Amathole DM SMME Development Strategy

AMATHOLE DISTRICT MUNICIPALITY
SMME DEVELOPMENT STRATEGY

CONTACT:
The Mayor
P. O. Box 320
East London
5200
Tel: (043) 701 4000

Fax: (043)743 9050
SMME DEVELOPMENT STRATEGY

AMATHOLE DISTRICT MUNICIPALITY
Final Draft, SMME Development Strategy 1

[INDEX PAGE
TABLE OF CONTENT]
SECTION [1]: INTRODUCTION [4]
• Background [4]
• Purpose of this report [5]
• Approach and Methodology [5]
SECTION [2]: THE NATIONAL SMME SECTOR [7]
• Introduction [7]
• Reasons why SMME’s are important [7]
• SMME Contribution to Employment and GDP [9]
• Key National Challenges Facing SMME’s [10]
• The National Small Business Act of 1996 [11]
• The Small Enterprise Development Agency [12]
SECTION [3]: ADM SOCIO-ECONOMIC PROFILE [14]
• Demographic Profile [14]
• Economic Profile [17]
SECTION [4]: ADM SMME DEVELOPMENT SECTOR [21]
• Small, Medium and Micro Enterprises [21]
• Definition of SMME’s [21]
• Concentration of SMME’s [21]
• SMME Contribution to GGP and Employment [22]
• SMME Market Profile of Amathole [23]
• Key Sector Challenges [25]
• Policy Environment in Amathole [27]
• Institutional Development [32]
SECTION [5]: STRATEGIC PROBLEM ANALYSIS

• Results of SWOT Analysis [42]
• District Strengths [42]
• District Weaknesses [42]
• District Opportunities [43]
• District Threats [44]
• Summary of Key Problem Statements [45]
SECTION [6]: SMME STRATEGIC ALTERNATIVES
• SMME development Vision [48]

• Strategic Objectives [49]
• Strategic Thrusts [49]
• Core Values and Principles [56]
SECTION [7]: INSTITUTIONAL ARRANGEMENTS
• Institutional Considerations [57]

• Role of Amathole District Municipality [57]
• Levels of Institutional Responsibilities [58]
• SMME Development Institutional Framework [59]
SECTION [8]: SMME PROGRAMME AND PROJECTS [62]
SECTION [9]: PROGRAMME IMPLEMENTATION PLAN [68]
SECTION [10]: USED ABBREVIATIONS AND [72]

ACKNOWLEDGEMENTS
SECTION [1]
INTRODUCTION

1. BACKGROUND
THREESIXTY Consulting was appointed by the Amathole District Municipality to undertake

the formulation of an integrated SMME Strategy for its municipal area.
The SMME Strategy for the Amathole District Municipality must achieve the following key
objectives:
• Provide a synoptic overview of the socio-economic environment

• Analyze key SMME sector challenges and opportunities
• Capture a shared SMME development vision for Amathole District
• Identify key strategic and priority interventions
• Develop an SMME Development Implementation Plan
The strategic planning process followed in the implementation of this assignment consists
of the following key phases:
1.1 Phase [ONE]: Situational Analysis
This involved the review and analysis of the external and immediate SMME development
environment in Amathole District Municipality through limited primary research and
extensive secondary data collection and analysis methods. Upon a draft completion, the
Report was tested with the relevant key stakeholders at a strategic workshop held in East
London on 15 April 2005. At this workshop an in-principle decision to support the outcomes
of this phase was taken.
1.2 Phase [TWO]: Objectives, Strategies & Proposals
This was the formulation of key strategic objectives, strategies and interventions in line
with the accepted findings and recommendations of the Situational Analysis Report. This
area also formed part of an input area for the stakeholder workshop held on 15 April
2005.
1.3 Phase [THREE]: Implementation and Scheduling Planning

This was the final phase focusing on the actual translation of Phase Two into achievable
goals, projects and initiatives. These were packaged into an Implementation Plan
spreading over a five year period.
2. PURPOSE OF THIS REPORT
This report attempts to present the results of a situational analysis research process into
the structure, challenges and opportunities for SMME development in Amathole District
Municipality and to some extent, its local municipalities.
The paper addresses the following critical areas:
• National and provincial policy environment for SMME development

• SMME policy environment in Amathole District Municipality
• SMME service delivery and programmes in Amathole
• SMME development resources, challenges and opportunities
This paper is geared towards kick-starting a rigorous debate on what the real issues and
opportunities for job creation and poverty alleviation through SMME development in the
area are. Its ultimate purpose is to guide the formulation of an SMME Strategy for the
Amathole District Municipality.
3. APPROACH AND METHODOLOGY
To gain the most applicable perspective on the social, economic and SMME development
factors of the Amathole District Municipality the following approach was undertaken:
3.1 Desktop Review
The following documents, in the form of existing completed research and information
sources on the various aspects of the Amathole municipal area or as related thereto, were
reviewed and taken into account in the preparation of this paper.
• Laphum’ Langa e-Eastern Cape, 2003 (ECDC)

• Annual Report 2003 (ECDC)
• Strategy Framework for Growth and Development, 2003 EC Government
• PGDP Priority Programmes and Projects, 2003 (EC Government)
• Revised Integrated Development Plan Review 2004/05, (ADM)
• LED Budget 2004/05, (Amathole Municipality)
• Draft Agricultural Plan, 2005 (Amathole Municipality)

• Spatial Development Framework, 2004 (Amathole Municipality)
• Programme Support for LED in the Eastern Cape, 2004 (Global Partners)
• Global Entrepreneurship Monitor, SA Executive Summary (2002)
• National SMME Annual Review, 2002 (Ntsika Enterprise Promotion Agency)
• Mdantsane SMME Market Assessment, 2005 (ECDC)
• Chris Hani SMME Market Assessment, 2003 (ECDC)
• Alfred Nzo SMME Market Study, 2005 (Alfred Nzo DM)
• National Small Business Review, 1999 (Ntsika Enterprise Agency)
• SMME Strategy, 2000 (Nelson Mandela Metropolitan Municipality)
• Business Support Policy, 2004 (City of Cape Town)
• Sector Support: Good Lessons, 2000 (Cape Metropolitan Council)
• Procurement Policy, 2002 (Amathole District Municipality)
• Youth Entrepreneurship & Job Creation Programme, 2005 (ECYC)
• SMME Strategy, 2000 (Durban Unicity Municipality)
• Vulindlela Draft Framework, 2004 (University of Port Elizabeth)
• SMME Support Organizations Database, 2004 (Threesixty Consulting)
3.2 Strategic Interviews
Given the very limited financial budget for this assignment, the fieldwork aspect for this
project was only limited to interviews with the LED Managers and Officers, and in some
instances the Municipal Manager and SMME Manager in the following listed municipalities
of Amathole:
• Nxuba Municipality
• Mnquma Municipality
• Great Kei Municipality
• Buffalo City Municipality
• Nkonkobe Municipality
• Amathole Municipality
• Mbashe Municipality
The interviews were conducted through an emailed, and sometimes, faxed information
form followed by telephonic follow-ups with the relevant persons within the Municipalities.
Of these Municipalities, the Great Kei could not provide responses with relation to this
assignment as the institution is in the process of appointing an LED Officer.
SECTION [2]
THE NATIONAL SMME SECTOR

1. INTRODUCTION
The review of the national small business regulatory and policy frameworks provides an
overview of the South African legal and policy positions by national government for the
SMME sector. These policies and frameworks are largely aimed at providing guidance to
the provincial and local governments on planning, implementation and management of
SMME development.
The White Paper on a National Strategy for the development and promotion of small
business in South Africa states: “The stimulation of small, medium and micro enterprises
must be seen as part of an integrated strategy to take the South African economy onto a
higher road – one on which is diversified, productivity enhanced, investment is stimulated
and entrepreneurship flourishes” (Ntsika, 1997).
2. REASONS WHY SMME’S ARE IMPORTANT
The case for employment creation and wealth distribution through small business is based
on sound economic sense. Small businesses have been identified as labour-intensive, have
the need for little capital and make use of the local resources available. By channeling
these resources to the small business sector, particularly in a growing and developing
economy like South Africa’s, employment opportunities can be maximized and people are
given the opportunity to contribute to the development of the economy.
Governments worldwide have assisted SMME‘s for various reasons, which include:
• SMME’s have shown a remarkable capacity to absorb labour, albeit largely

unskilled.
• SMME‘s are usually locally owned and controlled, and can strengthen the extended
family and other social systems and cultural traditions.
• In South Africa, where non-whites were historically discouraged from owning

businesses, the first attempts are likely to be informal, small, micro or medium.
• SMME’s provide a ‘nursery’ and a proving ground for entrepreneurship and

innovation.

• The products of SMME‘s tend to reflect local technology and are arguably more
likely to satisfy the needs of poor people than are the products of large enterprises
and foreign technology.
• Because the profits of small enterprises are not dependent on long production runs,
small firms can manufacture smaller quantities of products, which have a regional
or even a local market only.
• SMME’s satisfy local needs not only by making differential products but also by
being scattered throughout the country. This ensures a more equitable distribution
of employment opportunities and that raw material producers are more likely to
find local markets.
• Local technology is more likely to use locally produced raw material and equipment,
saving foreign exchange.
• SMME‘s provide employment for and sometimes expand the entrepreneurial talents
of women.
• SMME‘s tend to use less capital, a scarce resource, than large firms. They also
(arguably) require appropriate management skills, which are scarce in Third World
situations.
• Comparative studies of large and small businesses, carried out in countries at all
stages of development, confirm that small firms generally employ more labour per
unit of capital and require less capital per unit of output, than do large ones
(Harper, 1984:16).
• For the economy as a whole, Harper (1984:16) argues: “Small businesses are likely
to be more resilient to depression and to offer a steadier level of employment than
large ones; their activities and locations are diverse, they depend on a wide variety
of sources and types of raw material, and their owners, if only for the want of any
alternative, are likely to stay in business and maintain at least some activity and
employment in conditions where foreign investors would have closed their
factories”.
Available statistics indicate that the SMME sector is already playing an important role in the
South African economy. And, in all probability, its role will become crucial in the country’s
socio-economic development in the years that lie ahead.

3. SMME CONTRIBUTION TO EMPLOYMENT AND GDP
Small and medium sized businesses are an important part of the economy. This is borne
out by their significant contribution to GDP and employment in the country. Estimates for
2001 indicate that SMME’s (excluding survivalists and informal) accounted for 36,1 % of
GDP as opposed to 32,7% in 1995. In 2001 SMME’s accounted for at least half of GDP in
the agricultural and construction sectors and more than 40% of GDP in trade, catering and
accommodation, as well as transport, storage and communication sectors [Annual Review
2002, Ntsika].
Table 1 below provides a breakdown of percentage contributions by the various

SMME’s in terms of economic sectors.
Sector Micro % Small % Medium Large %

%
Agriculture, forestry and 3.4 9.2 43.8 43.6
fishing
Mining and quarrying 1.6 1.9 2.8 93.7
Manufacturing 4.9 7.5 21.2 66.4
Construction 2.8 32.5 14.7 50.0
Trade, catering and 4.2 24.6 12.1 59.1
accommodation
Transport, storage and 8.8 19.1 20.2 51.9
communication
Community, social and 15.7 13.9 2.6 67.8
other personal services and
finance and business
sectors
Total 5.9 14.8 15.4 63.9
Table 1 Estimated % sectoral contribution to GDP by size-class, 2002 [Annual Review 2002,
Ntsika]
In terms of employment, according to the September 2002 Labour Force Survey (LFS)
11, 03 million people were employed in South Africa out of an economically active
population of 15, 87 million. The labour market participation rate (i.e. the percentage of
people of working age that is economically active) was 56, 7%. Of these employed,
• 7, 03 million (or 63,4%) were employed in the formal sector

• 811 000 (or 7,4%) were employed in the commercial agricultural sector
• 520 000 (or 4, 7%) were employed in small-scale agriculture
• 1, 7 million (or 15,4%) were engaged in informal sector activities; and
• 875 000 (or 7, 9%) were employed in domestic service

Table 2 below provides a breakdown of the contribution of SMME’s to private sector
employment by sector in 2001.
Sector % of total employment in

sector
Agriculture, forestry and fishing 81.5
Mining and quarrying 21.3
Manufacturing 55.2
Construction 84.8
Wholesale trade 72.0
Retail trade (including motor trade) 89.5
Catering and accommodation 76.6
Transport, storage and communication 65.6
Finance and business services 69.4
Community, social and personal services 68.4
Total 68.2
Table 2 Contribution of SMME’s to private sector employment by sector, 2002 [Annual
Review 2002, Ntsika]
Overall it is clear that the small, medium and micro enterprises (SMME) sector plays and
could play an even more significant role than it currently does in terms of contribution to
employment and gross domestic output, but also in helping to combat unemployment,
encouraging wealth distribution and improving the quality of life for all sectors of the
national, provincial, district and local populations.
4. KEY NATIONAL CHALLENGES FACING SMME’s
According to the national Annual Review of the SMME sector conducted by Ntsika in 2001,
SMME’s face a swathe of constraints related to:
• The legal and regulatory environment

• Market access
• Access to finance and suitable business premises
• The acquisition of skills and managerial expertise
• Access to appropriate resources and technology
• The quality of infrastructure, especially in poverty and rural areas
• Bureaucratic hurdles; and
• In some cases, the tax regime
The nature and extent of the influence of the above constraints differ according to size and
economic profile of an enterprise, sector and the regional profile of the area within which

the enterprise operates. For instance, inadequate finance and limited appropriate skills
tend to be the major deterrent to survivalist and micro-enterprises. For medium-sized
enterprises, the rigours of international competition and technology transfer are significant
growth obstacles.
According to Ntsika, constraints are particularly severe for entrepreneurs in rural areas and
for women, who face their own unique set of deterrents, such as cultural and behavioural
norms, and problems regarding access to land [Annual Review 2002, Ntsika].
5. THE NATIONAL SMALL BUSINESS ACT OF 1996
The National Small Business Act was passed by Parliament in 1996 (Ntsika, 1998). The
National Small Business Act of 1996 provides for the:
[A] The formal establishment of the Ntsika Enterprise Promotion Agency (Ntsika)
as a subsidiary delivery arm of the Department of Trade & industry providing
non-financial support services in South Africa. Ntsika was established as
wholesale institution i.e. work through and with intermediary organizations such
as Local Business Support Centres, CBO’s, NGO’s and private service providers.
[B] The formal establishment of the now defunct National Small Business Council
(NSBC) as key player institutions of the national small business strategy. The
NBSC was established to provide a platform to fulfil the role of a ‘watchdog’ for
the SMME sector in South Africa.
[C] The formal establishment of Khula Enterprise Finance as a subsidiary delivery

arm of the Department of Trade & Industry focusing on financial support
services. Khula operates a wholesale financial institution and provides
guarantees to financial lending institutions for SMME’s. The organization works
through banking institutions as well as other retail financial institutions providing
micro lending services.
[D] The formal establishment of the National Manufacturing Advisory Trust

to provide sector-specific support to SMME’s through the Manufacturing
Advisory Programme (NAMAC Trust).
In 2003 the Act was amended to incorporate some policy changes in so far as the
regulatory framework for the establishment and operations of Ntsika Enterprise Promotion
Agency.

