalities themselves try
    to manage litany of non-viable projects or start-ups.


o   To support local economies in realising their optimal potentials and making local communities
    active participants in the economy of the country. This implies to support and encourage local
    community members to start SMMEs and to form cooperative businesses.

o   To elevate the importance and centrality of effectively functioning local economies in growing
    the national economy.

o   To wage the national fight against poverty more effectively through local level debates,
    strategies and actions.


o   To improve community access to economic initiatives, support programmes and information.

o   To improve the coordination of economic development planning and implementation across
    government and between government and non-governmental actors.

o   To build greater awareness about the importance and role of localities and regions which
    globally are playing an increasingly significant role as points of investment facilitated by
    supportive national policies.


The National Local Economic Development Framework introduces the concept of Sustainable
Developmental Community Investment Programming. SDCIP is about moving beyond project-
based community economic development. It is rather a much more empowering approach,

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utilising innovative instruments to systematically build community competence and capacity.
SDCIP suggests building community, and using a powerful cultural dynamic as the main vehicle
and partner for LED together with the resourcing of organised communities to carry out key local
functions, provide services and become important productive units. To do this, there needs to be
a paradigm shift, a corrective to the dominant „globalisation‟ model. A new balance has to be
struck between globalisation and „localisation‟. Localisation requires a new set of policies and
programmes to exist. It further requests as a specific outcome that all municipalities have
innovative spatial development strategies, land use policies, by laws and implementation capacity
to facilitate fast and effective business establishment and functioning especially for informal/
                                                                        9
street traders and SMME‟s and provides an analysis of the dual economy.


2.2.2 INFORMAL ECONOMY POLICIES

As per SMMEs, policies below have been identified as the most important for the informal
economy.

CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA

The Constitution provides for three spheres of government namely, National, Provincial and
Local. It also provides the basic legislative framework and the vesting of legislative authority in
each of the spheres of government. At the local sphere the Constitution provides that municipal
government is responsible for "trading regulations" and "street trading" within its area of
jurisdiction; a municipal government has the objective to promote social and economic
development; and the local government has the legislative powers to make by-laws for the
effective administration of matters over which they have these rights.

KWAZULU-NATAL GROWTH AND DEVELOPMENT STRATEGY (KGDS)

The KZN PGDS strategy aims to improve economic growth and development, increase formal
jobs, and enhance skills. Through its Business Support Service component, the strategy aims to
create a framework to facilitate the provision of business support services to existing and new
SMMEs to enhance sustainability and promote entrepreneurship. A critical element in assisting
those in the Second Economy is provision of information, particularly regarding how they can
access economic opportunities. In this regard, the targeted communication campaign on
economic opportunities occupies a central place.


KWAZULU-NATAL LICENSE AND BUSINESS HOURS ACT OF 1984.

The KwaZulu-Natal License and Business Hours Act specifies various categories of trading
activities in terms of which a license from “the issuing authority” is required. It also creates the
licensing boards and designation of such areas by the Minister.



9                                                                               st
    Extracted from NLEDF and the commentary made by an unknown author on the 1 draft of this report

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KWAZULU-NATAL STRATEGY FOR INFORMAL ECONOMY


The intention of the strategy development process is to set strategy and create an economic and
regulatory environment that supports sustainable economic growth in the informal economy in
KwaZulu-Natal so that it can contribute to the economic development of the province .

A number of basic principles guide the strategy. These include the following:

o   Any intervention in the informal economy should be based on considerations of equity,
    welfare, efficiency and effectiveness.
o   Strategy should be rooted, essentially in an economic perspective for the informal economy.
o   Strategy should recognise that informal activities are a permanent part of the overall economy
    and should not simply be aimed at supporting the move of informal economy operators into
    the formal economy,
o   Developmental efforts should target smaller, survivalist enterprises and individuals.
o   The needs, problems and opportunities of all those operating in the informal economy should
    be taken into account and strategy should not focus on one particular type of operation, such
    as street traders.
o   Strategy must allow for the management of co-operation and conflict between individuals in
    the formal and informal economies given that these economies are interlinked and mutually
    interdependent.
o   Strategy must be sensitive to, and address gender issues.
o   Strategy must promote co-operation between all spheres of government and between
    departments within provincial government.
o   While strategy integration is important it should be recognised that the characteristics and
    needs of small and medium enterprises differ to those of the micro survivalist enterprises and
    those who operate within them.
o   Strategy should differentiate in terms of support to the various sectors of the informal
    economy, (e.g. women or people/operators/workers who move from sector to sector, those
    who will always be survivalists and those who have the potential to move away from the
    survivalist end).


MANDENI INTEGRATED DEVELOPMENT PLANNING (IDP)

The Local Municipality‟s IDP plans out development for the area for the next five years and it
does so by taking into account all sectors viz physical, social, economic and environmental to
ensure truly integrated development.

The IDP is informed by the extensive community participation to maintain the local authority‟s aim
of providing services to its people according to their needs. This include creating a conducive
environment for SMMEs and informal trading development and growth. The IDP allocates
resources both financial and human to projects that need to be implemented in the Municipality. It
does this over a five-year forecast and is updated on an annual basis.



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MANDENI LOCAL ECONOMIC DEVELOPMENT (LED) STRATEGY

The LED Strategy is a framework with aims to integrate and co-ordinate activities and decisions
made by development agencies within the area. The LED Strategy also provide a matrix to assist
with the prioritisation and selection of projects within the various sectors thereby enabling
strategic and focussed decision making. An understanding of LED is generally followed by the
following two approaches:

The “economic need” approach, which is essentially poverty alleviation driven and tends to focus
on micro enterprise development, coupled with self-employment. On the other hand, the
“opportunity driven” approach tends to look at a wider range of LED strategies which in addition to
micro-enterprise development and investment attraction would also include actions to retain and
grow existing business, develop tourism etc.


The legislation above provides a breakdown of the role that a local municipality like Mandeni can
play to promote social and economic upliftment within their areas of jurisdiction. It highlights the
responsibilities of local municipalities in terms of their obligation to economic development viz. to
provide support services such as marketing, research and technology provision and
entrepreneurship assistance. The policy and legislation provides a framework, which needs to be
translated into programmes and projects through acknowledgement of the differences between
the categories of SMMEs and informal traders.




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2.3 SMME AND INFORMAL ECONOMY INSTITUTIONAL ANALYSIS

2.3.1 NATIONAL INSTITUTIONS


A number of national government departments and institutions support directly SMME and
informal economy development. The key departments are discussed below.

Table 2.5 List of some government programmes that support SMME development in SA
National Department

                       SMME development is a core focus area of the DTI through development
                       finance institutions; SEDA; regulatory institutions, technologies, innovations
                       and standards institutions and programmes. The DTI‟s strategic goals for
                       SMME development include the following:


                          Increase in the contribution of SMMEs to national economy,
                          Reduce the rate of failure in these enterprises,
Department of Trade       Maximise job creation,
and Industry (DTI)
                          Increase competitiveness and promote development through sectoral
                           targeting.


                       It has a range of programmes that support SMME development, incl. financial
                       assistance, credit risk sharing, investment incentives and funding business
                       support services, amongst many others. Sectors that are focused upon include,
                       inter alia, manufacturing, agriculture, telecommunication and ICT, trade, and
                       construction.
                       The DPLG are responsible in promoting LED amongst municipalities in SA,
Department of          which includes SMME development. For this purpose, the LED Fund and
Provincial and Local
                       Social Plan Fund were initiated, amongst others, to enable local governments
Government (DPLG)
                       to initiate and facilitate LED programmes in their respective areas.
                       The DOC‟s commitment to SMME development focus on ICT facilities and
                       services to communities through small businesses and procurement
Department of
Communications         programmes. Current initiatives include the “Bridging the Digital Divide”, part of
(DOC)                  which is focused on the issuing of under-serviced area licences for SMMEs and
                       co-operatives.
                       The DEAT has Tourism: Business Development Projects and Programmes.
                       The responsibility of Tourism Business Development is to undertake tourism
Department of
Environment Affairs    development planning, investment promotion and small business support and
and Tourism (DEAT)     development. This work is guided by the objective of transforming the tourism
                       industry for the benefit of all South Africans.




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National Department

                        The DOL has developed the Skills Support Programme (SSP) to assist
                        expanding and new companies with skills development and training costs. It is
Department of Labour    applicable to new or expanding enterprises approved for the DTI‟s Small and
(DOL)
                        Medium Enterprise Development Programme (SMEDP) providing approved
                        training programmes.
                        The DAC promotes the development of sustainable community arts and crafts
Department of Art and   projects through the Investment in Culture programme, SMME development in
Culture (DAC)           the creative industries such as theatre, TV and film, as well as its Arts
                        Education and Training programme.
                        The DME‟s Small-Scale Mining programme provides business support and
Department of Mineral   advice to SMMEs in the mining sector, while the Minerals Beneficiation
and Energy (DME)
                        programme also actively promote SMME development in minerals beneficiation

Department of           The DOA provides financial and non-financial assistance to small and emerging
Agriculture (DOA)       farmers, farming enterprises and farming cooperatives through its AgriBEE
                        programme, Comprehensive Agricultural Support Programme and Landbank.
                      The DST partners with the DTI in funding and implementing technological
Department of Science innovations into existing SA industries, as well as developing new SMMEs to
and Technology (DST) maximise the economic benefit of new technologies. Key programmes include
                      the GODISA programme, technology parks, Centres of Excellence programme.


In addition to these programmes and initiatives, all government departments and institutions have
preferential procurement policies that aim to support the growth and development of emerging
SMMEs. The South African government has also enacted legislation to support the development
of SMMEs, with the key legislation supporting SMME development listed in the table below.

2.3.2 PROVINCIAL INSTITUTIONS

Nearly all provinces in SA accepted more active roles in SMME development than what the initial
national government SMME strategies and policies provided for. The directorates for small
business support within provincial economic development departments focuses on:


       Propagating national support programmes and functioning as channels for national
        implementation processes;
       Developing complementary support programmes with provincial funds, sometimes in co-
        operation with other donors/partners;
       Encouraging small enterprise support initiatives in the rural areas and in the smaller
        towns which lack the capacity to develop their own programmes; and
       Co-operating with local business organisations, NGOs, CBOs and other stakeholders in
        assessing progress with small enterprise support as well as the need and scope for
        further action.



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KZN DEPARTMENT OF ECONOMIC DEVELOPMENT

Within KwaZulu-Natal, the Department of Economic Development (DED) is responsible for
economic and SMME development throughout KZN. The Integrated Economic Development
Services (IEDS), a core programme of the DED, is responsible for providing strategic leadership
and direction in implementing economic development and empowerment policies and
programmes within KZN as articulated in the various acts, policies and strategies guiding SMME
development in SA. There are four sub-programmes within this programme namely:


     Enterprise Development – focuses on supporting and developing business and social
      enterprises;
     Local Economic Development – focuses on developing a pipeline of sustainable LED
      projects that are partnership based and leverage public and private resources to fund them,
      as well as build the capacity of municipalities and other local stakeholders to plan and
      manage local economic development;
     Economic Empowerment – focuses on facilitating the process of empowerment and the
      creation of an enabling business environment for previously disadvantaged individuals; and
     Growth Fund – fund catalytic projects that will stimulate growth and development in the
      province and provide previously disadvantaged individuals the opportunity to participate
      meaningfully in the economy.

                                                                                         10
The DED has created a business resources databases accessible from their website. The DED
has also established a few key funds with local financial institutions to support SMME growth and
development in the province, over and above their general support for the work of SEDA and
Ithala Development Bank. These funds aimed to overcome the constraints identified within the
province with regards to financing emerging SMMEs.


     SMME Fund: The SMME fund is managed by Ithala and aims to promote SMME growth in
      KZN through providing debt finance. Within this programme, the DED has also established
      Joint Funds with two commercial banks to provide financial support to SMMEs in the
      province. However, take-up of finance has been below expectations due to higher than
      expected administrative procedures. Target is about R100million per year between 2007 and
      2009.
     Cooperatives Fund: This fund was established to support people and communities to
      generate their own income and become less dependent on grants. This fund has grown very
      rapidly, with nearly 800 cooperatives receiving a total of R163million by 2007. The aim is to
      create and assist another 2,000 cooperatives in the next 2 years
     Growth Fund: The strategic objective of the Growth Fund is to fund catalytic projects that will
      stimulate growth and development in KZN. The growth fund provides funding over R 30
      millions.



10
     See www.kznded.gov.za.

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THE GIJIMA KZN PROJECT

The GijimaKZN project, through the LCF facility, is also supporting SMME development in the
province, with a target of 65 SMMEs successfully established between 2007 and 2010.

2.3.3 LOCAL INSTITUTIONS

Mandeni Municipality does not have an official and well-structured institution dealing with the
SMMEs and informal traders. According the current local economic development officer, Patience
Sibisi, the Chamber of Commerce and business existed in Mandeni during the previous years,
but disappeared. The current Mandeni Business and Growth Coalition organisation does not have
a strong structure to coordinate businesses in the area. Informal traders on the other side have
an informal representative that stand for them in case of a meeting or workshop.

2.3.4 PRIVATE INSTITUTIONS

Table 2.6 List of Private Institutions that support SMME development in SA
Developmental Institutions                    Service Provided
Development Bank of southern Africa           BEE & Financial assistance
(DBSA)
National Development Agency NDA               Training, networking, capacity building.
                                              The National Development Agency is mandated to support
                                              and strengthen the capacity of civil society institutions to
                                              eradicate poverty within communities where they operate.
                                              They do this by providing training as well as offering
                                              dialogue, networking, capacity building and funding.
Sector Education Training Authority (SETA)    Training and learnership programme
National Research Foundation (NRF)            Research funds
Youth Development Trust (YDT)                 Skills development and Capacity building
Centre for Entrepreneurial and Enterprise     Skills development & training
Development (CEED)
LearntheNet                                   Internet training
Women and Enterprises-Women's net             Free internet access
Community Upliftment in Rural South Africa    Mentorship Support
(CURSA)
Olive (organisation, development       and    Training and business skills development
training )
Maputoland Development & Information          Business advice and mentorship.
Centre (MDIC)                                 Loans are offered at favourable interest rates. The
                                              programme also assists with business development. There
                                              are facilities available such as word processors and access
                                              to the Internet, which are open to the public.
Ekuseni Youth Development Centre              Business training & advice


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Developmental Institutions                     Service Provided
Foundation         for      Entrepreneurial    Business Training
Development KZN
Umthombo       Entrepreneurship            &   Business Advice
Development Agency
Khuphuka Skills Training                       Business training


2.3.5 SMME AND INFORMAL ECONOMY INSTITUTIONAL ANALYSIS

Strength

Decentralisation: the important feature characterising the SMME institutional structure is its
current decentralised system. The issues and challenges facing SMMEs in South Africa are
looked at by a series of organisations ranging from public institutions such as Department of
Trade and Industry, Department of Labour, Department of Communication, Department of
Provincial and Local Government, Department of Art, Culture, Science, and Technology, to
private organisations such as DBSA. This prevents the duplication of programmes and strategies,
reduces red tape, and enhances collaboration among stakeholders.

Coordination: despite the large decentralisation of the current institutional structure, the DTI has
the responsibility of coordinating and controlling other SMME support institutions and
stakeholders in the country. This has an important impact on recognising who is doing what and
where.

Weakness

Capacity: One shortcoming identified from the current institutional structure is the capability of
dealing with challenges facing SMMEs. In fact SMMEs in South Africa cover all sectors and are
confronted by a huge number of challenges that cannot be resolved by just four or five ministries
(DTI, DoL, DoC, DPLG, and DACST).         A department in each ministry should be opened related
to SMMEs of that field.

Lack of equilibrium: Equilibrium seems to be missing at national level in terms of addressing
issues facing SMMEs. Many programmes deal with training rather than advisory services and
financial assistance.

Programmes not known at the local level: National programmes so far identified seem to be
meaningless, since the majority of them are not found or applied at the local level where the
preponderance of SMMEs operate. Why is it important to have very well designed programmes
at the national level and not use them?

Inefficient channelling of programmes: There is a lack of efficiency in terms of channelling
programmes from the top down. Programmes are designed at the national level but do not flow
easily to the bottom level where SMMEs operate.


