Western Cape

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Western Cape turns focus to rural towns

wcregion-rm topWestern Cape Regional Manager Lizo Ntloko 

There is already plenty of investment flow in the Mother City, prompting the IDC Western Cape to move further afield. It aims to establish a healthy pipeline of projects in a variety of sectors – including agro-processing and the green industries – province-wide in the next few years.

For various reasons, historical and otherwise, economic growth in Western Cape has always been concentrated in the Cape Town metro, which contributes more than 70% to the province's gross domestic product.

"For us to deliver on the concept of 'inclusive growth' in the province, these patterns of economic activity need to change," says Lizo Ntloko, the director of the Industrial Development Corporation's Western Cape regional office. And Ntloko is not getting too comfortable in his office on the 28th floor of a Foreshore building, in the Cape Town CBD. Its views are spectacular but, as Ntloko says, reaching out to other areas of Western Cape, where high levels of unemployment and poverty are more prevalent, is more important than looking at a great view all day.

"We need to identify investment opportunities that we can be developed into a pipeline of bankable projects to stimulate economic activity in these district areas. In order to extend our reach to these areas, we are looking at piggy-backing on the existing infrastructure of our sister organisations for the roll-out of satellite regional offices throughout Western Cape."

Western Cape is divided into six districts areas: Cape Winelands, Overberg, West Coast, Central Karoo, Southern Cape, and Cape Metro. "Each one of these has its own distinct and comparative advantages," he says. "In the current year, the focus for the Cape Winelands may be on agro-processing. There is a lot of fruit production and exporting taking place in this area, especially around Stellenbosch and West Coast, and we are leveraging on this as part of a growth strategy in the Western Cape."

Turning to metals, besides the ship repair and fabrication industry, Ntloko points out, the revitalisation of the foundry industry also shows some growth prospects. The recent court decision on proposed legislation aimed at halting the export of scrap metal is expected to stimulate activity for local processors, and meetings with industry players are already set up to explore increasing the IDC exposure in this important sector, especially pertaining to job creation.

In addition, the Saldanha Bay Industrial Development Zone (IDZ), which was declared on 31 October 2013, will be a major catalyst for foreign direct investment and increased employment opportunities for the people of West Coast, in the medium to long term. The IDZ is the culmination of years of collaboration between all spheres of government and the Saldanha community. It has the potential to become one of the most important levers for jobs and economic growth in the province, and the IDC would like to be part of this process.

It has been identified as a hub for the servicing of the oil and gas sector. Its licensing company has already lined up a number of companies specialising in oilfield services, oil rig operations, ship repair, engineering and logistics to service this sector.

"The IDC has identified a lot of opportunities in this sector once it has taken off, and as a result we have re-aligned our priorities in order to take advantage of them," says Ntloko. "There will be a dire need for replacement components, and therefore localisation of components manufacturing will be top of our agenda. We have already leveraged on some of pockets of land we own in Saldanha Bay, strategically situated to be incorporated as part of the IDZ. Some of our land assets have been used to foster partnership arrangements with companies such as OTMS, a joint venture entity involving the Royal Bafokeng logistics company to unlock much-needed development in this district."

Another focus for the regional IDC office is the chemicals sector, particularly in beneficiation of virgin and recycled plastics, as well as processing of agricultural chemicals. Agriculture and its associated processing industries exports also reveal a comparative advantage over other provinces. There are opportunities in deciduous fruit, horticulture, oil seeds, and other indigenous products, such as rooibos and buchu. And then there is the potential development of aquaculture. As fish stocks are increasingly being depleted, he explains, there is a growing need for aquaculture as a food-producing sector, particularly for species such as the highly prized abalone and fresh water fish.

Finally, the green industries are another priority sector for the regional office, and again this is in line with the provincial government's sectors development strategy. "The main focus for us here includes energy saving and efficiency initiatives, such LED lighting, roof solar panels, biogas and biomass, as well as components manufacturing for the supply of upstream projects in areas such as wind power generation, photovoltaic and concentrated solar."

The IDC does not have a critical mass of green projects in its pipeline in Western Cape, but Ntloko says that going forward, "there is a lot of potential to increase our exposure in this sector".

He reiterates that manufacturing components for the green industry not only refers to renewables; there is also huge potential for alternative building materials and cleaner technology. It is "a very broad sector, and has substantial growth prospects. The provincial government has identified Atlantis as a green manufacturing hub, and we 100% support this initiative."