6. THE SMALL ENTERPRISE DEVELOPMENT AGENCY
The recent review of the national small business policy has led to the introduction of
interesting regulatory and policy changes by Parliament in an effort to streamline and
improve SMME support in South Africa. One of the key changes to the National Small
Business Act of 1996 has led to the disestablishment of Ntsika Enterprise Promotion Agency
(NEPA) and NAMAC Trust through the establishment of a merger institution – the Small
Enterprise Development Agency (SEDA).
SEDA was officially launched in December 2004 by the Honourable Minister of Trade and
Industry, Minister Mandisi Mpahlwa in Cape Town. SEDA has been established to
consolidate the provision and facilitation of non-financial support services to SMME’s in
South Africa.
In terms of its role, it is envisaged that SEDA will focus on the following key areas:
• ACCESS POINTS: Establishment of access points that will provide information,

advice and related business planning support to SMME’s
• GENERAL BUSINESS SUPPORT: Provision of the following support services to

SMME’s:
[a] Entrepreneurship Promotion

[b] Business Environment Support
[c] Enterprise Capacity and Competitiveness Building
• TECHNICAL PROJECT SPECIFIC SUPPORT through sector, local area and project
specialists
SEDA is expected to operate in all the nine provinces of South Africa through the
establishment of provincial structures that will cascade down to district and metro-levels to
local municipal areas through various access points. Table 3 below provides an overview
of the Eastern Cape provincial structure with respect to SEDA establishment and
operations.

Eastern
Cape
Provincial
Seda
Amatole Mandela Cacadu OR Alfred Nzo

Ukhahlamba Chris Hani
District Metro District Tambo District
District District
SEDA Seda Seda District Seda
Seda Seda
Seda
Municipality MAP MAP MAP MAP MAP MAP

Access
Points
Table 3 Eastern Cape Provincial SEDA Structure [Department of Economic Affairs, Tourism and Environment, 2004]

SECTION [3]
ADM SOCIO-ECONOMIC PROFILE
1. INTRODUCTION
The development of a sustainable and vibrant small, medium and micro enterprise sector
cannot take place in a vacuum. It must appreciate the social, economic and physical
environment within which it is pursued. This section provides a synoptic overview of such
an environment within the Amathole District Municipality.
2. DEMOGRAPHIC PROFILE
2.1 Settlement Hierarchy
The ADM Spatial Development Framework alludes to the following settlement structure for
the study area:
2.1.1 Primary Urban Node
The Primary Urban Node of the Amathole District is identified as the East London-
Mdantsane urban complex, which is located within the Buffalo City Municipality. It is
envisaged that this area would continue to function as the primary urban settlement in the
district, where higher order facilities and the greatest range of urban-economic
opportunities would be located. As such, it represents the area of greatest formal
economic opportunity and investment.
2.1.2 Administrative Node
The urban complex of King William’s Town/Bisho, also located within the Buffalo City
Municipality, is the seat of the Eastern Cape Provincial Government. As such, it has
significance over and above its relatively low standing within the urban hierarchy of the
Amathole district. It is anticipated that this area will remain a focus for investment,
particularly focused on institutional and cultural heritage aspects. This node is seen to
include the town of King William’s Town, in itself an important urban service centre for the
surrounding hinterland.

2.1.3 Secondary Urban Nodes
Three Secondary Urban Nodes are proposed. These are listed as: -
Butterworth (Mnquma Municipality)
Stutterheim (Amahlathi Municipality)
Alice (Nkonkobe Municipality)
These towns are identified as being of relative importance due to their present and
historical functions as centres where major investment has occurred in infrastructure (e.g.
Butterworth), or where significant successes and related impetus has been achieved in
local economic development (e.g. Stutterheim), or, finally, where cultural and heritage
factors are coincident with a growing importance as an administrative centre (Alice).
As such, these towns are considered to have growth potential that is relatively significant
within the Amathole district.
2.1.4 Urban Service Centres
Five Urban Service Centres are identified, which are seen as towns that provide a higher
order level of service to their surrounding hinterland areas. It is also recognised that these
towns exhibit trends of population influx and, consequently, require investment in order to
accommodate these pressures. The towns identified are: -
Adelaide (Nxuba Municipality)
Fort Beaufort (Nkonkobe Municipality)
Peddie (Ngqushwa Municipality)
Cathcart (Amahlathi Municipality)
Idutywa (Mbhashe Municipality)
2.2 District Population
Amathole accounts for more than 26% of the provincial population, making it the biggest
in terms of population [ECDC, 2003]. Of the 1, 84 million people in the District, 40% are
located within the Buffalo City Municipality, followed by Mnquma and Mbashe municipalities
with 17, 5% and 15, 3% respectively. The smallest contributors into the population are
Nxuba and Great Kei municipalities which account for 3, 9% collectively [LED Strategy,
2003].
Two thirds of the district is made up of ex-homeland areas, which are largely rural by
nature. Despite this fact, the district has a relatively high population density of 78/square

km, due to densification in the major towns and ex-homeland areas. The population is 91%
African, 3% coloured and 5% white [Laphum’ Langa e-Eastern Cape, 2003].
Based on the annual population growth rate for the area, it is envisaged that the
population will grow to about 2 million people by 2006. This figure very much takes into
account the impact of HIV/Aids and out migration, which effects have not been fully
researched. [LED Strategy, 2003]
2.3 Poverty Line
It is estimated that more than half the population live below the poverty line (R9 600 per
annum per household in 1999). The level of poverty in the area are also mirrored in low
levels of service provision, which reflect that 65% of the district population has no access
to water on-site, 30% have no flush sanitation, and that 70% are without on-site
electricity. [IDP 2004/5]
2.4 Employment and unemployment
The level of unemployment in Amathole follows national and provincial trends. In 2003 the
number of unemployed looking for work was estimated to be 23%, whereas those not
working and not looking for work constituted about 25%. Those not working for other
reasons totalled another 14%. Given the two scenarios, the average unemployment count
in 2003 in Amathole was about 62%. The table below provides a breakdown of the
employment / unemployment figures. [LED Strategy, 2003]:
MUNICIPALITY EMPLOYED (%) UNEMPLOYED (%)

Mbashe 9 56
Mnquma 13 66
Great Kei 25 58
Amahlathi 20 58
Buffalo City 38 70
Ngqushwa 11 49
Nkonkobe 18 57
Nxuba 25 64
Amathole District 25 62
Table 4: ADM Employment Status [Institute for Socio-Economic Research, 2003]

3. ECONOMIC PROFILE
3.1 Distribution of Gross Domestic Product
Amathole is the second largest economy (the first being the Nelson Mandela Metro) in the
province, providing 27% of value added. The private sector is dominated by manufacturing
which contributed 21% to value added in 2000 [ECDC, 2003]. The presence of a strong
automotive industry in East London (in the form of Dymler Chrysler and its first and second
tier suppliers) is central to thriving manufacturing base. Other key sub-sectors include
food processing and textile / clothing. While East London has invested in a state-of-art-
car export terminal, food processing is centred on pineapple canning and juicing,
confectionery and dairy products. Furnisher and leather goods are smaller industries with a
historic base in the area, although having facing strong foreign competition in recent years
(as would the textile and clothing).
The table below provides a breakdown of the district GDP in 2000.
Economic Sector % Distribution

Agriculture 3.6
Mining 0.2
Manufacturing 21.0
Electricity 1.4
Construction 3.3
Trade 15.6
Transport 8.3
Finance 12.9
Government & Community 33.8
Table 5: Amathole District Municipality Distribution of GDP 2000 [ECDC, 2003]
The performance of the primary sectors (agriculture and mining) has been rather
disappointing in terms of GDP distribution. In the contrary, Trade and Finance sectors have
strengthened collectively summing 28,5% into the value added. The government (also
known as the community services sector) remains the highest contributor and is indicative
of the high levels of government spending in the area. This is understandable given the
economic history of the area, in particularly the ex-Transkei areas.
3.2 Employment Distribution
Government is the biggest employer accounting for 35% of formal employment in the DM.
This is followed by the manufacturing sector at 22% of employment as well as the trade
sector, which accounted for 10% of formal employment in 1999. Total employment in
1999 was estimated at 211 454 of which 178 000 was formal employment and 33450 was
informal (16% in total) [ECDC, 2003].

The table below provides a breakdown of formal employment in the DM:
Economic Sector % Distribution

Agriculture 8
Mining 0.1
Manufacturing 22
Electricity 0.1
Construction 5
Trade 10
Transport 3
Finance 5
Government & Community 35
Domestic work 11
Table 6: Amathole District Municipality Formal Employment 1999 [ECDC, 2003]
Agriculture provides only 8% of formal employment but varies greatly within the district.
The ex-homeland areas are mostly under communal land tenure, although significant areas
of private tenure exist in ex-homeland areas around Peddie and Butterworth [ECDC, 2003].
Agriculture in the ex-homelands is mostly small scale, although some black commercial
farmers are present. The coastal belt south of East London is the centre of pineapple
farming industry, with citrus, horticulture and livestock also farmed. Significant forestry
plantations are sited in both the Amatola Mountains and around Butterworth.
3.3 The Tourism Sector
The visible contribution of the trade, finance and transport sectors are indicative of the
strong tourism potential in Amathole. The district boasts a wide range of tourism
attractions, from beaches and the natural beauty of the Transkei Wild Coast, to the forests
and waterfalls of the Amatola Mountains. It also hosted many of the conflicts between
Xhosa and settlers during the Boarder Wars, and is home to many of the leaders of the
struggle against apartheid [Laphum’ Langa eEastern Cape, 2003]. East London, which
forms part of the Buffalo City Municipality, is the emerging example of the thriving tourism
industry in the district and southern parts of the Eastern Cape.
3.4 Key economic-related challenges
The key economic-related challenges in Amathole are largely the results of failed former
industrial policies purported by the apartheid regime in its endeavour to control urban
sprawling through industrial decentralization mechanisms. This resulted in the
establishment of small industrial sectors in homelands through heavy subsidies, centred on

border towns of Butterworth, Zwelitsha and Dimbaza. Much of this industry has closed
down resulting in massive job losses and negative economic growth rates. In Dimbaza, the
withdrawal of the decentralization incentives programme eroded 80% of the local
industries and loosing 7000 of 8000 jobs in 1990 [LED Strategy, 2003].
Structurally, Amathole‘s challenge is that of a dual economy, in this case, referring to rural
and urban economies. This invariably calls for a more innovative approach on how
resources are prioritized to unlock natural resources in the ex-homeland and rural areas
while also ensuring exponential growth in the urban economy. It has been suggested that
by focussing on manufacturing, tourism, forestry agriculture and infrastructure
development - the competitive advantages of both economies can be extrapolated to
ensure meaningful growth and positive livelihood change.
3.5 Key Opportunities
The following table (adapted by Threesixty Consulting, 2005) provides a synoptic overview
into possible key opportunities in Amathole:
Focus Area Possibilities

Livestock & game-farming Public private partnerships and improved methods can
expand commercial livestock farming in the former
homelands
Crops Coastal belt prune for diversified horticultural
production, expansion of pineapples, tomatoes, citrus,
exotic fruits and vegetables.
Forestry Can be expanded both in the Amatola Mountains and
in the southern Transkei creating potential for wood
products and furnisher industries
Food Processing Canning and bottling of fruits and fruit-juices can
expand further. Expanded crop and dairy production
in the Transkei will provide small-scale food
processing opportunities with potential for high-value
branded products
Furnisher Can develop from its historic base through high-
volume pine furnisher components in the East London
IDZ and smaller, hand-crafted furnisher, with
potential with former homelands
Leather and Leather Goods Expanded livestock production in the Transkei holds
potential for small-scale tanneries and leather craft
industries
Tourism Strong and distinctive branding can optimize the
tourism value by linking the product offering and
create value for locals and investors

Automotive Automotive components in auto-plastics, electronics
and metal panels.
Textile and Clothing Possibility of establishing an integrated textile mill in
the East London IDZ can facilitate investment in
associated clothing cluster
Infrastructure Development Given the vast rural nature of the district,
infrastructure development opportunities to provide
appropriate transportation, logistics, water, electricity,
sanitation, housing and related bulk services through
PPPs are endless.
Table 7: Key Economic Opportunities in Amathole District Municipality [Adapted by
Threesixty Consulting from ECDC, 2003]