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2.4 MANDENI ECONOMIC PROFILES

DEMOGRAPHIC & SOCIO-ECONOMIC ANALYSIS

The Mandeni Municipality is one of the four local municipalities that comprise the Ilembe District
Municipality. The other three local municipalities are:

o   KwaDukuza Municipality;
o   Ndwedwe Municipality; and
o   Maphumulo Municipality.


The Mandeni Municipality lies most northerly within the district. The Municipality extends inland
from the coast to the Amatigulu River in the north and the boundary of the KwaDukuza
Municipality in the south. At a regional level, Mandeni is strategically located halfway between
Durban and Richards Bay.


The Mandeni Municipality borders the Umlalazi Municipality immediately after the Amatikulu
River, the Tugela River mouth in the south, and just to Darnall in the south.


The town/urban centre of Mandeni is an important economic node for the Municipality and
functions as the only sub-regional service centre to the Municipal area. Due to the fact that there
are no other service centres in the rural hinterland, which lies to the west beyond the Endulinde
Hills, Mandeni also services this area, which is the “shadow corridor of poverty”.

The area of Isithebe functions as an Industrial Estate, which is managed by Ithala. It is a
prominent sector in the Municipality and is a considerable contributor to the employment of
people in the area. The Amatikulu sugar milling operations and the SAPPI paper mills at Mandeni
are the two most notable developments in the area. The Growth and Development Summit held
earlier this year (2007) has identified the regeneration of the Isithebe Industrial Estate as a priority
issue for the area and the region.




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Figure 2.1 Contextualisation of the Mandeni Municipality




POPULATION

                                                                                              11
According to 2004 statistics, the Mandeni Municipality‟s population was recorded at 131 391
people. Of this total 53% of the population are females and males then account for the remaining
47%. Since 1995, the population of Mandeni has gradually grown. Over the period from 1995 to




11
     Statistics from Easy Data.

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2004, the population has grown by 15 669 people. The Ilembe District Municipality has a
population of 560 382 people. Mandeni accounts for 23.4% of the Ilembe population.

AGE DISTRIBUTION

The Municipality is characterised by a young population, with a large number of people in the
category of working age (15 to 64 years). The Municipality has a very small category of elderly
people (3.4%), which brings to question whether people are not able to live to old age, due to
early deaths or whether there is a generation of people that have left the area in the past. The
large number of very young people (35.2%) indicates high dependency rates on those that are
economically active. This is problematic because a key concern in the area is the high
unemployment rates.

EDUCATION LEVELS

The information shows that there is a vast majority of the population with little or no formal
education (more than 70% of population). Only 17% of the population have completed matric
while only 1.5% of the population have obtained tertiary education, with only 0.25% of the
population having obtained a University degree. As such, technical and management level jobs
are out of the reach of people with such a limited level of education. However, this scenario is not
unique to Mandeni as the District figures are not far of the same trend.

FORMAL EMPLOYMENT

More than half (55%) of the economic population of Mandeni is employed with 45% being
unemployed.

The table below provides a breakdown of the type of employment in terms of part-time, full-time
etc.   The   statistics   show   that   the   majority   of   the   population   (46%)    are   still
children/students/scholars. However, from the remaining population that forms the working
population, only 13% are employed on a full-time basis. Part time employment comprises of 5%
of the working population, while only 1% are self-employed. Twenty-three percent (23%) of the
working population are unemployed, which is greater than the number of people employed. As
such, there is a need to understand that majority of them are absorbed in the second economy.

Table 2.7 Employment Levels in Mandeni (2006)
 Types of Employments                                                               %
 Employed full time                                                               12.94
 Self employed                                                                     1.27
 Part time/contract/temporary                                                      5.08
 Casual                                                                            0.00
 Unemployed                                                                       23.10
 Housewife                                                                         0.25
 Pensioner                                                                         8.88

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 Types of Employments                                                                  %
 Scholar/student/child                                                               46.45
 Undetermined                                                                        2.03
 Total                                                                              100.00



In terms of employments, Manufacturing is the largest employer in the Municipal area,
contributing 50% of the total employment. The community services sector is the second highest
employer (12%) in Mandeni. The wholesale and retail sector (10%) and the general government
services sector (9%) come in at third and fourth highest employers respectively, while business
and finance accounts for 8% of the total employment. Agriculture is the sixth highest employer in
the Municipality, accounting for 6% of the employment contribution.

GDP CONTRIBUTION TO THE ECONOMY

According to the Easy Data statistics the Gross Domestic Product (GDP) contribution of the
Mandeni Municipality has increased by 9.7% between 1995 and 2005. The manufacturing sector
is the largest contributor (60.6%) to the Mandeni GDP. This sector has higher outputs than other
sectors and activities; therefore, its contribution far surpasses that of the other economic activities
in the Municipal area. Agriculture is the second largest contributor to the GDP, with 8.3%. This
shows the stark comparison between the two activities. Wholesale and Retail is the third largest
contributor to the GDP of the area with 8%.

INDIVIDUAL HOUSEHOLD INCOME

Table below indicates that almost 4% of the economically active population do not earn an
income in the Mandeni Municipality. A most astounding fact is that almost 53% of the working
population earn a monthly salary of below R 800. 20.1% of the working population have a
monthly income of between R801 and R1 600 per month. Average earners between R1 601 and
R6 400 account for approximately 19% of the working population. Medium-high income earners
(R 6 401 – R 25 600) account for approximately 4% of the working population; while high-income
earners (over R 25 601) account for 0.2% of the working population.

Table 2.8 Average Individual Monthly Income (Percentage of Employed)
 Income Categories                                                                             %
 No income                                                                                        3.9
 R1 - R400                                                                                       25.4
 R401 - R800                                                                                     28.0
 R801 - R1600                                                                                    20.1
 R1601 - R3200                                                                                   12.7
 R3201 - R6400                                                                                    6.3
 R6401 - R12800                                                                                   2.8
 R12801 - R25600                                                                                  0.6
 R25601 - R51200                                                                                  0.1


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 Income Categories                                                                          %
 Over R51201                                                                            0.1
 Total                                                                                100.0
Source: Urban-Econ Estimations based on Quantec 2007 & Statistics South Africa, Census 2001

ROADS

The roads in the area are in good condition and carry high volumes of traffic in the Municipality.
The two main roads MR 415 and MR 459 appear to be fairly in good state. The status of the
district roads is very bad, and this has a negative bearing to the social and economic status of the
local community.

WATER, SANITATION AND ELECTRICITY

35% of the households in the Mandeni Municipality do not have piped water and that they access
their water through other sources including rivers, rainwater tanks, boreholes, and springs. Only
21.8% of the households in the area receive piped water inside the dwelling. Approximately 22%
of the households receive piped water inside the yard but not inside the dwelling. Approximately
22% of the households receive piped water to a communal stand. However, the distance to these
stands varies.


Only 2.5% of the population utilise flush toilets, while 0.5% make use of septic tanks.
Approximately 51% of the population utilise basic pit latrines, while 1% have access to ventilated
improved pit latrine. Chemical toilets are utilised by 26% of the population. Most astounding is the
fact that over 7% of the population does not have any toilet facilities.

62.5% of all the households in the Mandeni Municipality have access to electricity supply. The
remaining population utilise various other energy sources for light and cooking.

ACCESS TO TELECOMMUNICATIONS

In general terms, most people in the Municipality have access to some form of
telecommunications either within private households, cell-phones, public phones or at
neighbours. Only 8.4% of the households do not have access to telephone.


HIV/AIDS STATUS IN THE MANDENI MUNICIPALITY

According to the Easy Data Statistics (2007), in 2004 21612 people were infected with HIV. This
figure accounted for 16.4% of the total population. The number of people infected with HIV/AIDS
has increased steadily over the last decade.




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2.5 MANDENI SMME AND INFORMAL ECONOMY PROFILES

Information in this sector comes from surveys conducted as part of this study in June 2008. Both
accounted for four hundred and two and four hundred and ten completed questionnaires for
respectively the informal economy and SMME surveys conducted in Mandeni.


As stated in the previous section, there is presently very little information published about the
Mandeni Municipality. Hence, the major part of data included in the following SMMEs and
informal traders profiles was sourced from surveys organised in Mandeni Municipality.


2.5.1 SMME PROFILE

MAJOR ACTIVITIES

SMMEs in Mandeni focus their business on the following activities:


Tourism, catering & accommodation, retail trade and allied services, construction, manufacturing,
restaurant & tavern, dairy farm, general dealer, supermarket, butcher, professional & financial
services, bricks/ blocks manufacture, burial services, liquor retail, consumer sales & other
services, motor repairs, beauty salon, arts and crafts, bakery, cleaning services, computer
repairs, electrical appliance, hardware retail, laundry services, light engineering services, radio &
TV repairs, clothing and textile, and security services.



NUMBER OF PERSON EMPLOYED PER BUSINESS

As per the following table, majority of SMMEs in Mandeni employ between 5 to 50 persons
depending on the business sector.


Table 2.9 SMME Range of Employment
 Number of Persons employed                                                  Percentages
 Between 100 and 200 persons                                                                   24.1
 Between 50 and 100 persons                                                                     5.6
 Between 20 and 50 persons                                                                     18.5
 Between 10 and 20 persons                                                                     14.8
 Between 5 and 10 persons                                                                      16.7
 Less than 5 persons                                                                           18.5
 Undisclosed                                                                                    1.9
 Total                                                                                       100.0
Source: Urban-Econ Surveys (2008)




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REASONS FOR CHOOSING MANDENI AS A WORKING ENVIRONMENT

The SMME surveys organised indicated a number of key points that attracted people to establish
business in Mandeni municipality. These include the following:

o   Close-by to home,
o   Rural Area,
o   Only available area,
o   Industrial area convenient for business growth,
o   Land Availability,
o   High demand,
o   Low competition,
o   Potential for business to grow and close to target market,
o   Cheaper labour at that time to recruit,
o   Government subsidies at that time to those who wanted to open business,
o   Land availability,
o   Good infrastructure including road, rail, harbour, etc.


However, the overall assessment of the business environment shows that Mandeni is a good
area for business growth as per the following table.


Table 2.10 Description of the Working Area
 Description of the Business area              Percentages            Overall assessment
 An excellent place to work                                    18.5
 A pleasant place to work                                      27.8          Good 83.3 %
 An average place to work                                      37.0
 An unpleasant place to work                                   13.0
                                                                             Worse 16.7%
 A very unpleasant place to work                                3.7
 Total                                                        100.0             100%
Source: Urban-Econ Surveys (2008)

BUSINESS DURATION

As per the following figure, majority of SMMEs in Mandeni have been operating for more than ten
years. This indicates and confirms that Mandeni is a good environment for business stability and
growth.




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Figure 2.2 Business Durations

                                    SMME Duration

                                                            1-5 years, 7.4%
                             < 1 year, 3.7%
                                                                           6-10 years,
                                                                             16.7%



                    10 years +,
                      72.2%



                        < 1 year   1-5 years   6-10 years     10 years +

Source: Urban-Econ Surveys (2008)


BUSINESS ANNUAL TURNOVER

Unlikely majority of SMMEs in Mandeni municipality did not accept to disclose their annual
turnover for some reasons. But among those who disclosed their annual turnover, majority range
from 2 to 7.5 million as per the following table.


Table 2.11 Annual Turnover of SMMEs Surveyed
 Annual turnover                                                              Percentage
 Undisclosed                                                                          63.0
 50.0 m                                                                                  5.6
 30.0 m                                                                                  1.9
 25.0 m                                                                                  1.9
 10.0 m                                                                                  3.7
 7.5 m                                                                                   7.4
 4.0 m                                                                                   3.7
 3.0 m                                                                                   1.9
 2.0 m                                                                                   7.4
 1.0 m                                                                                   1.9
 0.4 m                                                                                   1.9
Source: Urban-Econ Surveys (2008)

MAJOR OBSTACLES

Infrastructure issues

o   Transport infrastructure needs to be improved or developed,
o   Current roads and the sewerage system need to be improved,




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o   Crime too high (overgrown property -bushes are too thick, the criminals are using it as a
    hiding place),
o   Electricity problems,
o   Poor service delivery from municipality.

Institutional issues

o   Need for skilled workers,
o   Financial problems and limited access to formal finance and banking institutions
o   Poor marketing,
o   High competitions as the municipal officials own businesses in the area as well as from the
    Chinese cheap imports (the competition leads also to no stable labour).

Economic issues

o   High inflation,
o   Interest hike ,
o   Absenteeism by staff due to HIV/AIDS and other sickness,
o   Regular taxi violence,
o   Petrol increase.


2.5.2 INFORMAL ECONOMY PROFILE

MAJOR ACTIVITIES AND NUMBER OF EMPLOYEES

Major activities characterising the informal economy in Mandeni municipality include the following:

Gardeners, Garbage pickers, cardboard collectors, child carers, mielie cookers, news paper
vendors, taxis drivers, car and minibus washers, live chicken sellers, second hand clothes
dealers, hairdressers, barbers, fruit sellers, street food vendors, street non-food products
vendors, bricklayers and stonemasons, tavern and shebeen operators, motor vehicle mechanics
and fitters, spaza shop owners and workers, tailors, dressmakers and hatters, sewers,
embroiderers and related workers, traditional medicine practitioners, muthi traders, Mr. phone
dealers, shoe makers and polishers, domestic workers and welders.

Following the result from the informal economy surveys organised, it should be noted that the
informal economy in Mandeni is overwhelmingly dominated by the fruit sellers and second hand
clothes dealers. Street food products vendors, spaza shop owners, traditional medicine
practitioners as well as the street non-food products vendors followed.
Surveys also indicated that 56.6 % of informal businesses in Mandeni employ 1 person; 37.4%
employ 2 to 3 and 3.7% employ 4 to 6 persons.




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GENDER PARITY

The informal economy in Mandeni involves both male as well as female groups, but female
dominate the sector as per the following figure.

Figure 2.3 Informal economy gender groups

               Mandeni Informal Economy Gender Group



                                                         Male, 22.8%




                Female, 77.2%




                                      Male    Female

Source: Urban-Econ Surveys (2008)

AGE DISTRIBUTION & ORIGIN OF WORKERS

The informal workers in Mandeni include both young and old people. More than half of informal
workers are between 35 to 65 years. Majority of informal traders in Mandeni are South African
with small number made of immigrants from neighbouring and other SADC countries.

Figure 2.4 Informal Economy age groups

                Mandeni Informal Economy Age
                            Groups
                                             10 to 19,
           65 >,                              1.10%
                           00-09, 0%
          6.90%                                                20 to 34,
                                                                29.80%




                  35 to 65,
                   63.30%



              00-09      10 to 19      20 to 34     35 to 65     65 >

Source: Urban-Econ Surveys (2008)
ETHNIC GROUPS

The African people that account for 99% overwhelmingly dominate the informal economy in
Mandeni municipality, and Asians follow with 1% as shown in the Figure below.

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Figure 2.5 Mandeni Informal Economy Ethnic Groups

              Mandeni Informal Economy Ethinic Groups

                                                    1.0




                                                99.0

                                          African         Asian

Source: Urban-Econ Surveys (2008)

LEVEL OF EDUCATION

As shown in the following Figure, more than half of the informal workers in Mandeni are people
who studied to secondary school level. Others have done primary school and some have
diploma or a certificate. A small number of them have either an accredited training education or
degree.

Figure 2.6 Informal Economy Level of Education

                                   Level of Education
                        Diploma/Certificate,                 No Schooling, 4.3
                              13.1
     Some accredited
         training                                                 Primary School,
      educations, 2.3                                                  21.5




                         Secondary School,
                               58.3




Source: Urban-Econ Surveys (2008)

BUSINESS DURATION

As per the following figure, majority of informal businesses in Mandeni have been operating for
more than ten years


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Table 2.7 Business Durations

                Durations of Informal Economy
                   Businesses in Mandeni

   40%
   35%
   30%
   25%
   20%
   15%
   10%
    5%
    0%
            < 1 year     1 to 3     4 to 5      6 to 7   8 to 10   > 10
                         years      years       years     years    years


Source: Urban-Econ Surveys (2008)

BUSINESS GENERAL/AVERAGE GROWTH

Surveys also indicated that 77.6 % of informal businesses in Mandeni have a stagnant general
average growth, 14.1% of businesses have a declining growth and 8.2% show a growth. This
trend needs to be addressed in order redress the sector.