Province's comparative advantage

About Western Cape's economic background, he says that in terms of its comparative advantage over other provinces, services remain its leading growth and employment sector. "Unexpectedly, though we have increased the numbers of tourism visitors, funding of new and expansion of existing accommodation is not our priority; the IDC's focus area is rather in the creation of new destinations."

Historically, the province has been a leader in the clothing and textile industries, though in the past few years it has been negatively affected by cheap imports and uncompetitiveness, leading to factory closures and massive retrenchments. Through the Department of Trade and Industry, the government has put together very attractive incentive programmes that are geared to assist clothing and textiles businesses overcome these constraints.

"The IDC will [continue to play] a significant role in stabilising the industry. We have seen an improvement in recent years, and it is still a key sector for us because of its absorption ability for semi- and unskilled labour. The main threat now is no longer only imports of goods from China, but remaining competitive."

The biggest contributors to the Western Cape's economy are the financial services and wholesale and retail sectors, although both of these fall outside the IDC's mandate in terms of funding.

Deepen IDC presence in district areas

When it comes to increasing activity in non-metro district areas, he says the office is keenly watching fracking developments in Central Karoo. The IDC's regional office has not made as much investment impact in Southern Cape as it would want, with an interest in a blueberry operation outside George called Blue Mountain Berries. "We have also funded a boutique hotel in the George area, and outside Mossel Bay in a place called Vleisbaai. We are currently looking at a potential health care facility in George." The office has also funded a fish canning factory in Mossel Bay.

"Our medium-term plans are to deepen our presence in non-metro district areas. Currently, only 20% of [our] funding in the region goes to these areas, and we want to ramp up these figures in the in the next one to two years." By March, the regional office alone had notched up 30 approvals with signed loan agreements in Western Cape, creating a total of more than 2 000 jobs. "By the end of the [financial] year, 31 March 2014, we expect to have approvals in excess of R1-billion in funding."

But Ntloko points to the challenges to the big plans his office has for Western Cape. They include the lack of economic activity in many parts of the province, as well as making a meaningful impact in non-sector focus areas, such as youth development and women empowerment. "As much as we have facilities for the youth sector, such as our Youth Grow-E Fund, the biggest challenge is still the lack of entrepreneurship and business skills among the youth to be able to access this funding. The skills are not readily available in the sectors in which the IDC invests. The skills base is found more generally in services, retail, ICT and tour operating."

The regional office aims to increase the uptake of its funding by black industrialists. "Disappointingly, there seems to be very few black industrialists that are able to access IDC funding. We are optimistic this will ultimately be overcome. The problem is not only about funding; it is also about hand-holding, concerted efforts in skills development through mentorship programmes, creation of an entrepreneurial culture as a nation, business support and improved levels of our education system."

IDC Western Cape is an established presence on the development finance field in the province. "We do have a presence; people know about us. This has enabled us to set up a healthy pipeline of deals. We have established a network of service providers, and have a good relationship with the provincial government and its [special purpose vehicles], as well as with other major players in the [small- and medium-sized enterprises] funding space. I also think we are fortunate that entrepreneurship is more sophisticated in Western Cape as compared to other provinces, except Gauteng," Ntloko says.

Transformation a key objective

Transformation is a key objective in projects in which his office invests. "Our involvement should benefit the workers or communities through direct participation in ownership of shares in these projects, over and above just creating jobs."

Ntloko is a born and bred Capetonian, although he spent many career years in Joburg. He is very pleased with his team in the regional office, which he says, is "adequately staffed, with a total of seven professional and dedicated colleagues". "They are all professional people – with vast experience in deal origination, due diligence processes, and project development. Some of the individuals in the team are chartered accountants and engineers, for example, and therefore possess a wealth of technical skills to evaluate transactions and apply project development applications."

The team also possesses an all-round good knowledge and understanding of the province. "We are a good team and in a way very much complement each other. My team is very motivated and dedicated to its work. We all share the same objective – we live the IDC values in always striving to make a real difference in people's lives… We believe that as the regional office, we are very much aligned to the provincial government's strategies and those of the IDC as a corporation and our strategic business units. Alignment is key [in the realisation of our mutual goals as a country]," he concludes.

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