SECTION [4]
ADM SMME DEVELOPMENT SECTOR
1. INTRODUCTION
The analysis of the district SMME environment provides insight into the immediate local
challenges, opportunities and possibilities for sustainable enterprise development in
Amathole. This section provides a review of present environmental factors and highlights
key strategy issues.
2. PROVINCIAL CONTEXT
2.1 Definition of SMME ‘s
Category Generic Description

Micro Turnover is less than VAT registration limit, presently R300
000. Less than 5 employees. Mainly informal, untaxed and
unregistered businesses.
Small Employ between 5 and 50 employees and generate less
than R5 million per annum (Now being extended to R6
million). Have at least one management layer.
Medium Employ a maximum of 200 employees and turn about R20
million per annum
Table 8: SME Definitions, ECDC 2003
2.2 Concentration of SMME’s
Informal and micro enterprises account for the vast majority of all business enterprises in
the Eastern Cape. The following table shows numbers of enterprises in the province:
Category Number
Micro 174 000
Small 15 0000
Medium 640
Large 360
Total 190 000
Table 9: Numbers of SMME‘s in the Eastern Cape 1999 [ECDC, 2003]
A survey by Statistics South Africa (Stats SA) conducted in March 2001 found that about
nine percent of all small businesses in South Africa (mostly black or PDI) are in the Eastern

Cape – i.e. 209 000 small businesses. Their turnover was R143 million in February 2001,
or 7 percent of the national total. For the purposes of the Survey, Stats SA defined small
businesses as those with a turnover of under R300 000 per year – and are therefore not
required to register for VAT. Thus the East Cape with 14% of the population can
contribute only 9% by number and 7% by turnover of small business. It is further
important to note that women entrepreneurs outnumbered men by almost three to one in
the province – a figure well above the national average. Another relevant result of the
survey is that 126 000 of the 209 000 small businesses were based in rural areas
[Programme of Support for LED in the Eastern Cape, 2004].
Population and projected

SME figures for the Eastern Cape
District Population Expected no Business Area Population
Council of SMME’s coverage KM2 Density
ratio
Chris Hani 822 891 33 574 20,4% 37 111 22
Western 363 585 14 834 20,4% 58 242 6
Amathole 1 657 373 67 621 20,4% 23 675 78
Ukhahlamba 327 868 13 377 20,4% 25 553 14
O R Tambo 1 504 411 48 141 16% 15 535 90
Alfred Nzo 544 107 13 059 12% 7 913 72
Nelson 969 771 23 275 12% 1 952 714
Mandela
Metro
Eastern 6 190 006 213 880 17,3% 169 373 37
Cape
Province
Table 10: Population and Projected SMME Figures in the Eastern Cape [Chris Hani DM
Market Research for the ECDC, 2003]
In terms of Table 10 above, the projected number of SMME’s in Amathole should have
been about 67 621 in 2003. This is calculated on the basis of the total population,
population density as well as the measure of the business coverage ratio of 20,4% per 78/
square km. By virtue of these calculations, the largest number of SMME’s in the province
can be found in Amathole.
2.3 SMME contribution to GGP and Employment
Informal and micro enterprises account for only a small proportion of the total provincial
economic product as depicted in the table below:

Category % Private GGP
Micro 6
Small 14
Medium 15
Large 65
Total 100
Table 11: SMME GGP Contribution in the Eastern Cape [ECDC, 2003]
Small and medium enterprises have a significant contribution into the provincial economy
as opposed to informal and micro businesses. The same scenario prevails in terms of
employment contribution by the small and medium enterprises.
Category % Employment
Micro 17
Small 16
Medium 21
Large 45
Total 100
Table 12: SMME Employment Contribution in the Eastern Cape [ECDC, 2003]
In 2001 the contribution of SMME’s (excluding survivalist and micro) to GDP was 36,1% as
opposed to 32,7% in 1995 in South Africa. In the agricultural and construction sectors,
SMME’s accounted for at least 50% of the sector GDP‘s. In terms of employment an
interesting trend has been established. In 2002 SMME’s employed 68,2% of people as
opposed to 44% in 1995 and 53,9% in 2001. Small enterprises constitute the most
significant SMME employer, accounting for 21% of SMME employment [SMME Annual
Review, 2002].
2.4 SMME MARKET PROFILE OF AMATHOLE
The following profile has been constructed on the basis of an SMME study in the Buffalo
City Municipality focussing on the Mdantsane Urban Renewal Programme [Mdantsane
SMME Market Assessment, ECDC, 2005]. This has been collaborated further by
extrapolating from similar studies carried out by Threesixty Consulting in the ex-Transkei
areas to provide a rural perspective as well.
2.4.1 Ownership

The majority of businesses in the Amathole are unregistered and operate as sole traders
and to some extent, as poverty alleviation pockets. In Mdantsane this constitutes 70% of
businesses whereas in rural areas this can very well exceed the 80% point. The second
most common forms of registration are the Close Corporations (only 9% in Mdantsane).
2.4.2 Sector Classification
The majority of enterprises are operating within the trade and service sector, followed by
manufacturing. In terms of trade/service sector, the majority of businesses are spaza
shops, general dealers, shoe repairers, hair salons, caterers and service stations. In
Mdantsane 81% of SMME’s operate within the trade and services sector. Manufacturing
constitutes about 13% and is dominated by dressmaking and sewing (clothing and
textiles).
2.4.3 VAT and Turnover
The majority of businesses earn up to R5000 per month with a very limited number
generating above R25 000 per month. In Mdantsane, 90% of businesses earn up to R5000
per month. The majority of businesses are not registered for VAT, Pay-As-You-Earn and
Income Tax.
2.4.4 Types of Business Premises
The majority of businesses in the area are most likely to be operating from home and on
the streets. In Mdantsane this constituted about 67% of the businesses falling within this
category. In rural areas, this number could very well top 80%, with the majority leaning
more towards street-trading within rural service centres of Amathole. Visits to Mbashe and
Mnquma municipal service centres paint a glaring picture of a serious lack of appropriate
trading facilities.
2.4.5 Access to Electricity and Water
In the rural areas access to electricity and water by SMME’s remains a challenge [based on
the fact that 65% of population has no access to water-on-site, 70% of the population are
without on-site-electricity, IDP 2004/5]. In urban areas such as Mdantsane, access to water
and electricity by population, and indicatively SMME’s, exceeds provincial averages. In
Mdantsane 76% of businesses have access to on-site-electricity and water. 62% of
businesses in the rural areas of ex-Transkei may not have access to on-site water and
electricity [based on similar study in Alfred Nzo (Alfred Nzo DM SMME Situational Analysis,
2005)].

2.4.6 Sizes of enterprises
Given the above profile, it can be safely deduced that the majority of businesses (with a
high probability of exceeding the 70%-mark) fall within the informal and micro enterprise
sector i.e. earn less than R300 000 per annum and employ between 1 and 5 people each.
2.4.7 Business ownership by gender
A good number of SMME’s in the district are owned by women. In Mdantsane, only 50%
of SMME’s are owned by men. In Chris Hani District, a rural economy, women
entrepreneurs account for 64% of SMME business ownership. According to the Stats SA
research conducted in 2001, women entrepreneurs in the Eastern Cape out numbered men
by almost three to one– a figure well above the national average [Stats SA, 2002].
2.4.8 Ownership by youth
In Mdantsane youth business ownership constitutes about 21% of SMME enterprises. Given
the high youth dependency ratio in Amathole (94% less than 65 years – Wefa, 2000),
possibility exists that youth business ownership may very well be consistent with the urban
trend in Mdantsane.
2.4.9 Key SMME Challenges
Challenges facing SMME’s in Amathole are in a large extent no different to the most
common setbacks experienced by SMME’s elsewhere in South Africa, its provinces, districts
and local municipalities.
The following table provides an overview of the key challenges facing SMME‘s in Amathole
and further seeks to highlight the extent of these challenges in terms of urban/rural
enterprise distribution in Amathole:
Key Challenges: Key Challenges:

Urban Environment Rural Environment
Access to market opportunities [1] Access to advice and information [1]
Access to finance and funding [2] Access to business / technical skills [2]
Access to business and technical skills [3] Access to markets [3]
Access to advice and information Access to finance and funding
Access to technology support Poor business infrastructure and land
Poor business infrastructure Access to technology support

Table 14: Key Urban and Rural Challenges facing SMME’s in Amathole [Threesixty
Consulting, 2005]
As stated in the sector review carried out by Ntsika in 2001, the nature and extent of the
influence of the above constraints differ according to size and economic profile of an
enterprise, sector and the regional profile of the area within which the enterprise operates.
For instance, inadequate finance and limited appropriate skills tend to be the major
deterrent to survivalist and micro-enterprises. For medium-sized enterprises, the rigours of
international competition and technology transfer are significant growth obstacles.
According to Ntsika, constraints are particularly severe in for entrepreneurs in rural areas
and for women, who face their own unique set of deterrents, such as cultural and
behavioural norms, and problems regarding access to land [Annual Review 2002, Ntsika].
Table 15 below advocates the need to delineate the business support needs on the basis of
varying degree of business sophistication at the various levels of the SMME market. It
classifies businesses into survivalists, emerging, growth-oriented and globally competitive
firms that require specialized services based on the degree of sophistication.
Degree of Identifying Indicative size Business Support

sophistication characteristics Needs
Survivalist / No market plan. Micro, small Finance, business skills

necessity Predominately driven by the and market
entrepreneur skills/abilities of the 'owner'. opportunities
Mostly informal.
Emerging / stable Most common. Largest Micro, small, Entrepreneurial skills,

collective employer. medium finance, business
Established if not yet advice, market
formalised, or registered - opportunities and
'lifestyle oriented'. Provide technical skills.
regular income. Cash flow
oriented.

Growth oriented Formal and established. Small, medium Market opportunities,
Driven by desire to take large technology skills,
advantage of identified product development
business opportunities. and human resources
Management consciously development
v/works 'on the business' to
improve it. Focused of
market share. Revenue
growth oriented.
Globally Formal, established and Small, medium Market opportunities,

competitive structured. Consciously large technology transfer and
compete in terms of price, skills development
quality, flexibility and
delivery. Management
systems well developed.
Focus on efficiency. Balance
sheet oriented.
Table 15: Business Sophistication Index [Adapted by Threesixty Consulting from the Cape Town City
Business Support Policy, 2004]
3. POLICY ENVIRONMENT IN AMATHOLE
3.1 Integrated Development Plan, 2004
The IDP of Amathole sets out a series of immediate, medium and long-term strategies for
the growth and development of the district area. The IDP vision states that “The Amathole
District Municipality strives for a future where constituent communities have a peaceful,
stable and sustainable environment with basic needs being met through a participatory
development process (and) where communities have access to economic
opportunities.
The IDP sets out key strategy parameters for a range of sectors in Amathole. In terms of
this vision, a participatory development process and access by district communities to
economic opportunities is seen as key to achieving a peaceful, stable and sustainable
(livelihood) environment. This invariably, sets out a key objective towards which
sustainable SMME development in Amathole must be pursued - the intent to provide a
conduit for individuals to enter and participate in the mainstream economy.

In terms of the IDP, SMME (and co-operative) development is identified as one of the key
focus areas of the LED Cluster. With regards to SMME development, the IDP commits to
two main strategic objectives:
• To create sustainable employment opportunities; and

• To provide access and information to emerging SMME’s/Co-
operatives
In term of strategies to achieve the aforementioned objectives, the IDP stipulates that the
DM will:
• Facilitate and support SMME / Co-operative development

• Create linkages with other development initiatives (alignment)
• Develop an SMME/BEE policy
• Develop information on LED support
• Develop LED information portal on ADM website
This paper is aimed at providing a baseline for the SMME Strategy (invariable a policy
framework for SMME‘s) for Amathole.
3.2 Local Economic Development Plan, 2003
The LED Plan of Amathole provides a framework for sustainable LED in the region. It sets
out overall objectives for LED, as paraphrased below [LED Strategy, 2003]:
• To re-align stakeholder efforts through a shared LED vision for ADM

• To facilitate improvements of employment and income growth levels
• To strengthen the capacity of local government in LED
• To provide appropriate development support to address social ills
• To maximize LED by exploiting local comparative advantages
A key feature of the LED Plan is its implied role definition for the Amathole District
Municipality in LED. The Plan identifies this role as that of aligning, facilitating,
strengthening, providing a series of interlinking interventions in partnership with other
stakeholders. Invariably, this sets the platform in defining the role of the ADM in SMME
development.
Furthermore, the LED Plan proposes a range of key priority sectors for the DM, namely:
• SMME development
• Agriculture development
• Tourism development
• Human resources
• Business development (could mean industrial development)

3.3 Spatial Development Framework, 2004
The Spatial Development Framework provides a spatial interpretation of the LED Plan
implications in Amathole. Key to this is the fact that the ADM SDF proposes to channel
economic activities of the district into specific spatial nodes to direct investment and
economic growth.
Spatial Node SMME Development Considerations

Primary Urban Node: Focus on trade, wholesale, service, financial,
East London – Mdantsane agriculture and manufacturing
Administrative Node: Focus on trade, service, heritage and tourism
King Williams Town – Bisho
Secondary Urban Nodes: Focus on trade, wholesale, service, heritage,
Butterworth [Mnquma] tourism and agriculture (agro-processing)
Stutterheim [Amahlathi]
Alice [Nkonkobe]
Urban Service Centre: Focus on trade, wholesale, service, heritage,
Adelaide [Nxuba] tourism and agriculture (agro-processing)
Fort Beaufort [Nkonkobe]
Peddie [Ngqushwa]
Cathcart [Amahlathi]
Idutywa [Mbhashe]
Tourism Development Nodes: Focus on tourism, agri-tourism and eco-

tourism industries
The Mpofu – Katberg Area [Nkonkobe]
The Doubledrift Reserve Area

[Nkonkobe]
The Wild Coast Meander Trail [Great

Kei – Mnquma]
The Dwesa/Cwebe Reserve area

[Mbhashe]
Table 15 Key Spatial Nodes in the Amathole DM [SDF, 2004]
It should be highlighted that SMME development within these areas needs to be go in

tandem with the planning and implementation of long-term plans to revive the town
economies, in particular the small towns. It will be inappropriate to expect that SMME
development alone would yield high socio-economic results in these towns without
addressing the ‘bigger picture’.

