ECDC_Corporate Strategy 2011_2015

CORPORATE STRATEGY 2011 - 2015

CORPORATE BUSINESS PLAN 2011 - 2013

ANNUAL PERFORMANCE PLANS BUDGET

CORPORATESTRATEGY

2011 - 2015

List of acronyms

BSC Balanced Scorecard

DEDEA Department of Economic Development and Environmental Affairs

ECDC Eastern Cape Development Corporation

ELIDZ East London Industrial Development Zone

IDZ Industrial Development Zone

IPAP2 Industrial Policy Action Plan

PFMA Public Finance Management Act (1999)

PGDP Provincial Growth and Development Plan

PIDS Provincial Industrial Development Strategy

MTEF Medium Term Expenditure Framework

DFI Development Finance Institution

GRA Gross return on assets

NGP National Growth Path

FDI Foreign Direct Investment

LDI Local Direct Investment

BCTWF Best Company to Work For Survey (undertaken by Deloitte Consulting)

DFI Development Finance Institution

ROI Return on Investment

SLA Service Level agreement

MOU Memorandum of understanding

GDP Gross domestic product

R&D Research and Development

AG Auditor General

WSP Work skills plan

MSP Master Systems plan

SWOT Strengths, Weaknesses, Opportunities and Threats

KPI Key performance indicator

SMART Refers to objectives that are specific, measurable, achievable, realistic and time bound

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Table of contents

1. Introduction ............................................................................................................................................... 3

2. Analysis and strategy alignment ............................................................................................................... 5

2.1 ECDC overview ..................................................................................................................................... 5

2.2 Strategic alignment with key policies ................................................................................................... 5

2.3 Key initiatives that affect the strategy .................................................................................................. 6

2.4 Situation analysis (SWOT) .................................................................................................................... 8

3. A compelling case for change ................................................................................................................. 10

3.1 Financial performance ........................................................................................................................ 10

3.1.1 ECDC’s financial health ............................................................................................................. .....10

3.1.2 Property portfolio ............................................................................................................................ 13

3.1.3 Loans ................................................................................................................................................ 14

3.1.4 Government funding ....................................................................................................................... 15

3.2 Human resources of the corporation .................................................................................................. 17

3.3 Key outcomes of the organisational diagnosis .................................................................................. 18

4. Strategic planning process ..................................................................................................................... 19

5. Purpose of ECDC ..................................................................................................................................... 20

5.1 Vision .................................................................................................................................................. 21

5.2 Mission ................................................................................................................................................ 21

6. Strategic Goals ........................................................................................................................................ 22

7. Visioning of a sustainable ECDC by 2015 ............................................................................................... 23

7.1 Figure 8: Strategy mapping model and visioning .............................................................................. 23

7.2 Key performance indicators ............................................................................................................... 24

8. Key strategic objectives .......................................................................................................................... 26

9. Top risks .................................................................................................................................................. 33

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OFFICIAL SIGN OFF

It is hereby certified that this Strategic Plan was developed by the Management of the Eastern Cape Development Corporation under the guidance of the Board of ECDC and the Shareholder

The 5 year strategic plan takes into consideration all the relevant policies, legislation and other mandates for which the ECDC is responsible and accurately reflects

the strategic goals and objectives which the Eastern Cape Development Corporation will endeavour to achieve over the period. The Strategy is also accompanied

by a corporate business plan as well as relevant annual performance and operational plans.

Msulwa Daca Signature:

Chief Financial Officer

Sitembele Mase Signature:

Chief Executive Officer

Oyama Mabandla Signature:

Chairperson of the Board

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1. Introduction

The Eastern Cape Development Corporation (ECDC) strategic plan has been developed in accordance to the requirements of provincial public entities stated in

Part C, schedule 3 of the Public Finance Management Act (1999) (PFMA). The purpose of the strategic plan outlined in this document is to set a new direction for

the corporation. It shows components of the medium and long term objectives that are to be implemented by ECDC over the upcoming five-year period. As a tool, it

is intended to assist ECDC departments to prioritise the progressive implementation of new key strategic projects in alignment with its mandate. It is anticipated that

the strategic planning process and implementation will instill new ethos in the corporation in which people practice and work together to achieve the new strategic

goals and realise ECDC’s new vision.

The key strategic outcomes are:

• Build a new business model that promotes noticeable social and economic outcomes in the province.

• Identify an appropriate fund model.

• Strategic alignment with government and other stakeholders.

• Review of the current Asset Conversion Policy for the property portfolio.

• Identify innovative ways to spearhead investment promotion and re-model development micro-finance.

• Strengthen the relationship between the corporation and the ECDC Board so that it is in line with the corporate governance protocol.

• Organisational and human resource development.

• Develop key performance indicators (KPIs) for the key strategic drivers.

• Develop a reporting framework to measure business and individual performance.

By changing not only the way we think and do things, but also the way we perceive ourselves, we can create a more efficient and productive corporation. This

strategy was developed with the inputs of the Member of the Executive Committee, head of the Department of Economic Development and Environmental Affairs

(DEDEA), Chairperson of the Board and Board members, executives and senior management, and all ECDC employees who engaged robustly and dynamically

during the strategy session.

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2. Analysis and strategy alignment

2.1 ECDC overview

ECDC is the official economic development corporation for the Eastern Cape owned by the provincial Department of Economic Development and Environmental

Affairs (DEDEA). It is a provincial government business enterprise which reports to its Board of Directors. The ECDC is led by the economic development priorities

of the provincial government, as stated in the Provincial Growth and Development Plan (PGDP), and key strategic focus of the new Provincial Industrial

Development Strategy (PIDS) and Industrial Policy Action Plan (IPAP2).

The corporation works in tandem with provincial and national government ministries, chambers, private business, communities and other development agencies to

implement the economic development policies of the Eastern Cape provincial government. However, despite existing development policies and strategies, there

has been a very limited impact on poverty reduction and social marginalisation levels in the Eastern Cape. This has been attributed to mainly the poor

implementation process.

2.2 Strategic alignment with key policies

To address these challenges, ECDC embarked on an inclusive and unprecedented strategic planning process that included:

• Research on the socio-economic environment of the province. (See Annexure A, Socio-economic analysis of the Eastern Cape)

• An assessment of stakeholder perceptions on ECDC’s role and efficiency in achieving its mandate.

• A board retreat to assess the role and strategic direction of the corporation.

• A staff workshop attended by 160 employees to assess the strengths and weaknesses of the ECDC and provide input.

• A management workshop attended by 25 senior managers of the corporation to review board and staff input in order to develop the strategic framework going

forward.

The outcome of the strategic planning process was a consensus that the new strategic focus of ECDC should be to promote growth and economic development in

the Eastern Cape through its role as a leading development finance institution. By aligning its objectives to the PGDP, the new PIDS, IPAP2 and redefining its

objectives in key priority sectors of the economy, ECDC will increase its role significantly in driving economic growth and development in the province.

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2.3 Key initiatives that affect the strategy

During the strategy planning process, the following key areas were considered to be short to medium-term initiatives that the corporation will undertake. The key

initiatives, approach and possible way forward have been tabled to the Board and shareholder for a mandate to implement. These key initiatives will influence the

performance of the corporation, its strategic direction, budgeting and resourcing. These are critical initiatives to building a sustainable development finance

institution in the future. The detailed action plans of these key initiatives will be contained in the corporate business plan for 2011/12 and 2012/13.

Item Way forward and due dates

Property portfolio

ECDC property portfolio constitutes around 40% of our

asset base. However, our return on investment (ROI) is very

poor approximately 10% per annum. This demonstrates that

the asset class is non productive. There are other socio-

political risks associated with the management portfolio

especially the residential portfolio.

� An alternative to be sought with respect to the current

Asset Conversion Policy to maximize the return to the

corporation.

� The alternatives should be developed by management in

conjunction with the ECDC Board sub-committee.

� The alternatives and implementation plan should be

presented to the shareholder by the end of the first

quarter of the 2011/12 financial year.

Investment promotion

ECDC has subsidiaries such as Coega and East London

industrial development zones (IDZs) who are promoting

investments and trade. Municipalities and districts also do

the same. ECDC is perceived to be the leader with respect to

investment and trade however there is no clarity on the

roles of the various institutions.

� An alternative model needs to be developed to maximize

the investment and trade promotion function so that it

serves the province optimally as well as consider other

similar entities such Coega and East London IDZs and

municipalities.

� The plan should be presented to the Board by the end of

the first quarter of the 2011/12 financial year.

Funding model

The Auditor General has raised an issue of going concern

and sustainability based on the loan losses and inadequate

recapitalisation by the shareholder.

� Investigation should be conducted into the development of

a private equity fund model for mega catalytic projects.

� The alternative modalities will be developed by ECDC in

conjunction with the Board sub-committee by the first

quarter of the 2011/12 financial year.

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Item Way forward and due dates

Developmental Micro finance

In the current funding model, there is a mixture of micro

developmental loan portfolio within a larger portfolio of long

and medium-term loans. The culture and processes for

managing micro loans is not the same. Consequently,

developmental micro finance is meant to build social capital

by expanding households and family business through

building their asset base and provide access to their own

equity so that they can trade in the market place.

� An investigation be conducted and a report tabled to the

Board for discussion on how to create a special purpose

vehicle to ensure the effectiveness and efficiency of the

micro-developmental loan portfolio.

� This should be tabled by the end of the first quarter of the

2011/12 financial year.

Organisational development and redesign

There has been intensive interaction and consultation with

key staff, stakeholders and management. Human resources

(HR) processes and practices were interrogated and hence

management identified certain organisational inefficiencies

resulting in the conclusion that current staff relative to

throughput is not sustainable.

� ECDC should embark on a capacity and organisational

alignment and redesign exercise to pave way for

implementation of the new strategy.

� This exercise should be finalised by the second quarter of

the 2011/12 financial year however implementation of

actions could span into the middle to outer years of the

planning period.

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2.4 Situation analysis (SWOT)

As part of our strategic planning process, the board, management, staff and stakeholders identified ECDC strengths and weaknesses in relation to the opportunities

and threats it faces. Below is a synopsis of the issues identified in the SWOT analysis.

Strengths Weaknesses

• Internal specialist skills

• Sound financial management

• Good corporate governance

• Stable information technology (IT) systems (networks and availability)

• Shareholder support

• Regional and satellite offices

• Units working in silos

• Human resources administration

• Human capacity and skills for a Development Finance Institution (DFI)

• Weak employer/employee relations

• Ineffective internal communication within the organisation

• Organisational structure (matrix operating hierarchy)

• Inadequate profiling of the ECDC

• Lack of IT infrastructure (hardware and application systems not up to date)

• Overlap of services offered e.g. Small Enterprise Development Agency (Seda)

• Succession plan.

Threats Opportunities

• ECDC mandate perceived to be too wide

• Decrease in government financial support

• Political instability and influence

• Perceptions of ECDC by the public

• Overshadowed by other national development agencies

• Duplication of services provided by other government institutions and provincial agencies

• Provincial information communication technology (ICT) and infrastructure challenges are preventing links with the rural areas.

• The economic downswing

• A poor reputation

• Business sustainability

• Improve customer care to clients

• Defined mandate

• Infrastructure development

• Identify new opportunities for innovation

• Identify development problems and create opportunities

• Leader in economic intelligence in the province

• Formalise ECDC’s relationship and strategic partnerships with other provincial agencies and entities

• Refocus on priority sectors and industries i.e. agriculture and agro-processing, forestry, automotive, renewable energy, tourism, and oil refining

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From the SWOT analysis it can be observed that there are numerous internal weaknesses and a limited number of strengths. The new strategic plan therefore

focuses on organisational alignment processes to minimise these weaknesses and seeks to take advantage of the opportunities. These actions are contained in

paragraph 7 and 8 of this document.

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3. A compelling case for change

After assessing the socio-economic situation within the province (refer to Annexure A), there were additional reasons both financially and non-financially for

embarking on a new strategic direction for ECDC. These include the financial performance of the various asset classes and the organisation structure and

performance of the corporation.

3.1 Financial performance

3.1.1 ECDC’s financial health

The financial position of the corporation is weak and unsustainable. Firstly, the corporation has had challenges in meeting its operating expenses when compared

to its revenue generation, especially from properties and loans portfolios. Break even remains elusive as total revenues have not been able to cover full operating

costs since inception. This state of affairs has a profound effect on the “financial sustainability and survival” of the corporation.

Secondly, revenue growth is too erratic and has been declining and does not track the operating expenditure which grows according to inflation. This makes annual

planning difficult. This situation has been exacerbated by a historical trend of inadequate capital allocations and funding by its shareholder. In addition no strategic

decision has ever been made to adequately fund ECDC, whether once-off or through medium term expenditure framework (MTEF) expenditure allocations to shore

up its balance sheet thus building a base for a sustainable DFI.

Thirdly, the gross return on asset (GRA) on properties is between 10 and 11 percent per annum which is far less than the market related 20 to 25 percent rate of

return per annum. Likewise, the loan portfolio is still very small as a percentage of total assets at 15 percent of the total assets and cannot be expected to provide

any significant return, thus making the combination of two poor performing assets. Likewise, impairments on loans have been high - approximately 50 percent for

the entire loan book.

Lastly, on average a third of the loan investments are impaired. In other words, for every R1 per loan disbursed the corporation collects approximately 66 cents and

loses 33 cents. This could be higher when considering older loans and could be as high as 50 per cent impairment on the entire loan book. Due to the age of

certain investment periods of the loan book, recoverability is not guaranteed. This can be partly attributed to the risky nature of the ECDC’s developmental

mandate. The corporation takes more risks as the lender of last resort. In most investments both property and loans, the potential for development is higher than

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the risk it takes. Hence, ECDC considers funding risky venture capital projects that may not have commercial returns during early phases as commercial banks

would require. ECDC takes more risks as a developmental fund as per its mandate.

It is therefore difficult to adequately plan to resource the ECDC strategy on such erratic, unreliable cash flows and non-dependable returns. Figure 1 below shows

an income and expenditure analysis for the corporation between 2004/05 and 2009/10 financial years.

Conclusion: From the above analysis it can be concluded that the operating income from operations does not adequately cover operating expenditure.

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Liquidity

Although liquidity has not been in constant decline, it is erratic and not dependable. This is caused partly by erratic capital transfers for loan funding from the

department. In addition, rental income is not dependable as a revenue source. The management of the residential property portfolio is highly politicised which

makes it difficult to collect rental and arrear revenues.

Loan repayments during the past five years have been on average between 66 and 78 percent, which means the corporation impaired between 22 and 34 percent

on all loans issued during 2007/08 to 2009/10. This results in inconsistency of cash flows and liquidity as a percentage of total assets which exposes the

corporation to external market forces and makes it very vulnerable to financial shocks. This also poses risks with respect to the going-concern. Figure 2 below

shows the variability in cash as a percentage of total assets between 2004/5 and 2009/10.

Conclusion: From the above analysis it can be concluded that there are undependable sources of revenue that threaten liquidity of the corporation and likewise

hampers investment decisions.

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3.1.2 Property portfolio

The property portfolio is the corporation’s largest asset class. However, as shown in Figure 3 below, rental income as a percentage of property assets has been

declining since 2004/5 financial year.

The performance of this portfolio has been at 10 percent and has been declining because the management of the property portfolio, especially the residential

component, is highly political. The market average for performance is 20 to 25 percent. ECDC also spends significant revenues on expenditure for levies, staff

overheads, rates and maintenance yet rental collections do not adequately cover these costs.

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Conclusion: This asset is not performing optimally. Its revenues, in terms gross rental income, have been on a constant decline since 2004 thus impacting on the

cash resources of the corporation.

3.1.3 Loans

A DFI should ideally have 80 percent of its assets in the loan (project funding) book. While the corporation’s loan book has been increasing steadily since 2004/05,

ECDC has however not achieved the aforesaid ideal as its loans comprise only 15 percent of its total assets. Figure 4 and 5 below shows the percentage of loans

to the asset base as well as its performance. The upswing in impairments and funding as indicated in Figure 4 and 5 can be attributed to the strict lending criteria

that were put in place by the commercial banks during the downswing in the local and global economy.

Conclusion: Although the loan book showed significant improvement from the 2009/10 financial year end, the effects of the downswing in the economy have

increased the required impairment provision and hence curtailed further loan book growth. Major capital injection though would be required to increase the

percentage asset allocation to the target of 80 percent of loans of total asset. In order to attract this major funding, ECDC would have to review its risk tolerance

and appetite and review internal controls in the lending as per the Auditor-General’s recommendations.

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3.1.4 Government funding

Although government has indicated that ECDC should be a self-funding operation in the long-run, direct funding allocation for loans has fluctuated between R45,5m

and R36,1m over the past 5 years. These allocations have been erratic and not informed by a strategy to grow and capitalise the book.

Table 1: Government funding allocation

ALLOCATION (INCLUDING VAT) 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011

PROMOTION OF SMMEs (PER WHITE BOOK) 45,550,000 31,497,350 75,000,000 99,899,000 99,273,000

DEVELOPMENT PROJECTS PROGRAMS - - -47,187,000 -51,187,000 -63,123,000

PROVISION OF LOANS 45,550,000 31,497,000 27,813,000 48,712,000 36,150,000

INVESTMENT PROMOTION 9,000,000 14,910,000 17,000,000 19,000,000 20,900,000

TRADE DEVELOPMENT 4,000,000 4,500,000 6,000,000 7,000,000 7,700,000

DEVELOPMENT PROJECTS PROGRAMS (ENTERPRISE DEVELOPMENT SERVICES AND PROJECTS)

17,450,000 35,502,650 47,187,000 51,187,000 63,123,000

ECDC ALLOCATION FOR NON-FINANCIAL SUPPORT 30,450,000 54,912,650 70,187,000 77,187,000 91,723,000

OTHER FUNDS 35,200,000 58,000,000 20,000,000 - -

AUTOMOTIVE INDUSTRY DEVELOPMENT CENTRE - 5,500,000 6,888,000 7,000,000 7,606,000

ASGISA EASTERN CAPE - - 100,000,000 150,000,000 -

STEINHOF TIMBER 66,931,000 30,300,000 37,400,000 - -

CO-OPERATIVES - - - 50,000,000 52,600,000

CONDUIT FUNDS 102,131,000 93,800,000 164,288,000 207,000,000 60,206,000

TOTAL VOTED & TRANSFERRED TO ECDC 178,131,000 180,209,650 262,288,000 332,899,000 188,079,000

TRANSFER SPLIT

FOR ECDC PURPOSES 76,000,000 86,409,650 98,000,000 125,899,000 127,873,000

FOR CONDUIT PURPOSES 102,131,000 93,800,000 164,288,000 207,000,000 60,206,000

178,131,000 180,209,650 262,288,000 332,899,000 188,079,000

% TOTAL TRANSFERS FOR UTILISATION BY ECDC 43% 48% 37% 38% 68%

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As can be seen from the table and graph above, non-financial support for services that ECDC conducts on behalf of government has increased quite substantially

over the 5 year period. In line with this, ECDC has allocated increased funding to specific units’ project expenditure.

What is slightly more alarming and noteworthy however is the erratic nature of government’s allocation for loans which has varied during the years from a low in

2008/09 at R27m to a peak in 2009/10 of R48m, once again tapering off in 2010/11 financial year (as it previously did in the middle years ended 31 March 2008 &

2009 respectively). This has made planning for growth of development finance very difficult. Despite plans and strategies presented to the shareholder requesting

additional resources to recapitalise ECDC (loan book, investments, etc), capital allocations have not kept pace with these needs. The obvious direct impact of this

is the negative effect it has on the ability of ECDC to grow the loan book sufficiently to provide a sustainable income stream into the future.

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3.2 Human resources of the corporation

Table 2: Human capital (trends and statistics)

Category 2005/6 2006/7 2007/8 2008/9 2009/10 Total

Bonuses paid Nil Nil R2,251,139 R3,616,774 R2,4m Average of R2,8m

Dismissals 0 4 1 1 2 8

Terminations (death, resignation,

contract or ill health)

28 23 6 10 6 73

Retirement 3 1 0 2 2 8

Appointments 17 5 9 24 8 69

Average age 43 43

Actual employees 176 153 148 159 157 Average of 159

Establishment 181 181 183 183 186 Average of 182

Over the 5 year period, 89 employees have left the establishment and only 69 people have been employed. This has been a net loss of 20 personnel. The peak of

the loss occurred during the 2006/2007 financial year. And since that time, ECDC have not made considerable steps to reach the approved establishment figures,

which are as a result of inter alia, the following:

• HR matters such as performance management (bonus payments, target setting and performance contracting etc), succession planning and talent management

(training, development and promotions) have been inadequate.

• The regional matrix structure which is ineffective and inefficient. The organisational culture is hierarchical and bureaucratic which makes it very contradictory

and inefficient.

• Role clarification and authority levels are not clear and there is confusion which results in very poor employee relations, unnecessary conflicts, mistrust and

under performance.