WEEKLY INCOME

The monthly income of the informal workers depends on business focus and sector and varies
between R 100 to R 1500 and more per week. However, majority of them earns between R 100
to R 500 per week as per the following table.

Table 2.12 Weekly Income levels
             Weekly Income Levels                        Percentages
 R 100 to R 300                                                        35.4
 R 350 to R 500                                                        32.5
 R 550 to R 800                                                        14.3
 R 850 to R 1000                                                        5.1
 R 1000 to R 1500                                                       8.0
 R 1500 +                                                               4.8
Source: Urban-Econ Surveys (2008)

From the preceding table, there is a need to consider that the average monthly income for the
informal traders in Mandeni is approximately R 1417.00

REASONS FOR BEING IN THE INFORMAL ECONOMY

The result from the informal economy surveys organised pointed out the following as the major
cause that forced people to work in the informal economy.


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o   Lack of skills,
o   Unemployment,
o   Being housewife,
o   Being sick, and
o   Having business passion & interest,

PLACE OF WORK

From home, Taxi rank, Pavement of streets, in flea markets, built market, in front of big shops,
and in some office blocks


Figure 2.8 Major Working Places

                                  Place of Work

                        In some Office            From home,
                          Blocks, 8.2                 8.2        Taxi rank , 7.7
          In front of Big
           Shops , 7.1                                                 Pavement of
                                                                       streets , 10.1
           Built market,
                21.2

                                                   Flea markets ,
                                                        37.4




Source: Urban-Econ Surveys (2008)


MAJOR OBSTACLES

Infrastructure issues

o   Poor infrastructure such as transport, storage facilities, water, electricity.
o   Theft and criminal violence
o   Lack of working premises.
o   Poorly developed physical markets.
o   Police harassment

Institutional issues

o   No access to formal training and, as a result, lack of skills in particular as regards basic
    economic skills and managerial expertise.
o   Lack of formal schooling sometimes even resulting in illiteracy.
o   Limited access to formal finance and banking institutions.
o   Reliance on self-supporting and informal institutional arrangements.
o   Government regulations in areas such as business start-up, in particular as regards
    cumbersome, time demanding and costly procedures for business registration.


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o   Lack of access to official social security schemes.
o   Fewer market opportunities due for instance to non-compliance to national and international
    standards.
o   High competition.

Economic issues

o   Excessive registration and transaction costs of starting or operating businesses.
o   Limited access to technology.
o   High inflation.
o   Lack of opportunities for bulk purchase of inputs.
o   Low incomes or lack of regular income as household consumption competes for the use of
    business earnings.
o   Lack of working capital: credit has to be obtained from informal sources such as friends or
    relatives or non-banking financial agencies with unfavourable terms.
o   Insufficient funds do not allow for further investments.
o   Conflict with formal business and Problems with workers (turnover, absenteeism)

Synopsis


This section presented the Situational Analysis of the Mandeni municipality in terms of SMME
and informal economy. Many key points were addressed and presented in relation to the terms of
reference of the study.


In this perspective, the small business was defined according to the National Small Business Act,
No. 102 of 1996, and means a separate and distinct business entity, including cooperative
enterprises and non-governmental organisations, managed by one owner or more which,
including its branches or subsidiaries, if any, is predominantly carried on in any sector or sub-
sector of the economy and which can be classified as a micro-, a very small, a small or a medium
enterprise.


On the other side, a 3-pronged definition of the informal economy was adopted for the purpose of
this study and includes the legal, economic and social approaches.
In terms of legal approach, the informal economy includes all illegal and unregistered businesses.
The informal economy in the economic approach concerns all micro businesses in all sectors as
defined by the National Small Business Act, No. 102 of 1996.
According to the social approach, the informal economy consists of all disenfranchised and
socially unprotected businesses.

Two levels of the best practices in business facilities were presented including the international
and the South African. Best Cases at the international level show that the micro-enterprise sector
in many countries constitutes the majority of the working population. E.g., Firms of five or fewer
employees account for half of the non-farm workforce in Latin America and two-thirds of the non-



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farm workforce in Africa. In South Africa, more than 800,000 small, medium and micro-
enterprises absorb about a quarter of the labour force of 15 million people.


A number of SMME and informal economy policies were presented including the following:
o Constitution of the Republic of South Africa
o   White Paper on the Development and Promotion of SMMEs.
o   The Businesses Act of 1991 (since amended by Act No. 186 of 1993)
o   National SMMEs Act 102 of 1996
o   National SMMEs Amendment Bill, 2003
o   National SMMEs Amendment act 29 of 2004
o   Accelerated and Shared Growth Initiative for South Africa (ASGISA)
O   KwaZulu Natal Growth and Development Strategy (KGDS)
o   KwaZulu-Natal License and Business Hours Act of 1984.
o   KwaZulu-Natal Strategy for Informal Economy


Mandeni SMME profile indicates the following:

Major business include: tourism, catering & accommodation; retail trade and allied services;
construction; manufacturing; restaurant & tavern; dairy farm; general dealer; supermarket;
butcher; professional & financial services; bricks/ blocks manufacture; burial services; liquor
retail, consumer sales & other services; motor repairs; beauty salon; arts and crafts; bakery;
cleaning services; computer repairs, electrical appliance, hardware retail, laundry services, light
engineering services, radio & TV repairs, clothing and textile, and security services.

Majority of SMMEs in Mandeni employ between 5 to 50 persons depending on the business
sector. The annual turnover of SMMEs range from 2 to 7.5 million. Major obstacles include
infrastructural issues, institutional issues and economic issues. However, the overall assessment
of the business environment shows that Mandeni is a good area for business growth


The informal economy profile indicates the following


Major activities include: Gardeners, Garbage pickers, cardboard collectors, child carers, mielie
cookers, news paper vendors, taxis drivers, car and minibus washers, live chicken sellers,
second hand clothes dealers, hairdressers, barbers, fruit sellers, street food vendors, street non-
food products vendors, bricklayers and stonemasons, tavern and shebeen operators, motor
vehicle mechanics and fitters, spaza shop owners and workers, tailors, dressmakers and hatters,
sewers, embroiderers and related workers, traditional medicine practitioners, muthi traders, Mr.
phone dealers, shoe makers and polishers, domestic workers and welders.

56.6 % of informal businesses in Mandeni employ 1 person.            Females are dominating the
informal economy sector in Mandeni. 77.6 % of informal businesses in Mandeni have a stagnant
general average growth. The average monthly income for the informal traders in Mandeni is



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approximately R 1417.00. Major obstacles are similar to those from SMMEs and include
infrastructural issues, institutional issues and economic issues.


The profile of Mandeni municipality shows that there is a vast majority of the population with little
or no formal education. More than half (55%) of the economic population of Mandeni is employed
with 45% being unemployed. The manufacturing sector is the largest contributor (60.6%) to the
Mandeni GDP. Agriculture is the second largest contributor to the GDP, with 8.3%. The roads in
the area are fairly in good condition and carry high volumes of traffic in the municipality. the two
main roads MR 415 and MR 459 appear to be fairly in good state. 35% of the households in the
Mandeni municipality do not have piped water and that they access their water through other
sources including rivers, rainwater tanks, boreholes, and springs. 62.5% of all the households in
Mandeni have access to electricity supply.

The above synopsis leads to the SWOT analysis that concludes the situational analysis phase of
the study.



2.6 SWOT ANALYSIS

SWOT serves as the concluding part to the Situational Analysis section and provides a
breakdown of the Mandeni‟s Strengths, Weaknesses, Opportunities and Threats. It should be
indicated that the SWOT analysis is an outcome of data gathered from various sources including
desktop, consultation, workshops, meetings, interviews and various surveys. The strengths and
weaknesses are based on the present situation while the opportunities and threats consider the
future implications of various factors.




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     Table 2.13 SWOT
Economic sectors         Strengths                                   Weaknesses                          Opportunities                   Threats
Mandeni          other   -Mandeni is strategically located on the    -Poor services and rural road       -Tugela River Project           -weak and     interruption   of
Potentialities           Development Corridor of the N2              infrastructure                      -The area has a large pool      electricity
                                                                     -Limited number of people with      of semi-skilled people          -The high      incidence     of
                         between the two port cities of Durban       management & technical skills       available for employment        HIV/AIDS is having an impact
                         and Richards Bay.                           -Weak      networking   amongst     - Dube Trade Port and the
                                                                     businesses                          King Shaka International        in the workplace and this is
                         -Mandeni has a climate conducive to
                         both informal and formal economy            -The Traditional Authority areas    Airport,    presents    the     likely to continue accelerating
                         development, specifically in agriculture,   are under-utilised and are not      opportunity of access to        in the near future.
                         tourism and business trade.                                                     new untapped markets
                                                                     productive because the land is                                      -Businesses       have      not
                         -Further, the availability of the                                               without          exorbitant
                                                                     not farmed effectively.                                             developed           competitive
                         agricultural land in rural areas is                                             transport costs.
                                                                                                                                         advantages.
                         another crucial advantage for business                                                                          -Crash in farmer confidence
                         especially in agricultural sector.                                                                              due to issues of safety and
                         -Mandeni has a relatively good                                                                                  security.
                         infrastructure in CBD. These include
                         roads, taxi ranks etc.
Mandeni SMMEs            -Existence of National and Provincial       -Narrow view of SMMEs               -35.2% of the population in     -High level of competition
                         SMME programmes and Strategies              -Lack      of    equilibrium   in   Mandeni is constituted by       -Lack of skills and poor
                         -Existence of SMME Institutional            addressing SMME issues              youth that can be targeted      education levels
                         structure and various financial and         -Lack of Institutional Framework    -SMME        is  a    labour    -Crime and HIV / AIDS
                         non-financial stakeholders.                 and capability                      intensive sector                -Interruption to supply and
                         -Numerous tourism sites and diverse         -Lack of finance and difficult      -2010 soccer                    growing costs of electricity.
                         facilities                                  access to funding                   -Tourism        underutilised   -National     and    provincial
                                                                     -Poor services and rural road       potentialities exist in the     programmes not known at the
                                                                     infrastructure                      area.                           local level and not well
                                                                     -Lack     of   effective    SMME    -Dube Trade Port and the        channelled to the local level.
                                                                     partnerships                        King Shaka International
                                                                     -Absence of SMME Strategic          Airport have important
                                                                     framework in Mandeni                implications for the future
                                                                                                         development of SMMEs in
                                                                                                         many sectors
Mandeni      Informal    -Existence of International and National    -Lack of synergies between          -Determination to develop       -Lack of skills and poor
Economy                  Policy Instruments                          municipal officials on informal     and support the SMME            education levels.
                         -Existence of the Street Traders            traders                             and informal economy in         -High level of competition
                                                                                                                                   72



Economic sectors   Strengths                    Weaknesses                             Opportunities                 Threats
                   Committee in Mandeni         -Lack        of      formal-informal   Mandeni.                      -Crime and HIV / AIDS.
                                                businesses partnerships                -Informal Economy is a        -Narrow view of informal
                                                -Absence of business support in        Labour Intensive Sector       economy.
                                                Mandeni                                - Dube Trade Port and the     -High inflation
                                                -Lack of informal economy well         King Shaka International      -Police harassment.
                                                structured organisation                Airport have important
                                                -Lack of finance and difficult         implications for the future
                                                access to form funding and             development       of    the
                                                banking institutions.                  informal economy.
                                                -Poor working infrastructures
                                                (storage facilities, water,
                                                electricity)
                                                -Limited access to technology.
                                                -Lack of local framework such as
                                                bylaws
                                                -Excessive registration costs for
                                                starting or operating businesses




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Synopsis


Through an examination of the SWOT of Mandeni Municipality, strategies will be developed
which build on the strengths, overcome the weaknesses, grasp the opportunities and mitigate
against the threats in Mandeni municipality as per the following   figure.

Through an examination of the SWOT analysis of Mandeni municipality, strategies will be
developed which build on the strengths, overcome the weaknesses, grasp the opportunities and
mitigate against the threats in the area as per the following figure.


Figure 2.9 SWOT and Strategy




        Strengths
                                   • What should be done to sustain the
                                      strengths of the economy in                            S
                                                   Mandeni ?
                                                                                             T
                                                                                             R
                                     • What can be done to reduce the
     Weaknesses                       current weaknesses of the economy
                                                 in Mandeni ?


                                     • What economic opportunities are
                                                                                             T
   Opportunities
                                                                                             E
                                       there in Mandeni that should be
                                                 grasped?



         Threats
                                    • What actions need to be made to
                                        negate the threats posed to
                                                                                             G
                                       the economy in Mandeni ?
                                                                                             Y
Source: Urban-econ (2008)

The interventions required to do this, will be developed in the following section of the report.
                                                                                                  74


SECTION 3: STRATEGY FORMULATION
This strategy formulation section follows the preceding situational analysis part that assessed the
existing economic situation of Mandeni within the context of the IDP, LED and other initiatives of
relevance. In the conclusion of the situational analysis section, a breakdown of the Mandeni‟s
economy in terms of Strengths, Weaknesses, Opportunities and Threats (SWOT) was presented.

The current section deals with the formulation of a strategic framework and interventions
necessary to address the current challenges faced by SMMEs and informal traders in Mandeni
municipality. This will be achieved through creation of a vision and strategy, which takes into
consideration the projects within the area as well as stakeholder linkages and project
implementation.


     The World Bank defines these LED elements as follows:

     Vision: The vision describes the stakeholders (community, private sector, municipality, non-
     governmental organizations) agreement on the preferred economic future of the economy.

     Goals: they set performance standards and target activities for development. They are time
     bound and measurable.

     Strategies: Strategies are based on the overall vision and specify desired outcomes of the
     economic planning process.

     Projects and Action Plans: Projects implement specific programs components. They must
     be prioritised and alls costs must be established. They are time bound and measurable .
        Source: World Bank: Local Economic Development Plan, 2006


Importantly, vision, goals and strategies should be directed towards the bridging of the gap
between the first and second economies.


3.1 VISION

The vision adopted for the SMMEs and informal traders development strategy is based on the
Mandeni Municipality‟s adopted visions from the Integrated Development Plan and LED strategy,
and is in line with the objectives thereof. The economically specific aspects of the adopted
Visions are as follows:

IDP: “We, the Community, Amakhosis, Councillors and Staff of Mandeni Municipality hereby
resolve that our Municipality will strive for excellence in the effective and efficient management of
its financial, human, capital and developmental resources.




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o   We shall strive to maximise opportunities for growth and development for all people in our
    community, as well as the natural sources within our Municipal area.
o   We recognise that our economy is industrial and agricultural in its nature, and shall, therefore,
    strive to maximise opportunities for growth in the industrial and agricultural economies.
o   We are proud of the history and heritage of our Municipal area and commit ourselves to the
    growth of our historical and heritage resources in the tourism economy.” (Mandeni
    Municipality; 2006; Integrated Development Plan)


LED:
Growth and development opportunities must be maximised for all people in the area. Human
resources in the area are acknowledged as a key asset in the economic development of the
Municipality.


o   It recognises industrial and agricultural sectors as the basis of the local economy, which
    needs to be grown and expanded.
o   The tourism sector needs to focus on the history and heritage of the area.

From the assessment of the SMME and the informal economy, it is clear that there are
challenges and constraints facing these sectors of the economy due to the combination of the
existing high levels of poverty, low level of basic services, low levels of formal employment
opportunities and severe skill shortages. However, Mandeni municipality also plays host to a
wealth of opportunities across a variety of sectors, from good potential for agricultural
diversification through to the opportunities in the services and business trade sectors clearly
apparent.


Therefore the SMME/Informal economy vision states:


To grow and develop the employment and GDP contribution of Informal Economy and
SMME sector in Mandeni and to bridge the gap between the second and the first
economies in the process.
This will be achieved by
o Improving the capacity of entrepreneurs in each of the above groups;
o Improving their operating circumstances; and
o Providing them with support services including access to resources and by reducing
    their actual and opportunity costs.
In doing so sustainable job opportunities, household incomes and poverty in the
Mandeni community will be addressed.