3.4 Draft Agricultural Plan, 2005
The Agricultural Plan (Draft) highlights serious sector development challenges in Amathole,
namely:
• Too many people own too little land

• Land tenure system, poor land administration systems and unmanaged
environmental degradation
• Lack of or poor infrastructure, which is a bottleneck to achieving reasonable
yields and accessing of markets e.g. Access roads, storage facilities, fencing etc.
• High costs of production per unit and low yields are squeezing margins and
forcing farmers out of agriculture.
• Increasing preference for, and the resultant dependence on, paid employment,
which are both a result of and a causal factor of the erosion of agricultural skills.
• General lack of resources i.e. input costs, implements, traction animals and
labour are among the major constraints to farmers
• Changing land use systems
• Poorly developed backward and forward linkages to agriculture
• A culture of expectation on government grants (dependency) re-enforced by
overlapping support programmes with different sets of principles, rules and
criteria.
At a municipal level within the Amathole DM, the following serious shortcomings are
highlighted in the draft agricultural plan:
• Lack of hard agricultural sector information in each municipality

• Limited specialist skills in agricultural planning within municipalities
• Poor participation of municipalities in the Dept of Agriculture plans
• Ad hoc projects with little programmatic approach to addressing needs
• Little evidence of any link between SMME or manufacturing objectives and
strategies and agriculture objectives and strategies (i.e. sectors are
compartmentalized).
• There is little differentiation in agricultural planning between food security and
LED planning and projects.
• General lack of impact evaluation of municipal interventions in agriculture
In terms of agricultural enterprise development approach, a process of selection of the

most significant agricultural enterprises within the ADM (both subsistence and commercial)
has been made in terms of existing production and potential. This is based on an
assessment of the natural resources and a Relatively Homogeneous Farming Area (RHFA).
The following enterprises are of importance to ADM.

• Sheep
• Beef Cattle
• Dairy (Milk Production)
• Game Farming
• Citrus
• Tunnel / Hydroponic production
• Vegetables and Irrigated crops
• Field crops (food security)
• Goats
• Poultry - Broilers
• Poultry - Layers
• Pineapples
• Aquaculture / Mariculture
The relative importance of these enterprises differ in terms of economic contribution,

potential, employment and other criteria, between the predominantly commercial farming
areas and the communal farming areas [Draft Agricultural Plan, 2005].
3.5 Procurement Policy, 2002
The Amatole District Municipality’s [ADM] procurement policy seeks to promote an

innovative form of targeted procurement, which will encourage socio-economic
transformation within its region. The procurement policy will empower the Amatole District
Municipality to continue to redress the skewed distribution of wealth. The policy will also
assist in achieving the goals of poverty alleviation and job creation within its region.
The policy will achieve the above by providing employment opportunities to Historically
Disadvantaged Individuals [HDI’s] and disadvantaged communities, enabling socio-
economic transformation objectives to be linked to fair, transparent, equitable, competitive
and cost effective procurement practices.
In terms of SMME definition, the policy defines an SMME as a separate and district business
entity, including cooperative enterprises and non-governmental organizations, managed by
one owner or more which, including its branches or subsidiaries, if any, is predominantly
carried on in any sector or sub-sector of the economy. This definition is not consistent
with the Small Business Act.
In terms of overall performance of Council in achieving their procurement goals, the

following targets are contained in the Procurement Policy
• By June 2004 - allocate 70% of all its combined tenders to HDI’s

• By June 2005 - allocate 80% all its combined tenders to HDI’s

The Policy further asserts that in all capital projects, preference will be given to service
providers who demonstrate labour intensive employment strategies along the following
categories and ratios (targets):
• 40% of labour be women [above youth age category of 36 years];

• 30% of labour be youth [men and women];
• 25% of labour be men [above youth age category of 36 years]
• 5% of labour be disabled people [regardless of gender]
In terms of sureties, a very common setback for HDI SMME’s, the Policy dictates the
following thresholds:
AMOUNT PERCENTAGE
R300 000 Nil
R300 001-R1 000 000 2.5%
R1 000 001-R3 000 000 5%
R3 000 001-R5 000 000 7.5%
R5 000 001- and above 10%
Table 16: Contract Sureties in the Amathole DM [Procurement Policy, 2002]
The majority of SMME’s cannot afford to raise the required sureties. This is reason why the
surety threshold has in the past been increased from R120 000 to R300 000 work
contracts. In some municipalities, SMME’s are not required to raise surety for work
contracts less than R1 000 000 thus increase participation by HDI’s and SMME’s in the
category below R1 million.
4. INSTITUTIONAL DEVELOPMENT
4.1 District Municipality and Local Municipalities
The following table provides a status summary in terms of SMME development within the
DM and its LM’s:

District Municipality & Responsible Present Support Policy Support for Annual
Local Municipalities Person for SMME to SMME’s / Role SMME’s Budget
‘s Spending on
SMME’s
Amathole DM LED Manager Funding Support to Procurement Policy No Response
LM’s LED Plan
Policy and strategy Agricultural Plan
development Spatial Development
Framework
Amahlathi LED Officer Provide equipment Not yet, planning R35 000 per
Provide business investment policy annum
skills
Team building skills
Mbashe LED Manager To hawkers we give There are no policies, No Response
stands and training, we are yet to develop
to Agric projects we them
mentor and give
material like seeds
Nxuba LED Officer Purchasing Procurement Policy R304 125 per
equipment and favouring HDI’s annum
material for
projects
Mnquma LED Manager Facilitate training Procurement Policy None
Nkonkobe LED Manager Training and No R3 million
financial assistance
Buffalo City SMME Manager Cooperatives Procurement Policy R1 million
development
Mdantsane One
Stop Shop
The Business Place
Great Kei Municipal Manager No response No Response No Response

Table17: Amathole Municipalities SMME Status, Part 1 [Threesixty Consulting, 2005]

District Municipality & SMME Training / Predominant Database of Research
Local Municipalities Related Received businesses by local SMME’s into local
sector SMME
market
Amathole DM No Response No Response No Response No Response
Amahlathi No Micro enterprises To find out Yes,
agriculture and
crafts
enterprises
Mbashe YES, General Retail, No No
Business Management Agriculture
by Boulevard Business
Academy.
Nxuba Project Development Agriculture Yes No
Project Management Textile
Mnquma None Manufacturing, Retail No No
Agriculture, Tourism
Nkonkobe No Agriculture and No In the process
tourism
Buffalo City Yes, not specific Wholesale, retail and Consultants busy Yes,
services assembling one Mdantsane
only at this
stage
Great Kei No Response No Response No Response No Response
Table 18: Municipalities SMME Status, Part 2 [Threesixty Consulting, 2005]

District Municipality & SMME support Key Challenges Vision for local Perceived role
Local Municipalities partners facing local SMME’s SMME’s of the District
Municipality
Amathole DM
Amahlathi Stutterheim Lack of funds, skills, Sustainable, Funding
Development capacity, book- developed, create jobs Learnership
Forum keeping and in the area – generate Programme
management skills enough profit
Mbashe Still looking for Incapacity on To build a vibrant and Guide on policy
service business management self-sustaining issues, more
organisations skills which would businesses which are financial backing
make them able to able to generate so as to achieve
exploit the gaps or income and create the desired
niches available employment.
Nxuba Private Sector Funding / Access to Sustainable small Grant funding
finance businesses which help
eliminate poverty
Mnquma TABEISA (Border Access to finance A thriving SMME sector Provide training
Technikon) Skills Training that provides a …for for municipal staff
Business economic development Provide funding
Infrastructure
Nkonkobe ECDC, NDA, IDC, Funding, projects Thinking about it Provide capacity
University of Fort versus businesses, to LM’s / LED
Hare lack of community Officers
commitment
Buffalo City TABEISA, Access to information; Creating a conducive Lobby for more
COMSEC, NICRO, Access to funding environment for business centres
ELBDC, LSBDC, SMME’s in LM’s
IDC, ECDC etc. Promote business
linkages
Great Kei No Response No Response No Response No Response
Table 19: Municipalities SMME Status, Part 3 [Threesixty Consulting, 2005]

4.1.1 Amathole Development Agency
According to the Amathole District Municipality’s LED Plan [2003], the objectives
of the Amathole Development Agency are defined as follows:
• To facilitate economic growth in the rural and urban areas

• To implement a holistic and interactive planning and development process
• To identify appropriate opportunities, develop and exploit these opportunities
• To formulate a flexible Integrated Development Strategy
• To facilitate active community involvement, consultation and empowerment
• To develop an appropriate database
• To identify projects with the highest benefit for the region
In terms of its relationship with the ADM Economic Development Unit, the Agency is
considered as the implementing agency and works at a lower operational level. The Agency
is still in its infancy. Nkonkobe has also setup a Development Agency and the Buffalo City
Municipality is in the process of establishing one for its beachfront development area. It is
not clear to what extent these Agencies will prioritize SMME development in terms of their
mandate.
4.1.2 Key challenges and issues
Based on the above dipstick survey of the municipal environment within the DM and LM’s,
the following challenges are glaring:
• Training for municipal officials on SMME development
• Inconsistent financial and human resources for SMME development
• Need to differentiate between SMME development and poverty alleviation

projects
• Need to improve SMME planning capacity of municipalities
• Poor partnerships in the delivery of meaningful support for SMME

development at local municipal levels
• Need to improve SMME market and sector research across the board
• Lack of key and meaningful support programmes for SMME’s
• Skewed deployment of support organizations in the local municipalities

– programmes more prevalent in urban areas as opposed to rural

• Need to address access to markets, finance, skills and general business
information and advice.
• Need to prioritize support for trade/service, agriculture, tourism and

manufacturing enterprises across the board
• Need to define more clearly the role of the district and local municipalities in
SMME development
4.2 CBO’s, NGO’s and Private Sector Organizations
The table below provides examples of community-based, non-governmental and private

sector organizations that have presence and provide some form of business development
support to SMME’s in Amathole.

NON-FINANCIAL SUPPORT ORGANIZATIONS IN AMATHOLE DISTRICT MUNICIPALITY
Support Organization Services Provided Target Market Geographic Reach
Mdantsane Business Service Training, advice and SMME’s – start-up and Buffalo City
Centre business planning existing Municipality
Mdantsane One Stop Centre Training, advice and SMME’s – start-up and Buffalo City
business planning existing Municipality
The Business Place Training, advice and SMME’s, youth, women Buffalo City
business planning and rural Municipality, sometime
into rural areas
Duncan Village Business In Planning In Planning Duncan Village, Buffalo
Hives City Municipality
Comsec East London / Training, advice, business SMME’s and youth – Eastern Cape
Umsobomvu planning, linkages and start-up and existing
exports
Stutterheim Business Advice Business skills, information, SMME’s, poverty Amahlathi Municipality
Centre business linkages and advice alleviation projects
Border Training Centre Technical and business SMME ‘s, informal Eastern Cape
training traders, government and
business in general
Khula Enterprise Finance Financial and mentoring SME’s – start-up and Eastern Cape
services existing
Eastern Cape Development Enterprise development, Investors, big business Eastern Cape
Corporation enterprise finance, and SMME’s
contractor development and
property development
support
NAFCOC Business networks, Black business, and Eastern Cape
information and advice SMME’s in general
Border Kei Chamber of Investment facilitation, Small and big businesses Buffalo City
Commerce trade support, advice, Municipality and the
information and lobbying Border Region
TABEISA (Eastern Cape Advice, youth Youth, undergraduates Buffalo City
Technikon) entrepreneurship, training and communities Municipality, Eastern
and research Cape
Eastern Cape Manufacturing Advise, technology support, Existing manufacturing Buffalo City
Advisory Centre information support, quality enterprises (may soon Municipality, Eastern
and product standards, change into other sector Cape
productivity improvement, areas and include start-
market development and ups under SEDA)
exports
Table 20:Non-Financial Support Organizations in Amathole District Municipality [Adapted by Threesixty Consulting,
sources: Mdantsane SMME Study, 2005; ECDC, 2003]

FINANCIAL SUPPORT ORGANIZATIONS IN AMATHOLE DISTRICT MUNICIPALITY
Support Organization Services Provided Target Market Geographic Reach
ECDC Enterprise finance from Big business and SME’s Eastern Cape
R150 000 – R5 million – start-up and existing
Khula Enterprise Finance Loan Guarantees for loans SMME’s – start-up and Eastern Cape
up to R3 - 5 million existing
Eastern Cape Micro Finance Micro lending up to R3000 Informal and micro Buffalo City Municipality
Enterprise enterprises
Nicro Micro lending - R750 – Informal and micro Buffalo City Municipality
R2500 for ex-offenders enterprises
Marang Financial Services Micro lending R700 – R Informal and micro Buffalo City Municipality
6000 for groups; enterprises
R700 – R100 000 for
individuals
Table 21: Financial Support Organization in Amathole District Municipality (excluding banks) [Threesixty Consulting,
2005; ECDC, 2003]