• Inadequate skills amongst HR to deal with staff related attraction, development and retention.

Human capital initiatives are being planned to capacitate and improve the skill of current staff. The current vacancy rate at 18% is relatively high, and needs to be

addressed with appropriate interventions. In addition, a clear succession planning model and development is critical to address issues of the average age of 43 years.

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3.3 Key outcomes of the organisational diagnosis

• From the analysis of the income and expenditure of the corporation it reveals that there are disparities that make planning difficult, likewise there are no quick

fixes, and systemic change is needed over a medium term i.e. three to five years.

• The analysis of cash as an asset indicates that this hampers certainty with respect to investments and financing decisions. This also places the corporation in a

‘potential’ going-concern challenge.

• With respect to the properties portfolio, it can be deduced that this asset is not performing optimally and is a cash drain, yet it remains politically and socially

sensitive.

• The loans portfolio should increase to 80 percent of the total portfolio as the core business of a DFI whilst improving the quality of the loan book.

• An analysis of government funding for the loan book has indicated that the balance sheet has not been adequately funded to meet the DFI mandate.

• Finally the organisation is ineffective, inefficient and unsustainable.

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First Phase

4. Strategic planning process

The section outlines the components of a detailed strategic plan that evolved out of a comprehensive engagement process. The outcomes of this process include

ECDC’s new core purpose, customers, customer value proposition and values. It also includes the new vision, mission, strategic goals and objectives. In addition,

the key performance indicators, desired strategic outcomes and business risks were identified and aligned to each strategic objective. The strategic planning

process utilised the Balanced Scorecard (BSC)1 methodology and tools. Figure 7 below shows the strategic planning process that was undertaken.

Figure 7: Strategic planning

1 The Balanced Scorecard method is a strategic approach and management system that enables organisations to translate a company’s vision and strategy into implementation working from four perspectives: financial, customer, business process, and learning and growth perspectives.

Next Phase: ECDC’s operational plans (including budgets) and individual performance agreements

Used Balanced

Scorecard

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5. Purpose of ECDC

ECDC was established to address prevailing socio-economic challenges and market failures within the Eastern Cape. An act of Parliament, ECDC Act 2 of 1997,

legislates the creation of a corporation to be the vehicle to support the policy intervention. Therefore the PURPOSE of ECDC is:

FOCUSING on the following customers:

CUSTOMER VALUE PROPOSITION is therefore to offer:

To be a development finance corporation for the promotion of economic growth

in the Eastern Cape

• Enterprises (emerging and existing)

• Investors (local and international)

• Government

• Business finance to emerging and existing enterprises;

• Relevant market information and finance to local and international investors;

• Act as an agency for implementation of Government special projects;

• Contribute to research and policy innovation.

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The underpinning CORPORATE VALUES are:

5.1 Vision

ENVISION ECDC to be:

5.2 Mission

The mission is:

• Integrity, Trust and Transparency

• Excellence, Professionalism and Accountability

• Respect, Teamwork and Partnerships

An Innovative leader for promoting sustainable economic growth and development of the

Eastern Cape

To promote sustainable economic development in the Eastern Cape through focused:

• Provision of innovative development finance

• Leveraging of resources, strategic alliances, investment and partnerships

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6. Strategic Goals

In order to realise the purpose and achieve the vision and mission, the following five key strategic goals were identified:

1. Stimulate economic activity through focused investment in vital sectors of the Eastern Cape

economy.

2. Invest in intellectual leadership.

3. Optimise all resources so as to maximise investment returns and attain financial

sustainability.

4. Build a strong brand.

5. Establish integrated partnerships with stakeholders to ensure maximum leverage of

resources and development outcomes.

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7. Visioning of a sustainable ECDC for 2015/16

Below are the strategic visioning and the marching steps towards a sustainable ECDC.

7.1 Figure 8: Strategy mapping model and visioning

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The strategy model and map is built on 5 pillars that emerge from the compelling case for change. The pillars are to: a. Build a viable development finance institution through restructuring the balance sheet.

b. Undertake investment and trade promotion in the Province.

c. Build a capable organisation for high performance.

d. Invest in mega projects.

e. Strategically develop properties and related economic infrastructure.

The initiatives that will impact these pillars are situated in the detailed strategic plan and strategy map.

7.2 Key performance indicators

The following are the high level key indicators that will ensure that the corporation will be successful in the execution of its strategy over 4 years. The key

performance indicators demonstrate “marching steps’ towards the vision of a viable sustainable entity.

Table 3: Key performance indicators

Indicators Targets

Key performance

indicator

Definition of

indicator

Estimated

Baseline

2010/11

2011/12 2012/13 2013/14 2014/15

% quality of the loan

portfolio impaired

Impairment of loans

across all products (old

and new portfolio)

62% (total

loan book)

50% 45% 40% 35%

Audit reporting Compliance to all

legislative requirements

Clean audit

with

emphasis of

matter

Clean audit

with emphasis

of matter

Clean audit

with emphasis

of matter

Clean audit with

no emphasis of

matter

Clean audit with

no emphasis of

matter

% of total assets in loans

and funding

Amount of investments

that are in loans relative

to the entire portfolio

15% 25% 45% 50% 60%

% Collection rate

(of the total loan portfolio

relative to disbursements)

Loans collections 66% 60% 65% 70% 80%

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Indicators Targets

Key performance

indicator

Definition of

indicator

Estimated

Baseline

2010/11

2011/12 2012/13 2013/14 2014/15

Expense to income ratio Operational

sustainability

130% 128% 110% 110% 100%

Number of Mega projects >R50 million projects

engaged

1 2 2 3 3

% customer and employee

satisfaction

Customer and

employee satisfaction

No base2 Set base 10%

improvement

10% improvement

10% improvement

10% improvement

Number of jobs created or

saved

Number of job created

by Development

Finance Unit

2498 3000 3500 4000 4500

Number of SMME’s

assisted

Number of businesses

supported in priority

sectors (enterprise

development services)

266 350 450 550 650

Amount generated to

recapitalise ECDC3

Raising of capital

through various

avenues

R0 R100

million

R250

million

R250

million

R250 million

2 This has not been measured previously and is a new action with no base relative to the targets set. 3 Subject to successful application to National Treasury for a Section 66 of the PFMA permission to borrow.

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8. Key strategic objectives

Using the Balance Scorecard (BSC) approach, the strategic objectives, expected outcomes, key performance indicators and business risks that may affect the

strategic plan were identified. Figure 9 below shows ECDC’s strategy map which is a graphic representation of the balance scorecard. It shows how the objectives

to be pursued by the corporation are aligned to the four BSC perspectives i.e. financial, customer, internal business processes, learning and growth perspectives.

Subsequently, Table 4 shows the detailed strategic plan which includes objectives, key performance indicators, strategic outcomes and risks according to each

BSC perspective. Furthermore, each objective identified has been aligned to address the business risks associated with it.

The SMART principle has been used in the development of the objectives and related indicators and targets and both the map and scorecard (Figure 9 and Table

4) must read in conjunction to fully realise the extent of the SMART objectives. The details of the strategic plan as Table 4 cover an implementation period of 3

years as per Treasury regulations and have led to the development of the Corporate Business plan and respective annual performance plans.

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Figure 9: Eastern Cape Development Corporation strategy map

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Table 4: Details of the strategic plan4

Perspective Strategic objectives Key performance indicator Strategic results/outcomes Risk alignment

Development

Impact

Economic development of

the Eastern Cape

• Contribution to National Job creation target

• Contribution to impact of standard of living.

• Contribution to the GDP

• Contribution to NGP #14 Failure/inability to meet

changing shareholder

expectations

1 FINANCIAL

PERSPECTIVE

F1

DECREASE LOSSES ON

OPERATIONS

• Disposal of property

• Pricing of loan products.

• Impairments (% of total loan book)

• Loss reduction.

• Cash reserves/liquidity.

• Quality of the book.

#1

#4

#16

Failure to achieve

sustainability

Failure to generate sufficient

income to cover cost and

sustainability of unit.

Slow turnaround time in the

disposal of properties

F2

OPTIMISE AND GROW

RETURNS ON

INVESTMENTS AND

ASSETS

• Gearing and leveraging on Infra Fund

• Value of new loans approved and disbursed

• GRA : Rentals and arrears collected

• No. of new investments e.g. per year, per sector.

• Value of new investments (FDI and LDI)

• Value of exports

• Amount of third party funding leveraged for special

development projects

• New investors from public

and private sector

• Job creation

• New private equity fund

• New investment promotion

strategy

• ROI

#4

#6

#13

#3

Failure to generate sufficient

income to cover cost and

sustainability of unit.

Insufficient funding for loans.

The balance sheet is not

structured to be a DFI.

Lack of segregation of duties

in the development

investment unit between the

pre-investment and post

investment

F3

MAXIMISE COST

EFFICIENCY

• Reduction of property maintenance costs

• Cost to income ratio

• Percentage of government transfers to ECDC

(dependency ratio)

• Profitable corporation

• Increased liquidity/

reserves

• Annual surplus

• New investment/ business

projects

#4

#13

Failure to generate

sufficient income to cover

cost and ensure

sustainability of the unit



4 A full technical indicator document will be developed over 2011/12 and 2012/13 for adoption by the Board of ECDC.

29 | P a g e


1 FINANCIAL

PERSPECTIVE

F4

MAINTAIN ADEQUATE

LEVELS OF LIQUIDITY

• Loan repayment rate

• Debt to equity ratio

• ROI on cash reserves

• Quality of loan book

• Balance sheet efficiency

and funding model

• New private equity fund

#1

#22

#13

Failure of ECDC to achieve

sustainability

Notion that ECDC is

perceived as a funder of

grants as opposed to

development finance/loans.



2 CUSTOMER

PERSPECTIVE

C1

POSITION THE ECDC AS

THE FINANCIER OF

CHOICE

• No. of firms offered pre-start up assistance and post

finance after care support

• No. of incubates participating in ECDC mentorship

programme

• No. of complaints received and addressed on time

• Visitor rooms for client’s consultations at ground floor

(head office)

• Accurate debtor’s statements (billings).

• % of positive media coverage.

• Decrease in default rate

• Reduction in days to

process an application.

• Reduction in customer

complaints

• Knowledge hub.

• Rebranding.

• Customer relations model

• Positive media report

monitoring.

#11

#13

#6

#17

#22

#8

Lender of last resort.

Balance sheet is not

structured to be a DFI


Failure to provide in-house

business support

Notion that ECDC is grant

funder.

Lack of aftercare.

C2

INCREASE THE ECDC

PROVINCIAL

FOOTPRINT

• No. and value of loans granted per municipality (former

Transkei)

• Rand value of funds spent in supporting Municipalities

(spatial , project planning, etc)

• No. of memorandum of understanding (MOU)/service

level agreements (SLAs) made per year with other

Government bodies

• Impact assessment of ECDC products and services in 3

years.

• Improvement in quality of

life.

• SLAs implemented and

approved.

#6

#14

#5

#11

Insufficient funding for loans

Failure/inability to meet


expectations

High rate of loan defaulters.


30 | P a g e


3 CUSTOMER

PERSPECTIVE

C3

ESTABLISH STRATEGIC

PARTNERSHIPS WITH

STAKEHOLDERS

• No. of MOU/SLAs made per year with stakeholders/

other DFIs/ agencies etc in the Eastern Cape

• No. of joint funded and implemented projects

• Periodic stakeholder satisfaction surveys

• Programmes initiated with chambers of business

• Revise ECDC products

and services.

• Improved brand

awareness (product and

services)

• Increased uptake of

products and services

• Streamlined co-operative

fund model impacting

enterprise development

#13

#14

#6

#22

#11

#20

The Balance sheet is not


Failure/inability to meet


expectations


Notion that ECDC is a grant

funder

Lender of last resort

Limited integration of financial

and non-financial services

C4

BUILD A BALANCED

MARKET PORTFOLIO

• Develop a Loan Portfolio concentration mix model

• New developmental micro-loans model (SMME fund)

• Revised Imvaba fund

• Growth of net surplus

• New developmental micro-

loan special purpose

vehicle

• Portfolio management

model and analysis report

#15

#11

#13

#22

Low employee morale


(providing financial support to

a client base that is non -

bankable)

The Balance sheet is not


Notion that ECDC is grant

funder.

4 INTERNAL

PROCESSES

PERSPECTIVE

P1

DESIGN AND

STREAMLINE

INNOVATIVE

SOLUTIONS

Business Process Reengineering:

- Reduction in the turnaround times.

- No. of days required to approve loans and disburse.

- No. of days taken to allocate tenants

- Time to answer calls.

• Number of new products researched and launched

• Develop new business model (organisation

development)

• Creation of a research and development (R & D)

function.

• New business processes

• Structure, people, systems

and processes aligned to

strategy

#16

#15

#12

#3

#20

Slow turnaround time in the

disposal of properties

Low employee morale

The organisational structure is

not appropriately aligned

Lack of segregation of duties

in the development

investment unit between the

pre- and post investment


and non-financial services

31 | P a g e


4 INTERNAL

PROCESSES

PERSPECTIVE

#2 Lack of skills and capacity

P2

DEVELOP CUSTOMER

MANAGEMENT

RELATIONSHIP

PROCESSES

• Periodic customer satisfaction surveys

• Aftercare model and visits from investment and trade

promotion unit

• Number of hits on the website.

External and internal

customer and stakeholder

satisfaction.

#15

#7

#8

#14

#7

Low employee morale

Lack of integrity of personnel

Lack of aftercare to loanees

Failure/ inability to meet


expectations

The lack of integrity of

personnel

P3

DEVELOP EFFECTIVE

RISK MANAGEMENT

PROCESSES

• Implement King III and Companies Act readiness

program.

• Clean audit with no emphasis of matter

• Implement risk tolerance framework.

• Implement A-G and internal audit tracking register.

• Annual number of external cases investigated by the

South African Police Services (SAPS) for

misappropriation, misallocation and misapplication of

ECDC funds

• Annual no. of internal and external cases investigated by

internal auditors for misappropriation of ECDC funds

• Number of reports on the exposures due to future

changes in economic conditions.

• Implementation of a credit

risk function

• Improve compliance to

best practice corporate

governance framework

• Unqualified audit finding

and improved control

environment

#5

#7

#11

High rate of loan defaulters

The lack of integrity of

personnel


5 LEARNING

AND GROWTH

PERSPECTIVE

L1

INVEST IN HUMAN

CAPITAL IN LINE WITH

CORE BUSINESS

• Employee satisfaction index (BCTWF)

• Vacancy rate of key skills

• Value of training programmes implemented.

• Embedded performance management model

• Develop and implement six critical HR policies

(remuneration, performance, discipline, etc)

• Harmonise conditions of employment throughout the

entire corporation (organisational development exercise)

• Conducive employer/employee relations.

• Implementation of workplace skills plan (WSP) for

ECDC.

• Skills audit/gap analysis

• Succession plan

• New skills attracted.

• Quality services and

products offered to

customers and stake

holders

• Work Skills Programme

(WSP)

• Performance management

system implemented.

#9

#17

#2

#10

#21

Lack of succession planning

Failure to provide in house

business support to

emerging entrepreneurs for

all sectors

Lack of human capital and

skills

Failure to harmonize

conditions of employment.

Poor employee/employer

relations affecting

32 | P a g e


5 LEARNING

AND GROWTH

PERSPECTIVE

L1

INVEST IN HUMAN

CAPITAL IN LINE WITH

CORE BUSINESS

• Organisational structure aligned to strategy.

(Organisational development process).

• Improved productivity and

efficiency

• Code of conduct and

ethics.

• HR policy gap closed.

#22

productivity and efficiency.

Notion that ECDC is

perceived as funder of grants

as opposed to development

finance/loans.

L2

DEVELOP A CULTURE

OF EXCELLENCE AND

LEADERSHIP

• Management information system for decision making.

• Develop a corporate performance measurement tool

• Market intelligence report.

• Periodic / regular reporting and feedback on

performance from management.

• Codifying leadership skills and behaviours

• Improve internal

communication

• Continuous improvement

process to control quality.

• Corporate reporting

system.

#11

#20

#10


(Providing financial support to

a client base that is non-

bankable)


and non-financial services.

Failure to harmonize

conditions of employment

L3

INCREASE EFFECTIVE

DECISION MAKING

BASED ON ACCURATE

MANAGEMENT

INFORMATION AND

KNOWLEDGE SYSTEMS

• IT strategy

• Master systems plan (MSP)

• Approved MSP

• Developed IT strategy.

• Business intelligence tool

(writing reports, etc)

#18

#19

Loss of critical IT

infrastructure and information.


and business continuity within

IT department.

L4

BUILD DEVELOPMENT

FINANCE AND

ECONOMIC

INTELLIGENCE

• No. of research/information booklets produced per year

• Knowledge management system.

• Number of products

developed from research

• Knowledge Management

System (KMS)

implementation including

registry

#19

#18


and business continuity within

IT department

Loss of critical IT

infrastructure and information.

33 | P a g e

9. Top risks

Below is a list of the top strategic and operational risks (ranked and rated) that were identified during the business risk identification and rating project which took

place in April 2010.These risks are aligned to the key objectives for mitigation, monitoring and measurement. These risks have also been aligned to the details of

the strategic plan so that risk can be mitigated adequately.

Table 10.1: ECDC risks from highest to lowest

# Description of the risk identified

1 The failure of ECDC to achieve sustainability

2 Lack of human capacity and skill

3 Lack of segregation of duties in the development investment unit between the pre and post investment

4 Failure to generate sufficient income to cover cost and ensure sustainability of the unit

5 High rate of loan defaulters

6 Insufficient funding for loans

7 The lack of integrity of personnel

8 Lack of aftercare service to loanees

9 Lack of succession planning

10 Failure to harmonize conditions of employment

11 Lender of last resort (providing financial support to a client base that is non-bankable)

12 ECDC’s organisational structure of the ECDC is not appropriately aligned

13 The balance sheet is not structured to be a DFI

14 Failure/inability to meet changing shareholder expectations

15 Low employee morale

16 Slow turnaround time in the disposals of properties

17 Failure to provide in-house business support to emerging entrepreneurs for all sectors

18 Loss of critical IT infrastructure and information

34 | P a g e


19 Lack of succession planning and business continuity within the IT department

20 Limited integration of financial and non-financial services

21 Poor employee/employer relations affecting productivity and efficiency

22 Notion that ECDC is perceived as funder of grants as opposed to development finance/loans.

Eastern Cape Development Corporation

Research into the Socio-economic Environment in the Eastern Cape

FINAL REPORT

(c) Mthente Research and Consulting Services (Pty) Ltd, May 2010 ii

Executive Summary

This initial research report includes both an in-depth desktop analysis of the current socio-economic environment in the Eastern Cape and an institutional analysis

of the Eastern Cape Development Corporation (ECDC). This is accompanied by an analysis of the impact of provincial growth and development policies and

strategies, with the latter two based on a series of in-depth interviews conducted with a range of stakeholders in the Province. The findings contained in this

research report are intended to facilitate the development of the programme agenda for the ECDC Board Strategy Workshop.

Socio-economic Analysis

Historically, the Eastern Cape region has been beset by a variety of socio-economic challenges including pervasive poverty and widespread unemployment. The

provincial economy is also fundamentally dual in nature: 70 percent of the population is located in the rural areas of the Province, yet these areas collectively

contribute just 8 percent of the Province’s secondary output.

Economic growth in the Eastern Cape has been unstable since 1995, and the gross domestic product (GDP) growth rate has declined from 3.3 percent in 1996 to

–0.9 percent in 2009. Capital investment expenditure in building, construction, transport, machinery and equipment also declined steadily between 1995 and 2008.

In contrast, trade in goods increased by an annual average growth rate of 18.7 percent between 1995 and 2008. The Province’s major export merchandise has

traditionally consisted of motor vehicles, parts and accessories, machinery and equipment, rubber products, textiles and food. In turn, the chief imports include

motor vehicle parts and accessories, machinery and equipment and basic chemicals.

Unemployment in the province has remained high, reaching 27 percent in the fourth quarter of 2009. The majority of those employed in the formal sector work in

the public sector, with large shares of people also employed in the manufacturing, wholesale and retail trade, and tourism sectors. The informal sector remains a

dominant force in the provincial economy and, of the new jobs created in the fourth quarter of 2009, 62 percent were generated in the informal sector. The majority

of those employed in the informal sector work in wholesale and retail trade, tourism and construction activities.

(c) Mthente Research and Consulting Services (Pty) Ltd, May 2010 iii

Education remains a constraint to provincial economic growth and development. Although the number of people with no schooling declined from 21.3 percent in

1995 to 17.2 percent in 2008, the uptake into secondary education has been very low. The number of those with a grade 8 to 12 level of education remained

steady, averaging 28.9 percent each year between 1995 and 2008. There has been a negligible increase in the proportion of highly skilled people in the Province

since 1995, which has severely hampered the level of economic activity in the Eastern Cape.