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SYNERGIES BETWEEN VARIOUS VISIONS

The following table presents the linkages between the various visions from mandeni‟s policicies
including LED and IDP

3.1 Correlation of the IDP, LED and SMMEs/Informal Traders Visions
 Key Points of Mandeni IDP          Key Points of Mandeni LED                 Key Points of Mandeni
            Vision                                Vision                     SMME/Informal Economy
                                                                                     Vision



Maximising opportunities for         To grow and expand industrial and    To grow and develop the
growth and development for all       agricultural sectors                 employment  and    GDP
people                                                                    contribution

Development and growth of            The tourism sector needs to focus    To bridge the gap between the
the natural resources.               on the history and heritage of the   second and the first economies
                                     area.
Maximising opportunities for                                              To address job opportunities,
growth in the industrial and                                              household incomes and poverty
agricultural economies.                                                   alleviation issues


To grow the historical and
heritage resources        in   the
tourism economy.”




The correlation of the three visions lies at the point that all address the economic growth of Mandeni
Municipality as well as the improvement of livelihood of people of Mandeni trough poverty alleviation.




3.2 GOALS
In order to implement the vision as outlined above, and based on the SMME and informal
economy analysis in Mandeni, overall goals need to be developed and achieved. The outcomes
of the goals can be achieved through specific objectives or strategies. Therefore, taking into
account of that the major issue is to develop SMMEs and informal trading in Mandeni as well as
to bridge the gap between the two economies, the project‟s objectives include the following:


o   To grow and develop sustainable employment and GDP contribution of the informal economy
    in Mandeni,




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o   To grow and develop sustainable employment and GDP contribution of the SMMEs in
    Mandeni, and
o   To bridge the gap between the first and second economies in Mandeni

Each goal is discussed in terms of the current situation that gave rise to its identification; the
broad approach to be adopted in order to achieve it; and its specific identified strategies.


3.2.1 TO GROW AND DEVELOP SUSTAINABLE EMPLOYMENT AND GDP
CONTRIBUTION OF THE INFORMAL ECONOMY IN MANDENI

CURRENT SITUATION

Informal trading makes an important contribution to the economy of South Africa. It absorbs
workers who would otherwise be without work or income. Especially in circumstances of high
unemployment, underemployment and poverty, the informal economy has significant job and
income generation potential because of the relative ease of entry and low requirements for
education, skills, technology and capital. Informal economy also contributes the local, provincial
and national GDP.

Regardless the contribution of the informal trading in the economy, people in this sphere of the
economy are often excluded from various legal protections and they are unable to access the
basic benefits or enjoy the fundamental rights granted to those in the formal economy. These
unprotected conditions often include unsafe and unhealthy working conditions, long working
hours with insufficient and unsteady compensation, low skill and productivity levels, and a general
lack of access to information, markets, finance, training and technology.


BROAD APPROACH

The informal economy in Mandeni municipality includes both male and female traders, but the
majority is made of poor women, uneducated, with big families, survivalists, and mostly relying on
government deliveries and support services. Therefore, in order to improve livelihood of people
trapped in the second economy; to create sustainable employment and to allow the informal
trading to contribute more to the local, provincial and national GDP there is a need to address all
current challenges that this economy faces.
Strategies here include:


o To establish informal trading supporting institutions in Mandeni in order to facilitate easy
  access to various support services and to build capacity of entrepreneurs .
o   To facilitate franchising (uncomplicated registration process and an easy access to licence
    and permit) of new enterprises as well as the BEE certification of these enterprises.




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3.2.2 TO GROW AND DEVELOP SUSTAINABLE EMPLOYMENT AND GDP
CONTRIBUTION OF THE SMMES IN MANDENI

CURRENT SITUATION

SMMEs make an important contribution to the economic and social life of most South Africans as
per the informal traders. SMMEs in the first economy play major role in the South African
economy in terms of employment creation, income generation and output growth. They are also
often the vehicle by which the lowest-income people in our society gain access to economic
opportunities.


In spite of the contribution of SMMEs to the economy, it was discovered that SMME operators in
Mandeni are threatened by a number of challenges including among others the following: lack of
finance and difficult access to funding, poor market opportunity, high level of competition, lack of
skills and poor education levels, crime, HIV / AIDS, interruption to supply and growing costs of
electricity, etc.

BROAD APPROACH

SMMEs in Mandeni operate in various sectors including tourism, catering & accommodation;
retail trade and allied services; construction; manufacturing; restaurant & tavern; dairy farm;
general dealer; supermarket; butcher; professional & financial services; etc. further, SMMEs in
Mandeni generate employment ranging from five to fifty people per SMME. To sustain this sector
and to improve its full contribution to the GDP the above challenges need to be addressed.


Strategies here include:

o   To reorganise the SMME sector in Mandeni.
o   To facilitate access to various support services including skills development and capacity
    building.


3.2.3 TO BRIDGE THE GAP BETWEEN THE FIRST AND SECOND ECONOMIES IN
MANDENI

CURRENT SITUATION

As stated earlier, South Africa seems to be characterised by two economies operating side by
side. In an address to the National Council of Provinces, the former president Thabo Mbeki stated
that the second economy is marginalised and characterised by low performance while containing
the majority of South Africa‟s population. However, both formal and informal economies
contribute to the economy regardless their respective challenges. Further, a number of informal
traders in Mandeni are trapped in this unprotected sphere for more than ten years without
progress.



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BROAD APPROACH

Mandeni municipality can play an important role in creating an enabling environment for both
informal trading and SMMEs development. The approach of here is that the municipality should
plan strategically to create a bridge between the two economies so that informal and unprotected
traders can move to the formal economy and access various supports.
Strategies here include:

o   To solidify and consolidate linkages between the first and second economies.
O   The formulation of the standard policies, regulations and bylaws, and
o   Bulk infrastructure development.



3.3 STRATEGIC FRAMEWORK

The strategic framework provides details of the developed strategies, which will further be
unpacked into projects/Activities during the implementation phase of the study. Strategies
developed include the following:


1. To establish informal trading supporting institutions in Mandeni in order to facilitate easy
   access to various support services and to build capacity of entrepreneurs .
2. To facilitate franchising (uncomplicated registration process and an easy access to licence
   and permit) of new enterprises as well as the BEE certification of these enterprises.
3. To reorganise the SMME sector in Mandeni.
4. To facilitate access to various support services including skills development and capacity
   building.
5. To solidify and consolidate linkages between the first and second economies.
6. The formulation of the standard policies, regulations and bylaws, and
7. Bulk infrastructure development.



TO GROW AND DEVELOP SUSTAINABLE EMPLOYMENT AND GDP
CONTRIBUTION OF THE INFORMAL ECONOMY IN MANDENI

1. TO ESTABLISH INFORMAL TRADING SUPPORTING INSTITUTIONS IN MANDENI IN
ORDER TO FACILITATE EASY ACCESS TO VARIOUS SUPPORT SERVICES AND TO BUILD
CAPACITY OF ENTREPRENEURS

Currently skills development, access to finance, advisory and information services are among the
major challenges facing informal traders in Mandeni municipality; while there are a large number
of stakeholders and service providers of those services at national and provincial levels.
Therefore, the role of the Municipality should be that of pulling down those support services and
propagating them throughout the area so that informal traders may have access to them.



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In this context, the proposed tasks are


To open one stop shop in Mandeni municipality.
o   Upgrading of the current flea market at Isithebe.
o   To build the soft infrastructures at Siqume-Renkens including:
           Provision of storage facilities
           Provision of water and electricity service at the trading areas,
         Provision of trading shelters, toilet and allocation of business cubic stalls.
o   To provide training in business management to informal traders.


2. TO FACILITATE FRANCHISING FOR INFORMAL TRADERS

Facilitating franchising has a meaning of uncomplicated registration process and an easy access
to licence and permit of new enterprises as well as the BEE certification of these enterprises.
Excessive registration costs and red tape of starting or operating businesses in Mandeni
municipality remain another challenge for informal traders to start and grow their businesses.


In this context, the proposed activity will be to organise a short training with municipal officials
dealing with registration processes on the cutting of the red tape.


TO GROW AND DEVELOP SUSTAINABLE EMPLOYMENT AND GDP
CONTRIBUTION OF THE SMMES IN MANDENI

3. TO REORGANISE THE SMME SECTOR IN MANDENI

The SMME sector in Mandeni faces several very real constraints highlighted in the SWOT
analysis. The development of a SMME cluster in Mandeni will assist existing businesses and
emerging businesses in key sub-sectors grow and exploit the unique location and advantages of
Mandeni and encourage enhanced competitive behaviour.
Some of the SMME cluster focuses include the following:


o   Value chain alignment,
o   Labour productivity improvement,
o   Materials and Product development,
o   Competition platforms and marketing, and
o   Applied industrial research


Within the above context, the proposed tasks are:

o    To form SMMEs sector specific clusters in Mandeni, and
o    To engage local businesses to develop applicable HIV/AIDS workplace strategies / plans




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4. TO FACILITATE ACCESS TO VARIOUS SUPPORT SERVICES INCLUDING SKILLS
DEVELOPMENT AND CAPACITY BUILDING

As per the informal traders, SMMEs operators in Mandeni face a number of challenges including
skills development, access to finance, advisory and information services and the like. These
challenges faced by SMME operators in Mandeni have programmes and stakeholders at the
national and provincial levels to address them. Therefore, the role of the Municipality as per the
informal traders should be that of pulling down those support services and propagating them
throughout the area.


In this context, the open one stop shop will be crucial in Mandeni municipality for SMMEs
development.

TO BRIDGE THE GAP BETWEEN THE FIRST AND SECOND ECONOMIES IN
MANDENI

5. TO SOLIDIFY AND CONSOLIDATE LINKAGES BETWEEN THE FIRST AND SECOND
ECONOMIES.

As the gap between formal and informal businesses or the first and second economies in
Mandeni keeps on widening, the mentorship as well as partnerships between informal traders
and SMMEs operators are needed. This will allow informal traders as well as the start-up
businesses to learn from the experienced SMMEs. The outcome of this partnership and learning
processes is the reduction of the gap between the two economies in Mandeni.

Within the above context, the projects will be:
o    To establish partnership between the informal economy traders and the formal businesses of
     the area through regular meetings aiming at:
     Mentorship and experience sharing;
       Providing contract (small tender) to emerging businesses e.g. cleaning services, security
        services, transport contract, etc
       Targeting women and youth with entrepreneurship skills.
o   To persuade new constructors of malls and shop to consider the existence of the informal
    traders, and therefore to plan during the construction for a specific place to accommodate
    them.
o   To persuade new developers such as Tugela River Project (Dubai development) to establish
    an entrepreneurship programme rather than providing temporary jobs to the local
    community.


6. THE FORMULATION OF THE STANDARD POLICIES, REGULATIONS AND BYLAWS

Apart from the Municipality‟s lack of data and economic indicators on SMMEs and informal
economy, Mandeni municipality also does not have a specific strategic framework dealing with
SMMEs and informal trading. Consequently, firstly SMMEs and informal trading in the area

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evolve and function in an uncoordinated manner, and secondly the municipality does not have a
hand on these economic operators by the way of evaluating them, controlling them and assisting
them. In due course, this hinders their respective growth.

Activities here include:

o    Formulate the municipal informal economy By-laws,
o    To establish an informal economy forum in Mandeni,

7. BULK INFRASTRUCTURE DEVELOPMENT

SMMEs and informal economy traders in Mandeni municipality face a number of challenges
related to infrastructures. Throughout the surveys organised in the municipality, SMMEs and
informal economy traders pointed out that poor road infrastructure from the purchasing to the
trading points, is among the main cause of the high transport cost of their respective goods. The
taxis and mini-buses that constitute the major means of transport in Mandeni do not have a
proper rank and therefore work in an uncoordinated fashion. This has a major impact on business
grow especially for the informal traders and continues to widen the gap between the two
economies.


Proposed activities are:
o   To provide multimodal transport facilities including bus/taxi rank, rail way station, and the like
o    To upgrade various roads in liaison with the current regeneration programme of Mandeni,
     and
o    To build and run a small business incubator in Mandeni municipality.




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        Table 3.2 Recapitulation of the vision, goals, strategies and projects/activities
Vision Statement:
To grow and develop the employment and GDP contribution of Informal Economy and SMME sector in Mandeni and to bridge the gap between the
second and the first economies in the process. This will be achieved by Improving the capacity of entrepreneurs in each of the above groups;
Improving their operating circumstances; and providing them with support services including access to resources and by reducing their actual and
opportunity costs. In doing so sustainable job opportunities, household incomes and poverty in the Mandeni community will be addressed.
Goals                     Strategies                                     Projects/Activities
                           1.1 To establish informal trading supporting          1.1.1 To open one stop shop to assist informal traders (ref to 2.2.1).
                           institutions in Mandeni in order to facilitate easy   1.1.2 Upgrading of the current flea market at Isithebe
                           access to various support services and to build       1.1.3 To build the soft infrastructure at Siqume-Renkens including:
1. To grow and develop     capacity of entrepreneurs.                            o Provision of storage facilities
sustainable employment                                                           o Provision of water and electricity service at the trading areas,
and GDP contribution of                                                          o Provision of trading shelters, toilet and allocation of business cubic stalls.
the informal economy in
                                                                                 1.1.4 To provide training in business management to informal traders.
Mandeni
                           1.2 To facilitate franchising (uncomplicated          1.2.1 To organise a short training with municipal officials dealing with registration
                           registration process and an easy access to            processes on the cutting of the red tape
                           licence and permit) of new enterprises as well as
                           the BEE certification of these enterprises
                           2.1 To reorganise the SMME sector in Mandeni          2.1.1 To establish Mandeni chamber of business
2. To grow and develop                                                           2.1.2 To engage local businesses to develop applicable HIV/AIDS workplace
sustainable employment                                                           strategies / plans
and GDP contribution of    2.2 To facilitate access to various support           2.2.1 To open one stop shop in Mandeni municipality for SMMEs support and
the SMMEs in Mandeni       services including skills development and             development. (ref to 1.1.1)
                           capacity building.
                                                                                 3.1.1 To establish partnership between the informal economy traders and the
                                                                                 formal businesses of the area through regular meetings aiming at:
3. To bridge the gap                                                                       Mentorship and experience sharing;
between the first and      3.1 To solidify and consolidate linkages between                Providing contract (small tender) to emerging businesses e.g. cleaning
second economies in        the first and second economies.                                  services, security services, transport contract, etc
Mandeni                                                                                    Targeting women and youth with entrepreneurship skills.
                                                                                 3.1.2 To persuade new constructors of malls and shop to consider the existence
                                                                                 of the informal traders, and therefore to plan during the construction for a specific
                                                                                 place to accommodate them.
                                                                                                                                                        84



Vision Statement:
To grow and develop the employment and GDP contribution of Informal Economy and SMME sector in Mandeni and to bridge the gap between the
second and the first economies in the process. This will be achieved by Improving the capacity of entrepreneurs in each of the above groups;
Improving their operating circumstances; and providing them with support services including access to resources and by reducing their actual and
opportunity costs. In doing so sustainable job opportunities, household incomes and poverty in the Mandeni community will be addressed.
Goals                     Strategies                                     Projects/Activities
                                                                               3.1.3 To persuade new developers such as Tugela River Project (Dubai
                                                                               development) to establish an entrepreneurship programme rather than providing
                                                                               temporary jobs to the local community.

                          3.2 The formulation of the standard policies,        3.2.1 Formulate the municipal informal economy By-laws,
                          regulations and bylaws                               3.2.2 To establish an informal economy forum in Mandeni,
                          3.3 Bulk infrastructure development                  3.3.1 To provide multimodal transport facilities including bus/taxi rank, rail way
                                                                               station, and the like.
                                                                               3.3.2 To build and run a small business incubator in Mandeni municipality

       The interventions required to unpack the suggested projects/activities will be developed in the next phase of the study. There, selection of most
       suitable funding sources will be drawn on to formulate implementation plans for the projects identified as well as for their packaging.




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SECTION 4: IMPLEMENTATION FRAMEWORK
This Implementation section follows the preceding strategy formulation section that provided a
strategic framework and interventions necessary to improve the current SMME/informal
economy sector of Mandeni. The strategy formulation section developed a vision and
strategic goals taking into consideration the projects within the area; stakeholder linkages and
project implementation. It should be indicated that this section is made of a number of sub-
sections including the following:

o       Implementation Plan
o       Site identification
o       Financial Plan
o       Institutional Plan
o       Monitoring and Evaluation Mechanisms
o       Projects‟ Business Plans



4.1 IMPLEMENTATION PLAN

The Project Implementation Plan provides a time-based perspective of the projects and
activities relating to SMMEs and Informal Economy sector proposed for implementation.
Table 4.1 displays the project number, the project / activity name, and the proposed start and
end date. The GANTT chart starts from 2009 as a number of projects should be initiated
immediately and then the five years is broken down into blocks of six months.