The table below shows commercial banking institutions in the Eastern Cape.
Table: Geographic spread of financial institutions
Type of financial institution Name Eastern Cape branches
Some Banks active in SMME lending in the Eastern ABSA East London (10 branches)
Cape Nelson Mandela (15 branches)
Uitenhage, Despatch, Kirkwood, Grahamstown,
Fort Beaufort, Kenton-on- Sea, Port Alfred,
Adelaide, Alexandria, Humansdorp, Jeffreys Bay,
Joubertina, Kareedouw, Patensie, King Williams
Town, Cradock, Middelburg, Graaff Reinet,
Aberdeen, Jansenville, Murraysburg, Somerset
East, Queenstown, Cathcart.
Nedbank East London (3 branches)
Nelson Mandela (7 branches)
Uitenhage (1 branch)
Standard Bank Nelson Mandela (13 branches,
Aberdeen, Alexandria, Alice, Aliwal North, Barkley
East, Bedford, Butterworth, Cathcart, Cradock,
Dordrecht, Elliot, Engcobo, Fort Beaufort, Graaff
Reinet, Grahamstown, Humansdorp, Jansenville,
Jeffrey’s Bay, Kenton-on-Sea, King Williams Town
(2 branches), Kirkwood, Komga, Lady Grey,
Maclear, Mdantsane, Middelburg, Misgund,
Molteno, Port Alfred, Port St. Johns, Somerset
East, Sterkspruit, Steynsburg, Steytlerville,
Stutterheim, Ugie, Uitenhage, Umtata.
Table 22: Some Banks Active in SMME Lending in the Eastern Cape, [adapted by Threesixty Consulting from the EC
Programme of Support to LED, 2004]

4.2.1 Key Challenges and Issues
The following strategy issues can be isolated from the tables above with regards to the
spread, access to and delivery of SMME development support services in Amathole:
• Except for provincial development agencies such as the ECDC, ECMAC and
others, available SMME support services are more prevalent in the urban areas –
the Buffalo City Municipality (King Williams Town, Mdantsane and East London)
being the most beneficiary.
• In rural and small urban centres of Amathole in areas such as the Great Kei,
Mbashe, Mnquma and Nxuba the existence of an integrated support system
for SMME’s is almost non-existence. This is reason why many of these
municipalities have cut themselves a direct role in SMME support by providing
equipment, skills training etc. – a matter of strategic debate as to whether or not
these municipalities are in fact suppose to be fulfilling these roles directly or
indirectly.
• A service delivery gap in terms of sector specific support for agriculture, tourism
and small-scale manufacturing exists across the board. This further extends to
technology-related support programmes.
• Although a number of financial institutions are existing, largely in the form of

commercial banks, the majority do not provide the right level of financial assistance
needed by the bulk of the Amathole ‘s small business enterprises i.e. micro and
informal businesses requiring between R0 – R150 000. Even with the existing
micro-lending institutions, there is no capacity to meet the diverse demand for
micro loan finance.

SECTION [5]
STRATEGIC PROBLEM ANALYSIS
1. INTRODUCTION
This section will present the results of our strategic problem analysis process using the
SWOT Analysis as a tool. It will also summarize the SWOT into key problem statements
that the SMME Strategy of Amathole District Municipality will need to address to achieve a
growing and sustainable SMME sector.
2. RESULTS OF SWOT ANALYSIS
2.1 District Strengths
• Second biggest economy in the province

• Largest pool of micro, informal and SMME businesses
• Thriving manufacturing sector and sub-sectors
• Strong agricultural potential
• Excellent tourism resources
• Urban areas have strong presence of business support agencies
• Political will to support SMME’s and co-operatives
• Existence of Amathole Development Agency
• Youthful population
• Procurement Policy
• Agricultural Draft Policy
• Household sector employs more people
• Integrated Waste Management Plan
• Land in rural areas a great resource for agriculture and new investments
• District support for local municipality
2.2 District Weaknesses
• Lack of plans to grow and revive small towns and rural economies
• Urban sprawling placing additional pressure on urban infrastructure
• Poor SMME planning and development capacity within LM’s
• Undefined SMME support delivery mechanisms in rural and urban
• Absence of support agencies in rural and small town areas

• Lack of sector-specific support for agricultural, tourism and manufacturing
• Poor or lack of business infrastructure in rural and small town areas
• Fragmented business support system within the district
• Lack of coordination between municipalities and government agencies
• Poor access to water, electricity and sanitation
• Lack of a shared SMME / LED development vision for Amathole
• Lack of implementation capacity of SMME development programmes
• High levels of illiteracy and lack of marked-demand skills
• Access to funding for HDI and micro enterprises [R5 000– R100 000]
• Poor research into the district and local SMME sectors
• Few small and medium-sized enterprises
• Narrow entrepreneurial base driven-off from trade and retail sectors
• Lack of economic plans to revive small town and rural economies
• Access to business opportunities and markets
• Access to appropriate trading and business facilities
• Access to general business advice and information in rural areas
• Access to land for agricultural and investment purposes in rural areas
2.3 District Opportunities
2.3.1 [Market Opportunities]

• Grow livestock farming through proper support, land access
• Increase crops production through improved irrigation and technical support
• Food processing and fruit-bottling
• Leather and leather goods
• Manufacturing and automotives – auto-plastics, electronics, metals etc.
• Textiles and clothing
• Wholesale, retail and service to meet local demands
• Infrastructure / construction through government’s EPWP
• Pilot cooperatives in services/retail and agricultural [diverse areas]
2.3.2 [Development Opportunities]

• Graduate informal and micro into Small and Medium-sized enterprises
• Facilitate BEE targeting agriculture, tourism, manufacturing and services sectors
• Comprehensive market study into existing SMME capacities and growth potential
• Review existing district LED Plan to address infrastructure, sectors and capacity
• Formulate sector strategies for manufacturing, tourism and services sectors
• Develop SMME service delivery model for small towns and rural areas
• Formulate small-towns and rural areas investment promotion strategy
• Formulate a shared SMME vision for Amathole
• Access to appropriate trading facilities including water, electricity and sanitation

• Youth entrepreneurship targeted at schools, undergraduates and unemployed
• Research into local / rural consumption patterns and channel SMME’s to provide
• Improve transportation and logistic linkages between rural and urban [markets]
• Implement flagship programmes on [Micro Finance] and [Market Access]
• Conduct a comprehensive skills audit focussing on labour availability and needs
• Formulate a sector-specific HR Development Plan for Amathole
2.3.3 [Institutional Opportunities]

• Train and empower LED Officers on SMME development matters
• Improve SMME planning, coordination and implementation capacity
• Define the roles of the DM and LM’s in SMME development
• Partner the new SEDA to establish access appoints in all municipalities
• Partner the DBSA and Province on the Vulindlela Programme
• Amathole Development Agency to be a One-Stop Business and Investment Shop
• Partner tertiary institutions and private sector for sector-specific support
• Improve municipal and government spending on SMME’s and their programmes
• Improve coordination of support at various levels – province, district and LM’s
• Partner support agencies to provide support in rural and small town areas
• Improve institutional support for cooperatives and informal traders
• Improve institutional support on market access and funding
2.4 District Threats

• Neglect of rural and small town development resulting in high pockets of crime and
violence in those areas
• HIV/Aids and its deterring effect on economic growth in general

3. SUMMARY OF KEY PROBLEM STATEMENTS
Having reviewed and analyzed various sources of information and trends within the SMME
development sector of Amathole, its immediate environment – the Eastern Cape Province
and national landscape, it is our proposition that Amathole faces some of the following key
SMME development challenges [Please not these are for high-end strategy development]:
3.1 [Few Small and Medium-sized Enterprises]

Although Amathole having the largest pool of SMME’s, the majority of these are informal
and micro of nature with very few being in the small and medium-size category where
significant job creation and contribution to economic growth [GGP] is enhanced. There is
therefore the need to increase the number of SME businesses in Amathole, thus increasing
prospects for much higher employment and economic growth rates through various
mechanisms that will be explored in Phase 2 of this process.
3.2 [Narrow SMME Development Approach]

There is a need to diversify SMME development to include agriculture, tourism and
manufacturing as opposed to the prevalent over-dependency on the retail and services
sector given that these are high performing sectors of the ADM economy and in the case of
agriculture and tourism, job creation potential is optimal.
3.3 [Underdevelopment of Rural and Small Urban Centres]

Unless growth in the rural and small urban centres of the ADM is addressed in a more
rigorous and focussed way, SMME development will only remain the reality of large urban
centres such as in the Buffalo City Municipality. This is precisely due to the fact that
SMME’s cannot survive on their own and thus thrive on market and business opportunities.
These opportunities are maximum when there is new investment, infrastructure
development as well as increased government spending in an area.
3.4 [Absence of a shared district-wide SMME Vision]

There is an evident absence of a clearly defined SMME Vision shared by government,
industry and communities in Amathole. Because of this, SMME development, in particular in
rural and small town areas has in a greater extent been driven by and paid for by the
public sector. Although the private sector has its own initiatives around supplier
development and BEE, these are not coordinated to create a more visible impact in terms
of the overall picture. The vision must define common interests, desires and focus areas for
high growth and resource allocation. This will be addressed in the Phase 2 of this
assignment.

3.5 [Skewed SMME support services and lack of appropriate institutional support]
The delivery of SMME support service and availability of appropriate programmes to
SMME’s in Amathole is vastly skewed and imbalanced. The bulk of the existing support
system is physically and virtually focussed towards the large urban areas, with very little
support resources being dedicated to assist aspiring, existing and established
entrepreneurs in the rural and small urban centres of Amathole. This could be reason why
the majority of businesses in these areas remain informal and micro without much
progression into the SME-classes. In realization of this fact, many local municipalities have
tried to close these gaps by playing various direct roles such as ‘financiers’ and ‘trainers of
SMME’s in their areas putting tremendous pressure on the already non-existing LED
capacity.
At a secondary level, there is a general lack of appropriate institutional support within the
district for cooperatives development and sector-specific enterprises within agriculture,
tourism and manufacturing.
3.6 [Poor Municipal SMME Development Capacity]

The lack or absence of appropriate training and support programmes for LED Officers and
relevant persons within the municipalities is a setback that continues to defeat the very
existent political will to support and growth this sector. The lack of this capacity manifests
in the poor policy planning for SMME development, poorly conceived and executed SMME
programmes and duplication of resources and efforts due to lack of effective coordination
between municipalities, government departments and agencies. At another level this lack
of capacity is related directly to the limited municipal budgets for LED and SMME
development in general, a fact that limits the municipalities from employing well-trained
persons as well as providing the appropriate support for SMME development.
3.7 [Lack of appropriate trading and business infrastructure]

Previous studies into areas such as Mdantsane as well as our visits to most parts of the
ADM in particular areas such as King Williams Town, Butterworth and Idutywa reveal that
the majority of informal trading is conducted in an unregulated manner. Although there
may be other policy issues relating to informal trading, the lack of appropriate trading
facilities is the most immediate challenge as this has potential to exercibate crime, health
hazards and drive away customers from the informal and micro markets. At another level,
there is a general need for business premises and accommodation [with electricity, water
and sanitation] for the semi-formal and formal businesses.
3.8 [Inadequate market and financial access]

Access to finance and markets are not a peculiar challenge confined to Amathole. It is a
worldwide setback for most SMME’s whether in the developed or under-developed
countries. It has been generally proven that in the Eastern Cape there is a glaring lack of
appropriate micro lending finance for the R5000 – R100 000 categories. Even the ECDC’s

have increased their funding thresholds to R150 000 and above. No banks want to
participate at this level as they claim this remains a high risk market as SMME’s are unable
to meet the required financial costs, raise appropriate collateral and most of them have
been black-listed. In rural areas, the majority of people have never had any form of
relationship with any type of financial institutions [LED Support for the Eastern Cape,
2004]. Strong market and financial access are considered the ‘heart and soul’ of any
thriving economy, and in this case, SMME development.
3.9 [Illiteracy and Lack of appropriate skills]

Functional literacy rates are generally low across the district. Only 4% of the district adult
population has a post-matric qualification. Considering the skills requirements needed to
unearth opportunities in tourism, agriculture, manufacturing and the service industry, there
is a need to bridge the low literacy levels and build the appropriate skills capacity – both
technical and managerial, within the ADM SMME sector.
3.10 [Poor statistical and market information on the SMME Market]

There is a general lack of appropriate and up-to-date information that covers a
comprehensive range of SMME, economic and business development issues in Amathole
and its local municipalities. This exacerbates most of the policy, programme and support
challenges highlighted above.

SECTION [6]
SMME STRATEGIC ALTERNATIVES
1. SMME DEVELOPMENT VISION
The IDP vision states that “the Amathole District Municipality strives for a future where
constituent communities have a peaceful, stable and sustainable environment with basic
needs being met through a participatory development process (and) where communities
have access to economic opportunities”.
In terms of this vision, the ADM needs to achieve the following key priority outputs:
• Peaceful, stable and sustainable environment
To achieve this vision, the IDP statement proposes two main principles:
• Participatory development process i.e. transparency, fairness and equity

• Access to economic opportunities
Based on this analysis, the SMME vision for Amathole must assist the Municipality and its
stakeholders in achieving access to economic opportunities by all inhabitants of the district
area.
It is on this basis that it is believed that an IDP-aligned SMME vision for the ADM should
seek to achieve the following:
• The Amathole District Municipality promotes the creation of vibrant and sustainable
SMME’s that contribute towards increased wealth generation, employment creation
and poverty alleviation.
By virtue of this vision, the Amathole District Municipality and its stakeholders commit
themselves to achieving the following outputs:
• Vibrant SMME’s referring to growing private enterprises

• Sustainable SMME’s, which refers to income and employment creating private
business
By so doing, it is believed that the SMME sector would provide the needed platform for
local communities to enter and play a meaningful in the development of the district’s
economy.