An analysis of the welfare of individuals and households in the province showed that 58.3 percent of the population was living in poverty in 2008. Furthermore,

approximately two-thirds of the population had an income of below R800 a month in 2007. The Amathole and O.R. Tambo districts were home to the largest

numbers of people living in poverty between 2004 and 2008.

Access to basic services has also deteriorated across the Province. There has been a decline in the proportion of households with access to electricity for lighting

from 46.9 percent in 2001 to 45.9 percent in 2008. Similarly, the number of households with access to piped water inside their dwelling or yard declined from 37.8

percent in 2001 to 36.5 percent in 2008. Worryingly, more than two-thirds of the households in the Amathole and O.R. Tambo districts had no toilet facilities in

2007. The prevalence of HIV/AIDS in the Province has also grown steadily from 2.4 percent in 1995 to 16.7 percent 2007. The majority of those infected are

between the ages of 25 and 49.

Within this context, the ECDC, as the official economic development and investment agency for the Eastern Cape, has an important role to play in driving the

economic growth and development of the Province.

Institutional Analysis

Among most stakeholders there was a feeling that the ECDC should play a prominent role in driving the future growth and development of the Eastern Cape.

However, the general feeling is that the ECDC’s current mandate is too wide and needs to be refocused if the Corporation is to effectively fulfil its role as a

development institution.

(c) Mthente Research and Consulting Services (Pty) Ltd, May 2010 iv

There was consensus among a number of stakeholders that the ECDC is best placed to focus on its role as a development finance institution in the Province. One

prominent view was that the ECDC should drive funding targeted at the segments of the market that are not served by commercial banks. Linked to this, there was

a belief that the Corporation should also play a role in the development of viable investment projects in the Eastern Cape and provide support for development

activities. At the same time, some stakeholders have questioned whether the ECDC has the financial resources and operational capacity to simultaneously

perform other functions such as export and investment promotion.

Across the various provincial and national agencies operating in the Eastern Cape there is a degree of overlap in terms of the functions that they currently

perform. These overlapping functions provide opportunities to establish strategic relationships between agencies while, at the same time, creating a need to define

more clearly the roles of the various institutions. This will require a thorough review of the mandates of the various provincial agencies and entities operating in the

development space in the Eastern Cape.

To date, the performance of the ECDC has been affected by a number of internal and external factors. First and foremost, the Corporation’s wide ranging mandate

has meant that its resources have been stretched thinly, and this has affected its ability to perform multiple functions effectively. In recent years, the performance

of the ECDC has also been affected by a significant degree of institutional instability. The focus on stabilising the institution internally has meant that less focus

has been placed on addressing the ECDC’s previous external market failures.

The operational capacity of the ECDC continues to be affected by technical capacity shortages. The Corporation does not possess sufficient in-house technical

skills for certain financial and non-financial support functions and the skills problem is exacerbated by the high average age of ECDC employees. Another

challenge that has confronted the ECDC is the poor image of the Corporation in recent years.

(c) Mthente Research and Consulting Services (Pty) Ltd, May 2010 v

Impact of Provincial Growth and Development Policies and Strategies

Despite the best intentions of the existing provincial development policies and strategies, they have achieved only a very limited impact in terms of reducing the

levels of poverty and social marginalisation in the Eastern Cape. Much of the limited impact of these policies and strategies can be attributed to a lack of

implementation, together with a lack of coordination of resources and a lack of matching of resources to prioritised needs.

The goals of the Provincial Growth and Development Plan (PGDP) have been labeled by some stakeholders as unrealistic given the existing levels of capacity

and resources available in the Eastern Cape. It has also been argued that the PGDP has not been internalised by government departments in the Province, and

that departmental planning has not been operationalised along the imperatives of the PGDP.

The existing provincial growth and development policies and strategies have also failed to effectively address weaknesses in rural development in the Eastern

Cape. Much of this is due to the continued absence of meaningful economic linkages between the region’s major urban and peri-urban areas and the rural parts of

the Province.

Growth and development in the Province has been affected by trade promotion strategies that have been reactive rather than pro-active. In addition, the impact of

policies and strategies on provincial growth and development has also been constrained by certain investment climate barriers in the Eastern Cape. These include

significant infrastructure deficiencies and institutional instability, which have affected the Province’s ability to attract much needed investment.

A need was identified to re-focus the sectors within the provincial economy that should receive priority attention. The long list of priority sectors identified in the

PGDP has been described by some stakeholders as a “wish list”. Based on the input of key stakeholders, attention should be given to prioritising the following

sectors as drivers of job creation and poverty alleviation in the Eastern Cape:

� Agriculture and agro-processing

� Forestry

� Automotive industry

� Renewable energy

� Tourism

� Oil refining

(c) Mthente Research and Consulting Services (Pty) Ltd, May 2010 vi

Emerging Issues

Based on the findings contained in this research report, the following critical challenges to socio-economic development in the Eastern Cape need attention:

� Lack of progress in terms of rural development.

� Poor implementation of provincial growth and development policy strategies.

� Refocusing priority sectors for job creation and poverty alleviation.

� Diversifying the Province’s trade and investment promotion strategies.

� Directing provincial financial resources to drive socio-economic development initiatives more effectively.

Focusing on the repositioning of the ECDC and reformulating the Corporation’s strategy, the following issues should receive attention during the ECDC Board

Strategy Workshop:

� Defining the ECDC’s core business and focus as well as the products/services that it offers.

� Avoiding duplication and mission creep between provincial agencies and entities by clarifying mandates and roles.

� Keeping the ECDC sustainable and commercially viable.

� Managing the ECDC’s property portfolio in a manner that contributes effectively to the financial sustainability of the organisation.

� Addressing the shortage of technical capacity within the ECDC.

� Managing the reputation and image of the ECDC.

� Addressing the institutional instability within the ECDC.

� Formalising the ECDC’s relationships and strategic partnerships with other provincial agencies and entities.

(c) Mthente Research and Consulting Services (Pty) Ltd, May 2010 1

Table of Contents

1. Context ............................................................................................................................................................... 3

2. Socio-economic Analysis ..................................................................................................................................... 5

2.1 Economic growth .......................................................................................................................................... 6

2.2 Population dynamics ..................................................................................................................................... 8

2.3 Investment .................................................................................................................................................... 9

2.4 Trade ......................................................................................................................................................... 11

2.5 Labour trends ............................................................................................................................................. 13

2.6 Education ................................................................................................................................................... 16

2.7 Literacy ...................................................................................................................................................... 17

2.8 Poverty ....................................................................................................................................................... 18

2.9 HIV and AIDS ............................................................................................................................................. 23

3. Institutional Analysis .......................................................................................................................................... 25

3.1 The current state of the ECDC .................................................................................................................... 25

3.2 The future direction of the ECDC ................................................................................................................. 28

4. Analysis of the Impact of Existing Provincial Growth and Development Policies and Strategies ........................... 30

4.1 Provincial growth and development policy frameworks ................................................................................. 30

4.2 Analysing the impact of existing provincial growth and development policies and strategies .......................... 32

4.3 Refocusing priority sectors .......................................................................................................................... 33

5. Emerging Issues ............................................................................................................................................... 36

References ........................................................................................................................................................... 38

Appendix I ............................................................................................................................................................ 39


List of Acronyms

AIDS Auto Immune Deficiency Syndrome

AsgiSA Accelerated and Shared Growth Initiative of South Africa

DBSA Development Bank of Southern Africa

ECDC Eastern Cape Development Corporation

ECSECC Eastern Cape Socio Economic Consultative Council

ELIDZ East London Industrial Development Zone

GDP Gross Domestic Product

HIV Human Immunodeficiency Virus

IAPA2 New Industrial Policy Action Plan

IDC Industrial Development Corporation

IDZ Industrial Development Zone

ISRDS Integrated Sustainable Rural Development Strategy

MIDP Motor Industry Development Programme

PGDP Provincial Growth and Development Plan

PIDS Provincial Industrial Development Strategy

SME Small and Medium Enterprise

STATS SA Statistics South Africa


1. Context

In April 2010, Mthente Research and Consulting Services (Pty) Ltd was commissioned by the Eastern Cape Development Corporation (ECDC) to conduct

research into the economic environment of the Eastern Cape and facilitate the ECDC Board Strategy Workshop at the end of May 2010. This report represents

the initial output from the research process, which has involved both an in-depth desktop analysis of the current socio-economic environment and economic

performance in the Eastern Cape, and a series of in-depth interviews with a variety of stakeholders in the Province ranging from key government officials to

representatives of other agencies and entities operating in the Eastern Cape. The findings contained in this research report are intended to facilitate the

development of the programme agenda for the ECDC Board Strategy Workshop.

The Eastern Cape is the second largest province in South Africa after the Northern Cape, with a total population in 2009 of 6.3 million people.1 The provincial

economy is heavily reliant on the manufacturing sector (which is dominated by the automotive industry) as well as finance, real estate and business services

clusters among the secondary and tertiary industries, respectively.

Historically, a variety of socio-economic challenges – many of which are related to pervasive poverty and widespread unemployment – have beset the Eastern

Cape region. In recent years, however, significant progress has been made towards addressing the high levels of poverty and unemployment in the Province.

Since 2004, more than 200 000 people have been “lifted out of poverty”; and, at the same time, the unemployment rate in the Province declined by more than 6

percent from 29.6 percent in 2004 to 23.1 percent in 2007.2 Growth in the provincial economy has reached 5.3 percent, increasing from just 2 percent in 2002.3

Much of this good growth performance has been underpinned by the strong performance of the Province’s Industrial Development Zones (IDZs), which have

benefitted from rapidly increasing levels of investment. For instance, investment in the East London Industrial Development Zone (ELIDZ) increased from R450

million in 2006 to reach R755 million the following year, with the number of investors rising from four to 11 over the same period.4 Despite this, the Province has

experienced a recent surge in unemployment on the back of the global economic crisis. Specifically, the provincial unemployment rate reached 27 percent in the

fourth quarter of 2009, with the number of discouraged job seekers increasing by 30.4 percent since 2008.

Significant challenges to economic development in the Province still remain. At the heart of these challenges is the reality that the provincial economy is

fundamentally dual in nature. Approximately 60 percent of the Province is rural,5 and the spatial distribution of the majority of the provincial population is located in

the former homelands areas – which are distant from the main centres of economic activity in the Province. Individuals living in these areas survive mostly on

subsistence agriculture, migrant labour and welfare grants.


“The Eastern Cape economy very much conforms to the President’s metaphor of “two economies” – a modern industrial, financial, and services sector located

in Buffalo City and the Nelson Mandela Metropole, and a “marginalized” economy located primarily in the former bantustans, characterized by

underdevelopment, containing most of the population, contributing very little to GDP, and being incapable of self-generated growth and development.” 6

As a result, the Eastern Cape is characterised by uneven development. The Province’s four Integrated Sustainable Rural Development Strategy (ISRDS) nodes

(comprising the O.R. Tambo, Chris Hani, Ukhahlamba and Alfred Nzo district municipalities) collectively contribute just 8 percent of the region’s secondary output,

yet are home to 70 percent of the provincial population.7 In turn, a significant proportion of the Eastern Cape population does not participate in “wealth creating

entrepreneurial activity”.8 This not only has a significant impact on household incomes in the Province, but also places considerable pressure on the social safety

net and provincial and local government revenue bases in the Eastern Cape.

In recognising these challenges, the Eastern Cape Provincial Government has launched the Provincial Growth and Development Plan (PGDP) to provide a

blueprint for growth and development in the Province. Much of the focus of the PGDP is on the transfer of skills and productive assets to the poor in order to

facilitate more broad-based participation in the provincial economy. The PGDP targets an annual provincial economic growth rate of between 5 percent and 8

percent; and seeks to reduce the number of households living below the poverty line by 80 percent by 2014.9 The Plan also aims to ensure that the Eastern Cape

is food self-sufficient by 2014, and that basic services such as clean water and sanitation (all sanitation backlogs to be eliminated by 2010) are available to all.10

At the same time, the Province’s Framework for Growth and Development 2004-2014 outlines a number of strategic focus areas designed to drive economic

growth and development in the Eastern Cape. The specific focus areas are: agrarian transformation and food security; poverty eradication; manufacturing

diversification and tourism; public sector transformation; infrastructure development; and human resource development.

The ECDC, as the official economic development and investment agency for the Eastern Cape, has a primary role to play in driving the economic growth and

development of the Province. The agency works in tandem “with provincial and national government ministries, chambers, private business, communities and

other development agencies to implement the economic development policies of the Eastern Cape provincial government.”11 The mandate of the ECDC is closely

aligned to the strategic intent of the Eastern Cape’s PGDP, and the agency is focused on supporting existing businesses in the Province, creating opportunities for

new business, growing and sustaining existing markets and developing new markets, improving access to enterprise finance, and ensuring that skills and

infrastructure are developed in the Eastern Cape.12


2. Socio-economic Analysis

This section outlines the current state of the provincial economy and analyses growth trends in specific sectors. It aims to provide a snapshot of the performance

of various socio-economic indicators relevant to the conceptualisation of a strategic development plan for the Province.

The table below presents a summary of the socio-economic indicators that are analysed in the subsequent subsections.

Table 1: Socio-Economic Indicators for the Eastern Cape [Source: Statistics South Africa]

Indicator

Measure

Trend and Performance

1996 2000 2008

1. Economic Growth

2. Investment

3. Labour

4. Education

5. Literacy

6. Poverty

7. Energy

GDP growth rate (nominal terms) Capital investment expenditure in EC as a % of total investment in SA Unemployment rate % of population with no schooling/grade 0 % of population with grade 1 - 7 % of population with grade 8 -12 % of population with cert/dip & grade 12 % of population with degree/higher degree Literacy rate % of population living in poverty % number of households with electricity for lighting

3.3%

7.8%

21.3% 34.3% 27.8% 1.8% 0.7%

59.3%

57.9%

36.5%

4.3%

7.6%

29.1%

18.2% 37.7% 29.1% 2.1% 0.9%

64.1%

64.2%

45.0%

1.9%

7.3%

23.5%

17.4% 39.0% 29.2% 2.2% 0.9%

65.5%

58.3%

45.9%

(c) Mthente Research a

8. Water 9. Sanitation 10. HIV & AIDS

% number of households with piped water inside dwelling or yard % number of households with flush or chemical toilets % of population with HIV & AIDS (age 15-64)

2.1 Economic growth

According to Statistics South Africa (Stats SA), the provincial economy grew by an annual average of 2.3 percent from 1996 to 2000 (See Figure 1) and by 3.1

percent from 2001 to 2005. Annual gross domestic product (

seasonally adjusted GDP stood at -5 percent in the second quarter of

quarter of 2000 to 2.8 per cent.13 Across the Province, GDP and employment distribution remains heavily concentrated in the Nelson Mandela Bay Metropo

Municipality and the Amathole District Municipality.

Figure 1: Eastern Cape GDP Growth Rate, 1996-2009

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1996 1997 1998 1999 2000 2001Ea

ste

rn C

ap

e G

row

th R

ate

(c) Mthente Research and Consulting Services (Pty) Ltd, May 2010

64)

37.0%

33.1%

3.75%

37.7%

34.8%

10.5%

36.5%

34.1%

16.7% (2007)

rovincial economy grew by an annual average of 2.3 percent from 1996 to 2000 (See Figure 1) and by 3.1

gross domestic product (GDP) growth in 2006 was 5 percent and 4.7 percent in 2007. The Eastern Cape

the second quarter of 2009. It recovered during the third quarter to 0.8 percent and rose again during

, GDP and employment distribution remains heavily concentrated in the Nelson Mandela Bay Metropo

2009 [Source: Stats SA]

2002 2003 2004 2005 2006 2007 2008 2009Year

6

rovincial economy grew by an annual average of 2.3 percent from 1996 to 2000 (See Figure 1) and by 3.1

growth in 2006 was 5 percent and 4.7 percent in 2007. The Eastern Cape’s estimated

to 0.8 percent and rose again during the fourth

, GDP and employment distribution remains heavily concentrated in the Nelson Mandela Bay Metropolitan


Table 2 shows the contribution to GDP of key economic sectors in the province. Approximately 53.5 percent of the provincial GDP between 2003 and 2007 was

derived from the three fastest growing sectors: government services, manufacturing, and finance, real estate and business services. Of these sectors, the

financial, real estate and business services sector has consistently been a key driver of growth in the economy. Since 2004, these industries have steadily

outperformed the public sector (government services) in contributions to provincial GDP. Their contribution has grown from 17.3 percent in 1995 to 19.7 percent in

2007. Despite this, the public sector still plays a significant developmental role in the economy. Although the public sector’s contribution to economic growth

decreased from 21.1 percent in 1995 to 17.7 percent in 2007, it has been the second largest source of GDP growth since 2004. This is closely followed by the

manufacturing sector. The steady decline in the performance of the agriculture, forestry and fishing sector underscores the need for collaboration among all

stakeholders in order to attract investment in agro-processing, aquaculture and fisheries if the Province is to achieve its strategic objectives. In addition, the

tourism (hotels and restaurants), wholesale and retail trade, transport and communication sectors are potential growth sectors in the economy.

Table 2: Provincial GDP contribution by Industry [Source: Stats SA]

Industry

Percentage of Total GDP(Eastern Cape)

2003 2004 2005 2006 2007

Agriculture, forestry and fishing 2.3 2.2 2.2 2.0 1.9

Mining and quarrying 0.1 0.1 0.1 0.1 0.1

Manufacturing 16.4 16.4 16.2 16.0 16.0

Electricity and water 1.2 1.1 1.1 1.1 1.1

Construction 2.1 2.1 2.3 2.3 2.5

Wholesale & retail trade; hotels & restaurants 14.1 14.2 14.3 14.4 14.4

Transport and communication 8.8 8.7 8.7 8.6 8.6

Finance, real estate and business services 18.3 18.9 19.1 19.4 19.7

Community, social and other personal services 9.1 8.9 8.9 8.9 8.9

General government services 18.7 18.4 18.2 17.9 17.7

Taxes less subsidies on products 9.1 8.9 9.0 9.2 9.2


2.2 Population dynamics

The Eastern Cape had a total population of 6 294 274 in 2008. Between 1995 and 2008, the population growth rate was 0.5 percent, in spite of negative growth

among the Coloured and White population groups. Table 3 shows the population distribution for each district municipality between 2004 and 2008. The Amathole

and O.R. Tambo districts recorded the largest populations during this period.

Table 3: Total Population Distribution by District Municipality, 2004 – 2008 [Source: Stats SA]

District 2004 2005 2006 2007 2008

Cacadu District Municipality 387,685 386,685 385,448 383,163 385,019

Amathole District Municipality 1,658,030 1,653,790 1,646,156 1,635,433 1,641,661

Chris Hani District Municipality 801,681 796,954 789,954 780,667 783,652

Ukhahlamba District Municipality 345,571 346,660 347,202 347,253 349,783

O.R. Tambo District Municipality 1,711,938 1,722,005 1,728,596 1,731,862 1,751,820

Alfred Nzo District Municipality 409,025 416,520 424,580 433,363 437,707

Nelson Mandela Metropolitan District Municipality 984,712 974,218 960,519 943,785 944,632

Eastern Cape Province 6,298,642 6,297,153 6,282,455 6,255,526 6,294,274


2.3 Investment

Capital investment expenditure in building and construction works, machinery and equipment as well as transport in the Easter

in 1995 to R181 557 million in 2008 (see Figure 2). This represented

Figure 2: Capital Investment Expenditure in the Eastern Cape, 1995

Even though capital investment expenditure in these areas has grown since 1995, the

national investment statistics. For instance, in 2008 capital investment expenditure in building and construction works, machinery and equipment

the Eastern Cape accounted for 7.3 percent of the national

from 7.8 percent in 1995. Any further reduction in capital investment is likely to hamper general economic activity in the province.

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

1995 1996 1997 1998 1999 2000

Fix

ed

In

ve

stm

en

t in

R M

illi

on

s


Capital investment expenditure in building and construction works, machinery and equipment as well as transport in the Eastern Cape grew from R147

represented a year on year average growth of 1.6 percent.

Figure 2: Capital Investment Expenditure in the Eastern Cape, 1995 – 2008 [Source: Stats SA]

ven though capital investment expenditure in these areas has grown since 1995, the performance has been less impressive when considered in relation

capital investment expenditure in building and construction works, machinery and equipment

national fixed investment. Furthermore, capital investment expenditure in these areas

reduction in capital investment is likely to hamper general economic activity in the province.

2000 2001 2002 2003 2004 2005 2006 2007 2008

Year

9

n Cape grew from R147 517 million

en less impressive when considered in relation to

capital investment expenditure in building and construction works, machinery and equipment and transport in

apital investment expenditure in these areas has declined steadily


Figure 3: Capital Investment Expenditure National Comparison, 1995 – 2008 [Source: Stats SA]

Table 4 shows the capital investment expenditure in the various district municipalities since 2004. The Amathole District Municipality and Nelson Mandela

Metropolitan Municipality received the highest investment expenditure between 2004 and 2008. Both account for an average of 60 percent of the provincial

investment expenditure in that period. Alfred Nzo District Municipality has received the smallest absolute share of investment expenditure since 2004.