It should be noted that:

    o    Where activities did not have a defined end date the end of the 5-year term was used
         as the end date, i.e. 30 December 2013;
    o    Where a project will be undertaken within a specific six month period and have a
         shorter timeframe (i.e. two months) the full six-month block was filled; and
    o    A large number of projects start out in the early parts of the five-year term and the
         potential for achieving this should be reconsidered based on the human resources
         capacity within Mandeni Municipality.
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        Table 4.1: The Project Implementation Plan

No      Projects/Activities                                                                2009   2010   2011   2012   2013

1.1.1 To open one stop shop to assist informal traders.
1.1.2 Upgrading of the current flea market at Isithebe
      To build the soft infrastructure at Siqume-Renkens including:
      o Provision of storage facilities
1.1.3 o Provision of water and electricity service at the trading areas,
      o Provision of trading shelters, toilet and allocation of business cubic stalls.

1.1.4 To provide training in business management to informal traders.
        To organise a short training with municipal officials dealing with registration
1.2.1
        processes on the cutting of the red tape
2.1.1 To establish Mandeni Chamber of commerce
        To engage local businesses to develop applicable HIV/AIDS workplace
2.1.2
        strategies / plans
        To open one stop shop in Mandeni municipality for SMMEs support and
2.2.1
        development.
      To establish partnership between the informal economy traders and the formal
      businesses of the area through regular meetings aiming at:
           Mentorship and experience sharing;
3.1.1
           Providing contract (small tender) to emerging businesses e.g. cleaning
              services, security services, transport contract, etc
           Targeting women and youth with entrepreneurship skills.
      To persuade new constructors of malls and shop to consider the existence of
3.1.2 the informal traders, and therefore to plan during the construction for a specific
      place to accommodate them.
                                                                                                                   87




No      Projects/Activities                                                           2009   2010   2011   2012   2013

      To persuade new developers such as Tugela River Project to establish an
3.1.3 entrepreneurship programme rather than providing temporary jobs to the local
      community.

3.2.1 Formulate the municipal informal economy By-laws,
3.2.2 To establish an informal economy forum in Mandeni,

        To provide multimodal transport facilities including bus/taxi rank, railway
3.3.1
        station, and the like

3.3.2 To build and run a small business incubator in Mandeni municipality




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4.2 SITE IDENTIFICATION FOR SMMES AND INFORMAL TRADING

The strategy and activities identified in the previous sections include a number of projects that require the
identification of a physical site where particular facilities should be provided. These projects include:

o   Business one stop shop
o   Business incubator
o   Permanent market for informal economy
o   Flea market for informal trading
o   Regulated and organised street trading


Possible areas have been identified during the course of this study where these facilities could be
provided and include the following:

o    Sundumbile Siqume-Renkens
o    Sundumbile township Gcaleka Shopping Centre, and
o    Isithebe Medical Centre ground

The following table indicates the facilities and their suggested sites


Table 4.2 SMMEs and Informal Trading identified Sites and Facilities
                                                                  Site Options
     SMMEs and Informal                Sundumbile            Sundumbile      Township      Isithebe Medical
      Trading Facilities               Siqume-Renkens        Gcaleka Shopping Centre       Centre Ground


Business one stop shop
                                                                        
Business incubator                                                       
                                               
Permanent market for informal
economy
                                               

Flea market for informal trading                                                                   
Regulated and organised street
trading                                                                  


A brief discussion of the sites follow whereas the projects themselves are dealt with in section 4.5
                                                                                                     89



4.2.1 SUNDUMBILE: SIQUME-RENKENS

Informal traders in a scattered fashion currently use the south area of the current Siqume-Renkens
centre.

Figure 4.1 Siqume-Renkens Centre



                                         Siqume-Renkens
                                              South




This area can be targeted for two options:

o   The first option is to build either the one stop shop that could help majority of SMMEs and informal
    traders including those scattered from the north area of the Siqume-renkens centre to access various
    supports. This one stop shop might house the SMMEs and informal trading incubator.
o   The second option is to construct a permanent market for the current scattered informal traders with
    trading stalls and other facilities provided.




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4.2.2 SUNDUMBILE TOWNSHIP: GCALEKA SHOPPING CENTRE

Gcaleka Shopping centre is situated in Sundumbile Township as per the following figure.

Figure 4.3 Gcaleka Shopping Centre


      Siqume-Renkens
          Centre




                                                                 Sundumbile Township
                                                                  Gcaleka Shopping Centre




    Sundumbile Township
    Gcaleka Shopping Centre




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The centre encompasses a number of formal and informal businesses. Importantly to mention is that the
centre is close to other municipal official services including the police station, department of transport, etc.


o   The great option for this area is to build the one stop shop for SMME and informal trading that will
    house the incubator.
o   Another option is to construct a permanent market for the current scattered informal traders with
    trading stalls and other facilities provided



4.2.3 ISITHEBE MEDICAL CENTRE GROUND

Isithebe Clinic ground is situated in Isithebe industrial area.

Figure 4.3 Isithebe Medical Centre Ground (Flea Market)




       Isithebe Medical
        Centre Ground




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      Isithebe Medical
       Centre Ground
     (Aerial Close Look)




The ground has been for years used for the informal trading flea market that take place every Friday.
There is a need for this area to be used continuously for the same purpose (flea market).



CONCLUDING REMARK

There is a need to mention that Mandeni Municipality is currently developing the city‟s regeneration plan.
The study has been undertaken and is due to the completion before the end of the year 2008. According
to the Mandeni‟s town planner, the team of the study is made of the town planners, architectures,
economists, engineers, developer, etc. Therefore, it is believed that the study will determine what need to
be established where. In other words, the study will find the kinds of development needed in Mandeni
municipal area and will decide on their site allocation. Therefore, the above-mentioned SMMEs and
informal trading sites are to be considered as suggestions and will be informed by the regeneration study.


4.3 FINANCIAL PLAN

The Financial Plan reflected in Table 4.3 provides an overview of capital and operational budget
requirements per institution or service provider over a certain period (probably 5 years). The following
should be noted when considering the budgets.

o   Operational costs are reflected by a (O) next to the amount, and

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o   Capital costs are reflected by a (C) next to the amount.


The budgets indicated in the table below is indicative only. Detail cost estimates will only be able to make
once feasibility studies for the actions have been undertaken that includes the conceptualisation of the
designs of the facilities and actions.




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     Table 4.3: The Project Financial Plan

                                                                                                                                                Indicative
            Projects/Activities – see also the more
No                                                                 Actions to undertake                                                         cost estimate
            detail project descriptions in Section 4.5
                                                                                                                                                2009
                                                                   The specific design of the one stop shop needs to be undertaken and be
                                                                   site specific to determine a realistic cost estimate of the operating and    R 10 m (c)
                                                                   capital budgets. Mandeni Municipality has applied to DED for the
1.1.1       To open one stop shop to assist informal traders.                                                                                   R200 000/annu
                                                                   opening of one stop shop with the capital cost estimated at 10 m. The
                                                                   operating cost of the facility is based salaries for 2 staff members with    m
                                                                   basic support materials sourced from SEDA


                                                                   Both the services infrastructure and the design and construction of the
1.1.2       Upgrading of the current flea market at Isithebe       top structures need to be undertaken. The cost estimate is based on the      R 8,7 m (c)
                                                                   250 traders currently frequenting the facility estimated at R 35000/p unit

            To build the soft infrastructure at Siqume-Renkens
            including:
            o Provision of storage facilities                      The cost estimate is merely indicative. Feasibility and detail design and
1.1.3       o Provision of water and electricity service at        assessments of the available infrastructure would need to be undertaken      R 1.5 m (c)
                 the trading areas,                                to give any indication of actual costs.
            o Provision of trading shelters, toilet and
                 allocation of business cubic stalls.

                                                                   Cost estimate is based on 600 traders receiving training at a cost of
            To provide training in business management to          R660 per trader. The cost per training is based on the availability of
1.1.4                                                              SETA funding being channelled through the municipality and the               R 400 000 (o)
            informal traders.
                                                                   principle organisation. The training needs to be renewed as new traders
                                                                   enter the business sphere

            To organise a short training with municipal
                                                                   In house training provided by the LED office to officials to be appointed.
1.2.1       officials dealing with registration processes on the
                                                                   R 2000 is for the preparation of the materials
                                                                                                                                                R 2 000 (c)
            cutting of the red tape
                                                                                                                                              95


                                                                                                                                        Indicative
        Projects/Activities – see also the more
No                                                            Actions to undertake                                                      cost estimate
        detail project descriptions in Section 4.5
                                                                                                                                        2009
                                                              This is one of the facilitation functions of the municipality already
2.1.1   To establish a chamber of commerce in Mandeni         identified in the Mandeni LED and already implemented through that        R 0 (c)
                                                              programme

        To engage local businesses to develop applicable      This is one of the facilitation functions of the municipality already
2.1.2
        HIV/AIDS workplace strategies / plans                 identified in the Mandeni LED
                                                                                                                                        R 0 (c)


        To open one stop shop in Mandeni municipality         As per 1.1.1 above, the same one stop shop will accommodate both
2.2.1
        for SMMEs support and development.                    SMMEs and informal traders

        To establish partnership between the informal
        economy traders and the formal businesses of the
        area through regular meetings aiming at:
             Mentorship and experience sharing;
             Providing contract (small tender) to            Facilitation function taking place through the proposed SMME/Informal
3.1.1
                emerging businesses e.g. cleaning             Economy Forum
                                                                                                                                        R 0 (c)
                services, security services, transport
                contract, etc
             Targeting women and youth with
                entrepreneurship skills.

        To persuade new constructors of malls and shop
                                                              Private sector cost in terms of the actual provision of the facilities.
        to consider the existence of the informal traders,
3.1.2
        and therefore to plan during the construction for a
                                                              Municipality plays a role through the consideration and influencing the   R 0 (c)
                                                              designs of the buildings
        specific place to accommodate them.


        To persuade new developers such as Tugela
        River Project to establish an entrepreneurship
3.1.3                                                         Facilitation function of the municipality                                 R 0 (c)
        programme rather than providing temporary jobs
        to the local community.




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                                                                                                                                           Indicative
        Projects/Activities – see also the more
No                                                             Actions to undertake                                                        cost estimate
        detail project descriptions in Section 4.5
                                                                                                                                           2009

                                                               Internal funding of the proclamation of the by-laws. The cost for this
        Formulate the municipal informal economy By-
3.2.1                                                          project is estimated at R 150 000 as it will implicate research and         R 150 000 (o)
        laws,
                                                               analysis of the area.


        To establish an informal economy forum in              Facilitation function of the Municipality to help informal traders form a
3.2.2                                                                                                                                      R 0 (c)
        Mandeni,                                               forum.

                                                               The multimodal transport facility referred to as “ranks, terminals,
                                                               terminuses, etc. Cost indicative of the provision of this facility is
        To provide multimodal transport facilities including   estimated at R 100 m. This estimation has been arrived to as a similar
3.3.1                                                                                                                                      R 100 m (c)
        bus/taxi rank, rail way station
                                                               project is undertaken at port Shepstone. This development will however
                                                               be a private sector investment cost.


                                                               The implementation of the incubator would require external funding. The     R 10 m (c)
        To build and run a small business incubator in
3.3.3                                                          cost is merely indicative and is based on the experience of the
        Mandeni municipality                                                                                                               R 2m/ annum
                                                               Umkhambane incubator in Durban.




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4.4 INSTITUTIONAL PLAN

This sub-section of the report examines the institutional arrangements that would best facilitate the
optimal growth of SMMEs and informal trading in Mandeni Municipality. It should be indicated that without
a clear institutional framework in place, SMMEs and informal trading programmes and projects will be
implemented in an uncoordinated fashion that might sometimes lead to their duplication and waste of
scarce resources. Therefore, following suggested recommendations are crucial to facilitate an optimal
growth of the SMMEs and informal trading business in Mandeni.



ESTABLISHMENT OF MANDENI SMMES/INFORMAL TRADING PANEL

To implement Mandeni SMMEs and informal traders‟ development Strategy there is a need to establish
the SMMEs/Informal trading Panel. The Mandeni SMMEs/Informal Trading Panel will be made of the
following people:

o   The KZN DED representative
o   SEDA representative
o   Mandeni SMMEs representative
o   Mandeni Informal traders representative, and
o   Mandeni LED Unit


The major tasks of the SMME/Informal trading Panel include among others the following:

1. Advisory inputs to support SMME development in Mandeni
2. Advisory inputs to support and informal trading development in Mandeni
3. Advisory inputs to bridge the gap between the two segments of the business sector
4. Monitoring and evaluation of the Mandeni SMME and informal traders strategy outcome
5. Providing secretarial and logistical services to the Panel
6. Channelling information to the Mandeni Portfolio committee
7. Executing Mandeni SMMEs and informal traders strategy projects

It should be indicated that the provision of secretarial and logistical services to the Panel, the channelling
of the information to the Mandeni portfolio Committee and the execution of the projects will be assumed
by Mandeni LED Unit.

All the above can be presented as follows:
                                                                                                        98



      KZN DED           SEDA          Informal Traders          SMMEs          Other Stakeholders



      Mandeni Portfolio                                                    I
        Committee                                                          N
                                                                           P
                I
                                                                           U
                N                                                          T
                F
                O                                                          S
                R
                M
                A
                T
                I
                O
                N
                -
                F
                L
                O
                w

                                                                   SMMEs/Informal
                                                                    Trading Panel
       Mandeni LED Unit                                               (All Rep)


The figure shows that SMMEs and informal traders stakeholders feed their inputs into the Panel, and the
outcome is taken to the portfolio committee for the approbation before the implementation process takes
place



4.5 MONITORING AND EVALUATION TOOLS AND MECHANISMS

The monitoring and evaluation (M&E) process is always seen as an essential component used in the
process of developing and implementing local economic projects. The objectives of the monitoring and
evaluation mechanism are to:


o   Ensure that the correct milestones, as planned, are being achieved
o   Act as an early warning system in cases where targets are unlikely to be achieved
o   Provide regular information to all stakeholders on progress of the projects and an informed basis for
    any reviews
o   Ensure the continuous sharpening and focusing of strategies and assist in the mobilisation of
    appropriate interventions


It should be noted that monitoring and evaluation of the projects would be a continuous implementation
review function to provide the main stakeholders with early indications of progress or lack thereof in the



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     achievement of objectives and outputs. The monitoring team should make use of the following project
     specific tools and indicators:


       Table 4.4 The Project Monitoring Tools
                                                                                        Key Performance Indicators (KPI)




                                                                                                         Percentages of the




                                                                                                                                                                                  completed on time


                                                                                                                                                                                                      Exceptional report
                                                                                                                              Project completed
                                                                                      Project progress
                                                                  Project initiated




                                                                                                                                                                created to date
                                                                                                                                                                Number of Job
                                                                                      (Rand spent?)
                       Projects




                                                                                                                                                                                  On schedule/
                                                                                                                                                  Responsible
                                                                  (yes or no?)




                                                                                                                              (yes or no?)