2. STRATEGIC OBJECTIVES
In order to achieve the stated SMME vision for the area, the ADM and its partners commit
themselves to the following strategic goals and objectives:
2.1 To improve access to market-driven and sustainable business development support

services for the informal, micro, small and medium-sized enterprises in both urban and
rural areas;
2.2 To improve the planning and institutional capacity for SMME support in the District thus
ensuring the creation of a conducive environment for SMME’s;
2.3 To diversify the existing SMME development base through agricultural, tourism and
manufacturing development;
2.4 To increase youth participation in the entrepreneurial and SMME development sector of the
District and its economy.
2.5 To increase the number of start-up and existing small and medium-sized enterprises thus
their contribution into the economic and job growth in the district;
The above strategic objectives set out a performance measure for this SMME
Strategy and are congruent with those set-out in the Provincial Growth and
Development Plan of the Eastern Cape, which seeks to increase the number of
start-up and existing enterprises in the Province.
3. STRATEGIC T THRUSTS
A strategic thrust defines an area of priority focus. It has a collective economic force that
can generate sufficient economic energy and momentum to create a series of sustainable
opportunities to achieve short, medium and long-term objectives of any strategy.
We believe by focussing on the following priority areas, reasonable impact on the SMME
sector and eventually job and income creation.

3.1 DEVELOPMENT THRUST [1]: SECTOR DEVELOPMENT SUPPORT
3.1.1 Strategic goals:
• To increase the number of small, medium and micro enterprises operating within
tourism, agriculture and manufacturing sectors;
• To improve the competitiveness and productivity of small, medium and micro

enterprises operating within the tourism, agriculture and manufacturing sectors on
employment and gross geographic production of Amathole;
• To increase the contribution of tourism, agriculture, manufacturing and

trade/service sectors on employment and economic growth of Amathole.
3.1.2 Strategic target market:
Sector Development Support will focus on the following primary market:
• Small, Medium and Micro Enterprises

[Employing 1 – 200; Annual Turnover 0 – R20 million]

[Start-ups in Tourism, Agriculture and Manufacturing]

[Existing enterprises in Tourism, Agriculture and Manufacturing]
3.1.3 Sector Development Support Framework
3.1.3.1 Agriculture Enterprise Development Framework:
• Improve the quantity and quality of extension services

• Facilitate access to land and agricultural infrastructure
• Facilitate access to affordable inputs, implements and skilled labour
• Facilitate market access for agricultural production
• Improve research on agriculture and its sub-sectors
• Improve agricultural planning capacity within municipalities
• Improve coordination of government agricultural programmes
• Promote linkages and alignment with the manufacturing and tourism sectors
• Stimulate new and existing enterprises to commercially focus on:
o Livestock farming [Sheep, Goats, Beef Cattle, Poultry]

o Game farming

o Agro-processing [Dairy, milk production, others]
o Tunnel / Hydroponic production
o High-value vegetables and irrigated crops
o Mass food production
o Pineapples and citrus
o Aquaculture / Mari-culture
• Proactive facilitate BEE in agriculture and business to business linkages
It is crucial to note that important issues such as new commercial investments into major
agricultural developments and provision of hard infrastructure such as roads, railways etc.
should be addressed as part of the greater LED and Agricultural Plans of Amathole.
3.1.3.2 Tourism Enterprise Development Framework:
• Improve access to tourism support services

• Improve research on tourism, heritage and cultural issues
• Facilitate BEE within the trade, services, transport and accommodation sectors
• Improve the quality of craft production and competitiveness of enterprises
• Facilitate access to local and overseas tourism markets
• Improve access to trading places and business finance
It is, once more, crucial to highlight that the formulation of a Tourism Master Plan for
Amathole will be necessary to support the successful implementation of the aforesaid
tourism enterprise development programme framework. This must invariable address
issues of tourism infrastructure, branding and market audits to identify how the existing
gaps could be strategically addressed to achieve on even higher tourism growth in the
District.
3.1.2.3 Manufacturing Enterprise Development Framework:
• Promote establishment of new enterprises focussing on:

o small-scale tanneries and leather craft industries
o Food processing
o Textile / clothing
o Pineapple canning and juicing, confectionery and dairy products
o Furnisher and leather goods
o Automotive component suppliers
o Light metal works
o Forestry and furnisher manufacturing
• Stimulate manufacturing through the municipal preference procurement

• Improve research and information on manufacturing and sub-sectors
• Facilitate meaningful technical and management training programmes

• Improve business support for manufacturing enterprises
• Proactively promote BEE in the manufacturing industries
• Focus on technology access and productivity improvement
• Promote the establishment of specialized industrial parks
• Formulate a comprehensive Manufacturing Development Plan [MDP]
Once again, the development of manufacturing within Amathole must be integrally linked
to the LED, Agricultural, Transportation and other sectoral plans.
3.2 STRATEGIC THRUST 2: BLACK ECONOMIC EMPOWERMENT SUPPORT
• To increase the number of BEE deals between local black small, medium and micro
enterprises and local white-owned businesses;
• To facilitate meaningful support for both black-owned and white-owned businesses

on issues of black economic empowerment e.g. advice, policy planning, linkages
etc.
• To promote BEE within the key economic growth sectors of Amathole namely,
agriculture, tourism and manufacturing and sub-sectors.
• To monitor the impact and advancement of BEE in Amathole.
Black Economic Empowerment Support will focus on the following primary market:
• Black-owned Small, Medium and Micro Enterprises

[Employing 1 – 200; Annual Turnover 0 – R20 million]
• White-owned Small, Medium and Micro Enterprises

[Start-ups in Tourism, Agriculture and Manufacturing]
• White-owned Large Businesses

[Employing 200 plus; Annual Turnover R20 million plus]

3.2.3 BEE Support Framework:
• Establishment of a BEE Council to coordinate BEE in the ADM

• Provide easy access to tender opportunities (fax broadcasts, mobile phone
notifications, email notifications etc.)
• Render assistance in tender document completion, contracts & contract
management
• Assist with access to finance on awarded tenders
• Assist with conducting BEE status audits (use of score card)
• Facilitate twinning of big and small enterprises (buyer/supplier match making)
• Broaden the base of BEE suppliers across sectors
• Encourage and recognise significant contributors to BEE
• Promote BEE in all the sectors of the local economy
• Provide information and advice on all BEE matters
3.3 STRATEGIC THRUST [3]: INFORMAL SECTOR DEVELOPMENT
• To promote the participation of the previously disadvantaged communities and

individuals in informal self-employment, self-help and poverty-alleviation initiatives.
• To provide meaningful support to informal self-employment, self-help and poverty

alleviation initiatives thus ensuring progressive growth into the SMME sector.
• To enhance the role of the informal economy or improve its capacity to meet rural
and township consumption / consumer needs.
• Poverty-alleviation [or welfare] projects

• Street-traders and hawkers
• Youth
• Women
3.3.3 Informal Sector Framework:
• Formulate informal trading policy for the District

• Strengthening dialogue between the Municipalities and the informal sector
• Improve the coordination of government poverty alleviation projects
• Improve access to project and business advice, training and information

• Facilitate access to local and external informal markets
• Provide appropriate street-trading and hawkers facilities
• Facilitate women business development programmes
• Promote youth entrepreneurship in local schools and communities
• Strengthen existing non-governmental organizations as key partners
• Address access to funding and financial assistance
• Facilitate life-skill programmes for the unemployed, youth, disable and women
• Entrepreneurial awareness
3.4 STRATEGIC THRUST [4]: HUMAN RESOURCES AND SKILLS DEVELOPMENT
• To develop quality management, technical and life-skills in line with labour market
demands of the area, its key sectors and the region at large;
• To improve the management and production capacity of SMME’s through training,

learnership and capacity building programmes
• To consolidate human resource and skills development interventions in a manner

that improves the sustainability of this District‘s SMME Strategy and local SMME’s.
• Poverty-alleviation [or welfare] projects

• Street-traders and hawkers
• SMME’s
• Women
• Youth
• Municipal Officials
• Politicians
3.4.3 SMME [Enterprise] Skills Development Framework:
• Create a comprehensive database of existing skills base in the area

• Investigate the existing and future labour needs of the economy
• Conduct an analysis of skills requirements in major developments
• Prioritize skills development needs and link to major economic projects
• Promote and facilitate basic adult educational programmes
• Partner SETA’s and coordinate SMME-related development programmes
• Establish dedicated labour linkages centres or facilities
• Formulate an Enterprise Skills Development Programme for Amathole

3.5 STRATEGIC THRUST [5]: INSTITUTIONAL DEVELOPMENT AND SERVICE
DELIVERY IMPROVEMENT
• To address the serious shortages of SMME development human resources within

the District and Local Municipalities;
• To build the appropriate internal [municipal] and to some extent, the external
institutional capacity necessary to ensure the successful implementation of the
Council‘s SMME Strategy.
• To eliminate duplication of roles, improve synergy and strengthen the existing

SMME support delivery system of Amathole
• To improve the integration, alignment and coordination of government and

stakeholder economic development programmes to leverage resources.
• To ensure meaningful communication, efficient decision-making and effective

implementation capacity of SMME development programmes within the District.
• To improve access to business development support services in both rural and

urban areas of Amathole, targeting the previously disadvantaged communities.
• To address the lack of or access to appropriate finance and micro-lending facilities

for local businesses.
• Strengthen relationships with private sector service providers
Institutional Development and Service Delivery Improvement will target the following
primary beneficiaries:
• District Municipality
• Local Municipalities
• Municipal Implementation Agencies
• Provincial Government Agencies
• Community-Based Organizations [CBO’s]
• Non-Governmental Organizations [NGO’s]
• Business Support Organizations [BSO’s]
• National Government Departments
• International Donors
• Private Sector

3.5.3 Institutional Development and Service Delivery Framework:
• Provide meaningful SMME training for municipal officials

• Improve SMME programme coordination at district and local levels
• Strengthen the relationship of the Municipalities with CBO’s and NGO’s
• Improve budgeting for SMME development and leverage financial resources
• Improve the quality of available support services and sustainability of CBO’s
• Institutionalize support for tourism, agriculture, manufacturing and informal sector
• Ensure market-demand approach to the design and delivery of support services
• Establish business support structures in rural and small town areas
• Service delivery in rural areas – mobile statistics
4. CORE VALUES AND PRINCIPLES
The following core values and principles shall at all times guide and direct the
implementation of this SMME Strategy:
4.1 To add value to existing SMME and related programmes and thus not duplicate.
4.2 To be innovative and creative to achieve sustainability of support programmes
4.3 To establish meaningful partnerships with the private and non-governmental sectors
4.4 To adhere to the strict standards of sustainable development as per the WSSD outcomes
4.5 To be transparent, fair and equitable
These are non-negotiable and are mandatory mechanisms that the Amathole Municipality
and its stakeholder will adhere to in the rolling-out of this SMME strategy.

SECTION [7]
INSTITUTIONAL ARRANGEMENTS
1. INSTITUTIONAL CONSIDERATIONS
In designing the appropriate institutional framework for SMME development for Amathole
District Municipality, the following factors were taken into consideration:
• No one type of organizational structure is best suited for all economic

development or SMME development services;
• Every type of organizational structure has both its legal and management-based
strength and weaknesses, hence no institution is totally flawless;
• Any legal structure or management system established in an area must be

relevant to the local economic, social and cultural conditions of the region;
• All institutional arrangements should be able to fit into the overall economic
development framework for the region as well as the complex web of existing
structures and services;
• Coupled to the Municipal Structures and Systems Acts, the Municipal Finance
Management Act of 2004 provides guidance as to the powers, functions and
legal structural options available to South African municipalities.
This section will articulate the role of the Amathole District Municipality with respect to
SMME development [and this Strategy] and will outline the appropriate institutional
arrangements to plan, manage, implement and monitor SMME development within this
area.
2. THE ROLE OF THE AMATHOLE DISTRICT MUNICIPALITY
The primary role of the Amathole District Municipality in SMME development is to

coordinate, facilitate and stimulate the sustainable development of Small, Medium and
Micro enterprises within its jurisdiction through the following mechanisms:
• Strategy and policy development

• Programme development and co-ordination
• Strategic liaison and networking
This role consists of the following three most critical responsibilities:

2.1 Coordination
The ADM acts as a co-ordination body for SMME development matters for its area.
Through its Integrated Development Plan (IDP), LED Strategy and this SMME Strategy, the
ADM will act to ensure alignment between government, business, labour and community
programmes as a fundamental step towards achieving the shared SMME vision for the
area. The SMME Strategy forms the basis for the coordination of such programmes.
2.2 Facilitator
The ADM acts to facilitate the creation of an enabling SMME development environment as
an integral mechanism to bolster local economic development in the area. The Municipality
promotes and encourages proactive participation by government, business, labour and
communities in processes that will yield remarkable transformation and growth of local
SMME’s. This involves the facilitation of access to appropriate business services,
infrastructure, resources such as funding and infrastructure as well as market and business
opportunities for SMME’s.
2.3 Stimulator
The ADM will at all times seek to pioneer new approaches, strategies and interventions to
develop, identify and leverage new support and growth opportunities for its SMME sector.
These approaches may at time appear to be in the form of direct interventions and
incongruent with the conventional role of facilitation and coordination. The implementation
of a preferential procurement and value chain management policy is an example of a direct
intervention to stimulate a sector of the economy [SMME’s and PDI enterprises] to become
major economic players.
3. LEVELS OF INSTITUTIONAL RESPONSIBILITIES
The planning, execution and monitoring of SMME development in the ADM area consists of
the following two most critical levels of institutional responsibilities:
3.1 Strategy and policy development
This responsibility, which includes the planning of short, medium, and long-term strategies
and policies to guide and direct SMME development within the area, is considered the first
and high-end level of institutional responsibilities in the Amathole District Municipality. The
most fundamental purpose is to create an appropriate and conducive business and

economic environment to harness the full job creation and poverty alleviation opportunity
within the area.
3.2 Strategy and programme execution
This involves the implementation of all or some aspects of the SMME Strategy of the ADM.
This level of responsibility will include packaging the strategy into manageable programmes
and projects as well as the provision of ongoing support services to strategy beneficiaries.
3.3 Programme monitoring
This level is considered the most critical in the planning and execution of the SMME
strategy of the ADM as it ensures that stakeholders participate effectively in the
monitoring of the implementation processes. Involved as well is the constant evaluation of
the impact and performance of the execution process against original plans and strategic
directions decided jointly with stakeholders.
4. SMME DEVELOPMENT INSTITUTIONAL FRAMEWORK
Based on the levels of institutional responsibilities identified above (2), the implementation
of the SMME Strategy of the Amathole District Municipality will be carried out through
the following three main SMME development institutional vehicles as per the
diagrammatical illustration of Diagram 5.
[Amathole District Municipal Council,