Table 4: Capital Investment Expenditure by District Municipality, 2004 – 2008 [Source: Stats SA]

District

Investment in R Millions

2004 2005 2006 2007 2008

Cacadu District Municipality 15,831 16,947 18,537 19,977 21,509

Amathole District Municipality 44,285 44,975 45,816 46,889 48,076

7.0

7.1

7.2

7.3

7.4

7.5

7.6

7.7

7.8

7.9

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

% o

f N

ati

on

al

Ca

pit

al

Inv

est

me

nt


District

Investment in R Millions

2004 2005 2006 2007 2008

Chris Hani District Municipality 12,827 13,461 14,189 15,051 15,939

Ukhahlamba District Municipality 6,491 7,264 8,164 9,177 10,228

O.R. Tambo District Municipality 17,211 17,634 18,172 18,836 19,605

Alfred Nzo District Municipality 4,136 4,255 4,397 4,569 4,756

Nelson Mandela Metropolitan District Municipality 58,765 59,212 59,702 60,530 61,446

Total investment Eastern Cape Province 159,546 163,748 168,797 175,030 181,557

2.4 Trade

The Eastern Cape’s trade in goods totaled R87 billion in 2008. This represented 11.3 percent of South Africa’s overall trade in goods. Exports in goods were

valued at R44.3 billion in 2008. Major export merchandise included motor vehicles, parts and accessories, machinery and equipment, rubber products, textiles and

food. The Province’s exports of motor vehicles, parts and accessories contributed 57.6 percent of the total export value in 2008. The annual average export

growth rate between 1996 and 2008 was 24 percent.

The top five export destinations in 2008 were the United States, Germany, Japan, Australia and Spain. Mozambique was the only African country included among

the 20 top export destinations in that year. Thereafter, China replaced Australia among the top five export destinations in 2009.14 Mozambique and Zimbabwe

were the only African countries among the top 20 export destinations in 2009.


Figure 4: Percentage Growth of Eastern Cape Imports and Exports (Rand values), 1996-2008 [Source: Stats SA]

The value of goods imported into the Province stood at R42.1 billion in 2008. Imports increased in Rand value by an annual average rate of 14.9 percent between

1996 and 2008. The majority of imports were in the manufacturing sector, and included motor vehicles parts and accessories, machinery and equipment and basic

chemicals.

The top five countries of origin for imports in 2009 comprised of Germany, Britain, Spain, the United States and China. Germany was by far the largest country of

origin for imports, with the value of imports from that country amounting to approximately R14 billion in comparison to Britain, Spain and the United States – with

the value of imports from those countries totalling approximately R2 billion.15 The dominance of German imports can be attributed to the fact that Germany is the

major source of components for firms in the automotive industry.

-20

-10

0

10

20

30

40

50

60

70

80

90

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Pe

rce

nta

ge

Gro

wth

Exports Imports


2.5 Labour trends

Using Stats SA’s narrow definition of unemployment, the unemployment rate in the Eastern Cape

percent in the first quarter of 2009. The majority of those employed in the formal sector work in the

manufacturing, wholesale and retail trade and tourism sectors. There has been a steady decline in those employed in the formal sector of agricu

fishing from 333 176 in the first quarter of 2000 to 81 935 in

economy work in the wholesale and retail trade, tourism and construction s

Figure 5: Annual unemployment rate in Eastern Cape 2000

The most recent unemployment statistics available for the Eastern Cape

quarter of 2009, of which 5 000 (38 percent) were generated in the formal sector. Formal employment in the Eastern Cape fell by 7 percent year

and grew by 0.4 percent quarter on quarter (QoQ), while informal employment fell by 7.9 percent YoY

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004

Un

em

plo

ym

en

t ra

te


narrow definition of unemployment, the unemployment rate in the Eastern Cape declined from 29.1 percent in the first quarter of

ajority of those employed in the formal sector work in the public sector. This is followed by

and tourism sectors. There has been a steady decline in those employed in the formal sector of agricu

935 in the first quarter of 2009. The majority of those employed in the informal sector

wholesale and retail trade, tourism and construction sectors.

: Annual unemployment rate in Eastern Cape 2000 – 2009 [Source: Stats SA]

the Eastern Cape (shown in Table 5) show that 13 000 new jobs were created in

) were generated in the formal sector. Formal employment in the Eastern Cape fell by 7 percent year

and grew by 0.4 percent quarter on quarter (QoQ), while informal employment fell by 7.9 percent YoY and grew by 2.9 percent QoQ.

2004 2005 2006 2007 2008 2009

13

declined from 29.1 percent in the first quarter of 2000 to 23.5

sector. This is followed by employment in the

and tourism sectors. There has been a steady decline in those employed in the formal sector of agriculture, forestry and

2009. The majority of those employed in the informal sector of the provincial

000 new jobs were created in the Province in the fourth

) were generated in the formal sector. Formal employment in the Eastern Cape fell by 7 percent year-on-year (YoY)


During the fourth quarter of 2009 there were 13 000 discouraged job seekers who gave up looking for jobs. The number of discouraged job seekers rose by 30.4

percent YoY, indicating low labour absorption capacity in the Eastern Cape economy. The labour absorption rate stagnated on a QoQ basis and fell by 2.8 percent

YoY during the fourth quarter of 2009.

Table 5: Employment Status in the Eastern Cape, 4Q2009 [Source: Stats SA, (Quoted in ECSECC, 2010)]

Eastern Cape labour market

Numbers(000) Percentage

3Q2009

4Q2009

Year on Year change

Quarter on Quarter Change

Year on Year change

Quarter on Quarter Change

Formal 1,258 1,263 (95.0) 5.0 (7.0) 0.4

Informal 272 280 (24.0) 8.0 (7.9) 2.9

Total Employment 1,530 1,543 (119.0) 13.0 (7.2) 0.8

Unemployment 460 468 10 8.0 2.2 1.7

Labour force 1,718 1,732 (85.0) 14.0 (4.7) 0.8

Discouraged job seekers 326 339 79 13.0 30.4 4.0

Not economically active 2,292 2,290 133.0 (2.0) 6.2 (0.1)

Population ( age 15-64) 4,010 4,021 48.0 11.0 1.2 0.3

Labour absorption rate 31.4 31.4 (2.8) 0.0

Labour force participation rate 42.8 43.1 (2.7) 0.2

Unemployment rate 26.8 27.0 1.8 0.2

A disaggregated analysis of employment status and gender in the seven district municipalities shows that the highest levels of both employment and

unemployment were found in the Amathole District Municipality and Nelson Mandela Metropolitan Municipality in 2007 (see Table 6).


Table 6: Labour Force by District Municipality, 2007 [Source: Stats SA (Community survey, 2007)]

Employment Status and

Gender (%)

District Municipality

Cacadu Amathole Chris Hani Ukhahlamba O.R.

Tambo

Alfred

Nzo

NMM Total

(%)

Employed Male 9.2 25.3 7.1 4.0 23.4 4.3 26.8 100

Employed Female 7.0 25.0 6.6 3.6 29.9 6.0 21.8 100

Unemployed Male 5.5 29.2 14.0 4.0 17.2 5.9 24.1 100

Unemployed Female 6.8 29.6 14.5 3.9 14.4 5.3 25.4 100

Not economically

active

Male 4.2 27.3 13.1 5.0 28.5 7.6 14.3 100

Not economically

active

Female 5.3 26.4 13.0 4.9 28.0 8.0 14.3 100

With the exception of the O.R Tambo, Ukhahlamba and Alfred Nzo districts, there were more women than men unemployed in the other four districts. Table 7

below shows the number of people by employment status and gender in the various district municipalities in 2007.

Table 7: Labour Force by District Municipality, 2007 [Source: Stats SA (Community survey, 2007)]

Employment Status

and Gender


Cacadu Amathole Chris

Hani

Ukhahlamba O.R. Tambo Alfred

Nzo

NMM Total (%)

Employed M 52,773 145,475 40,599 22,948 134,133 24,542 153,971 574,440

Employed F 37,449 133,760 35,400 19,243 159,689 32,156 116,324 534,020

Unemployed M 18,890 99,615 47,739 13,748 58,445 20,039 82,200 340,674

Unemployed F 26,157 113,715 55,789 14,861 55,447 20,537 97,720 384,232

Not economically

active

M 32,205 207,872 99,792 37,906 217,075 58,285 109,131 762,266

Not economically

active

F 54,829 275,218 135,282 51,519 291,764 83,713 149,468 1,041,784


2.6 Education

Figure 6 below shows that the number of people with no school or grade 0 level of education declined from 21.3 percent in 1995 to 17.2 percent in 2008. There

has been an increase in those with a grade 1 to 7 level of education from 34.2 percent in 1995 to 39.2 percent in 2008. However, the figure shows that the number

of those with a grade 8 to 12 level of education has remained low within a narrow band of an annual average of 28.9 percent. This suggests that there is an

increasing number of people unable to continue further than grade 7, possibly due to the prohibitive cost of secondary education given the high levels of poverty in

the Province. In 2008, only 2.2 percent of the Eastern Cape population had a certificate or diploma with a grade 12 level of education or university degree.

Figure 6: Education Levels in the Eastern Cape, 1995-2008 [Source: Stats SA]

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

% o

f E

ast

ern

Ca

pe

Po

pu

lati

on

Grade 0 or No scholing Grade 1 - 7 Grade 8 - 12

Cert/Dip & grade 12 Degree/Honors/Masters/PhD


2.7 Literacy

According to Stats SA, literacy levels in the Province ha

opportunities and access to higher education which, in turn

The percentage of semi-skilled and unskilled workers fell from 49 percent in 1995 to 40 percent in 2007. During the same period, the percentage of

increased from 34 percent in 1995 to 41 percent in 2007. However, if the Eastern Cape is to grow its economy and attract more

secondary industries, the Province should consider ways to increase the percentage

2007.

Figure 7: Literacy rate in the Eastern Cape, 1995 - 2008 [Source: Stats SA]

56.0

57.0

58.0

59.0

60.0

61.0

62.0

63.0

64.0

65.0

66.0

67.0

1995 1996 1997 1998 1999 2000 2001

% o

f E

C P

op

ula

tio

n


rovince have improved from 59.2 percent in 1995 to 65.5 percent in 2008. High literacy rates inc

in turn, influences the nature of the economy.

skilled and unskilled workers fell from 49 percent in 1995 to 40 percent in 2007. During the same period, the percentage of

increased from 34 percent in 1995 to 41 percent in 2007. However, if the Eastern Cape is to grow its economy and attract more investment in its tertiary and

secondary industries, the Province should consider ways to increase the percentage of highly skilled workers, which stood at an average of just 19 percent in

2008 [Source: Stats SA]

2001 2002 2003 2004 2005 2006 2007 2008

17

improved from 59.2 percent in 1995 to 65.5 percent in 2008. High literacy rates increase job

skilled and unskilled workers fell from 49 percent in 1995 to 40 percent in 2007. During the same period, the percentage of skilled workers

investment in its tertiary and

of highly skilled workers, which stood at an average of just 19 percent in


Table 8: Percentage Distribution of Skill Levels 1995 – 2007 [Source: Quantec 2008 (quoted in ECSECC, 2009)]

Skill Levels 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Highly skilled 17 18 19 19 18 18 18 18 20 20 19 19 19

Skilled 34 34 36 35 36 37 37 38 39 39 40 40 41

Semi Skilled & unskilled 49 47 46 46 45 46 46 44 42 41 41 40 40

Total 100 100 100 100 100 100 100 100 100 100 100 100 100

2.8 Poverty

An analysis of poverty levels in the Eastern Cape was undertaken in order to understand the welfare of individuals and households in the Province. In this section,

the levels of poverty in the Province are considered in terms of a comparison of access to income, access to energy for lighting, piped water and toilet facilities

within households.

According to Stats SA, 58.3 percent of the Eastern Cape population was living in poverty in 2008. This amounted to approximately 3 671 348 people, and

represented 18.7 percent of the national population living in poverty in that year.

Table 9 shows that 67.4 percent of the population in the Eastern Cape had a monthly income of below R800 in 2007. Women accounted for the majority of the

population in this income category. Within this context, it is clear that radical measures must be undertaken in the Province if it is to achieve a reduced poverty rate

of 20 percent by 2014.


Table 9: Income Distribution by Population Group and Gender in the Eastern Cape, 2007

[Source: Stats SA (Community Survey, 2007)]

Income Category

(%)

Black Coloured Indian White Sub Total

Total % Male Female Male Female Male Female Male Female Male Female

No Income 44.8 50.5 41.0 47.3 38.7 51.6 27.8 37.8 42.6 49.0 45.9

R1-R800 24.9 25.6 12.5 13.6 4.8 5.1 2.0 2.8 21.1 21.9 21.5

R801-R3200 17.9 15.5 21.3 20.6 16.9 17.0 9.2 12.9 17.3 15.8 16.5

R3201 or more 6.2 3.7 12.9 8.5 28.0 16.3 44.1 31.5 11.1 7.1 9

No response 6.2 4.7 12.3 10.0 11.6 10.0 16.9 15.1 7.9 6.3 7.1

Total 100 100 100 100 100 100 100 100 100 100 100

Table 10 shows that, over the period between 2004 and 2008, the district municipalities of Amathole and O.R. Tambo had the highest number of people living in

poverty. In 2008, 56.7 percent of the total population that were living in poverty in the Eastern Cape were located in these two districts.

Table 10: Eastern Cape population living in poverty by district [Source: Stats SA]


Year

2004 2005 2006 2007 2008

Cacadu 177,827 175,750 165,159 159,744 153,396

Amathole 1,093,088 1,073,995 1,003,383 964,360 936,365

Chris Hani 657,769 653,519 624,633 609,416 593,710

Ukhahlamba 274,385 273,944 256,075 249,142 231,042

O.R. Tambo 1,319,782 1,310,174 1,234,247 1,197,901 1,154,063

Alfred Nzo 367,240 370,458 356,665 354,477 333,090

Nelson Mandela Metropolitan 373,048 363,983 340,192 324,862 319,954


2.8.1 Access to energy sources

The percentage of households in the Eastern Cape with access to electricity for lighting increased from 36.5 percent in 1995 to 46.9 percent in 2001, and declined

progressively to 45.9 percent in 2008. Table 11 below shows the proportion of households in each district with electricity as a source of lighting between 2001 and

2008. In 2008, the municipalities with the highest number of households with electricity were Amathole District Municipality and Nelson Mandela Metropolitan

Municipality. The Alfred Nzo District Municipality, followed by Ukhahlamba, had the lowest number of households with electricity. The use of cheaper alternative

energy sources is critical if the welfare of the provincial population is to improve.

Table 11: Percentage of households (by district) with Electricity as a source of lighting [Source: Stats SA]


Year

2001 2002 2003 2004 2005 2006 2007 2008

Cacadu District Municipality 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.8

Amathole District Municipality 14.1 14.1 14.0 14.0 14.0 13.9 13.8 14.0

Chris Hani District Municipality 5.9 5.8 5.8 5.8 5.7 5.7 5.6 5.7

Ukhahlamba District Municipality 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.4

O.R. Tambo District Municipality 5.6 5.6 5.7 5.7 5.7 5.7 5.7 5.9

Alfred Nzo District Municipality 1.2 1.2 1.2 1.2 1.3 1.3 1.3 1.3

Nelson Mandela Metropolitan District Municipality 13.0 12.9 12.7 12.6 12.4 12.2 11.9 11.9

Total % of EC households with electricity for lighting 46.9 46.7 46.6 46.3 46.1 45.8 45.5 45.9

Note: The balance of the provincial population uses solar, gas, paraffin, candles or others sources of lighting


2.8.2 Access to water

The percentage of households with access to piped water inside their dwelling or yard has remained steady at an average of 37 percent since 1995. The rest of

the population has access to water either through a community stand, community borehole, rainwater tank, well, river, spring or water vendor. As was the case

with electricity for lighting, the district municipalities of Alfred Nzo and Ukhahlamba had the lowest number of households with access to piped water between

2001 and 2008 (see Table 12). Access to piped water was expanded at an average annual growth rate of just 1 percent between 2007 and 2008; far below the

target rate of 12.6 percent between 2007 and 2014 as delineated in the PGDP.

Table 12: Percentage of households (by district) with access to piped water inside dwelling/ yard [Source: Stats SA]


Year

2001 2002 2003 2004 2005 2006 2007 2008

Cacadu District Municipality 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0

Amathole District Municipality 10.2 10.2 10.2 10.1 10.1 10.1 10.1 10.0

Chris Hani District Municipality 4.0 3.9 3.9 3.9 3.9 3.8 3.8 3.8

Ukhahlamba District Municipality 1.5 1.5 1.5 1.5 1.5 1.6 1.6 1.6

O.R. Tambo District Municipality 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3

Alfred Nzo District Municipality 0.8 0.8 0.8 0.8 0.8 0.9 0.9 0.9

Nelson Mandela Metropolitan District Municipality 14.1 14.1 13.8 13.6 13.4 13.2 13.0 12.9

Total % of EC households with piped water in dwelling or yard 37.8 37.6 37.4 37.2 37.0 36.8 36.5 36.5

Note: The balance of the provincial population has access to piped water on community stand/ borehole/rain water/river/spring/water vendor/other


Table 13: Percentage of households (by district) with toilet facilities, 2007 [Source: Stats SA (Community survey 2007)]

Toilet Facilities


Cacadu Amathol

e

Chris Hani Ukhahlamba O.R. Tambo Alfred

Nzo

NMM Total

Flush toilet (with sewerage system) 11.6 28.9 9.8 2.9 3.7 0.8 42.3 100

Flush toilet (with septic tank) 18.8 36.2 8.6 4.6 14.5 3.0 14.3 100

Dry toilet facility 1.7 21.8 14.1 11.1 44.0 5.9 1.4 100

Pit toilet with ventilation (VIP) 2.5 20.0 15.6 15.2 31.3 14.4 1.0 100

Pit toilet without ventilation 2.6 33.4 11.0 5.0 29.4 15.3 3.2 100

Chemical toilet 3.6 30.6 14.7 13.3 30.6 4.1 3.0 100

Bucket toilet system 17.6 20.6 9.9 6.9 3.7 3.7 37.6 100

None 1.2 29.5 18.5 5.9 38.8 4.9 1.1 100

2.8.3 Access to sanitation

According to Stats SA, the number of households in the Eastern Cape with flush toilets or chemical toilets has averaged around 34 percent between 1995 and

2008. Those households with no toilet facilities at all actually increased from 29 percent in 1995 to 32 percent in 2008. The Community Survey of 2007 found that

the Amathole and O.R Tambo districts had the highest number of households with no toilet facilities. In the same year, the Nelson Mandela Metropolitan

Municipality had the highest number of households that used the bucket toilet system.

Based on the performance of the three poverty indicators, the Amathole District Municipality and the Nelson Mandela Metropolitan Municipality have the largest

number of households that use the bucket system. This is in spite of the fact that they both record the highest number of households with electricity for lighting and

piped water within their dwelling or yard. Given that both areas provide the greatest level of employment activity and contribute the most to provincial GDP, this

may point to the presence of a large number of informal settlements in these areas. The Alfred Nzo district is home to the lowest level of employment and also

makes the smallest contribution to provincial GDP. Furthermore, the district has the smallest percentage of households with electricity as a source of lighting, as


well as the lowest share of households with access to piped water inside

of poverty in the Eastern Cape.

2.9 HIV and AIDS

According to Stats SA, HIV and AIDS prevalence among people aged between

During this period, the highest prevalence was found to be among the most productive ages of 25 to 49. In 2007, the Eastern C

(634 319 people) of the national HIV population in South Africa.

Figure 8: HIV and AIDS prevalence in the Eastern Cape (15

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

1995 1996 1997 1998 1999 2000 2001

% P

op

ula

tio

n o

f E

ast

ern

Ca

pe


access to piped water inside their dwelling or yard, and flush toilet facilities. These areas represent the major pockets

among people aged between 15 and 64 years increased from 2.4 percent in 1995 to 16.7 per

During this period, the highest prevalence was found to be among the most productive ages of 25 to 49. In 2007, the Eastern Cape accounted for

South Africa.