                                                                                                                                                                                  (yes or not)
                                                                                                         progress



                                                                                                                                                  Project
1. To open one stop shop to assist informal traders.
2. Upgrading of the current flea market at Isithebe.
3. To build the soft infrastructure at Siqume-Renkens
    including provision of storage facilities, water and
    electricity services, trading shelters, toilet and business
    cubic stalls.
4. To provide training in business management to
   informal traders.
5. To organise a short training with municipal officials
   dealing with registration processes on the cutting of the
   red tape.
6. To establish Mandeni chamber of business.
7. To engage local businesses to develop applicable
    HIV/AIDS workplace strategies / plans.
8. To open one stop shop in Mandeni municipality for
    SMMEs support and development
9. To establish partnership between the informal economy
    traders and the formal businesses of the area through
    regular meetings aiming at mentorship and experience
    sharing; providing contract to emerging businesses
    Targeting women and youth with entrepreneurship
    skills.
10. To persuade new constructors of malls and shop to
    consider the existence of the informal traders, and
    therefore to plan during the construction for a specific
    place to accommodate them.
11. To persuade new developers such as Tugela River
    Project to establish an entrepreneurship programme
    rather than providing temporary jobs to the local
    community.
12. Formulate the municipal informal economy By-laws.
13. To establish an informal economy forum in Mandeni.
14. To provide multimodal transport facilities including
    bus/taxi rank, rail way station, etc
15. To build and run a small business incubator in Mandeni
    municipality


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4.5 PROJECTS BUSINESS PLANS

This sub-section is made of small-sections unpacking the key projects suggested from the strategy
formulation section including the following:

1. To open one stop shop to assist informal traders.
2. Upgrading of the current flea market at Isithebe.
3. To build the soft infrastructure at Siqume-Renkens including:
            Provision of storage facilities
            Provision of water and electricity service at the trading areas,
            Provision of trading shelters, toilet and allocation of business cubic stalls.
4. To provide training in business management to informal traders.
5. To organise a short training with municipal officials dealing with registration processes on the cutting
   of the red tape.
6. To establish Mandeni chamber of business.
7. To engage local businesses to develop applicable HIV/AIDS workplace strategies / plans.
8. To open one stop shop in Mandeni municipality for SMMEs support and development
9. To establish partnership between the informal economy traders and the formal businesses of the area
    through regular meetings aiming at:
            Mentorship and experience sharing;
            Providing contract (small tender) to emerging businesses e.g. cleaning services, security
             services, transport contract, etc
         Targeting women and youth with entrepreneurship skills.
10. To persuade new constructors of malls and shop to consider the existence of the informal traders,
    and therefore to plan during the construction for a specific place to accommodate them.
11. To persuade new developers such as Tugela River Project to establish an entrepreneurship
    programme rather than providing temporary jobs to the local community.
12. Formulate the municipal informal economy By-laws.
13. To establish an informal economy forum in Mandeni.
14. To provide multimodal transport facilities including bus/taxi rank, rail way station, and the like.
15. To build and run a small business incubator in Mandeni municipality.



4.5.1 TO OPEN ONE STOP SHOP TO ASSIST SMMES AND INFORMAL TRADERS.

Background

Entrepreneurship and the successful development of SMMEs has been a burning issue for some time.
The fostering of a national capacity for entrepreneurship is critical to the growth of the country and its two
economies. Enter – one stop shop, the concept of which is a response to the well-defined need for the
growth of the small and micro business sector, a sector that is historically poorly serviced and supported
with a resulting high failure rate.


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In Mandeni SMMEs and informal traders, face a number of challenges including skills development,
access to finance, mentorship, advisory and information services, etc. These challenges have
programmes and support services at the national and provincial levels that might be replicated or
established in Mandeni.

In addition, some existing support services in Mandeni are not all together. They evolve and function in an
uncoordinated manner. As a result, the service provided to SMMEs and informal traders is poor and
inefficient.

It is within this regard that the Municipality intends to provide one stop shop
    o    To group the majority of services providers together or within a walking distance
    o    To facilitate the establishment of some national and provincial SMMEs/informal economy support
         services and programmes in Mandeni and
    o    To help the existing and future emerging traders and SMME business people to access
         assistance in order to grow their businesses

It is possible that the one stop shop will reduce the failure of start up businesses while bridging the gap
between the first and second economies in Mandeni.

Description of activities


The first activity is to construct the building that will house a number of activities and service providers
including the following:

Activities
    o SMMEs and Informal Economy Incubator
    o    General business and client advisory service
    o    Training, in the form of business management and technical skills training
    o    Tender advice and access to market
    o    Access to finance and referrals to funding and finance institutions
    o    Business incubation and mentoring
    o    Access to government grants for community and business projects
    o    Institutional capacity building for SMMEs
    o    Assistance with registration and trading permits
    o    Consultation on South Africa's regulatory environment
    o    Links to joint venture partners in South Africa

Service providers:
    o    Umsobomvu / Mandeni Youth Advisory Centre
    o    Ithala Banks
    o    SEDA
    o    SETA
    o    FET


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    o   Youth Development Trust (YDT)
    o   Centre for Entrepreneurial and Enterprise Development (CEED)
    o   Other business agencies

The building needs also to be provided with the following
    o   Parking
    o   Display area
    o   Internet facilities
    o   Equipped secretary (with photocopy, fax and other work related machines)
    o   Waiting or rest area
    o   Ablution


It should be noted that the full design of the building would be provided by a professional architecture
appointed by the Municipality.


The second activity of the project is the running of the one stop shop

Apart from the presence of the SMMEs and informal trading service providers in the building, the one stop
shop will have a manager and a receptionist who will handle its daily activities. This because some
service providers will not be based in the building but come in certain days of the week.


Location

The first option will be to locate the one stop shop Building at Gcaleka Shopping Centre in Sundumbili
Township. The second option will be at Sundumbile Siqume-Renkens.

Timeframe, Budget and Responsibility

The construction of the building will probably take six months but the running of the one stop shop is
permanent. The cost estimated for the construction is R10 m, but precision will be provided by the
architecture. The running of the project is estimated at R 200 000 per annum. The responsibility of the
project is the Mandeni Municipality.

Possible source of funding include:
o Department of Trade and Industry (DTI) through SEDA programme
o   Department of Agriculture through AgriBEE programme, Comprehensive Agricultural Support
    Programme and Landbank
o   KZN Department of Economic Development (DED) through SMME fund and cooperatives fund
    programmes




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4.5.2 UPGRADING OF THE CURRENT FLEA MARKET AT ISITHEBE.

Background

The flea market at Isithebe has been running for the years under the responsibility of Ithala Development
Corporation. It opens from early morning every Friday till late. There many articles are exposed for sale
including curios, clothing, jewellery and home décor items, food, refreshments, Garbage, cooked mielies,
news papers, live chicken, second hand clothes, hairdressing, fruits and vegetable, non-food products,
traditional medicine, Mr. Phone, etc


However, as per the following photo, informal traders operate in an open area exposed to all sort of
weather challenges including the rain, sun, snow, etc. In addition, the trading area is not well catered in
terms of ablution facilities, parking, walking ways, electricity as well as water and sanitation.


Figure 5.4 Isithebe Flea Market




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Description of activities

The project‟s activities include:
    o   Providing parking
    o   Providing a roof such as taxi rank
    o   Providing ablution facilities coupled with water and electricity
    o Providing sanitation facilities such as bins
It should be indicated that the full renovation design of the flea market would be provided by a
professional architecture appointed by the Municipality.

Location
Isithebe Flea Market will remain at its current place in Isithebe Medical Centre Ground.


Timeframe, Budget and Responsibility

The construction of the above facilities will probably take 12 months and Mandeni municipality will be the
responsible of the project. The budget is estimated at R8,7 m

Possible source of funding include:
o   Department of Trade and Industry (DTI) through SEDA programme
o   KZN Department of Economic Development (DED) through SMME fund and cooperatives fund
    programmes
o   Mandeni Municipality




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4.5.3 TO BUILD THE SOFT INFRASTRUCTURE AT SIQUME-RENKENS INCLUDING:
PROVISION OF STORAGE FACILITIES, PROVISION OF WATER AND ELECTRICITY
SERVICE AT THE TRADING AREAS, PROVISION OF TRADING SHELTERS, TOILET AND
ALLOCATION OF BUSINESS CUBIC STALLS.

Background

Siqume-Renkens is one of vibrant informal trading markets if not the first in Sundumbile area. The market
is characterised by variety of goods sold as well as informal services supplied. However, as the market is
big, a small number of informal traders operate under a well-constructed roof with trading cubic stalls
while majority of them are trading under the sun. In addition, those trading under the constructed roof do
not have storage facilities as well as water and electricity as per the following figure.


Figure 5.5 Constructed Informal Trading Market at Siqume-Renkens




Therefore, the project is to provide water electricity and storage facilities to those already trading under
the constructed roof. To those who trade under the sun, to provide a constructed market with cubic stalls
etc.



Description of activities

The project‟s activities include:
   o Providing storage facilities, water and electricity,
    o   Providing of a good trading market (shelter)

Location
All activities including the provision of market will be done at Siqume-renkens at Sundumbile.

Timeframe, Budget and Responsibility

Provision of storage facilities, water and electricity will take four months. The estimated budget is R
500 000.
The construction of the market (shelter) will take six months. The estimated budget is R1 m.
For all activities, Mandeni municipality will be the responsible.


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Possible source of funding include:
o Department of Trade and Industry (DTI) through SEDA programme
o   KZN Department of Economic Development (DED) through SMME fund and cooperatives fund
    programmes



4.5.4 TO PROVIDE TRAINING IN BUSINESS MANAGEMENT TO INFORMAL TRADERS.

Background

The acquisition of relevant vocational, technical and business skills is generally regarded as one of the
critical factors for success in small enterprises. In addition, literacy and entrepreneurial awareness are
seen as particularly important to enable people to advance from survivalist activities into larger and better
earning enterprises. The acquisition of relevant vocational, technical and business skills is generally
regarded as one of the critical factors for success in small enterprises.

The SMME and informal economy surveys organised in Mandeni revealed that majority of informal
traders lack business management and administration skills therefore do not grow. The crucial need is
therefore to provide training to informal traders as means of enhancing people„s empowerment and
economic growth of Mandeni.

Description of activities

Developing a Micro Business Clinic: in the Informal Economy sphere as per other SMMEs, there is a lack
of information distribution among the stakeholders. In fact, they are a number of training support services
and programmes that deal with the informal economy and SMMEs related skills issues. Unfortunately, the
targeted spheres (SMMEs and Informal Traders) are not aware of those support services and
programmes. Therefore, a mobile team of individuals should be organised to circulate wherever informal
traders are trading to inform them about where to get the training.

Location
The training will take place at various training centres in Mandeni specifically in Sundumbile.

Timeframe, Budget and Responsibility

The micro business clinic and the training are the ongoing activities. Their estimated budget will be
determined by uMsobonvu and other related service providers but approximately the budget is estimated
at R 400 000.
For all activities, Mandeni municipality and uMsobonvu will be the responsible.

Possible source of funding and services include:
o   Department of Trade and Industry (DTI) through SEDA programme
o   Department of Labour (DOL) through Small and Medium Enterprise Development Programme
    (SMEDP)

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o   National Development Agency NDA
o   Sector Education Training Authority (SETA)
o   Centre for Entrepreneurial and Enterprise Development (CEED)
o   Foundation for Entrepreneurial Development KZN
o   KZN Department of Economic Development (DED) through SMME fund and cooperatives fund
    programmes



4.5.5 TO ORGANISE A SHORT TRAINING WITH MUNICIPAL OFFICIALS DEALING WITH
REGISTRATION PROCESSES ON THE CUTTING OF THE RED TAPE.

Background

The majority of people in Mandeni, including officials, think that informal economy means illegal business,
forgetting that the sector includes some great businesses that generate employment and contribute the
local, provincial and national GDP. The narrow view of the officials and other developmental agencies on
the informal economy sector restricts their focus on the economic and developmental impact of the sector
in the area. In the worst-case scenario, this leads police to harass the informal economy traders while
municipal officials complicate the registration processes of their informal businesses.

Description of activities

Activity here will be to send municipal officials that directly deal with SMMEs and informal traders to a
short training on how to reduce regulatory and administrative barriers during the registration processes of
small businesses.

Location
The training will take place at various training centres in Mandeni specifically in Sundumbile.

Timeframe, Budget and Responsibility
In most the cases, this kind of training take two days and is estimated at R 2000 per candidate. Mandeni
municipality will be the responsible.



4.5.6 TO ESTABLISH MANDENI CHAMBER OF BUSINESS

Background

Currently SMMEs in Mandeni municipality do not have a well-structured organisation such as a "municipal
chamber of commerce" that could coordinate their activities and speak on behalf of its members.
Consequently, each small business owner deals with his/her challenges on his/her own. Therefore, the
need is to establish a chamber of business in the area that will provide valuable support & opportunities
for SMMEs and the business community at large, to develop, grow & prosper in today's business
environment.



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Description of activities

Activity here will be to invite all SMME owners and to elect among them a team that will form a chamber.


Location

The chamber will be based in Mandeni municipality.

Timeframe, Budget and Responsibility


The chamber will be permanent and its day-to-day running will be estimated by its administration.
Mandeni Municipality will facilitate the establishment of the chamber but its sustainability will be done by
its members.


Possible source of funding and services include:
o   Department of Labour (DOL) through Skills Support Programme (SSP)
o   Department of Trade and Industry (DTI) through SEDA programme
o   Sector Education Training Authority (SETA)
o   KZN Department of Economic Development (DED) through SMME fund and cooperatives fund
    programmes



4.5.7 TO ENGAGE LOCAL BUSINESSES TO DEVELOP APPLICABLE HIV/AIDS
WORKPLACE STRATEGIES / PLANS.

Background

The HIV/AIDS rate in Mandeni as per other areas of the in the province is high. The impact of the
epidemic on the SMMEs and informal economy, as with other sectors, is that it results in the early deaths
of skilled, semi-skilled and unskilled workers, resulting in increased operating and training costs as well
as reduced productivity. Some SMMEs have been heavily affected by the pandemic through increased
absenteeism from work, as well as the death of workers. The survey organised revealed that many of the
medium and small enterprises do not have a specific HIV/AIDS policy or strategy in place. Therefore,
there is a need to develop an applicable HIV/AIDS strategy for SMMEs.



Description of activities


Activity here will be to develop a HIV/AIDS plan at the work place.
As long as the pandemic is affecting the area, the policy remains a permanent activity until HIV/AIDS is
completely eradicated. Each SMME will be responsible to develop the policy at a normal cost.




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4.5.8 TO OPEN ONE STOP SHOP IN MANDENI MUNICIPALITY FOR SMMES SUPPORT AND
DEVELOPMENT.

See 4.5.1 as the same one stop shop will be utilised for both SMMEs and Informal traders


4.5.9 TO ESTABLISH PARTNERSHIPS BETWEEN THE INFORMAL ECONOMY TRADERS
AND THE FORMAL BUSINESSES OF THE AREA THROUGH REGULAR MEETINGS
AIMING AT:

       MENTORSHIP AND EXPERIENCE SHARING
       PROVIDING CONTRACT (SMALL TENDER) TO EMERGING BUSINESSES E.G. CLEANING SERVICES,
        SECURITY SERVICES, TRANSPORT CONTRACT, ETC
       TARGETING WOMEN AND YOUTH WITH ENTREPRENEURSHIP SKILLS



Background

Another major problem facing the informal traders is the lack of partnerships between them and big
businesses that do not trust them. As per other Municipalities, there is very little co-operation between the
formal and informal businesses in Mandeni municipality. The formal businesses consider informal traders
as illegal and hinders of their businesses especially when informal traders are trading on the road
pavement or in the formal businesses' entrances. Hence, the lack of partnership between the two spheres
of the economy constitutes a major deterrent to bridge their gap in Mandeni.


The project therefore will be to create and develop a partnership between these two spheres of the
economy.

Description of activities


Activity will be through the established chamber of business and the established forum of informal
traders, to organise meetings aiming at:
       Mentorship and experience sharing
       Providing contract (small tender) to emerging businesses e.g. cleaning services, security
        services, transport contract, etc
    Targeting women and youth with entrepreneurship skills
The established chamber and forum will be responsible of the organisation of such meetings

4.5.10 TO PERSUADE NEW CONSTRUCTORS OF MALLS AND SHOP TO CONSIDER THE
EXISTENCE OF THE INFORMAL TRADERS, AND THEREFORE TO PLAN DURING THE
CONSTRUCTION FOR A SPECIFIC PLACE TO ACCOMMODATE THEM.

Background

The informal economy in Mandeni is heterogenic, ranging from street traders and shebeen owners to
child carers and domestic workers. It is often characterised by its flexibility, creativity, resilience to absorb


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shocks, and its ability to adapt to changing external environments. However, the characteristics of the
informal economy have ensured that it will never disappear, but instead continues to grow in size and
importance.