Executive Mayor]
[Development Planning
Committee]
[Office of the Municipal Manager,

Strategic Management Unit]
[Municipal LED Forum]
[Amathole Economic Development

Agency]
[SMME Workgroup]

4.1 Strategic Management Unit [SMU]
4.1.1 Role in SMME Development:

To facilitate, coordinate and stimulate SMME Development in the Amathole Municipal area.
4.1.2 Scope of responsibility:

• To formulate and review the SMME strategy and plan for the area
• To develop appropriate SMME policies and by-laws
• To coordinate SMME development programmes and initiatives
• To facilitate access to business infrastructure for SMME’s
• To build institutional capacity and improve service delivery to SMME’s
• To facilitate meaningful participation by local communities in LED
• To monitor the implementation of the SMME Strategy
• To advise Council on all LED and SMME development related matters
4.1.3 Type of structure:

The SMU is located within the Office of the Municipal Manager as a dedicated unit
responsible for strategy and LED in Amathole District Municipality. The Unit is accountable
to the Municipal Manager through the Strategic Manager [being supported by the LED
Manager]. Politically, the Strategic Management Unit also reports directly to the
Development Planning Committee as the custodian of the LED Strategy of the ADM. It also
forms part of the Economic Development and Environmental Cluster, an IPD structure of
the ADM.
4.2 Amathole Economic Development Agency [AEDA]
4.2.1 Proposed SMME Development Role:

To implement key aspects of the SMME Strategy of Amathole District Municipality in line
with the overall organizational mandate of the Amathole Economic Development Agency.

• To implement sector development programmes in line with the SMME Strategy
• To implement human resource and skills development programmes
• To develop the informal sector of the economy in line with the SMME Strategy
• To facilitate and promote Black Economic empowerment in the area
• To improve access to SMME enterprise support services in small towns, rural and
under-serviced areas

The Amathole Economic Development Agency is an economic development implementation
arm of the Amathole District Municipality. The Agency will consist of a Board and will

function in line with the provisions of the Municipal Finance Management, Municipal
Systems Act and Municipal Structures Acts.
5. SMME Workgroup [SWG]
5.1.1 Mandate:
To advise the Amathole District Municipality and its local economic development entities on
matters pertaining to SMME development in general as well as the implementation of the
SMME Strategy.

• To act as an advisory body to the Amathole Municipality
• To share development information, ideas and experiences
• To fulfill a lobbying and advocacy role in support of the ADM on SMME matters
• To leverage and share human, financial and technical resources
• To monitor and evaluate the implementation of the SMME strategy
• To ensure effective coordination of all local stakeholder programmes
• To improve communication and alignment between support organizations
• To coordinate planning of support services and service delivery in ADM

The SWG is a platform to provide a more structured mechanism of coordinating SMME
development efforts in the ADM. The SWG will be comprised of the key support
organizations, local municipalities, government departments and agencies. It will be
coordinated by the ADM‘s Strategic Management Unit and will work in tandem with the LED
and IDP Forums.

SECTION [8]
SMME PROGRAMME AND PROJECTS
PROGRAMME DESCRIPTION KEY PARTIES PRIORITY BUDGET
STRATEGIC THRUST [1] - SECTOR DEVELOPMENT SUPPORT

[1] AGRICULTURE 1.1 Enterprise Development Formulate and implement a programme to provide ADM High R300 000-00
ENTERPRISE SUPPORT Programme integrated support services to new and existing
agricultural SMME’s.
1.2 Agriculture Enterprise Establish a dedicated Unit within the Amathole AEDA High R100 000-00
Development Unit Economic Development Agency to implement the
agricultural enterprise development programme.
1.3 Municipal Capacity Building Partner with tertiary institutions to develop and Tertiary Institutions High R100 000-00
Programme implement an Agriculture Training Programme for
LED Officials within local and district municipalities.
1.4 Agriculture Research Partner with the Agriculture Research Council and ARC and tertiary High R200 000-00
Programme tertiary institutions to establish a comprehensive institutions
sector research intelligence providing information
on all the key sub-sectors and markets
1.5Institutional Partnership Sign MOU’s with key government departments to ECDC, DoA, DoL, High R25 000-00
Programme improve coordination of agricultural programmes, Land Bank, ARC
leverage funding and improve access to land and
agricultural infrastructure.
[2] TOURISM ENTERPRISE 2.1 Enterprise Development Partner private sector to implement a programme Triple Trust, Business High R200 000-00
SUPPORT Programme providing integrated support to new and existing Trust, ECTB
tourism SMME’s
2.2 Tourism Enterprise Establish a dedicated Unit within the Amathole AEDA High R100 000-00
Development Unit Economic Development Agency to implement and
coordinate the tourism enterprise programme
2.3 Trading and market places Provide appropriate trading and market places for ADM Medium R500 000-00
tourism related SMME’s e.g. crafts, art etc.
2.4 Institutional Partnership Sign MOU’s with key government and non- ECTB, DEAET, ECDC High R25 000-00
Programme governmental organizations to improve
coordination of tourism initiatives, leverage funding
and improve market access for local products.

2.5 Tourism Master Plan Formulate a Tourism Master Plan to guide tourism ADM High -
infrastructure development, market development
and positioning of Amathole as a tourist
destination.
[3] MANUFACTURING 1.1 Manufacturing Development Formulate a Manufacturing Development Strategy ADM High R150 000-00
DEVELOPMENT SUPPORT Strategy and Plan aimed at increasing the number and
sustainability of SMME’s and competitiveness of the
manufacturing sector in general.
1.2 Regional DTI Office Facilitate the establishment of the DTI regional ADM, DEAET, DTI High R50 000-00
office within the District to improve access to
industrial information, incentives etc.
1.3 Manufacturing Research Partner with tertiary institutions to develop and Tertiary Institutions High R100 000-00
Programme implement a comprehensive manufacturing and private sector
research database covering all key sub-sectors.
1.4 Manufacturing Development Establish a dedicated Unit within the Amathole AEDA High R50 000-00
Unit Economic Development Agency to implement the
Manufacturing Development Strategy and
coordinate sector activities.
1.5Institutional Partnership Sign MOU’s with key government departments and ECDC, CSIR, DEAET, High R25 000-00
Programme agencies to improve coordination of manufacturing AIDC, DTI,
programmes, leverage funding and improve market ECMAC/SEDA
and infrastructural needs.
STRATEGIC THRUST [2] - BLACK ECONOMIC EMPOWERMENT SUPPORT

1.1 BEE Council Establish a BEE Council for Amathole to monitor ADM, Labour and High R45 000-00
and guide black economic empowerment in Business
Amathole. Representation would include the district
municipality, local municipalities, key industry and
economic sector representatives from labour,
corporate and social partners.
1.2 BEE Support Centres [BEEC’s] Facilitate the establishment of BEEC‘s that will ADM, DEAET, DTI Medium R100 000-00
provide information on tenders, opportunities,
conduct BEE audits, facilitate twinning between
small and big enterprises and broaden the base of
BEE suppliers across sectors.

1.3 Financial Access Facilitation Develop and implement an appropriate programme AEDA, ADM, DEAET, High -
to unlock funding and financial assistance for BEE DTI, ECDC, SEDA,
enterprises. Banks
STRATEGIC THRUST [3] - INFORMAL SECTOR DEVELOPMENT

INFORMATION, ADVICE AND 1.1 Directory of Business Support Production of a detailed brochure, leaflet or ADM, AEDA, SEDA High R100 000-00
TRAINING directory of available support services for different
sectors in Amathole
1.2 SMME Help Line Launch a local SMME Hotline, as a toll-free facility ADM, AEDA, SEDA Medium R50 000-00
aimed at assisting informal traders, aspiring
entrepreneurs and general business to gain
business advice and information telephonically
thereby minimizing the travel and time cost.
1.3 Radio Outreach Programme Launch a radio programme to provide business ADM, AEDA, SEDA High R100 000-00
information to the community at large, promote
entrepreneurship and improve awareness about
existing support services.
1.4 SMME Tabloid Implement a regular local SMME supplement or ADM, AEDA, SEDA High R100 000-00
tabloid as a tool to provide business information
such as tenders, business opportunities as well as
an advertising medium for SMME ‘s and big
business.
1.5Mobile Outreach Campaign Implement a mobile business outreach programme ADM, AEDA and High R600 000-00
to provide business advice and information to rural support organizations
communities, township and home-based
entrepreneurs.
1.6 Walk-In Centres Establish facilities wherein the majority of the ADM, DBSA, DEAET Medium R500 000-00
existing and new support organizations can all and support
operate, part-time or full-time, under a single roof organizations
and offer a variety of support services for informal
and established businesses across the District.
1.7 Informal Sector Forum Establish and operate a Forum representing ADM High R50 000-00
poverty-alleviation and hawker associations to
consolidate support and resources and improve
communication at various government levels

POLICY SUPPORT AND 1.8 Informal Trading Policy Formulate a policy to guide the regulation and ADM High R150 000-00
DEVELOPMENT Framework support of informal trading in the Amathole District
Municipality as a guide for local municipalities.
INFRASTRUCTURE AND 1.9 Infrastructure Support Provide or facilitate access to appropriate business ADM, AEDA High R5 000 000-00
BUSINESS ACCOMMODATION Programme trading places such as hawkers stalls, business
hives as well as access to affordable electricity,
water and sanitation services.
MARKET DEVELOPMENT 1.10 Consumption Pattern Studies Implement a study into sources of income and ADM, AEDA High R120 000-00
SUPPORT spending / consumption patterns in Amathole
District Municipality as way of determining local
opportunities for new and existing businesses. This
will also assist to determine community needs i.e.
where they are spending their money. This study
could further ascertain where spazas and general
dealers are buying from, opportunities to increase
distribution by private sector providers.
1.11Spaza Development Initiative Partner private sector to implement a targeted AEDA High R100 000-00
programme for spaza shops and general dealers to
improve viability and profit margins.
1.12 Taxi Industry Development Formulate and implement a programme aimed at AEDA, ECDC Medium R100 000-00
Initiative formalizing businesses operating within the taxi
industry and thus increase sustainability and
contribution to the informal economy.
FUNDING AND FINANCIAL 1.13 Micro Lending Facility Lobby for the establishment of a number of micro- ADM High R15 000-00
ACCESS lending facilities by or in partnership with the
private sector to provide micro funding less than
R50 000 to informal and micro businesses.
1.14 European Union LED Partner with the Department of Local Government, ADM, DLGH&TA, High -
Programme Housing and Traditional Affairs through the ECDC, IDC
European Union LED Programme for the
establishment of various business support funds to
improve access to grant and micro-finance.
STRATEGIC THRUST [4]: HUMAN RESOURCES AND SKILLS DEVELOPMENT

1.1 Comprehensive Skills Audit Conduct a detailed skills audit of the existing ADM, AEDA, DoL High R400 000-00
businesses, employed and unemployed persons in
the ADM. The first phase would focus on existing
business and economic projects to determine
training and human resource needs.

1.2 SMME Skills Plan Formulate a skills development programme AEDA High R100 000-00
containing key training areas to build the SMME
capability of ADM. Partner with local tertiary
institutions to develop appropriate training
programmes for local SMME’s, support
organizations, municipalities and communities.
1.3 Municipal SMME Capacity Partner with the Vulindlela SMME Programme to ADM, DEAET, ECDC, High R500 00-00
Building Programme implement the SMME training and capacity building SEDA, DBSA, NMM
programmes for LED Officers, Coordinators and University
relevant municipal officials.
1.4 Programme Partnering Sign an MOU with the Department of Labour and ADM, SETA’s, AEDA, High R10 000-00
relevant SETA’s to fund and rollout specific LM’s
technical and business training programmes in line
with the needs of local municipalities, business and
major developments in the area.
1.5 Mentorship Programme Enter into a strategic partnership with service AEDA, Khula, High R100 000-00
providers, to establish a pool of qualified mentors Business Partners,
that will provide support to SMME businesses ECDC, local support
requiring support in the area. organizations
STRATEGIC THRUST [5] - INSTITUTIONAL DEVELOPMENT AND SERVICE DELIVERY IMPROVEMENT

1.1 SMME Working Group Establish an SMME Working Group (SWG) wherein ADM, LM’s, AEDA, High R100 000-00
major support organizations, local municipalities SEDA, ECDC, DEAET,
and government agencies are represented to DLGH&TA, DBSA,
advice Council on SMME issues, undertake joint Tertiary Institutions
planning, leverage resources and coordinate and local support
support services. organizations
1.2 SMME Market Intelligence Establish and maintain an operational database AEDA, ECDC, DEAET High R400 000-00
providing information on types of businesses by
ownership, sector, size, turnover, location, services
as well the database of support organizations, their
services, target market and location.
1.3 Rural and Small Towns SMME Design an integrated SMME delivery model to ADM, SWG High R60 000-00
Service Delivery Model improve the quality and quantity of SMME support
in small towns and rural areas as priority areas.
This will include forming partnerships to implement
some aspects of the Council‘s SMME strategy as
well as the establishment of strategically located
business support centres.
1.4 Support Organizations Design and implement a capacity building ADM, DBSA, DEAET, Medium R500 000-00
Development Programme programme to improve the quality of SMME support SEDA, ECDC
services provided by municipal agencies and non-
governmental organizations.