AIDS prevalence in the Eastern Cape (15-64 years), 1995 - 2007 [Source: Stats SA]

2002 2003 2004 2005 2006 2007

23

These areas represent the major pockets

years increased from 2.4 percent in 1995 to 16.7 percent in 2007.

accounted for 10.7 percent


Table 14: Estimated HIV prevalence among antenatal clinic attendees by province, 2001-2007

[Source: South Africa Department of Health]

Province

Percentage Prevalence

2001 2002 2003 2004 2005 2006 2007

KwaZulu-Natal 33.5 36.5 37.5 40.7 39.1 39.1 37.4

Mpumalanga 29.2 28.6 32.6 30.8 34.8 32.1 32.0

Free State 30.1 28.8 30.1 29.5 30.3 31.1 33.5

Gauteng 29.8 31.6 29.6 33.1 32.4 30.8 30.3

North West 25.2 26.2 29.9 26.7 31.8 29.0 29.0

Eastern Cape 21.7 23.6 27.1 28.0 29.5 28.6 26.0

Limpopo 14.5 15.6 17.5 19.3 21.5 20.6 18.5

Northern Cape 15.9 15.1 16.7 17.6 18.5 15.6 16.1

Western Cape 8.6 12.4 13.1 15.4 15.7 15.1 12.6

National 24.8 26.5 27.9 29.5 30.2 29.1 28.0

The Department of Health’s national survey on HIV prevalence among women attending public antenatal clinics provides an indication of the percentage of

women testing positive for HIV. The study found that HIV prevalence in the Eastern Cape among antenatal clinic attendees amounted to an average of 26.4

percent between 2001 and 2007. Although this survey found that the Eastern Cape boasted lower prevalence figures in comparison to the national incidence rate

between 2001 and 2007, HIV prevalence among antenatal attendees grew at an average rate of 3.1 percent. In order to halt and begin to reverse the spread of

HIV/AIDS in the Eastern Cape by 2014, far-reaching interventions must be undertaken in the Province.


3. Institutional Analysis

This section provides an overview of the institutional direction and performance of the ECDC to date, and also looks at possibilities for the future strategic direction

that the ECDC could take. The information contained in this section is drawn predominantly from the views collected through a number of face-to-face and

telephonic interviews conducted with relevant stakeholders in the Eastern Cape Province.i

3.1 The current state of the ECDC

In order to provide an outline of the current state of the ECDC and its existing role within the provincial economy, stakeholder views on the mandate and role of the

ECDC in the Province, together with its recent performance are presented below. Thereafter, stakeholder perceptions of the ECDC’s existing relationships and

interactions with other key agencies and entities operating in the Province are outlined.

3.1.1 The ECDC’s mandate and role in the Province

The ECDC performs a number of different roles within the development sphere in the Eastern Cape Province. First, the ECDC acts as a property management

company, managing a large property portfolio. Second, the ECDC is a loan portfolio manager. The ECDC also performs a role in terms of enterprise development

assistance, providing non-financial support to enterprises in the Province. Fourth, the ECDC is a central player in marketing the Eastern Cape brand through its

role in trade and investment promotion. This role was previously performed by SIMEC, which, following a merger of the two entities, became a division of the

ECDC.

Within the context of this wide-ranging mandate, there is a common belief among many stakeholders in the Eastern Cape that the ECDC is “wanting to do

everything”. Part of this relates to the disconnect between perceptions and views of what the ECDC is supposed to do and what the Corporation currently does.

The diversity of perceptions regarding the role of the ECDC was captured succinctly by one stakeholder who described the views on the purpose of the

Corporation as being driven by “an amalgamation of expectations”. In some quarters, the ECDC is seen primarily as a development finance institution, providing

i See Appendix I for a comprehensive list of stakeholders interviewed in the research process.


financial packages to clients, particularly to those unable to obtain funding from commercial banks and other financial institutions due to their stringent lending

criteria. This role as a development finance institution is also believed to encompass non-financial development support to enterprises and, more broadly, through

assistance with infrastructure development projects.

Among most stakeholders there was a feeling that the ECDC should be playing an important role in driving the future growth and development of the Eastern

Cape. However, the general feeling emerging from the stakeholder engagements is that the ECDC’s current mandate is too wide and needs to be refocused if the

Corporation is to effectively fulfil its role as a development agency in the Province; and fit in with the broader developmental objectives of the Eastern Cape

Provincial Government.

Furthermore, across the various provincial agencies operating in the Eastern Cape there is a degree of overlap in terms of the functions that they currently

perform. For instance, the ECDC is occupying a similar space to ASGISA-EC in terms of its developmental role. Similarly, SEDA and the ECDC also perform

functions within the realm of non-financial support. Moreover, the ECDC’s role as a development finance institution is similar to that performed on a national level

by the Development Bank of Southern Africa (DBSA), which also provides development finance.

These overlapping functions provide opportunities to establish strategic relationships between agencies while, at the same time, creating a need to define more

clearly the roles of the various institutions. This will require a thorough review of the mandates of the various provincial agencies and entities operating in the

development space in the Eastern Cape.


3.1.2 Factors affecting the performance of the ECDC

To a certain extent, the performance of the ECDC appears to have suffered as a result of having to perform a wide range of different roles. According to one

stakeholder, the ECDC is “floundering” because it “tries to be too many things”. This stakeholder argued that, because the institution is only partly a development

finance institution, and given that it competes with a number of other development finance institutions such as the Industrial Development Corporation (IDC) and

the DBSA at the national level, it has not performed this function very well. Another stakeholder indicated that the ECDC’s large property portfolio has not

performed optimally. Furthermore, one stakeholder pointed out that the ECDC has struggled to secure investors for the Province, with the costs associated with

trying to bring in investors exceeding the value of investments secured. Another stakeholder remarked that the role of promoting investment in the Eastern Cape

region was performed better when SIMEC existed as a stand alone, dedicated investment promotion agency.

In recent years, the performance of the ECDC has been affected by a significant degree of institutional instability. This has been addressed, in part, by a

turnaround strategy designed to deal with internal operational issues affecting the institution. However, the impact of the ECDC in the development space in the

Eastern Cape has been affected by this turnaround strategy, which was primarily inward-focused. As a result, the focus on stabilising the institution internally has

meant that less focus has been placed on addressing the ECDC’s previous external market failures, translating into an impact in the developmental sphere that

was described by one stakeholder as “dull”.

Aligned to the problem of institutional instability is the reality that the operational capacity of the ECDC continues to be affected by a shortage of technical

capacity. While the Corporation appears to possess an abundance of technical skills to service its property management and developmental project functions, key

staff members representing the ECDC indicated that the Corporation does not possess sufficient in-house technical capacity in terms of both its financial and non-

financial support functions. The technical skills problem is exacerbated by the reality that the average age of ECDC employees is 49 years, and the Corporation is,

on average, retiring approximately five to 10 staff members each year.

Another challenge that has confronted the ECDC is the poor image of the Corporation in recent years. This points to a critical reputational management issue that

the ECDC needs to address. The poor image of the Corporation has also affected its ability to attract high calibre employees; thereby contributing to the existing

technical skills constraints that it faces.

In general terms, there was a feeling among some stakeholders consulted during the research process that the ECDC has not optimised its position as the

premier government agency in the Eastern Cape. To a certain extent this relates to a need to recognise the magnitude of the ECDC and make optimal use of the


assets at its disposal. Despite this negativity, the ECDC has been praised for the progress it has achieved in difficult circumstances, which have included limited

funding and operational resources, and frequent leadership instability.

3.1.3 ECDC’s relationships and strategic partnerships with other entities and agencies in the province

More encouragingly, several stakeholders representing various agencies and organisations operating in the Eastern Cape reported enjoying a good relationship

with the ECDC. The Coega IDZ, for example, currently enjoys a multifold relationship with the ECDC. On a legal level, the ECDC currently holds shares in the

Coega IDZ on behalf of both the provincial and national governments. The Coega IDZ also engages with the ECDC as a strategic partner, with the ECDC

providing finance to contractors operating within the IDZ. The ECDC also plays an important role in many of the key strategic projects undertaken by district

municipalities in the Province, and also provides technical support for events taking place within specific districts.

There is a need, however, to formalise many of the existing relationships between the ECDC and other entities and agencies in the Province by establishing new

strategic partnerships or enhancing existing partnerships. In some instances, this requires a change in the structure of engagement between the ECDC and the

relevant partner organisation. For instance, engagements between the ECDC and the Border-Kei Chamber of Commerce and the Eastern Cape Socio-Economic

Consultative Council (ECSECC) continue to occur on an ad-hoc basis. There is a need to formalise the ECDC’s relationship with these organisations in a manner

that is mutually beneficial to both parties.

3.2 The future direction of the ECDC

Going forward the institutional performance of the ECDC should be measured in terms of its contribution to job creation in the Eastern Cape and its achievements

in terms of furthering the notion of the developmental state. One stakeholder argued that this is likely to require a fundamental change in the “genetic footprint of

the organisation”. In any event, there is a need to revisit the institutional elements of the organisation that remain rooted in the legacy of the old Ciskei and

Transkei development corporations. The ECDC, as the largest parastatal in the Eastern Cape, is well placed to make a meaningful impact in terms of driving the

growth and socio-economic development of the Province if it is positioned correctly.


Achieving this is likely to require a more focused role for the ECDC as a provincial development agency and a clarification of the position of the ECDC within the

provincial landscape. This is also likely to require greater streamlining and separation of functions across the various agencies and entities operating in the

developmental space in the Eastern Cape. There was consensus among a number of stakeholders that the ECDC is best place to focus on its role as a

development finance institution in the Province. To this end, it was suggested that the ECDC should drive funding targeted at the segments of the market that are

not served by commercial banks – particularly small and medium enterprises (SMEs) – and, at the same time, play a more prominent role in venture capital

initiatives in the Eastern Cape. Linked to this, there was a belief that the Corporation should also play a prominent role in the development of viable investment

projects in the Eastern Cape and provide support for pre-finance development activities.

A focus on its activities as a development finance institution would also allow for a greater level of strategic interaction between the ECDC and the Accelerated

and Shared Growth Initiative of South Africa (AsgiSA) Eastern Cape to drive rural development in the Province. For example, it was suggested by one stakeholder

that as AsgiSA Eastern Cape unlocks opportunities in the rural development space through its agricultural projects, finance would be required in order to capitalise

on these opportunities. Here the ECDC could provide soft loans in the form of free interest subsidies for investment.

Certain stakeholders expressed the view that the ECDC is particularly well placed to focus on providing finance to SMEs operating in the Eastern Cape.

Furthermore, it was suggested that the ECDC could make a particularly significant impact on local economic development in the Province by performing the role of

a wholesale fund for high-risk, high impact development projects. To this end, the ECDC could, for example, provide funding to development agencies located in

municipalities in the form of guaranteed loans, with the development agencies then free to distribute the funds as they see fit. It was argued by one stakeholder

that this would give greater legitimacy to the local economic development process and increase the accessibility of funding in the Province, while, at the same

time, reducing the ECDC’s risk exposure.

At the same time, some stakeholders have questioned whether the ECDC has the financial resources and operational capacity to simultaneously perform other

functions such as export and investment promotion. It was also felt that these functions may be better performed by agencies or entities focusing on them

independently. There was also a feeling that, at least in the two major urban nodes in the Province, the ECDC is disadvantaged in terms of competing for

investment with the IDZs in Port Elizabeth and East London because the IDZs are able to offer an entire value chain proposition to investors whereas the ECDC

“can only walk alongside investors”. Therefore, instead, of competing with the IDZs in terms of investment promotion, it was suggested by one stakeholder that the

ECDC should rather become the lender of first preference to the IDZs.


4. Analysis of the Impact of Existing Provincial Growth and

Development Policies and Strategies

4.1 Provincial growth and development policy frameworks

This subsection outlines the various policy frameworks that guide local economic development in the Province. The most prominent of these are the PGDP 2004-

2014, the AsgiSA, and the Provincial Industrial Policy.

The PGDP was formulated in 2004 and sets out the vision and plan for the development of the Eastern Cape until 2014. It is the overarching provincial framework

which specifies what will be done to fight poverty, promote economic and social development, create jobs, and generally create a better life for all in the Eastern

Cape. It was designed in line with the national policy framework for socio-economic planning at the provincial level. The framework developed quantified targets to

guide the implementation of the PGDP.

AsgiSA aims to boost sustainable economic growth over the long term with the objective of achieving 6 percent GDP growth in the period 2010-2014, and halving

the levels of poverty and unemployment in the Province. It was designed to overcome six binding constraints on growth that include deficiencies in government

capacity, currency volatility, low levels of investment in infrastructure and related services, a shortage of skills, uncompetitive sectors and weak sector strategies,

and the marginalisation of those in the informal economy.

In the Eastern Cape, AsgiSA forms part of the PGDP. AsgiSA Eastern Cape Pty Ltd, a subsidiary of the Eastern Cape Rural Finance Corporation, was launched in

2007 to implement the national objectives in the Province. That same year, AsgiSA Eastern Cape, when prompted by the provincial government to define high

impact priority development programmes, identified agriculture and agro-processing, forestry development, water resources development, alternative energy with

a particular focus on hydro power and renewable energy, tourism (eco-tourism), and rural-urban economic renewal related to human settlement. However, as a

result of constraints related to the availability of capital resources, AsgiSA Eastern Cape has largely focused on those priority development areas where it feels it

can make the greatest impact, leading to a focus on agriculture, forestry, water resources and alternative energy in the Province’s rural areas.


According to the final report on the assessment of the PGDP by the ECSECC, the Eastern Cape does not have an active industrial policy. Trade liberalisation has

had an adverse effect on many industrial sectors of the Province with little intervention from national government. The only sector where the state has consistently

intervened, and where the Eastern Cape has benefited, has been the automotive industry through the Motor Industry Development Programme (MIDP). The move

to a more active industrial policy through the implementation of a revised Provincial Industrial Development Strategy (PIDS) was highlighted as a key focus area

for the Province in a policy speech by the Honourable MEC for Finance and Economic Development and Environmental Affairs, Mr Mcebisi Jonas, in March 2010.

The key pillars of the strategy are to:

a) Diversify local manufacturing through targeted investment in social and economic infrastructure, skills development, research and development, and

industrial upgrading.

b) Design specific sector interventions through value-chain research and engagement with key players.

c) Increase linkages between the manufacturing sector and other sectors, such as transport, agriculture and agro-processing.

It is essential that the PIDS is aligned with the new Industrial Policy Action Plan 2010/11-2012/13 (IPAP2), which builds on the National Industrial Policy

Framework and the Industrial Policy Action Plan of 2007/08. IPAP2 aims to move the South African economy away from its current reliance on traditional

commodities and non-tradable services by creating a more intensified, labour-absorbing industrialisation path, through seven key initiatives. These are:

a) Aligning macro and micro economic policies more closely.

b) Ensuring greater concessional financing through the IDC.

c) Overhauling existing public procurement processes in order to leverage more local procurement.

d) Adopting a strategic approach to trade policy and the use of import tariffs in particular.

e) Targeting anti-competitive practices.

f) Increasing skills levels and innovation.

g) Boosting production in a selection of newly targeted sectors, including some with long-term potential. Alignment to IPAP2 may provide a conduit for

greater intervention from the state.


4.2 Analysing the impact of existing provincial growth and development policies

and strategies

Despite the best intentions of the existing provincial development policies and strategies, they have, to a large extent, achieved only a very limited impact in terms

of reducing the levels of poverty and social marginalisation in the Eastern Cape. Much of the failure of these policies and strategies to achieve a meaningful

developmental impact on a large scale across all regions of the Province can be attributed to a lack of implementation. According to one stakeholder, the

implementation of the PGDP and the PIDS “remains an enormous problem”. Another stakeholder remarked that the implementation of development policies and

strategies in the Province “has failed dismally”. This lack of implementation can, at least in part, be attributed to a lack of coordination of resources and a lack of

matching of resources to needs. This has been exacerbated by comparatively high levels of political instability in the Eastern Cape region.

The PGDP, in particular, has come in for a significant amount of criticism, some of it directed at a more conceptual level. One stakeholder argued that achieving

the goals of the PGDP is unrealistic given the existing levels of capacity and resources available in the Eastern Cape. Others have been more scathing,

suggesting that the PGDP is outdated and has “no teeth”, or that it is not focused. There was also a suggestion that the PGDP has not been internalised by

government departments in the Province and that departmental planning has not been operationalised along the imperatives of the PGDP. The PGDP has also

been criticised for spelling out development policies that are not spatially referenced, meaning that the policies delineated in the plan are not customised according

to the unique and diverse challenges confronting the various regions of the Province.

The existing provincial growth and development policies and strategies have also failed to effectively address weaknesses in rural development in the Eastern

Cape. Much of this is due to the continued absence of meaningful economic linkages between the region’s major urban and peri-urban areas and the rural parts of

the Province. The acceleration of rural development in the Eastern Cape is also likely to require a greater level of coordination between local economic

development strategies in terms of what is developed at the provincial level and what is implemented at the local government level.

Spending by the Eastern Cape government continues to sustain much of the economic activity in the Province. Indeed, provincial expenditure accounts for a

significant proportion (almost half) of the overall provincial GDP. While the level of resources injected into the provincial economy by the government is admirable,

the over-reliance on government expenditure does suggest that the productive component of the economy requires strengthening.

Growth and development in the Province has been affected by trade promotion strategies that have not been pro-active. In many senses, the Province’s trade

promotion strategies have tended to be reactive and based on demand rather than taking the form of offensive export strategies. This has seen much of the


Eastern Cape’s trade remain focused on traditional export markets in Europe, especially Germany and Denmark. Despite this, the Province is increasingly looking

to diversify its exports by expanding into African markets as well as markets such as the United States, China and Australia.

The impact of policies and strategies on provincial growth and development has also been constrained by certain investment climate barriers in the Province. The

Eastern Cape remains the poorest of South Africa’s nine provinces, and is plagued by significant infrastructure deficiencies. These, coupled with institutional

instability, represent huge obstacles to investment and limit the Province’s ability to attract foreign direct investment. Furthermore, the Province does not have the

resources to compete for investors with wealthier provinces such as Gauteng and the Western Cape.

4.3 Refocusing priority sectors

Another criticism of the existing PGDP has centred on the large number of sectors identified as priority sectors in the Province, with many stakeholders viewing

this as a “wish list” given the limited resources available to the Province. Within this context, there is a need to refocus the Province’s priority sectors for

government support and promotion by identifying and prioritising those core sectors in terms of their economic growth, job creation and poverty alleviation

potential. To this end, as part of the stakeholder engagement process, the stakeholders were asked to identify four or five sectors that they believed should be

prioritised in the Eastern Cape context.

Based on the views expressed by key stakeholders in the Province, the following sectors emerged as the most commonly cited sectors that should receive priority

attention in promoting the growth and development of the Eastern Cape economy.


4.3.1 Agriculture and agro-processing

Despite the socio-economic importance of the agricultural sector due to its broad reach into the rural areas of the Province – particularly the economically deprived

former Bantustan areas – and its potential role as a significant source of rural incomes, the sector’s contribution to provincial GDP has been steadily declining.

Nevertheless, the Eastern Cape’s natural endowments mean that it should, in theory, be strongly competitive in terms of agriculture. This competitive advantage

could also be harnessed to produce value added products through agro-processing, thereby linking the Province’s existing economic platform to economic

potential.

The development of agriculture and agro-processing also allows for the development of many important subsectors including aquaculture, medicinal plants,

fertiliser and biofuels. Furthermore, the potential linkages to the sector in terms of the development of a water resource sector are significant, particularly with

respect to the development of both big and small irrigation schemes.

4.3.2 Forestry

The Eastern Cape is arguably the only area in South Africa with new forestry potential, with approximately 100 000 hectares potentially available for new

forestation. Furthermore, the labour intensive forestry sector boasts huge job creation potential.

4.3.3 Automotive

The rapid development of the automotives sector in the Eastern Cape has been one of the key drivers of industrial development in the Province. Consequently, it

is important that this sector, and the various industries that link into the automotives value chain, remain supported and allowed to continue to grow. Efforts to

continue developing the sector should also focus on deepening internal linkages within the sector. In particular, it is necessary to ensure that ancillary industries

emerge in the automotive sector whereby local firms can be integrated into the value chain.


4.3.4 Renewable energy

In many senses, the skills required in the development of a renewable energy sector, through, for example the construction of wind turbines and solar panels, are

already housed in the automotive sector in the Province. Consequently, there is scope to position the Eastern Cape as a hub in terms of engineering capacity for

renewable energy inputs. The Province also enjoys a number of natural competitive advantages in terms of renewable energy sources.

4.3.5 Tourism

The natural beauty of the Eastern Cape presents the region with a significant competitive advantage in the tourism sector. The sector is also important from a

socio-economic perspective due to its direct impacts on rural incomes. Furthermore, the job creation potential of the sector is significant, and comparatively few

capital inputs are required to expand jobs in the sector. Despite this, the contribution of the tourism sector to the provincial GDP remains negligible. Much of this is

due to a lack of infrastructure and transport networks to support it; suggesting that the sector should be prioritised in future development initiatives.

4.3.6 Oil refining

In addition to these sectors, plans to establish a new crude oil refinery at the Coega IDZ – dubbed Project Mthombo – could facilitate the development of a viable

oil refining sector in the Province should the development go ahead. Some reports have suggested that the project could generate 5 000 direct jobs during

operations and a further 20 000 indirect jobs.16 This aside, the real benefits to the Eastern Cape from the development of the oil refinery are likely to be felt

through the jobs created in the downstream industries linked to the refinery. Furthermore, the development of a prominent oil refining sector offers potential for the

establishment of links to the crucial automotive and agricultural sectors in the Province.