Given that the informal economy supports the livelihoods of thousands of mostly poor, vulnerable and
marginalized people in Mandeni, there exist a need to persuade new constructors of malls and shop to
consider the existence of the informal traders, and therefore to plan during the construction for a specific
place to accommodate them.

Description of activities


Activity here is to inform, through the Mandeni town planner, new developers of Malls and shopping
centres to plan and reserve the places to be allocated to informal traders.


4.5.11 TO PERSUADE NEW DEVELOPERS SUCH AS TUGELA RIVER PROJECT TO
ESTABLISH AN ENTREPRENEURSHIP PROGRAMME RATHER THAN PROVIDING
TEMPORARY JOBS TO THE LOCAL COMMUNITY.

Background
The same apply as per the preceding project

Description of activities
See the preceding project


4.5.12 FORMULATE THE MUNICIPAL INFORMAL ECONOMY BY-LAWS.

Background

Local Municipalities including Mandeni have the responsibility to create a conducive environment in which
the informal economy traders might peacefully operate. Regulations and planning have major impact on
the growth of the economy. Municipalities and local areas should be provided with a means to evaluate
the impact and potentially damaging impact of inappropriate by-laws and regulates on economic growth
and job creation processes.

The study revealed that Mandeni municipality does not have the informal economy by-laws to coordinate
and this sector. This consequently rends difficult to control and manage informal trading in the area. The
project is therefore to develop by-laws in Mandeni.

Description of activities

Activity here is to develop the Mandeni informal trading by-laws.
The project will take three months and is estimated that R 150 000.
Mandeni Municipality will be the responsible of the project.


Possible source of funding and services include:

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o   Department of Provincial and Local Government (DPLG) through the LED Fund and Social Plan Fund
o   KZN Department of Economic Development (DED) through Economic Empowerment Programme.

4.5.13 TO ESTABLISH AN INFORMAL ECONOMY FORUM IN MANDENI.

Background

Currently the informal economy traders in Mandeni do not have a well-structured organisation such as a
"Municipal Forum of Informal Traders" that could coordinate their activities and speak on behalf of its
members. As a result, each informal economy trader deals with his/her own challenges with little effect to
impact on the needed outcome or solution. Therefore, there is a need to establish a Mandeni informal
economy forum that will represent and speak on their behalf.

Description of activities

Activity here will be to invite available informal traders and to elect among them a team that will form a
forum.


Location
The forum will be based in Mandeni municipality.


Timeframe, Budget and Responsibility
The forum will be permanent and its day-to-day running will be estimated by its administration. Mandeni
Municipality will facilitate the establishment of the forum but its members will assume its sustainability.


4.5.14 TO PROVIDE MULTIMODAL TRANSPORT FACILITIES INCLUDING BUS/TAXI
RANK, RAIL WAY STATION, AND THE LIKE.

Background

Public transport in Mandeni Municipality is more dominated by taxis and minibuses. It operates in an
uncoordinated fashion and present many challenges to public and commuters. Therefore there is a need
to reorganise it through the provision of a multimodal transport facility. The multimodal transport facility
referred to as “ranks, terminals, terminuses etc” the term modal interchange is preferred since it better
conveys an appreciation of what is the prime function of such facilities: ie to provide a
collection/distribution point that is convenient to passengers.


Importantly the multimodal facility:


        Provide a safe and secure environment for the public to be able to access public transport
         services
        Provide accurate, “real time‟ information to passengers on service available
        Increase convenience for transferring passengers by decreasing transfer time and walking
         distance by integrating transportation modes and/or routes into one facility


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       Eliminate or alleviate problems associated with on-street taxi/bus operations such as traffic
        congestion, sidewalk congestion, pedestrian accidents, insufficient curb space, illegal parking at
        terminus and exhaust emission
       Attractive design and appropriate architecture provided by the facility will improve urban
        environment therefore facilitate urban renewal and economic development and
       Provide a focal point for informal trading and other activities and services and incorporate private
        and public uses and activities into the facility, thus increasing economic viability of the facility.

Description of activities

Activity here will be to construct a modern transport interchange facility that includes taxis and buses
ranks, terminals, terminuses, and rail way station.

Location
The multimodal facility will be in Sundumbili close to Siqume-Renkens centre as per the following figure.


Figure 5.6 Suggested Area for the Multimodal transport Facilities


          Siqume-Renkens Centre                               Multimodal Transport
                                                                    Facilities




Timeframe, Budget and Responsibility


Mandeni Municipality and the KZN Department of Transport will be the responsible of the project and will
estimate the budget (R 100 m) and duration of the construction.


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4.5.15 TO BUILD AND RUN A SMALL BUSINESS INCUBATOR IN MANDENI
MUNICIPALITY.

Background

SMMEs and informal traders in Mandeni still face many challenges which are not yet adequately
addressed. Among those challenges are:

o   Access to advisory services (especially informal economic entrepreneurs)
o   Access to finance
o   Lack of skills and poor education:
               Business management skills
               Bookkeeping skills commonly known as financial management skills
             Basic business skills
o   High level of competition with many people applying for tenders to make money quickly, while still
    battling for skills development
o   Some Co-operatives and Businesses are not productive, hence do not fit into the market


Given that the informal economy supports the livelihoods of thousands of mostly poor, vulnerable and
marginalised people in Mandeni, there is a need to pay a special attention to this sector in order to
address the preceding challenges. Therefore, there is a need to provide an incubator that will cater for
SMMEs and informal traders.

Description of activities

The project is made of two activities including the construction of the incubator and its running.


Location
The incubator needs to be within or close to the one stop shop at Gcaleka Shopping Centre in Sundumbili
Township.


Timeframe, Budget and Responsibility

The construction of the incubator will probably take six months and its running will be an ongoing activity.

The estimated budget for the provision and running of Incubator for SMMEs and informal traders in
Mandeni is R 10 000 000.00 for the construction and R 2 000 000.00/ year for the running.

The Mandeni Municipality and the Department of Trade and Industry through SEDA Programme will be
responsible for the sustainability of the SMMEs/informal economy incubator

SYNOPSIS

This section followed the strategy formulation and unpacked the key developed and anchor activities
considered to have specific initiatives to give effect to the SMMEs and informal economy sector of

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Mandeni. The section presented the identified sites to be allocated to the informal trading services. The
financial and implementation plans were also presented and the business plans for the key following
projects were unpacked:

1. To open one stop shop to assist informal traders
2. Upgrading of the current flea market at Isithebe
3. To build the soft infrastructure at Siqume-Renkens including:
        o   Provision of storage facilities
        o Provision of water and electricity service at the trading areas,
        o Provision of trading shelters, toilet and allocation of business cubic stalls
4. To provide training in business management to informal traders
5. To organise a short training with municipal officials dealing with registration processes on the cutting
    of the red tape
6. To establish Mandeni chamber of business
7. To engage local businesses to develop applicable HIV/AIDS workplace strategies / plans
8. To open one stop shop in Mandeni municipality for SMMEs support and development.
9. To establish partnership between the informal economy traders and the formal businesses of the area
    through regular meetings aiming at:
        o Mentorship and experience sharing;
        o   Providing contract (small tender) to emerging businesses e.g. cleaning services, security
            services, transport contract, etc
        o   Targeting women and youth with entrepreneurship skills
10. To persuade new constructors of malls and shop to consider the existence of the informal traders,
    and therefore to plan during the construction for a specific place to accommodate them
11. To persuade new developers such as Tugela River Project to establish an entrepreneurship
    programme rather than providing temporary jobs to the local community
12. Formulate the municipal informal economy By-laws
13. To establish an informal economy forum in Mandeni
14. To provide multimodal transport facilities including bus/taxi rank, rail way station, and the like
15. To build and run a small business incubator in Mandeni municipality




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SECION 5. GENERAL CONCLUSION

The importance of the SMME and informal economy for economic development and job creation has
been clearly acknowledged in several development strategies and plans at national and provincial level.
Despite the significance of the SMME and informal trading in the economy, there have been few detailed
research studies on their structures, dynamics and opportunities. As a result of the poor database and of
the limited nature of recent detailed research on the SMME/informal economy, strategic planning
initiatives are difficult to undertake.


In Mandeni Municipality for instance, there is not a clearly defined SMME/informal economy Development
Programme. This is a challenge that required urgent intervention/s if the Municipality is indeed going to
adhere to its constitutional obligation of promoting socio-economic development in its area of jurisdiction.

It is therefore, against that brief background that the Municipality decided to develop a “solution driven”
and an “implementable SMME/informal trading development and management strategy” within its area of
influence. The SMME/informal trading development and management strategy


   Will guide local officials in the management and support of the workers in both SMME and informal
    economy in Mandeni
   Will address objectives which relate to the SMME/informal economy problems identified in Mandeni
    including:
            o Support the growth and development of the SMME/informal economy to the benefit of
                  the overall local and provincial economies.
             o    Reduce the vulnerability and risks of informal economy workers and enterprises.
             o    Encourage economic and employment growth in rural areas to boost overall development
                  of Mandeni.
   Will provide all stakeholders in Mandeni with clear guidelines on how to manage and support the
    development and growth of the SMME/informal economy to the benefit the overall economy.


As part of the methodology followed, the project engaged with key local stakeholders from the private,
non-governmental and public sectors in the development of the informal economy strategy.

Information for formulation of this Strategy was sourced from various municipal sources. Key of these
were detailed desktop study, stakeholders‟ consultation, interviews, and surveys.

The vision and goals were developed as follows:

Vision stated:
To grow and develop the employment and GDP contribution of Informal Economy and SMME
sector in Mandeni and to bridge the gap between the second and the first economies in the
process. This will be achieved by
   Improving the capacity of entrepreneurs in each of the above groups;

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   Improving their operating circumstances; and
   Providing them with support services including access to resources and by reducing their
    actual and opportunity costs.
In doing so sustainable job opportunities, household incomes and poverty in the Mandeni
community will be addressed.


Goals included:


o   To grow and develop sustainable employment and GDP contribution of the informal economy in
    Mandeni,
o   To grow and develop sustainable employment and GDP contribution of the SMMEs in Mandeni, and
o   To bridge the gap between the first and second economies in Mandeni

Strategies derived from the preceding goals included the following:

1. To establish informal trading supporting institutions in Mandeni in order to facilitate easy access to
   various support services and to build capacity of entrepreneurs.
2. To facilitate franchising (uncomplicated registration process and an easy access to licence and
   permit) of new enterprises as well as the BEE certification of these enterprises.
3. To reorganise the SMME sector in Mandeni.
4. To facilitate access to various support services including skills development and capacity building.
5. To solidify and consolidate linkages between the first and second economies.
6. The formulation of the standard policies, regulations and bylaws, and
7. Bulk infrastructure development

A number of projects were suggested including the following:

1. To open one stop shop to assist informal traders.
2. Upgrading of the current flea market at Isithebe.
3. To build the soft infrastructure at Siqume-Renkens including:
       Provision of storage facilities
       Provision of water and electricity service at the trading areas,
    Provision of trading shelters, toilet and allocation of business cubic stalls.
4. To provide training in business management to informal traders.
5. To organise a short training with municipal officials dealing with registration processes on the cutting
   of the red tape.
6. To establish Mandeni chamber of business.
7. To engage local businesses to develop applicable HIV/AIDS workplace strategies / plans.
8. To open one stop shop in Mandeni municipality for SMMEs support and development.
9. To establish partnership between the informal economy traders and the formal businesses of the area
   through regular meetings aiming at:
       Mentorship and experience sharing;

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       Providing contract (small tender) to emerging businesses e.g. cleaning services, security
        services, transport contract, etc
     Targeting women and youth with entrepreneurship skills.
10. To persuade new constructors of malls and shop to consider the existence of the informal traders,
    and therefore to plan during the construction for a specific place to accommodate them.
11. To persuade new developers such as Tugela River Project to establish an entrepreneurship
    programme rather than providing temporary jobs to the local community.
12. Formulate the municipal informal economy By-laws.
13. To establish an informal economy forum in Mandeni.
14. To provide multimodal transport facilities including bus/taxi rank, rail way station, and the like.
15. To build and run a small business incubator in Mandeni municipality.




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REFERENCE

BOOKS AND PAPERS

1. Antonio Ocampo, J. 2005 “The inequality predicament: Report on the world social situation 2005,”
   Produced by the United Nations Department of Public Information United Nations publication.

                 ,
2. Cato Manor ABM, September 2006, Economic Empowerment and Support for Cooperatives, Urban-
   Econ 2006.


3. Department of Trade and Industry (DTI), 2004, Review of ten year of small business support in South
   Africa 1994-2004, Entrepreneurial Empowerment, Job creation, and Equity facilitated: An Analysis of
   the evolution of public sector support for small enterprises in South Africa.


4. Department of Trade and Industry (DTI), 2000, Policy Support Programme, National Strategy for
   Fostering Entrepreneurship Study Code: A.1.005.


5. Department of Trade and Industry (DTI), 2004, Annual Review of Small Business in South Africa –
   2004, a Statistical Review.


6. Department of Trade and Industry (DTI), 2005, Integrated Small-Enterprise Development Strategy:
   Unlocking the potential of South African entrepreneurs.

7. Department of Trade and Industry (DTI), 2004, Conducting research for the formulation of a Draft
   Enterprise Development Bill.


8. National Framework for Local Economic Development (LED) in South Africa (2006 – 2011),
   Stimulating and Developing Sustainable Local Economies, Department of Provincial and Local
   Government


9. Emmy Simmons, 2004, The role of Micro-enterprises in U.S. Development Policy: Micro-enterprise,
   Laying the Foundation for Economic Development, in Economic Perspectives, Vol 9, No 1, pp 6-10
   online http://usinfo.state.gov/journals/journals.htm

10. Government Gazette Policy for the Implementation and Enforcement of the Businesses Act No 71 of
    1991


11. Government Gazette, National Small Business Act 102 of 1996,


12. Government Gazette, 15 December 2004, Act No. 29 of 2004, National Small Business Amendment
    Act, 2004.




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13. Government Gazette, National Small Business Amendment Act No. 26, of 2003. Vol. 461


14. Government Gazette: Constitution of the Republic of South Africa No 108 of 1996

15. Government Gazette: KwaZulu-Natal License and Business Hours Act 1984

16. Green Paper Policy for the Informal Economy of KwaZulu-Natal Drafted by Participative Solutions
     Africa July 2003
17. Informal Economy in South Africa. School of Development Studies University of KwaZulu-Natal
    Development Policy Research Unit February 2006, Working Paper 06/102


18. International Labour Organisation: Fundamental Principles and Rights at Work and Globalization:
   Where Do We Stand? Presentation by Stephen Pursey (IPG), Decent Work – Issues and Policies, ILO
   Staff Conference, Turin 1-2 October 2001


19. International Labour Organization: Resolution concerning decent work and the informal economy, The
                                                                                  th
    General Conference of the International Labour Organization, meeting in its 90 Session, 2002

20. KwaZulu-Natal Policy for the Informal Economy quoted from Caroline Skinner: Securing Livelihoods: A
   Gendered Analysis of Support Interventions Available to Street Traders in the Durban Metropolitan
   Area, CSDS Research Report No 34 School of Development Studies (Incorporating CSDS) University
   of Natal, Durban November 2000

21. Richard Devey, Caroline Skinner and Imraan Valodia: Second Best? Trends and Linkages in the
   Informal Economy in South Africa. School of Development Studies University of KwaZulu-Natal
   Development Policy Research Unit February 2006, Working Pa per 06/102

22. Skinner, Caroline & Valodia, Imraan (2006) Two Economies? A Critique of the Second Economy
    Notion in Recent South African Policy Discussions . Centre for Civil Society Colloquium on the
   Economy, Society and Nature: 1-10.


23. Jeemol Unni, 2006 “Informal employment and informal sector,” Commission for Enterprises in the
    Unorganised Sector, India, statistics discussion group, WIEGO General Assembly, Durban.

24. KwaZulu-Natal Department of Economic Development (KZNDED), 2005, Strategic and Performance
    Plan 2005-2010.

25. Ntsika Enterprise Promotion Agency (2003), State of Small Business in South Africa, 2002 Report,
    Pretoria.


26. Standard Industrial Classification of all Economic Activities, 1993, Central Statistical Service, Pretoria,
    South Africa.