1.5 Municipal SMME Support Fund Establish a Fund from which to financially assist ADM, DEAET, DBSA, High R500 000-00
local municipalities towards their ECDC
SMME programmes by providing annual grants.
The Fundd will leverage funding from the ADM,
government departments and other private sector
1.6 Municipal SMME Capacity partnerswith the Vulindlela SMME Programme and
Partner ADM, DEAET, ECDC, High R200 000-00
Building Programme other SP’s to implement SMME training and SEDA, DBSA, NMM
capacity building programmes for LED Officers, University
Coordinators and relevant municipal officials.

SECTION [9]
PROGRAMME IMPLEMENTATION PLAN
YEAR ONE [2005/2006] PROJECT NAME PROJECT DESCRIPTION LEAD PARTY BUDGET
1.1 SMME Development Appoint an SMME Coordinator on a full-time basis to manage the ADM R200 000-00
Coordinator rolling out of the SMME Strategy.
1.2 SMME Workgroup Establish the SMME workgroup as a coordinating body of all SMME ADM R50 000-00
related matters and advisor to Amathole District Municipality.
1.3 SMME Research Database Implement comprehensive study to collect and analyze information ADM [AEDA] R400 000-00
on types of businesses by ownership, sector, size, turnover, location,
services as well the database of support organizations, their services,
target market and location.
1.4 SMME Service Delivery Model Design a plan on how services will be delivered in the rural, urban ADM [SWG] R60 000-00
and small town areas of the District and what instruments will be
used and managed.
1.5 Manufacturing Development Formulate a sector plan for that will guide the development of the ADM R75 000-00
Plan manufacturing industry of Amathole.
1.6 Sector Programme Designs Design sector enterprise programmes for agriculture, tourism and ADM [AEDA] R100 000-00
manufacturing and establish capacity to deliver them through the
district.
1.7 SMME Service Directory Production of a detailed brochure, leaflet or directory of available ADM [AEDA] R100 000-00
support services for different sectors in Amathole
1.8 Municipal SMME Capacity Partner with the Vulindlela SMME Programme and other SP’s to ADM [DEAET] R200 000-00
Building Programme implement SMME training and capacity building programmes for LED
Officers, Coordinators and relevant municipal officials.
1.9 Municipal SMME Support Fund Establish a Fund from which to financially assist local municipalities ADM R200 000-00
towards their SMME programmes by providing annual grants. The
Fund will leverage funding from the ADM, government departments
and other private sector partners
1.10 Mobile Outreach Campaign Implement a mobile business outreach programme to provide ADM [SWG] R200 000-00
business advice and information to rural communities, township and
home-based entrepreneurs.

YEAR TWO [2006/2007] PROJECT NAME PROJECT DESCRIPTION LEAD PARTY BUDGET
1.11 Informal Sector Forum Establish and operate a Forum representing poverty-alleviation and ADM R50 000-00
hawker associations to consolidate support and resources and
improve communication at various government levels
1.12 Spaza Development Initiative Partner private sector to implement a targeted programme for spaza AEDA R100 000-00
shops and general dealers to improve viability and profit margins.
1.13 Informal Trading Policy Formulate a policy to guide the regulation and support of informal ADM R100 000-00
Framework trading in the Amathole District Municipality as a guide for local
municipalities.
1.14 Radio Outreach Programme Launch a radio programme to provide business information to the AEDA R100 000-00
community at large, promote entrepreneurship and improve
awareness about existing support services.
1.15 Walk-In Centres Establish facilities wherein the majority of the existing and new ADM [DBSA, DEAET] R500 000-00
support organizations can all operate, part-time or full-time, under a
single roof and offer a variety of support services for informal and
established businesses across the District.
1.16 Micro Lending Facility Lobby for the establishment of a number of micro-lending facilities by ADM [AEDA, DEAET]
or in partnership with the private sector to provide micro funding less
than R50 000 to informal and micro businesses.
1.17 BEE Council Establish a BEE Council for Amathole to monitor and guide black ADM [AEDA] R45 000-00
economic empowerment in Amathole. Representation would include
the district municipality, local municipalities, key industry and
economic sector representatives from labour, corporate and social
partners.
1.18 Consumption Pattern Studies Implement a study into sources of income and spending / ADM [AEDA] R75 000-00
consumption patterns in Amathole District Municipality as way of
determining local opportunities for new and existing businesses. This
will also assist to determine community needs i.e. where they are
spending their money. This study could further ascertain where
spazas and general dealers are buying from, opportunities to
increase distribution by private sector providers.
1.19 European Union LED Partner with the Department of Local Government, Housing and ADM [DLGH&TA, R10 000-00
Programme Traditional Affairs through the European Union LED Programme for ECDC]
the establishment of various business support funds to improve
access to grant and micro-finance.
1.20 Support Organizations Design and implement a capacity building programme to improve the ADM [DBSA, DEAET, R500 000-00
Development Programme quality of SMME support services provided by municipal agencies and SEDA, ECDC]
non-governmental organizations.

YEAR THREE [2007/2008] PROJECT NAME PROJECT DESCRIPTION LEAD PARTY BUDGET
1.22 SMME Tabloid Implement a regular local SMME supplement or tabloid as a tool to ADM [AEDA, SEDA] R100 000-00
provide business information such as tenders, business opportunities
as well as an advertising medium for SMME ‘s and big business.
1.23 Infrastructure Support Provide or facilitate access to appropriate business trading places ADM [AEDA] R2 000 000-00
Programme such as hawkers stalls, business hives as well as access to affordable
electricity, water and sanitation services.
1.24 Comprehensive Skills Audit Conduct a detailed skills audit of the existing businesses, employed AEDA [DoL] R450 000-00
and unemployed persons in the ADM. The first phase would focus on
existing business and economic projects to determine training and
human resource needs.
1.25 SMME Skills Plan Formulate a skills development programme containing key training AEDA [DoL] R100 000-00
areas to build the SMME capability of ADM. Partner with local tertiary
institutions to develop appropriate training programmes for local
SMME’s, support organizations, municipalities and communities.
1.26 Skills Programme Partnering Sign an MOU with the Department of Labour and relevant SETA’s to ADM, [SETA’s, AEDA, R15 000-00
fund and rollout specific technical and business training programmes LM’s]
in line with the needs of local municipalities, business and major
developments in the area.
YEAR FOUR [2008/2009] PROJECT NAME PROJECT DESCRIPTION LEAD PARTY BUDGET
1.28 SMME Help Line Launch a local SMME Hotline, as a toll-free facility aimed at assisting ADM [AEDA, SEDA] R50 000-00
informal traders, aspiring entrepreneurs and general business to gain
business advice and information telephonically thereby minimizing
the travel and time cost.
1.29 BEE Support Centres [BEEC’s] Facilitate the establishment of BEEC‘s that will provide information on ADM [DEAET, DTI] R100 000-00
tenders, opportunities, conduct BEE audits, facilitate twinning
between small and big enterprises and broaden the base of BEE
suppliers across sectors.
Programme such as hawker’s stalls, business hives as well as access to affordable

1.31 Mentorship Programme Enter into a strategic partnership with service providers, to establish AEDA [SEDA, ECDC] R100 000-00
a pool of qualified mentors that will provide support to SMME
businesses requiring support in the area.
1.32 Taxi Industry Development Formulate and implement a programme aimed at formalizing AEDA [ECDC] R100 000-00
Initiative businesses operating within the taxi industry and thus increase
sustainability and contribution to the informal economy.
YEAR FIVE [2009/2010] PROJECT NAME PROJECT DESCRIPTION LEAD PARTY BUDGET
Programme such as hawker’s stalls, business hives as well as access to affordable
1.35 Impact Evaluation Programme Design and implement a programme to evaluate impact of the ADM [SWG] R500 000-00
Council‘s interventions on SMME’s.

SECTION [10]
ABBREVIATIONS AND
ACKNOWLEDGEMENTS
1. GLOSSARY AND ABBREVIATIONS
1 ADM Amathole District Municipality

2 AEDA Amathole Economic Development Agency
3 ARC Agriculture Research Council
4 CSIR Council for Scientific Information and Research
5 DBSA Development Bank of Southern Africa
6 DEAET Department of Economic Affairs, Environment and Tourism
7 DoA Department of Agriculture
8 DoE Department of Education
9 DoH Department of Health
10 DoHLG Department of Housing and Local Government (provincial)
11 DoL Department of Labour
12 DoLA Department of Land Affairs
13 DPLG Department of Provincial and Local Government (national)
14 DTI Department of Trade & Industry
15 DWAF Department of Water Affairs
16 ECDC Eastern Cape Development Corporation
17 ECMAC Eastern Cape Manufacturing and Advisory Centre
28 ECSECC Eastern Cape Socio-Economic Consultative Council
29 ECTB Eastern Cape Tourism Board
20 ECYC Eastern Cape Youth Commission
21 HDI Historically Disadvantaged Individual
22 LED Local Economic Development
23 LMs Local Municipalities
24 PGDP Provincial Growth and Development Plan
25 SCDA Sundays River Community Development Agency
26 SETA State Education and Training Authority
27 SMME Small Medium and Micro Enterprise
28 SWG SMME Workgroup
29 TABEISA Technical and Business Education in South Africa
2. ACKNOWLEDGEMENTS
The Amathole District Municipality acknowledges the valuable input and support provided
by its local stakeholders during the process of formulating this SMME Strategy. Our special
thank you for the role played is accorded to the following organizations:
2.1 Eastern Cape Development Corporation

2.2 Department of Economic Affairs, Environment and Tourism
2.3 Triple Trust Organization
2.4 NICRO
2.5 Mdantsane Chamber of Commerce
2.6 Khula Enterprise Finance
2.7 Buffalo City Municipality
2.8 Nkonkobe Municipality
2.9 Mahlathi Municipality
2.10 Mbashe Municipality
2.11 Mnquma Municipality
2.12 Mdantsane One Stop Shop
The LED Manager further acknowledges the support role played by the Communication Department
and Special Programmes Unit during this strategy formulation process.

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AMATHOLE DISTRICT MUNICIPALITY

SMME DEVELOPMENT STRATEGY

Tel: (043) 701 4000

SMME DEVELOPMENT STRATEGY

Final Draft, SMME Development Strategy 1

SECTION [1]: INTRODUCTION [4]

SECTION [2]: THE NATIONAL SMME SECTOR [7]

SECTION [3]: ADM SOCIO-ECONOMIC PROFILE [14]

SECTION [4]: ADM SMME DEVELOPMENT SECTOR [21]

SECTION [5]: STRATEGIC PROBLEM ANALYSIS

Final Draft, SMME Development Strategy 2

SECTION [6]: SMME STRATEGIC ALTERNATIVES

• SMME development Vision [48]

SECTION [7]: INSTITUTIONAL ARRANGEMENTS

• Institutional Considerations [57]

SECTION [8]: SMME PROGRAMME AND PROJECTS [62]

SECTION [9]: PROGRAMME IMPLEMENTATION PLAN [68]

SECTION [10]: USED ABBREVIATIONS AND [72]

Final Draft, SMME Development Strategy 3

THREESIXTY Consulting was appointed by the Amathole District Municipality to undertake

• Provide a synoptic overview of the socio-economic environment

1.1 Phase [ONE]: Situational Analysis

1.2 Phase [TWO]: Objectives, Strategies & Proposals

1.3 Phase [THREE]: Implementation and Scheduling Planning

Final Draft, SMME Development Strategy 4

2. PURPOSE OF THIS REPORT

The paper addresses the following critical areas:

• National and provincial policy environment for SMME development

3. APPROACH AND METHODOLOGY

3.1 Desktop Review

• Laphum’ Langa e-Eastern Cape, 2003 (ECDC)

Final Draft, SMME Development Strategy 5

3.2 Strategic Interviews

Final Draft, SMME Development Strategy 6

2. REASONS WHY SMME’S ARE IMPORTANT

• SMME’s have shown a remarkable capacity to absorb labour, albeit largely

• In South Africa, where non-whites were historically discouraged from owning

• SMME’s provide a ‘nursery’ and a proving ground for entrepreneurship and

Final Draft, SMME Development Strategy 7

Final Draft, SMME Development Strategy 8

Table 1 below provides a breakdown of percentage contributions by the various

Sector Micro % Small % Medium Large %

• 7, 03 million (or 63,4%) were employed in the formal sector

Final Draft, SMME Development Strategy 9

Sector % of total employment in

4. KEY NATIONAL CHALLENGES FACING SMME’s

• The legal and regulatory environment

Final Draft, SMME Development Strategy 10

5. THE NATIONAL SMALL BUSINESS ACT OF 1996

[C] The formal establishment of Khula Enterprise Finance as a subsidiary delivery

[D] The formal establishment of the National Manufacturing Advisory Trust

Final Draft, SMME Development Strategy 11

• ACCESS POINTS: Establishment of access points that will provide information,

• GENERAL BUSINESS SUPPORT: Provision of the following support services to

[a] Entrepreneurship Promotion

Final Draft, SMME Development Strategy 12

Amatole Mandela Cacadu OR Alfred Nzo

Municipality MAP MAP MAP MAP MAP MAP

Final Draft, SMME Development Strategy 13

Butterworth (Mnquma Municipality)

Stutterheim (Amahlathi Municipality)

Alice (Nkonkobe Municipality)

Adelaide (Nxuba Municipality)

Fort Beaufort (Nkonkobe Municipality)

Peddie (Ngqushwa Municipality)

Cathcart (Amahlathi Municipality)

Idutywa (Mbhashe Municipality)