5. Emerging Issues

Based on the findings of this research, it is suggested that a number of themes should form the focus of the engagement and debate regarding the repositioning of

the ECDC and its future strategy framework. These themes are organised into emerging issues related to the broad socio-economic context in the Eastern Cape,

and decision points related specifically to the ECDC’s future strategic direction. In terms of the former, the reformulation of the ECDC’s strategy and positioning

needs to take cognisance of these developmental constraints.

OBJECTIVE 1:

Generating solutions to address critical challenges to socio-economic development in the Eastern Cape

Province

Discussion Theme 1 Addressing the lack of progress in terms of rural development

Discussion Theme 2 Addressing the poor implementation of provincial growth and development policy

strategies

Discussion Theme 3 Refocusing priority sectors for job creation and poverty alleviation

Discussion Theme 4 Diversifying the Province’s trade and investment partners

Discussion Theme 5 Directing provincial financial resources to drive socio-economic development

initiatives more effectively


OBJECTIVE 2:

Repositioning the ECDC strategy within the provincial context

Discussion Theme 1

Defining the ECDC’s core business and focus as well as the products/services that

it offers

Discussion Theme 2 Avoiding duplication and mission creep between provincial agencies and entities

by clarifying mandates and roles

Discussion Theme 3 Keeping the ECDC sustainable and commercially viable

Discussion Theme 4 Managing the ECDC’s property portfolio in a manner that contributes effectively to

the financial sustainability of the organisation

Discussion Theme 5 Addressing the shortage of technical capacity within the ECDC

Discussion Theme 6 Managing the reputation and image of the ECDC

Discussion Theme 7 Addressing the institutional instability within the ECDC

Discussion Theme 8 Formalising the ECDC’s relationships and strategic partnerships with other

provincial agencies and entities


References

Eastern Cape Department of Economic Development and Environmental Affairs, 2010, “Policy Speech by the Honourable MEC for Finance and Economic

Development and Environmental Affairs”

Eastern Cape Development Corporation, 2010, “About Us”, http://www.ecdc.co.za/about_the_eastern_cape_development_corporation [24 March 2010]

Eastern Cape Provincial Government, “PGDP Launch – Outline of Provincial Growth and Development Plan by the Honourable Premier Mrs. Nosimo Balindlela”

Eastern Cape Socio-Economic Consultative Council, 2010, “Quarterly Economic Update”, March 2010

eProp Commercial Property News in South Africa, 2008, “Coega oil refinery plans on track”, http://www.eprop.co.za/news/article.aspx?idArticle=9849 [21 May

2010]

Ministry of Finance, 2010, “Budget Speech 2010”

South African Government Information, 2008, “Province geared to improve economy, increase jobs and reduce poverty”,

http://www.info.gov.za/speeches/2008/08091910451004.htm [23 March 2010]

South African Revenue Services, 2010, “Exports and Imports Data”

Statistics South Africa, 2010, “Bulletin of Statistics”, http://www.statssa.gov.za/publications/statsdownload.asp?PPN=Bulletin&SCH=4620 [7 May 2010]


Appendix I

The table below documents the stakeholders interviewed during the research process.

Table A1: Provincial stakeholders interviewed

Name Organisation Designation

Mr Simphiwe Somdyala ASIGISA Eastern Cape Chief Executive Officer

Mr Msulwa Daca ECDC Acting Chief Executive Officer

Mr Lesley Govender ECDC Strategy and Corporate Planning

Manager

Mr Andrew Murray Eastern Cape Socio Economic

Consultative Council

Executive Director

Mr Les Holbrook Border-Kei Chamber of Commerce Executive Director

Ms Margaret Kusambiza Eastern Cape NGO Coalition Director

MEC Mcebisi Jonas Province of the Eastern Cape

Provincial Treasury

MEC for Finance and Economic

Development and Economic Affairs

Mr Xola Pakati Province of the Eastern Cape

Provincial Treasury

Chairperson of the Portfolio

Committee on Economic Affairs,

Environment and Tourism

Mr Pepi Silinga Coega Development Corporation

(Pty) Ltd


Mr Kevin Hustler Port Elizabeth Regional Chamber of

Commerce and Industry (PERCCI)


Mr Duma Magxwalisa Cacadu District Municipality Project Manager of Local Economic

Development

Dr Solomzi Makohliso Ayanda Biosystems Chief Executive Officer


Endnotes

1 Statistics South Africa, 2010, http://www.statssa.gov.za/publications/statsdownload.asp?PPN=Bulletin&SCH=4620 [7 May 2010] 2 South African Government Information, 2008, http://www.info.gov.za/speeches/2008/08091910451004.htm [23 March 2010] 3 Ibid. 4 Ibid. 5 Jonas, 2010 6 Eastern Cape Provincial Government 7 Ibid. 8 Ibid. 9 Ibid. 10 Ibid. 11 Eastern Cape Development Corporation, 2010, http://www.ecdc.co.za/about_the_eastern_cape_development_corporation [24 March 2010] 12 Ibid. 13 Eastern Cape Social Economic Consultative Council, 2010 14 South African Revenue Services, 2010 15 Ibid. 16 eProp Commercial Property News in South Africa, 2008, http://www.eprop.co.za/news/article.aspx?idArticle=9849 [21 May 2010]

CORPORATEBUSINESS PLAN

2011 - 2013

INCLUDING:

ANNUAL PERFORMANCE PLANSBUDGET

1 | P a g e

TABLE OF CONTENTS 1. INTRODUCTION 3

2. CORPORATE BUSINESS PLAN 5

3. ANNUAL PERFORMANCE AND OPERATIONAL PLANS

3.1 CREDIT RISK 12

3.2 DEVELOPMENT FINANCE 16

3.3 DEVELOPMENT PROPERTIES 20

3.4 DEVELOPMENT SERVICES 25

3.4.1 ENTERPRISE DEVELOPMENT SERVICES

3.4.2 DEVELOPMENT PROJECTS

3.4.3 INVESTMENT AND TRADE PROMOTION

4. BUDGET 38

2 | P a g e

List of acronyms and abbreviations BSC Balanced Scorecard PERCII Port Elizabeth Chamber of Industry

DEDEA Department of Economic Development and Environmental Affairs SMME Small, Medium and Micro Enterprises

ECDC Eastern Cape Development Corporation NAFCOC National African Chamber of Commerce

ELIDZ East London Industrial Development Zone DIU Development Investments Unit

IDZ Industrial Development Zone DSU Development Services Unit

IPAP2 Industrial Policy Action Plan ITP Investment and Trade Promotion

PFMA Public Finance Management Act (1999) EDS Enterprise Development Unit

PGDP Provincial Growth and Development Plan DPP Development Projects Programme

PIDS Provincial Industrial Development Strategy ICT Information Communication Technology

SWOT Strengths Weaknesses Opportunities and Threats analysis CRM Customer relations Management model

MTEF Medium Term Expenditure Framework PROMUN Accounting system used by ECDC

DFI Development Finance Institution Man Manager

GRI Gross return on investments Coms Communication

GRA Gross return of assets SAPS South African Police Service

NGP National Growth Path HR Human Resources

FDI Foreign Direct Investment HIPP’s High impact priority projects

LDI Local Direct Investment R&D Research and Development

BCTWF Best Company to Work For Survey (undertaken by Deloitte Consulting) Prop. Properties

DFI Development Finance Institution Exec Executive

ROI Return on Investment the dti The Department of Trade and Industry

SLA Service Level agreement SEDA Small Enterprise Development Agency

MOU Memorandum of understanding EMIA Export Marketing investor assistance

GDP Gross domestic product CFO Chief Financial Officer

R&D Research and Development

AG Auditor General

WSP Work skills plan

MSP Master Systems plan

3 | P a g e

1. INTRODUCTION

1.1 Current scenario with respect operations

The corporate business plan is the first step of a five year process to transform ECDC into a fully functional development finance institution. In 2011/12 it is

anticipated that ECDC’s financial performance will decline however is expected to improve in the middle and outer years. Currently there are challenges with respect

to:

1.1.1 High impairments on loans and rentals.

1.1.2 Poor people management especially performance management.

1.1.3 Properties portfolio is not performing optimally relative to the asset base.

1.1.4 Inappropriate funding model and portfolio mix (15% loans and 45% properties) to guarantee viability.

1.1.5 Erratic levels of liquidity and government allocations.

1.2 Pillars going forward- Implementing the Strategy

The problems facing ECDC are systemic. Whilst the core of the ECDC strategy is to dispose of non-performing assets while investing in mega projects, this is

underpinned by increasing quality throughput using competent and professional personnel. To date the following has been achieved in transforming into a DFI.

1.2.1 Transfer R27 million of properties that reduces costs with respect to maintenance and rates.

1.2.2 Geared and trained staff through communication of the strategy and Board and shareholder expectations.

1.2.3 Total buy-in from organised labour to the organisational development plan.

1.2.4 On track with the disposal of properties.

1.2.5 Plans to build the Infra Fund are advanced.

1.2.6 Creation of SMME fund.

1.2.7 Refocusing the investment and trade function.

Therefore this business plans is built on initiatives that have begun and will impact operations in the 2011/12. Although the corporate business plan is expanded it is

necessary to ensure that in the first year rigorous monitoring and evaluation occurs. This plan is also linked to the budget and budgetary period.

4 | P a g e

Eastern Cape Development Corporation strategy map

5 | P a g e

2. CORPORATE BUSINESS PLAN 2011/12 TO 2013/14

The ECDC corporate business plan is meant to create a stepping stones between the strategy and annual performance plans. The corporate business plan contains

SMART objectives linked to the strategy map as well provide a basis to measure each objective whilst the annual performance plans contains detail with respect to each

business unit within the ECDC.

The measures listed in the corporate business plan are those required so as to measure corporate performance and my include support functions critical to success of the

strategy whilst those in the annual performance plans measure the contributions of the individual core business units or line functions of the ECDC.

Perspective Strategic objective Key performance indicator Owner Target 11/12

Target 12/13

Target 13/14

Strategic drivers Control Yes/No

Risk Alignment

DEVELOPMENT IMPACT

Creation of jobs Contribution of job creation to National Target

All 5030

6310 7200 Contribution to NGP

No #14

Disbursement of funding on all loan products

Number contribution to impact of standard of living of livelihoods (Jobs created x 4 dependants)

All 20,120 25,240 28,800 Contribution to NGP

No

Contribution to GDP % contribution of ECDC activities to GDP

All Develop a tool to measure contribution

Implement and set base

Measure Contribution to Provincial GDP

No

FINANCIAL PERSPECTIVE

F1 DECREASE LOSSES ON OPERATIONS

Rand value disposal of property portfolio 1

Exec Prop R286m R286m 0 Asset conversion policy

No #1 #4 #16 Pricing of loan products Exec DIU Prime +3 to

prime -2% Prime +3 to prime -2%

Prime +3 to prime -2%

Pricing policy Yes

% impairments (% of total loan book) Credit Risk and DIU

50% 45% 40% Impairment policy Yes

F2 OPTIMISE AND GROW RETURNS ON INVESTMENTS AND ASSETS

Gearing and leveraging on Infra-fund2

CFO R250mil R250mil R250mil Infra Fund model No #4 #6 #13 #3

Value of new loans approved and disbursed3

Exec DIU R200 million R250 million R300 million Investment policy Yes

GRA on properties:4 Rentals and arrears collected

Exec Prop 12% R46m

15% R44m

20% R48m

Rentals policy Yes

Number and value of new investments (FDI and LDI) 5

Exec DSU 15 R750m

18 R800m

20 R1b

Macro-economic policy

No

1 Assumed part disposal will occur in 2011 (half of the total portfolio). 2 Assumed that the Infra Fund will be approved and that there will be investor uptake. 3 Partly based on allocations from Government. 4 Assumed that sale of properties will not necessarily improve the GRA since rentals are not at market value and may be the existing portfolio. The part disposal is assumed at end of the 4th quarter of 2011/12.

6 | P a g e


Target 12/13

Target 13/14


Risk Alignment

FINANCIAL PERSPECTIVE

F2 OPTIMISE AND GROW RETURNS ON INVESTMENTS AND ASSETS

Value of exports6 Exec DSU R900m R1bn R1.2bn Macro- economic policy

No

Amount of third party funding leveraged for special development projects

Exec DSU R75m R90m R110m Development Projects policy

Yes

F3 MAXIMISE COST EFFICIENCY

Reduction of property maintenance Exec Prop 20%

30% 40%

Maintenance policy Yes #4 #13

Cost to income ratio CFO 128% 110% 110% n/a Yes

Percentage of government transfers to ECDC (Dependency ratio)

CFO 30% 29% 28% MTEF No

F4 MAINTAIN ADEQUATE LEVELS OF LIQUIDITY

Loan repayment rate (Value of current collections per month/year)7

Exec DIU 60% 65% 70%

Investment policy Yes #1 #22 #13 Debt to equity ratio CFO 20% 15% 15% n/a Yes

ROI on cash reserves CFO Steffi Call Steffi Call Steffi Call Cash investment policy

No

CUSTOMER PERSPECTIVE

C1 POSITION THE ECDC AS THE FINANCIER OF CHOICE

Number of firms offered pre-start up assistance and post finance after care support

Exec DIU Develop a model and implement

Implement and measure

200 companies Investment policy Yes #11

#13

#6

#17

#22

#8

Number of incubates participating in ECDC mentorship programme

Exec DSU 90 Incubates - 20 ICT, - 70 Creative Industry

100 Incubates - 25 ICT, - 75 Creative Industry

120 Incubates - 30 ICT, - 90 Creative Industry

Enterprise Development Policy

Yes

Number of complaints received and addressed on time

Man Coms Develop a CRM model

Implement and measure

100% CRM model Yes

Visitor room for client’s consultations at ground floor (head office)

CFO Design and implement visitor

rooms

n/a n/a n/a Yes

Accurate debtor’s statements (% accurate billings sent).

CFO 80% 90% 95% PROMUN Yes

Yes

% positive media coverage. Man Coms 80% 90% 90% Media and coms policy

5 Assumption that this function will be in ECDC. 6 Assumption that this function will be in ECDC. 7 Expected collections divided by actual collections per annum/month.

7 | P a g e


Target 12/13

Target 13/14


Risk Alignment

CUSTOMER PERSPECTIVE

C2 INCREASE THE ECDC PROVINCIAL FOOTPRINT

Number and value of loans granted per municipality (emphasis on former Transkei)

Exec DIU 45% 48% 50% Investment policy Yes #6

#14

#5

#11

Rand value of funds spent in supporting municipalities (spatial, special projects, etc)

Exec DSU R3 m

R5 m

R7 m

Development Projects policy

Yes

Number of memorandum of understanding (MOU)/service level agreements (SLAs) made per year with other Government bodies

All 2 2 2 Joint agreements, SLA, partnership agreements.

Yes

Impact assessment of ECDC products and services in 3 years.

All Launch new/ pilot new or retain products

Implement Impact assessment of products

n/a Yes

C3 ESTABLISH STRATEGIC PARTNERSHIPS WITH STAKEHOLDERS

Number of MOU/SLAs made per year with stakeholders/ other DFIs/ agencies etc in the Eastern Cape

Exec DIU 2 2 2 Joint agreement/ SLA/ partnership agreements

Yes #13

#14

#6

#22

#11

#20

Number of joint funded and implemented projects

Exec DIU 2 2 2 Joint agreement/ SLA/ partnership agreements

Yes

Periodic stakeholder satisfaction surveys

Man Coms Determine baseline through

survey

Improve by 10% Improve by 10% n/a Yes

Programmes initiated with chambers of business (NAFCOC, PERCII, Border Kei, etc)

Exec DSU 4 4 4 SLA with DEDEA Yes

C4 BUILD A BALANCED MARKET PORTFOLIO

Develop a Loan Portfolio concentration mix model

Man Credit Risk

Develop model and implement

Review Review Concentration risk model

Yes #15 #11 #13 #22

New developmental micro-funds model (SMME fund)

Exec DIU Pilot model Implement model fully

Review model New SMME model Yes

Revised Imvaba fund Exec DIU Develop and implement guidelines

Implement guidelines

Review guidelines

Revised Imvaba fund

No

INTERNAL PROCESSES PERSPECTIVE

P1 DESIGN AND STREAMLINE INNOVATIVE SOLUTIONS

Business Process Reengineering: For example on number of days required to approve and disburse loans, to allocate tenants, answer calls, turnaround times for all product, etc.

All Exec OD

Develop and implement

standard for all 100% of core

ECDC processes

Implement standard

Review standard OD project Yes #16

#15

#12

#3

#20

8 | P a g e


Target 12/13

Target 13/14


Risk Alignment


P1 DESIGN AND STREAMLINE INNOVATIVE SOLUTIONS

Number of new products researched and launched

All 2 2 2 Yes #2

Develop new business model for ECDC (organisation development)

Man HR Exec OD

Develop and pilot Align and Implement

Review n/a Yes

Creation of a research and development (R & D) function.

Man HR Exec OD

Appoint Economist and set up Unit +

1 research paper

2 research papers

3 research papers

Research and development policy

Yes

P2 DEVELOP CUSTOMER MANAGEMENT RELATIONSHIP PROCESSES

Periodic customer satisfaction surveys

Man Coms 1 survey Set baseline

1 survey 10%

improvement

1 survey 10%

improvement

Marketing and Coms policy

Yes #15

#7

#8

#14

#7

Aftercare model from investment and trade promotion unit and reports

Exec DSU Develop and implement a aftercare model

for

Implement, monitor and report

Implement, monitor and report

Aftercare model for ITP

Yes

Increase number of hits on the website.

Man IT 63 135 hits 69 500 hits 77 000 hits Marketing and Coms strategy

Yes

P3 DEVELOP EFFECTIVE RISK MANAGEMENT PROCESSES

Implement King III and Companies Act readiness program.

Man Credit Risk

Readiness assessment and implement

Implement findings

Review Credit risk policy Yes #5 #7 #11

Clean audit with no emphasis of matter

All Clean audit with emphasis of matter

Clean audit with emphasis of matter

Clean audit with NO emphasis of

matter

n/a Yes

Implement risk tolerance framework. All Implement Review and implement

Review and implement

Board approved document

Yes

Implement A-G and internal audit tracking register.

All Q1 and Q2- Implement 100% findings of previous

year. Q3-Q4- 50% of current year findings done.

Q1 and Q2- Implement 100% findings of

previous year. Q3-Q4- 50% of current year findings done.

Q1 and Q2- Implement 100% findings of

previous year. Q3-Q4- 50% of current year findings done.

AG Management letter

Yes

Annual number of external cases investigated by the South African Police Services (SAPS) for misappropriation, misallocation and misapplication of ECDC funds

All 0 0 0 Internal Audit Yes

9 | P a g e


Target 12/13

Target 13/14


Risk Alignment


P3 DEVELOP EFFECTIVE RISK MANAGEMENT PROCESSES

Annual Number of internal and external cases investigated by internal auditors for misappropriation of ECDC funds

All 0 0 0 Internal audit Yes

Number of reports on the exposures due to future changes in economic conditions.

Man Credit Risk

1 1 1 Credit risk policy Yes

LEARNING AND GROWTH PERSPECTIVE

L1 INVEST IN HUMAN CAPITAL IN LINE WITH CORE BUSINESS

Employee satisfaction index (conduct annual surveys)

Man HR 50% 70% 80% n/a Yes #9 #17 #2

#10

#21

#22

Vacancy rate of key vacancies Man HR 10% 5% 5% HRD policy Yes

Value of training programmes implemented.

Man HR R3m R2m R1m HRD policy Yes

Embedded participation in the performance management model

Man HR 70% 80% 100% PMS policy Yes

Develop and implement six critical HR policies (remuneration, performance, discipline, etc)

Man HR 100% complete

Implement Implement n/a Yes

Harmonise conditions of employment throughout the entire corporation

Man HR OD project Implement findings

Implement findings

OD process Yes

Conducive employer/employee relations.

Man HR 1 agency shop agreement

1 agency shop agreement

1 agency shop agreement

Agency shop agreement

Yes

Implementation of workplace skills plan (WSP) for ECDC.

Man HR 1 WSP 1 WSP 1 WSP WSP Yes

Organisational structure aligned to strategy. (Organisational development process).

Man OD OD project Implement findings

Implement findings

OD process Yes

L2 DEVELOP A CULTURE OF EXCELLENCE AND LEADERSHIP

Management information system for decision making.

Man IT 1 MIS developed and designed

Implement Implement n/a Yes #11

#20

#10

Develop a corporate performance measurement tool

Man Strategy

Implement 1 corporate performance measurement

tool

Implement tool Implement tool Reporting guidelines

Yes

Market intelligence report.