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27. Trade And Industrial Policy Strategies (TIPS), December 2005, the Role of Provincial Governments in
   Supporting Small Enterprise Development, Centre for Innovation and Entrepreneurship, University of
   Cape Town Working Paper 8, 2005.

28. Mandeni Municipality Integrated Development Planning (IDP) 2007/2008.

29. Mandeni Municipality Local Economic Development Strategy (LED) 2007


WEBSITES

1. Small Enterprise Development Agency SEDA online: http://www.seda.org.za/


2. KwaZulu-Natal Department of Economic Development online: http://www.kznded.gov.za/

3. Khula Enterprise Finance LTD on line: http://www.khula.org.za/

4. Ithala Development Finance Corporation online: http://www.ithala.co.za/

5. Department of Trade and Industry online: http://www.thedti.gov.za/


6. Department of Provincial and Local Government online: http://www.dplg.gov.za/

7. The World Bank Local Economic Development Plan 2006 online http://www.worldbank.org




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ANNEXURE 1: MANDENI SMME AND INFORMAL ECONOMY
QUESTIONNAIRES

1.1 Informal Economy Questionnaire


Good day, I am ………………………….. from Urban-Econ Development Economic consultants. We are
conducting a research study on behalf of the Mandeni Local Municipality investigating the problems and
development opportunities of informal economy businesses. Would you please be so kind to answer the
following questions for me, I should only take 5 minutes to complete. The information will be kept
confidential and will not be made available to any outside person or organization.


                      Name of interviewer
                        Date of interview
                    Name of business owner
                 Business owner’s Cell Number
                Business owner’s License number
           Business owner’s demarcated space number


   1. Gender, Age and Ethnic group of the interviewee
                                                                             Male               1
   1.1 Gender
                                                                            Female              2
                                                                            00 to 9             1
                                                                            10 to 19            2
   1.2 Age group                                                            20 to 34            3
                                                                            35 to 65            4
                                                                         65 and above           5
                                                                            African             1
                                                                             Asian              2
   1.3 Ethnic group
                                                                           Coloured             3
                                                                             White              4


   2. Place of work (to be filled by the Interviewer)
                                          From home                                            1
                                           Taxi rank                                           2
                                     Pavement of streets                                       3
                                         Flea markets                                          4
                                         Built market                                          5
                                     In front of Big Shops                                     6
                                    In some Office Blocks                                      7




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3. What sort of goods are you selling?
Barbers                                1    News paper vendors                   13
Bead Sellers                           2    Second hand clothes dealers          14
Candle makers                          3    Shoe makers and polishers            15
Cardboard collectors                   4    Spaza shop owners                    16
Dressmakers and hatters                5    Street food vendors                  17
Embroiderers and related workers       6    Street non-food products vendors     18
Fruit sellers                          7    Tailors                              19
Hairdressers                           8    Tavern and shebeen operators         20
Live chicken sellers                   9    Taxis, minibus drivers               21
Mielie cookers                        10    Traditional medicine practitioners   22
Mr. Phone dealers                     11    Welders                              23
Muthi traders                         12    Other (specify)

4. What is your level of education?
                                     No Schooling                                1
                                    Primary School                               2
                                   Secondary school                              3
                       Some accredited training educations                       4
                              Diploma/Certificate                                5
                                       Degree                                    6

5. What did you do before you started trading in the informal economy?
 1
 2
 3
 4
 5

6. What is the reason for not being formally employed?

1
2
3
4
5

7. How long has your business been operating for?
                                 < 1 year                                            1
                               1 to 3 years                                          2
                               4 to 5 years                                          3
                               6 to 7 years                                          4
                              8 to 10 years                                          5
                                > 10 years                                           6



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8. What is the average income of the business per week?
                                 100 to 300                                     1
                                 350 to 500                                     2
                                 550 to 800                                     3
                                850 to 1000                                     4
                               1000 to 1500                                     5
                                   1500 +                                       6

9. Over the past twelve months, what has been your business General/average
   Growth?
                                P = Positive                                    1
S = Stagnant                                                                    2
                                 D = Decline                                    3

10. What stops you from expanding your business?
 1
 2
 3
 4
 5

11. What would you like the municipality to do to help you expanding your business?
 1
 2
 3
 4
 5

12. How many people are involved in this business including the owner?
                                      1                                          1
                                   2 to 3                                        2
                                   4 to 6                                        3
                                   7 to 10                                       4
                                     >10                                         5

13. Finally, do you have any suggestion about improving business activity within the
    community?
 1
 2
 3
 4
 5

THANK YOU FOR YOUR PARTICIPATION



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1.2 SMMES Questionnaire

Good day I am…………..from Urban-Econ Development Economic consultants. We are conducting a
research study on behalf of Mandeni Local Municipality investigating the problems and development
opportunities pertaining to SMMEs. Would you please be so kind to answer the following questions for
me. This should only take 5 minutes to complete. The information will be kept confidential and will not be
made available to any outside person or organization.


Name of interviewer
Date of interview
Name of business owner
Business owner‟s Cell Number
Business owner‟s License number
Business owner‟s demarcated space number


1. How long has your business been operating for in Mandeni?
 1. Less than 1 year
 2. 1-5 years
 3. 6-10 years
 4. Over 10 years


2. What is the main reason for locating your business in Mandeni?
 1
 2
 3
 4
 5


3. Overall, how would you describe the area in which your business is located?
 An excellent place to work                                                                         1
 An pleasant place to work                                                                          2
 An average place to work                                                                           3
 An unpleasant place to work                                                                        4
 A very unpleasant place to work                                                                    5


4.   What are the main problems that you face as a business owner in Mandeni?

1
2
3
4
5

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5. Over the past twelve months, what has been your business turnover?
Less than                          1     R 7.50 m                                 9
R 50.00 m                          2     R 5.00 m                                 10
R 40.00 m                          3     R 4.00 m                                 11
R 30.00 m                          4     R 3.00 m                                 12
R 25.00 m                          5     R 2.00 m                                 13
R 20.00 m                          6     R 1.00 m                                 14
R 15.00 m                          7     R 0.40 m                                 15
R 10.00 m                          8     R 0.15 m                                 16



6. How many people are involved in this business including the owner?
Between 200 and 100                                                                1
Between 100 and 50                                                                 2
Between 50 and 20                                                                  3
Between 20 and 10                                                                  4
Between 10 and 5                                                                   5
Less than 5                                                                        6


7. What could be done locally to allow you expanding your business and employ more
   people?
1
2
3
4
5



8. Finally, do you have any suggestion or idea about improving business activity within
   the community?
1
2
3
4
5


THANK YOU FOR YOUR PARTICIPATION




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ANNEXURE 2: MANDENI DRAFT STREET TRADING BY-LAWS

TABLE OF CONTENTS


TABLE OF CONTENTS............................................................................................................................................... 126

PREAMBLE .............................................................................................................................................................. 127

STREET TRADING BY-LAWS MANDENI MUNICIPALITY INDEX ................................................................................. 127

1. DEFINITIONS .......................................................................................................................................................... 127

2. PROHIBITION........................................................................................................................................................... 128

3. RESTRICTIONS ......................................................................................................................................................... 129

4. CLEANLINESS ......................................................................................................................................................... 130

5. DISPLAY OF GOODS................................................................................................................................................... 131

6. REMOVAL AND IMPOUNDMENT .................................................................................................................................. 131

7 DISPOSAL OF IMPOUNDED GOODS ................................................................................................................................ 132

8. GENERAL OFFENCES AND PENALTIES............................................................................................................................. 132

9 REPEAL OF EXISTING BY-LAWS ..................................................................................................................................... 133

10 SHORT TITLE AND COMMENCEMENT ........................................................................................................................... 133




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PREAMBLE

The Council of Mandeni Municipality has in terms of Section 156 of the Constitution, 1996 Act no 108 of
1960, read in conjunction with section 11 of the Local Government Systems act, 2000 (act No 32 of 2000),
read together with section 6A(1) of the Businesses Act (Act No 71 of 1991), hereby publishes Street
Trading By-Laws which shall come into operation on the date of publication of this notice.



STREET TRADING BY-LAWS MANDENI MUNICIPALITY INDEX

1. Definitions
2. Prohibitions
3, Restrictions
4. Cleanliness and public health
5. Display of goods.
6. Removal and impoundment
7. Disposal of impounded goods
8. General offences and penalties
9. Repeal of by-laws
10. Short title and commencement...


1. DEFINITIONS

In this by-law, unless the context indicates otherwise-,


"approval" means approval by an authorized official and "approve" has a corresponding meaning;


"authorised official" means an official of the Council to whom it has delegated a duty, function or power
under this bylaw, in relation to the exercise or performance of that duty, function or power and includes
any employee acting under the control and direction of such official;


"Council" means the Council of the Mandeni Municipality and in relations to the exercise of a power, the
performance of a duty or the carrying out of a function includes any committee or official of the Council to
whom such power, duty or function has been delegated;


"demarcated stand" means stand demarcated by Council for the purposes of street trading in terms of
section 6(A)(3)(b) of the Act;




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"goods" means any movable property used in connection with street trading and, without limiting the
generality of the foregoing, includes products for sale, display tables, stands, receptacles, vehicles,
structures or animals;


"public place" means a public place as defined in section 1 of the Local Authorities Ordinance No. 25 of
1974;


"public road" means a public road as defined in section 1 of the National Road Traffic Act No. 93 of 1996;


"roadway" means a roadway as defined in section 1 of the National Road Traffic Act No. 93 of 1996 but
excludes a public place;


"sidewalk" means a sidewalk as defined in section 1 of the National Road Traffic Act No. 93 of 1996;


"street trader" means a person who sells, barters, exchanges, hires out, displays, exposes, offers or
prepares for sale, barter, exchange or hire any goods or who provides or offers any service for reward as
a street vendor, hawker or pedlar in a public road or in a public place, but does not include any person
who sells newspapers only;


"the Act" means the Businesses Act No. 71 of 1991 and includes the regulations made there under; and
"verge" means a verge as defined in section 1 of the Road National Traffic Act No. 93 of 1996.


2. PROHIBITION

No street trader shall carry on undertake street trading –


(1) on a verge contiguous to –


(a) a building belonging to or occupied solely by the state or the Council;
(b) a church or other place of worship, or
(c) a building declared to be a national monument in terms of the National Monuments Act No. 28 of 1969;


(2) on any verge contiguous to a building in which business is being carried on by any person who sells
goods of the same nature as, or of similar nature to, goods being sold by the street trader or who offers
services of the same nature as, or of a similar nature to, a service offered by the street trader concerned
without the consent of such person;




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(3) on that half of a public road contiguous to a building used for residential purposes, if the owner or
person in control or any occupier of the building objects thereto;


(4) at any place where the carrying on of such business causes an obstruction to-


(a) the entrance to or exit from a building, or
(b) a fire hydrant;


(5) in any declared area identified as such in terms of section 6A (2) of the Act in respect of which the
carrying on of the business of street trader has been –


(a) prohibited by the Council, or
(b) restricted by the Council, unless such business is carried on in accordance with such restrictions


(6) at any place which has been set apart and demarcated as stands or areas by
the Council in terms of section 6A (3) (b) of the Act for the purposes of the carrying on of the business of
street trader, unless such business is carried on in accordance with -


(a) an agreement with the Council, or
(b) the allocation by the Council to the street trader of any area or stand; and


(7) in any public garden or park except with prior written consent of the Council.


3. RESTRICTIONS

No person engaging in street trading shall –


(1)sleep overnight at the business site;


(2) erect any permanent structure in a public place or public road for the purpose of providing shelter, or


(3) place or store any goods in such a manner or position as to constitute a danger to any person;


(4) carry on such business in such a manner as to-
(a) create a nuisance;
(b) damage or deface any public road or public place or any public or private property; or
(c) create a traffic hazard;


(5) obstruct access to a service or to service works of the Councilor of the State or any statutory body;

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(6) interfere with the ability of persons using a sidewalk to view the goods displayed behind a shop display
window or obscure such goods from view;


(7) obstruct access to a pedestrian arcade or mall;


(8) carryon such business in a place or area in contravention of any restriction imposed by Council
resolution in terms of section 6A(2)(a) of the Act;


(9) place or store his or her goods on or in a building, without the consent of the owner, lawful occupier, or
person in control of such building or property;


(10) attach any of his or her goods by any means to the building structure, pavement, tree, parking meter,
lamp, pole, electricity pole, telephone booth, post box, traffic sign, bench or any other street furniture in or
a public road or public place


(11) make an open fire on a public road or public place;


(12)interfere with the ability of a person using a sidewalk to view the goods displayed behind a shop
displayed window, or obscure such goods from view;


(13) obstruct access to a pedestrian crossing, a parking or loading bay or          other facility for vehicular
or pedestrian traffic; and


(14) obstruct or inhibit the use of street furniture and any other facility designed for the use of the general
public.




4.        CLEANLINESS

Every street trader shall-


(1) keep the area used by him or her for the purposes of street trading, as well as any goods
used by him or her, in a clean and sanitary condition;


(2) at the request of any authorised official of the Council, move or remove his or her goods
so as to permit the cleansing of the area where he or she is trading, or for the purpose of
effecting Council services;




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(3) if his or her activities involve the cooking or other preparation of food, take steps to ensure
that no fat, oil or other substance drops or overflows onto the surface of a sidewalk or
splashes against a building or other structure; and


(4) not dispose of litter in a manhole, storm water drain or other place not
intended for the disposal of litter.


5. DISPLAY OF GOODS

A street trader shall ensure that any structure, container, surface or other object used by him
or her for the preparation, display, storage or transportation of goods-


(1) is maintained in a good state of repair and in a clean and sanitary condition; and --
(2) is not so placed or stored so as to constitute a danger to any person.


6. REMOVAL AND IMPOUNDMENT

(1 ) An inspector may remove and impound any goods -


(a)which he reasonably suspects are being used or intended to be used or have been used in or
connection with the carrying on of the business of a street trader, and


(b)which he finds at a place where the carrying on of such business is prohibited or restricted in terms of
these bylaws,


Whether or not such goods are in the possessions or under the control of any person at the time of such
removal and impoundment.


(2) An inspector removing and impounding any goods shall -
(a) except in the case of goods which appear to have been abandoned or in respect of which the owner or
person having control thereof cannot be found, issue to the owner or person having control of such goods
a receipt for the removal and impoundment thereof and stating-


(i) the place where the goods shall be kept;
(ii) the amount payable in respect of expenses incurred by the Council in impounding and removing the
goods; and
(iii) the date on or after which the goods will be sold or destroyed unless claimed; and



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(b) forthwith place such goods in safe custody.


(3)Neither the Council nor any inspector, officer or employee of the Council shall be liable for any loss or
theft of or damage to any goods removed and impounded in terms of these bylaws


7 DISPOSAL OF IMPOUNDED GOODS

(1) Any goods impounded in terms of these by-laws shall be dealt with as follows -


(a) if the goods are claimed, the street trader shall pay the expenses
incurred by the Council for impoundment; and


(b) if the goods are not claimed within the period specified on the receipt issued in terms of these by-laws,
the goods shall be sold to defray expenses incurred by Council in impounding and removing the goods.


(2) In the event that the goods-


(a) are not capable of being sold, they shall be destroyed after the properd specified on the receipt issued
in terms of these by-laws;


(b) any perishable goods may be sold or destroyed as soon as may be necessary.


(3) If the proceeds contemplated by this section are insufficient to pay expenses incurred by Council, the
owner shall be liable for any excess.


8.      GENERAL OFFENCES AND PENALTIES

(1) Any person who


a) contravenes any provision of these by-laws;


(b) ignores, disregards or disobeys any notice, sign or marking displayed
or erected for the purposes of these by-laws;


(c) for the purposes of these by-laws, makes a false statement knowing it
to be false or deliberately furnishes false or misleading information to an authorised official; or


(d) threatens, resists, interferes with or obstructs an authorised official, officer or employee of the Council

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in the performance of his or her powers, duties or functions under these by-laws,


shall be liable on conviction to a fine not exceeding an amount that is to be published in the media or
imprisonment for a period not exceeding three months.


9 REPEAL OF EXISTING BY-LAWS

The Council's existing Street trading. By-laws are hereby repealed.


10 SHORT TITLE AND COMMENCEMENT

These by-laws shall be called the Mandeni Street Trading By-laws, 2008 and shall come into operation on
date of promulgation




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