Man Coms 1 report Implement findings

1 report n/a Yes

10 | P a g e


Target 12/13

Target 13/14


Risk Alignment

LEARNING AND GROWTH PERSPECTIVE

L2 DEVELOP A CULTURE OF EXCELLENCE AND LEADERSHIP

Periodic/regular reporting and feedback on performance from management to staff

Man Strategy/ Man OD

1 town hall meeting

1 town hall meeting

1 town hall meeting

Strategy planning process

Yes

Codification of Leadership and Management behaviours

Man HR Develop leadership cadre

Embed Embed n/a Yes

L3 INCREASE EFFECTIVE DECISION MAKING BASED ON ACCURATE MANAGEMENT INFORMATION AND KNOWLEDGE SYSTEMS

Align IT strategy

Man IT Design and Develop IT strategy.

Implementation Implementation IT strategy Yes #18

#19

Align Master systems plan (MSP) to Corporate business plans

Man IT Design, develop and document the MSP

Implement the MSP

Review and update the system

MSP Yes

L4 BUILD DEVELOPMENT FINANCE AND ECONOMIC INTELLIGENCE

Build a knowledge hub: Number of research/information products produced annually

All 2 2 2 ITP, DPP and EDS research

Yes #18

#19

Knowledge management system.

Man IT 1 system Implement Implement n/a Yes

11 | P a g e

Top risks: ECDC risks from highest to lowest


1 The failure of ECDC to achieve sustainability

2 Lack of human capacity and skill

3 Lack of segregation of duties in the development investment unit between the pre and

post investment

4 Failure to generate sufficient income to cover cost and ensure sustainability of the unit

5 High rate of loan defaulters

6 Insufficient funding for loans

7 The lack of integrity of personnel

8 Lack of aftercare service to loanees

9 Lack of succession planning

10 Failure to harmonize conditions of employment

11 Lender of last resort (providing financial support to a client base that is non-bankable)

12 ECDC’s organisational structure of the ECDC is not appropriately aligned

13 The balance sheet is not structured to be a DFI

14 Failure/inability to meet changing shareholder expectations

15 Low employee morale

16 Slow turnaround time in the disposals of properties

17 Failure to provide in-house business support to emerging entrepreneurs for all sectors

18 Loss of critical IT infrastructure and information

19 Lack of succession planning and business continuity within the IT department

20 Limited integration of financial and non-financial services

21 Poor employee/employer relations affecting productivity and efficiency

22 Notion that ECDC is perceived as funder of grants as opposed to development

finance/loans.

12 | P a g e

3. ANNUAL PERFORMANCE AND OPERATIONAL PLANS

3.1 CREDIT RISK 3.1.1 PERFORMANCE PLAN 2011/12 to 2013/14

Assumptions made in this plan: a. The appointment of the credit analyst will be finalised.

Perspective

and strategic objective

Key Initiative

Performance Indicator

PI definition

Responsibility

Resources a. Indicative b. Allocated c. Deficit

Indicative Baseline 2010/11

Medium term targets

2011/12 2012/13 2013/14

F1 Operate under a sound well defined credit granting process.

• Number of reports with respect to credit limits framework and new projects and new loans.

• Number of new policies and procedure manuals approved.

• Establish loan sector concentrations

• Perform Credit risk report

Man Credit

Risk

a. R1, 2m b. 0 c. R1,2m

No baseline

• Develop Credit limit framework.

• Develop a credit Procedure manual

• Develop 3 new policies

• Develop Concentrations loan portfolio.

• Credit risk reports for all loans and projects.

• Develop a pricing policy.

• Review credit limit framework, procedure manuals and policies, concentration levels

Review credit limit framework, procedure manuals and policies. concentration levels

F2 Maintain an appropriate credit administration, measurement and monitoring process

• Number of impairment reports per annum.

• Policy document and reporting system on internal risk rating system.

• Number of reports on the exposures due to economic conditions.

• Risk comment on procedures loans, rental portfolio, and project loans.

• Report indicating exposure of economic conditions.

Man Credit

Risk

No budget required

No baseline

• 4 impairment reports.

• New impairment policy

• 1 report on economic conditions





P1

Ensure adequate controls over credit risk

• Number of training sessions with staff.

• Number of work out loan papers submitted.

• Training sessions of all Units for ensure compliance.

Man Credit

Risk

a. R1,8m b. R0 c. R1,8m

No baseline

• 1 Quarterly training

• 10% of qualifying loans




• 100% of Qualifying loans

13 | P a g e

Perspective and

strategic objective

Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

P2 Performance review of unit by Executive Management / Audit Committee / Risk Committee / Board / Internal audit

Number of surveys conducted internally.

Participate in internal survey to determine satisfaction levels

Man Credit

Risk

No budget

required

No baseline

Determine baseline. Improve by 10% internal customer satisfaction index.

Improve by 20% internal customer satisfaction index.

P3 Assess ECDC credit policy and procedures against King III.

Number of reports highlighting compliance

Assessment of ECDC against King III for credit aspects.

Man Credit

Risk

No budget

required

No baseline

1 report 1 report 1 report

P3 Identify and manage credit risk inherent in the high impact products/plan and activities.

Number of risk reports to Board / Audit Committee

A report detailing the risks for each new high impact project.

Man Credit

Risk

a. R600k b. 0 c. R600k

No baseline

50% of all projects 75% of all projects

100% of all projects

P3 Establish an appropriate credit risk environment across all Units

• Approved credit risk strategy and policies.

• Number of reports with respect to credit risks inherent in loan products.

• Credit risk strategy and polices with proposed risk appetite and tolerance.

• 1 inherent risk reports per product from DIU and Projects.

Man Credit

Risk

a. R600k b. 0 c. R600k

No baseline

• Credit and risk strategy.

• 1 inherent risk reports per product

• Credit and risk strategy. 1 inherent risk reports per product

• Credit and risk strategy.

• 1 inherent risk reports per product

L2 Provide assurance service to Board

Number of service standards signed with each Unit.

SLA/ MOU’s to be entered into between CR and other Units

Man Credit

Risk

No budget

required

No baseline

60% compliance 100% compliance

100% compliance

L3 Communicate requirements to IT

Number of new system definitions implemented

Number of new reports systems generated by IT.

Man Credit

Risk

No budget

required

No baseline

4 reports 4 reports 4 reports

L4 Communicating of ideas and lessons learnt to responsible person for development through a committee.

• Constitution of committee drafted and approved.

• Number meeting held.

Minutes on lessons learnt

Man Credit

Risk

No budget

required

No baseline

4 meetings and reports



14 | P a g e

3.1.2 OPERATIONAL PLAN- 2011/12

Perspective and

strategic objective


PI definition

Reporting frequency

Annual target Quarterly targets

Q1 Q2 Q3 Q4

F1 • Number of reports with respect to credit limits framework and new projects and new loans.

• Number of policies and procedure approved.

• Amendments to development investment policy, rental policy and project loans policy.

• Establish concentrations

• Perform Credit risk report

Quarterly Per loan/per project

• Develop Credit limit framework.

• Develop a credit Procedure manual

• Develop 3 new policies

• Develop Concentrations loan portfolio.

• Credit risk reports for all loans and projects.

• Develop a pricing policy.

• Establish overall credit limit framework loan portfolio

• Procedure manual Nexus

• 100% DIU loan reports over R1million

• 1 Development Investment Policy

• Procedure manual term loans

• 1 pricing policy

• 100% of DIU loans

• 1 Rental Policy

• Procedure manual Construction


• 1 Project Policy

• Rental policy


F2 • Number of impairment reports per annum.

• Policy document and reporting system on internal risk rating system to manage credit risk.

• Number of reports on the exposures due to economic conditions.

• Risk comment on procedures loans, rental portfolio, and project loans.

• Report indicating exposure of economic conditions.

Quarterly • 4 impairment reports.



• 1impairment report




• 1 economic conditions report


P1 • Number of training sessions with staff.

• Number of work out loan papers submitted.

• Training sessions of all Units for ensure compliance.

Quarterly • 1 Quarterly

• 1 training sessions quarterly


• 1 training session

• 10% of loans


• 10 % of loans.


• 10% of loans.

• 1 training session.

• 10% of loans.

P2 Number of surveys conducted internally with staff, management and Board

Participate in internal survey to determine satisfaction levels

Annual Satisfied internal customers satisfied.

0 Conduct survey Interpret results determine actions.

Determine baseline for internal customer satisfaction.

P3

Report highlighting compliance Assessment of ECDC against King III for credit aspects.

Quarterly 1 report 0 1 report n/a n/a

15 | P a g e

Perspective and

strategic objective


PI definition

Reporting frequency


Q1 Q2 Q3 Q4

P3

• Approved credit risk strategy and policies.

• Number of reports with respect to credit risks inherent in loan products.

• Credit risk strategy and polices with proposed risk appetite and tolerance.

• 1 inherent risk reports on per product from DIU and Projects and Properties.

Quarterly Credit and risk strategy, amended policies and inherent risk reports

0 Credit risk strategy 33% Inherent Risk

report

Amend policy 33% Inherent Risk report

33% Inherent Risk report

P3 Number of Risk assessment reports

Risk report for all new products before implementation

Depending on

new products

1 overall product risk report per new product

100% compliance 100% compliance 100% compliance

100% compliance

L2 Number of service standards signed with each Unit.

SLA/ MOU’s to be entered into with other Units

Quarterly 60% compliance 0 0 0 60% compliance

L3 Number of new system definitions implemented

Number of new reports systems generated by IT.

Quarterly 4 reports 1 report 1 report 1 report 1 report

L4 • Constitution of committee drafted and approved.

• Number meeting held.

Minutes on lessons learnt Quarterly 4 meetings and reports Constitution and procedures

1 report 1 report 1 report

16 | P a g e

3.2 DEVELOPMENT FINANCE

3.2.1 PERFORMANCE PLAN 2011/12 TO 2013/14

Assumptions of this plan include: a. Estimated organic growth of R50 mil p.a. due to improved in collections process to match the disbursements and expected annual allocation of R50 million. b. Estimated based on R226 achieved in the last year due to funding constraints excludes fees and refunds. c. Availability of funds required to achieve the set targets. d. Training expected cost of R20 000 per employee for approximately 30 staff members. e. Appointment of additional employees to boost capacity. f. Jobs estimated based on current pipeline and trend in historic performance with a provision of 10% escalation p.a. g. Impairments improvement is dependent on the calculation methodology and review of grading process. h. At least one presentation or workshop per month to promote ECDC funding products. No budget required as this is done in collaboration with Development

Services Unit. i. MOUs/ SLAs with other entities are highly dependent on negotiation with third parties and the success might be affected by factors beyond control.

Perspective


Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

F1 Improve processes to ensure efficiency and effectiveness.

Value of collections per month/year

Cash receipts from total loan book as percentage of loans disbursed.

Exec: DIU Key staff to be appointed: -Monitoring Manager -Legal Advisor* -Credit Risk Analyst*

70%

60%

65%

70%

F2 Source Mega investment projects

Number of mega investment projects identified (build a pipeline)

Projects over the value of R50m

Exec: DIU Attributed to direct

expenses8

1 (Joule car) 2 2 3

F2 Improve quality of the loan portfolio

% impairment rate % impairment rate

as per risk appetite

and tolerance


expenses

62% (of the

total loan

book)

50% 45% 40%

Value of new investments

Loans disbursed (excl. fees, insurance and refunds)

Exec: DIU Approx. R200 million required.

R250 million

R200 million

R250 million

R300 million

8 Attributed to direct expenses means as per the budget for ECDC in the rest of the document.

17 | P a g e

Perspective and

strategic objective

Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

F2 Approval and disbursement of investments.

Jobs created (Temporary,

full-time, jobs retained).

No. of jobs created

from loans

disbursed

Exec: DIU Linked to disbursement.

No budget required

2 500

3 000 3 500

4 000

C4 Build loans portfolio New SMME/ Micro Loans Model

SMME/ micro fund Model

Exec: DIU Linked to disbursement. No budget required

No baseline Pilot new model Implement model fully

Review model

Revised Imvaba fund. New guidelines Exec: DIU Linked to disbursements. No budget required

No baseline Develop and implement guidelines

Monitor Review guidelines

C1 and C4 Promoting awareness of ECDC products.

No. of Ads, information workshops done per month, etc (Establish awareness of products and services offered)

No. of presentations introducing ECDC funding products

Exec: DIU/

Marketing

Marketing budget. Attributed to direct expenses

12 12 12 12

C3 Develop a survey for loan recipients

Number of surveys conducted

Develop a survey to check satisfaction of clients

Exec: DIU No budget required/ Marketing. Attributed to direct expenses

No baseline Develop survey, run and implement findings

Develop, run and implement findings

Develop, run and implement findings

C3 Developing and leveraging on relationship.

No. of MOU/SLAs concluded per year with stakeholders or other DFIs in the Eastern Cape.

No. of MOU/SLAs signed and implemented with external stakeholders


expenses

2 2 2 2

P1 Approval and disbursement of investments.

Turnaround time No. of days taken to disburse loans


expenses

No baseline Develop and implement standard

Implement standard

Review standard

P2 Client relationship management

No. of complaints from customers and stakeholders

New customer feedback system


expenses

No baseline Develop and implement system

Implement system

Review system

L4 Support provided pre and post financing

Number of products developed to assist pre and post financing

Unique products meant to support enterprises before and after financing


expenses

No baseline Develop 2 products (pre and post interventions) and pilot implementation

Implement Review

18 | P a g e

3.2.2 OPERATIONS PLAN- 2011/12

Perspective and strategic

objective


PI definition

Reporting frequency

Annual target

2011/12

Quarterly targets

Q1 Q2 Q3 Q4

F1 Value of collections per year Cash receipts from total loan book as percentage of loans disbursed.

Quarterly 70%

60% 60% 60% 60%

F2 Number of mega investment projects identified and secured

Projects over the value of R50m Quarterly 2 0 1 0 1

F2 % impairment rate % impairment rate as per risk appetite and tolerance

Quarterly 50% 50% 50% 50% 50%

Value of new investments

Loans disbursed (excl. fees, insurance and refunds)

Quarterly R200million R55 million R50million R45million R50million

F2 Jobs created (Temporary, full-

time, jobs saved).

No. of jobs created from loans

disbursed

Quarterly 3 000 800 750 700 750

C4 New SMME/ Micro Loans Model SMME/ micro fund Model Quarterly Pilot model Conclude conceptualisation

Pilot model Pilot model Pilot model

Revised Imvaba fund New guidelines Quarterly Develop and implement new guidelines

Develop new guidelines

Implement Implement Review the new guidelines and adjust.

C1 and C4 No. of Ads, information workshops done per month, etc (Establish awareness of products and services offered)

No. of presentations introducing ECDC funding products

Quarterly 12 3 3 3 3

C3 Number of surveys conducted Develop a survey to check satisfaction of clients

Quarterly Develop survey, run and implement findings

Develop survey Run survey Implement and adjust systems

Review

C3 No. of MOU/SLAs concluded per year with stakeholders or other DFIs in the Eastern Cape.

No. of MOU/SLAs signed and implemented with external stakeholders

Quarterly 2 0 1 0 1

P1 Turnaround time for granting loans

No. of days taken to grant loans Quarterly Develop and implement standard

Measure and set limits for each product

Monitor and take corrective action

Monitor and take

corrective action

Monitor and take

corrective action

P2

No. of complaints from customers and stakeholders

New customer feedback system Quarterly Develop and implement system

Develop a system for feedback

Implement the system

Implement the

system

Implement the

system

19 | P a g e


objective


PI definition

Reporting frequency

Annual target

2011/12

Quarterly targets

Q1 Q2 Q3 Q4

L4 Number of products developed to assist pre and post financing

Unique products meant to support enterprises before and after financing

Quarterly Develop 2 products (pre and post interventions) and pilot implementation

0 0 1 1

20 | P a g e

3.3 DEVELOPMENT PROPERTIES

3.3.1 PERFORMANCE PLAN 2011/12 TO 2013/14 The following assumptions are critical to the Unit a. Available budget for actual property developments and feasibility studies. b. Rental portfolio collections are based on disposal in part in the 4th quarter. c. Reduction of Operational Costs - Transfer non ECDC registered properties d. Communication Plan – improved stakeholder participation e. Internal referral system between EDS and DIU f. Redeployment and re-skilling of staff (through the OD exercise) g. Complete Disposal – Lock, Stock & Barrel h. Retain & Develop vacant land and participate in property - Cash from strategic disposal

Perspective


Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

F1 Reduction of operational costs in line with sale of residential portfolio

Reduction of operational cost.

% reduction of operational costs annually

Exec: Properties

Attributed to direct

expenses

5%

10%9

30%

40%

Improved property values

Amount spent on reactive maintenance

Spend 10% of rental income on reactive maintenance

Exec: Properties


expenses

R8m R2.4m R2.4m R300k

F2 and F4 Implement new property development initiatives

Value of expenditure on project costs

Allocated budget spent on development initiatives

Exec: Properties

a. R35m b. R15m c. R20m (R20m – Proposed budget) R10m – capital improvements R5m – Hillcoombe)

R10m R5m CIB R5m – Hillcoombe)

R12.15m (R5m CIB)

R7.25m

R5.6m

Invest in any other new property initiatives

Value of property investment opportunities identified

Strategic partnerships in developing vacant land

Exec: Properties

R72m (R30m Owl st) R42m Bunting place)

n/a

R30m

R42m

0

9 Dependant on sale of properties.

21 | P a g e

Perspective and

strategic objective

Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

F3 Maximise revenue through rentals

Amount of rentals collected

Amount of rental collected on current rentals

Exec: Properties


expenses

R40m R34m R30.8m R33.8m

Amount of arrear debt collected

Amount of arrears collected

Exec: Properties


expenses

R8.7m (Baseline 5% of R174m)

R12m (Base R1m per month)

R13.2m (10% growth p.a.)

R14.52m (10% growth

p.a.)

F3 Maximise revenue through disposals (accelerate ACP) and re-invest proceeds to property developments

Value of properties sold

Disposal of property portfolio retain vacant land

Exec: Properties


expenses

R13m

R286m

R286m

0

C2 Increased visibility of ECDC properties

% of ECDC properties Branded

% of properties and sites branded

Exec: Properties


expenses

10%

30%

30% 30%

C3 Establish relationships with internal stakeholders to attract key investors

Number of Investment opportunities

Collaborate with internal stakeholders / units to attract investors

Exec: Properties


expenses

1

1

1

1

Establish relationships with external stakeholders to realize potential of ECDC investments

Number of Signature events e.g. activities/ engagements with relevant stakeholders (lettings/ developments/ marketing

Improved stakeholder relationships in terms of business transactions leveraged

Exec: Properties


expenses

4 4 4 4

C4 Market existing ECDC’s properties and new property development initiatives

Improve occupancy rates from Base 87% yearly

% properties profiled in monthly publications and website

Exec: Properties


expenses

2% 3% 3% 2%

22 | P a g e

Perspective and

strategic objective

Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

P1 Improve business processes and turnaround

Customer satisfaction survey

• Reduction in lead time to maintain properties.

• Timeous resolving of customer queries

Exec: Properties


expenses

No baseline

Determine baseline

Improve 10% on baseline

Improve 10% on baseline

P2 Develop customer management relationship model

No. of forums/meetings with customers to improve relations

Stakeholder buy-in on initiatives and ECDC business principles

Exec: Properties


expenses

3 meetings

Develop and implement a CRM model for tenants

Implement model Review the model

23 | P a g e

3.3.1.1 OPERATIONAL PLAN- 2011/12

Perspective and strategic objective


PI definition

Reporting frequency


Q1 Q2 Q3 Q4

F1 % reduction of operational costs Reduction of operational costs by 10% annually

Quarterly 10%

2% 2% 3% 3%

Amount spent on reactive maintenance

Spend 10% of rental income on reactive maintenance

Quarterly R2.4m R600k R600k R600k R600k

F2 and F4 Value of expenditure on project costs

Allocated budget spent on development initiatives

Quarterly R12.15m (R5m CIB)

R3.04m R3.04m R3.04m R3.04m

Value of property investment opportunities identified

Strategic partnerships in developing vacant land

Quarterly R30m

R0.00 R0.00 R0.00 R30m

F3 Amount of rentals collected

Amount of rental collected on current rentals

Quarterly R34m R8.5m R8.5m R8.5m R8.5m

Amount of arrear debt collected Amount of arrears collected Quarterly R12m (Base R1m per month)

R3m R3m R3m R3m

F3 Value of properties sold

Disposal of property portfolio and retain vacant land

Quarterly R286m

R0 R0m R0m R286m

C2 % of ECDC properties Branded % of properties and sites branded

Quarterly 30%

7% 8% 8% 7%

C3 Number of Investment opportunities

Collaborate with internal stakeholders / units to attract investors

Quarterly 1

0 1 0 0

Number of Signature events e.g. activities/ engagements with relevant stakeholders (lettings/ developments/ marketing

Improved stakeholder relationships in terms of business transactions leveraged

Quarterly 4 1 1 1 1

C4 % properties profiled in monthly publications and website

% of Improvement on occupancy rates from base 87% yearly

Quarterly 3% 0% 1% 1% 1%

P1 Customer satisfaction survey • Reduction in lead time to maintain properties

• Timeous resolving of customer queries on rentals, maintenance and disposals

Bi-annually Determine baseline Develop and implement survey

Interpret and implement results of survey

Implement results

Review successes and set baseline

24 | P a g e



PI definition

Reporting frequency


Q1 Q2 Q3 Q4

P2 No. of forums/meetings with customers to improve relationships

Improved customer satisfaction in terms of improved communication

Bi-annually Develop and implement a CRM model for tenants

Develop a model

Pilot and set up structures

Implement Review and determine base

25 | P a g e

3.4 DEVELOPMENT SERVICES

3.4.1 DEVELOPMENT PROJECTS PROGRAMME (DPP) 3.4.1.1 DPP PERFORMANCE PLAN- 2011/12 to 2013/14

Assumptions: The following assumptions are made with respect the plan: a. Stable economy b. Cooperation with Municipalities is secured c. Operating partners are secured d. Equity and loan funding secured to implement projects is secured e. Consistency in projects scopes f. Partners adhere to contractual obligations g. No natural disasters h. Budget availability


objective

Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

F2 Identification & scoping of high impact projects

No. of projects identified for scoping

Sum total of all the projects on which scoping will be conducted

Programme

Head: DPP

Attributed to direct expenses

6 Projects 7 10 12

Scoping of identified high impact projects

Rand value of Funds spent in scoping

Resources utilized in determining viability of projects

Programme

Head: DPP

R7 m R5m R7m

R8m

R10m

Leverage funding for the implementation of high impact projects (after scoping is done)

Rand value of funds spent supporting implementation of high impact projects

Total budget spent by DPP in support of project implementation

Programme

Head: DPP

R4 m R3m R4m

R6 m

R10m

Mobilise resources towards implementation of High impact Priority Projects ( HIPP’s)

Rand value of the total project pipeline created

Rand value of funds required to implement the project pipeline for HIPPs

Programme

Head: DPP

Results from scoping as above

New KPA R1billion R1.3billion R1.6billion

26 | P a g e


objective

Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

F2 and C3 Creation of jobs through the investments in HIPPs & interventions in ailing industries

No. of jobs created (Temporary, full-time, jobs retained)

Jobs created (Temporary, full-time, jobs retained)

Programme

Head: DPP


660 700 850 1000

Support municipalities in the development of economic infrastructure

Rand value of funds spent in supporting municipalities

Funds spent in partnership with municipalities on economic infrastructure Projects

Programme

Head: DPP

R3 m R2 m R3 m

R5 m

R7 m

F2 Establish partnerships with third parties to facilitate co-funding of HIPPs

Rand value of funds leveraged from 3rd party funders

Rand value of funds provided by 3rd parties in co-funding HIPPs

Programme

Head: DPP

Negotiations and facilitation of partnerships. Attributed to direct expenses

R60 m R75m R90 m R110 m

L4 Commission research on new economic opportunities available for E.C.

No of research projects commissioned

Research projects commissioned to determine opportunities

Programme

Head: DPP


New Target 1 1 2

27 | P a g e

3.4.1.2 DPP OPERATIONAL PLAN- 2011/12

Perspective and

strategic objective


PI definition

Reporting frequency

Annual target

2011/12

Quarterly targets

Q1 Q2 Q3 Q4

F2 No. of projects identified for scoping Sum total of all the projects on which scoping will be conducted

Quarterly 7 1 3 2 1

Rand value of DPP Funds spent in scoping Resources utilized in determining viability of projects

Quarterly R7 m R500k R3 m R3 m R500k

Rand value of funds spent supporting implementation of high impact projects

Total budget spent by DPP in support of project implementation

Quarterly R4m R250k R1,250 m R1 m R500k

Rand value of the total project pipeline created

Rand value of funds required to implement the project pipeline for HIPPs

Quarterly R1b total value of pipeline created

R150m R250m R400m R200m

F2 and C3 No. of jobs created/saved through investing in HIPPs or intervention in ailing industries

Jobs created from HIPPs or from saved ailing industries

Quarterly 700 100 300 200 100

Rand value of funds spent in supporting municipalities

Funds spent in partnership with municipalities on economic infrastructure Projects

Quarterly R3 m R500k R1m R1m R500k

F2 Rand value of funds leveraged from 3rd party funders

Rand value of funds provided by 3rd parties in co-funding HIPPs

Quarterly R75m

R5m R35m R30m R5m

L4 No of research projects commissioned Research projects commissioned to determine opportunities

Quarterly 1 0 0 1 0

28 | P a g e

3.4.2 ENTERPRISE DEVELOPMENT SERVICES (EDS) 3.4.2.1 EDS PERFORMANCE PLAN- 2011/12 to 2013/14

Assumptions: The following assumptions are made with respect this plan. a. Main focus for business development services being supporting businesses financed or to be financed by ECDC b. There is closer alignment and collaboration with Development Investments. c. Need for mapping out process flow linked with Development Investment d. The unit will focus on pre-financing support and post finance support as and when the required. This needs to be done in collaboration with Development

Finance. e. Identification of gaps in the business and entrepreneur will be done collaboratively with Development Investment.

Perspective and

strategic objective

Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

C1 Establish and support enterprises in 2 priority sectors through incubation programme

Number of entrepreneurs participating in the incubation programme - 50% ownership by women.

- 40% ownership by youth

- 2% ownership by people with disability

Number of incubates participating in the programme

Programme Head: EDS

a. R 5m - R2,5m – ICT - R2,5-Creative

Industries b. R5m c. R0

75 Incubates - 15 ICT, - 60 Creative

Industry

90 Incubates - 20 ICT, - 70

Creative Industry


Industry


Industry

Facilitate access to markets

Value of deals/ orders generated from incubation

Value of deals/ orders generated from intervention.

Programme Head: EDS

Attributed to

direct expenses

R457k R1million R2million R3million

C2

Facilitate job creation No. of jobs created No. of jobs created Programme Head: EDS

Attributed to

direct expenses

110 130 160 200

29 | P a g e


Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

C1, C2 and C3

Provide pre and post enterprise support to ECDC loan applicants, loanees and other entrepreneurs including construction programme.

Number of enterprises provided with pre and post finance support.

Enterprises provided with pre and post finance support.

Programme Head: EDS

a. R7m 190 200

230

280

Facilitate skills development and training of entrepreneurs in order to improve competitiveness

Number enterprises trained.

Training of enterprises trained on different aspects business needs.

Programme Head: EDS

b. R2m 360 750 1000 1500

Number co-operatives trained.

Training of co-operatives trained on different aspects in line with business needs


100 150 200 200

Facilitate company registration including co-operative registration.

Number of companies registered

Companies registered.

Programme Head: EDS

c. R 100 000 4400 6000 6500 7000

Number of co-operatives registered

Co-operatives registered

Programme Head: EDS


200 300 350 400

Facilitate access to information and empowerment

Number of Seminar held including SMME Summit

Empowerment seminars held for entrepreneurs

Programme Head: EDS

R 1 million 8 12 14 14

Number of supplier development programmes

Supplier development programme implemented including service provider support

Programme Head: EDS

R 200 000 2 4 6 7

C3 Implement programmes in partnership with organised business.

Number of projects supported through partnership with organised business/ other entities

Number of projects supported through partnership with organised business other entities

Programme Head: EDS

R5m 3 4 6 6

30 | P a g e


Key Initiative


PI definition

Responsibility



Medium term targets

2011/12 2012/13 2013/14

P1 Undertake SMME research.

Complete research report.

Research commissioned and completed

Programme Head: EDS

a. R600k Research on financial skills gap on ECDC financed enterprises

One complete research report



L4

Information portal at regional offices that will assist self help by entrepreneurs (Business planning, financial records, internet etc) (Business Hub)

Number of portals created and fully functional

User-friendly portal accessible to entrepreneurs

Programme Head: EDS

R220k n/a 3 portals 5 portals 7 portals

31 | P a g e

3.4.2.2 EDS OPERATIONAL PLAN – 2011/12


objective


PI definition

Reporting frequency


Q1 Q2 Q3 Q4

C1 Number of entrepreneurs participating in the incubation programme - 50% ownership by women. - 40% ownership by youth - 2% ownership by people with disability

Number of incubates participating in the programme

Programme Head: EDS 90 Incubates - 20 ICT, - 70 Creative Industry

60 Creative Industry 15 ICT




Value of deals/ orders generated from incubation

Value of deals/ orders generated from intervention.

Programme Head: EDS R1 million R200k R500k R100k R200k

C2 No. of jobs created No. of jobs created Programme Head: EDS 130 30 30 50 20

C1 and C2 Number of enterprises provided with pre and post finance support.

Enterprises provided with pre and post finance support.

Programme Head: EDS 200

50 70 40 40

Number enterprises trained. Training of enterprises trained on different aspects business needs.

Programme Head: EDS 750 150 200 200 200

Number co-operatives trained. Training of co-operatives trained on different aspects business needs


Number of companies registered Companies registered. Programme Head: EDS 6000 1500 1500 1500 1500

Number of co-operatives registered

Co-operatives registered Programme Head: EDS 300 75 75 75 75

Number of Seminar held including SMME Summit

Empowerment seminars held for entrepreneurs


Number of supplier development programmes

Supplier development programme implemented including service provider support


C3 Number of projects supported through partnership with organised business/ other entities

Number of projects supported through partnership with organised business other entities


32 | P a g e


objective


PI definition

Reporting frequency


Q1 Q2 Q3 Q4

P1 Complete research report Research commissioned Programme Head: EDS One complete research report

Procurement of service provider /partnership concluded

Design of research completed

Fieldwork completed with report.

Completed research report.

L4 Number of portals created. User-friendly portal accessible to entrepreneurs

Programme Head: EDS 3 portals Design of the portal completed.

Procurement of portal complete

3 Portal installed

3 Operational portals.

33 | P a g e

3.4.3 INVESTMENT AND TRADE PROMOTION (ITP) 3.4.3.1 ITP PERFORMANCE PLAN- 2011/12 to 2013/14

Investment Promotion Trade Promotion

Assumptions: The following assumptions are made with this plan: a. The overall budget for IP will increase in response to the increased activities involving

coordination of IP activities b. The institutional arrangement will be approved by the Board and supported by DEDEA c. The overall investment climate will improve in response to the economic recovery d. The investment targeted will be more job absorbing and retaining to ensure the targeted

jobs are achieved e. The local currency will stabilize to support FDI and Exports f. The Provincial Investment Promotion strategy will be approved by DEDEA g. The IP Head will be appointed to provide leadership to the unit. h. The current year budget will be increased by the inflation factor to R6m

Assumptions : The following assumptions are made: a. The rand that continues to strengthen, affecting the exports negatively, will reach stability

resulting in improvement in exports b. TP manager will be appointed, thereby bringing about increased capacity and leadership c. Budget will be made available to invest in HR development, and increased knowledge

base through research d. The existing organogram will be reviewed to allow for increased capacity to the unit e. Trade Promotion to continue to play the role of lead agency in Trade Promotion in the

province f. The newly prepared Trade Promotion Strategy will be approved by the Board and

supported by DEDEA for implementation g. The budget will be increased by the inflation factor to R3,5m

Perspective


Key Initiative


PI definition Responsibility



Medium term targets

2011/12 2012/13 2013/14

INVESTMENT PROMOTION F2

Develop packaged projects

No. of researched and packaged projects

No. of projects researched and packaged for investors

Programme Head ITP

a. R3m 5

4

6

8

Leads /pipeline generation Number of leads generated through IP activities

Generation of investment enquiries and projects through IP activities

Programme

Head ITP


130 150 200 220

New FDI and LDI/expansions Number and value of investments realized

No. of and total value of investments landed (New/Expansions)

Programme

Head ITP

Attributed to

direct

expenses

12 (R500m)

15 (R750m)

18 (R800m)

20 (R1b)

New and saved jobs facilitated Number of jobs

Direct new or saved jobs resulting from IP facilitation activities

Programme

Head ITP

Attributed to

direct

expenses

1000 1200 1800 2000

34 | P a g e

Perspective and

strategic objective

Key Initiative





Medium term targets

2011/12 2012/13 2013/14

C3 Maintain a functional provincial IP forum

Functional IP Provincial Forum

Set up and co-ordinate the Provincial IP forum

Programme

Head ITP

a. R50k No baseline

Set up the forum for Province

n/a n/a

P2 Aftercare visits Number of reports from aftercare visits

Reports from aftercare visits to existing investors

Programme Head ITP


30 33 36 40

L4 Develop an annual Provincial investment publication

Data collection, research and publishing of annual provincial investment publication.

Annual Provincial Investment Publication

Programme

Head ITP

a. R300k

No baseline

1

1

1

Sector Forums for information sharing & networking

Functional Sector Forums

Sector specific Reports Programme

Head ITP

a. R360k 6 4 4 4

TRADE PROMOTION F2 Increase the Value of exports

Rand Value of exports

Rand Value of exports Programme

Head ITP

Attributed to

direct expenses

R840m

R900m R1bn

R1.2bn

Market Trade Finance to exporters

Value of referrals to DIU

Value of exporters referred to DIU for Trade Finance

Programme Head ITP

Attributed to

direct expenses

R1m R2m R3m R5m

C2 Increase the number of exporters

Number of new exporters

Number of new exporters Programme

Head ITP

Attributed to

direct expenses

12 15 20 25

C3

Develop programs in partnership with relevant stakeholders for purposes of - information sharing - networking, - capacity building.

Number of partnerships established

Partnership with SEDA (export readiness), Exporters’ club, the dti (EMIA)

Programme

Head ITP

Attributed to

direct expenses

0 4 4 4

P1 Trade stats and trends relevant to customer and stakeholder needs in EC

Number of Provincial Trade Statistic reports published

Quarterly Trade Statistics Reports

Programme

Head ITP

a. R400k 1 4 4 4

P2

Develop improved systems to respond to enquiries

Number of enquiries responded to within set standard

Reduced the time to respond to enquiries

Programme

Head ITP

Attributed to

direct expenses

No base Determine standard and implement

100% response rate

100% response rate

35 | P a g e

Perspective and

strategic objective

Key Initiative





Medium term targets

2011/12 2012/13 2013/14

L4 Conduct research specifically looking at export opportunities (new or expansion)

At least 2 reports produced and made available to customers per annum

2 Research Reports on export opportunities and relevant markets

Head ITP

a. R600k

1

2

2

2

36 | P a g e

3.4.3.2 ITP OPERATIONAL PLAN- 2011/12



PI definition Reporting frequency

Annual target

2011/12

Quarterly targets

Q1 Q2 Q3 Q4

INVESTMENT PROMOTION F2 No. of researched and packaged projects No. of projects researched and

packaged for investors Quarterly 4

0 2 1 1

Number of leads generated through IP activities

Generation of investment enquiries and projects through IP activities

Quarterly 150 30 40 45 35

Number and value of investments realized No. of and total value of investments landed (New/Expansions)

Quarterly 15 (R750m)

3 (R150m)

4 (R200m)

5 (R250m)

3 (R150)

Number of jobs

Direct new or saved jobs resulting from IP facilitation activities

Quarterly 1200 240 320 400 240

C3 Value of Investments

Value of Investments landed as a result of Agency Agreement

Quarterly R100m R0m R20m R30m R50m

C3 Set up forum/ Number of IP Forum record of meetings

IP Forum Reports/Records on meetings held

Quarterly Set up forum 4 meetings

Set up forum

1 1 1

P2 Number of reports from aftercare visits Reports from aftercare visits to existing investors


L4 Data collection, research and publishing of annual provincial investment publication.

Research on provincial investments Annual Provincial Investment Publication

Quarterly 1

0 1 0 0

Functional Sector Forums Sector specific Reports (one per quarter)

Quarterly 4 1 1 1 1

TRADE PROMOTION F2 Rand Value of exports Rand Value of exports Quarterly R900m R100m R200m R300m R300m

No./Value of referrals to DIU Value of exporters referred to DIU for Trade Finance

Quarterly R2m R400k R400k R600k R600k

C2 Number of new exporters Number of new exporters Quarterly 15 3 3 4 5

C3

Number of partnerships established

Partnership with SEDA (export readiness), Exporters’ club, the dti (EMIA)

Quarterly 4 1 1 1 1

P1

Number of Provincial Trade Statistic reports published

Quarterly Trade Statistics Reports Quarterly 4 1 1 1 1

37 | P a g e



PI definition Reporting frequency

Annual target

2011/12

Quarterly targets

Q1 Q2 Q3 Q4

P2 No. of aftercare reports and interventions to existing exporters

Aftercare reports and interventions


L4 At least 2 reports produced and made available to customers per annum

2 Research Reports on export opportunities and relevant markets

Quarterly 2

0 1 0 1

38 | P a g e

4. BUDGET 10

10 The budget is subject to change due to awaiting allocations from Provincial Government.

50% 8% 8%

ECDC SUMMARY BUDGET 2011/2012

Property

Management &

Development

Development

Investments

Trade &

Investment

Promotion

Projects

Development (SMME

Promotion)

Support

Units

ECDC Budget

2011/12

ECDC Budget

2012/13

ECDC Budget

2013/14

ECDC Budget

2014/15

Net Rental Income 58,000 - - - - 58,000 29,000 4,640 4,640

Interest Income on Loans ## - 35,462 - - - 35,462 53,588 66,071 81,886

Total Revenue 58,000 35,462 - - - 93,462 82,588 70,711 86,526

Government Grant Income - - 25,589 51,802 - 77,391 82,808 88,605 94,807

Other Income 20,000 12,436 - - - 32,436 13,307 14,238 15,235

Total Income 78,000 47,898 25,589 51,802 - 203,289 178,703 173,554 196,568

Administration expenses 11,810 1,600 40 110 32,160 45,720 40,277 32,350 33,744

Rates & Taxes 23,000 - - - - 23,000 11,500 1,840 1,840

Security Services 10,500 - - - - 10,500 5,250 840 840

Repairs & Maintenance 15,500 - - - 1,661 17,161 8,581 1,373 1,373

Salaries & Employee benefits 16,263 17,970 9,106 15,351 38,618 97,308 104,119 111,407 119,206

Impairment Allowance - 42,054 - - - 42,054 44,998 48,148 51,518

Government funded projects - - 4,288 18,646 - 22,934 24,540 26,258 28,096

Other Expenses 3,850 2,800 40 - 16,475 23,165 18,561 14,376 15,860

Total Direct Expenses 80,923 64,424 13,474 34,107 88,914 281,842 257,825 236,592 252,477

Share of Corporate expenditure 4,602 3,242 1,360 2,511 -11,715 - -

Share of Support units expenditure 25,489 25,771 10,755 15,184 -77,199 - -

Total Expenses 111,014 93,437 25,589 51,802 - 281,842 257,825 236,592 252,477

-

Operating profit /-loss -33,014 -45,539 - - - -78,553 -79,122 -63,038 -55,909

Investment Income # - - - - 29,000 29,000 40,530 50,367 60,893

Net profit /-loss -33,014 -45,539 - - 29,000 -49,553 -38,592 -12,671 4,984

# = Investment Income includes interest on liquid assets and management fees that are expected to be earned from the Impact fund.

## = Interest income on loans represent returns from investments in developmental financial instruments including loans and equity investments.

HEAD OFFICEECDC House, Ocean Terrace ParkMoore Street, Quigney, East LondonPO Box 11197, Southernwood 5213

Tel:+27 (0) 43 704 5600 • Fax:+27 (0) 43 704 5700

KING WILLIAM’S TOWN75 Alexander Road

PO Box 498, King William’s Town 5600Tel:+27 (0) 43 604 8800 • Fax:+27 (0) 43 642 4199

BUTTERWORTH24 High Street

PO Box 117, Butterworth 4960Tel:+27 (0) 47 401 2700 • Fax:+27 (0) 47 491 0443

MTHATHA7 Sissons Street, Fort Gale

Private Bag X5028, Mthatha 5099Tel:+27 (0) 47 501 2200 • Fax:+27 (0) 47 532 3548

QUEENSTOWN22 Cathcart Road

Private Bag X7180, Queenstown 5320Tel:+27 (0) 45 838 1910 • Fax:+27 (0) 45 838 2176

PORT ELIZABETH152 Cape Road, Mill Park

PO Box 1331, Port Elizabeth 6000Tel:+27 (0) 41 373 8260 • Fax:+27 (0) 41 374 4447

Satellite offices

MOUNT AYLIFFSEDA Building

Nolangeni Street, Mount Ayliff, 4735Tel:+27 (0) 39 254 0584 • Fax:+27 (0) 39 254 0584

ALIWAL NORTH97 Somerset Street

P O Box 198, Aliwal North, 9750Tel:+27 (0) 83 399 1427

[email protected] • www.ecdc.co.za

Documents

ECDC_Corporate Strategy 2011_2015