Creating a Local Competitive Advantage for Ilembe: Focus on Manufacturing in Isithebe Results of the PACA Exercise February 2004

Part 1: Introduction

What is Participatory Appraisal of Competitive Advantage (PACA ® )? Participatory Appraisal of Competitive Advantage Involve local stakeholders Motivate local stakeholders to take an active role in an LED initiative Transfer know-how to local stakeholders and businesses Do a quick scan of the local economy Assess and refocus ongoing local economic development activities Identify strengths, skills, talents and opportunities Identify business and LED opportunities

What is the objective of PACA? Identify, with a rapid appraisal, the main strengths and weaknesses of the local economy and its main sectors (duration: weeks) Identify options for practical activities to strengthen the competitiveness of firms -- Criteria: –feasible with local resources –quickly implementable (starting next week) –quick, visible results (with 3 months)

The PACA Team A team of LED consultants drawn from all over South Africa Contracted by Enterprise Ilembe and GTZ Facilitated by Mesopartner

What have we been doing? Review of secondary literature Built on previous work – PACAs in Agriculture and tourism in Ilembe in 2003 Kick-off workshop 18 interviews with businesses on the estate 4 mini-workshops with businesses Walking & interviews (7) in Sundumbili township & plaza Interviews with micro-enterprises (9) at sundumbili Plaza & Ithala small business park Feed-back workshop (today)

Part 2: Diagnosis

Main findings Key locational strengths are infrastructure and basic services Access to pool of labour Negative impact of HIV/Aids on productivity Little communication, networking and linkages between businesses Disconnection between Isithebe and environs Many local firms are relying on comparative advantage rather than developing competitive advantages Isithebe is showing signs of decline, not collapse

Key locational strengths are infrastructure & basic services Generally input costs are low There is existing management of the industrial estate Basic service problems do exist – but issues relating to water are being resolved There is a critical mass of existing businesses Transport costs remain an issue of concern, not very critical Crime is a problem requiring attention

Access to pool of labour Historical cost advantage still a strength but being eroded by wage parity Large pool of appropriate skills & experience, but not at a higher level Poor linkages to training providers to address apparent skills gap

Impact of HIV/Aids Recognised by organisations as an issue – some existing initiatives Beginning to impact on labour productivity (eg absenteeism) and bottom line Few firms have proactive strategies Lack of cooperation & coordination between organisations to build on existing initiatives

Little communication, networking & linkages between businesses In thriving industrial districts firms network to increase business, reduce costs and create healthy competition The general absence of this is a matter for concern Isithebe business need to have a common point of contact

Disconnection between Isithebe and environs Perceptions of “unhealthy” relationship between estate and Sundumbili Little obvious signs of corporate citizenship Emerging enterprises are not being integrated into the local mainstream economy Smaller firms on the estate feel marginalised

Firms rely on comparative advantage rather than developing competitive advantage Many firms in low end, cost-based markets Firms admit to little product and process innovation, although many have this potential and expertise Lack of market expansion – focus on local rather than national and international markets

Isithebe is showing signs of decline, not collapse Many firms still committed Some firms expanding and investing Challenges likely to intensify and cannot look to government for help Negative perceptions are contagious – general view is that “the glass is half empty rather than half full”! Isithebe is in fact doing better than many other industrial estates – especially those established with decentralisation incentives

Part 3: Proposals The proposal are based on the diagnosis The criteria used: – use of local resources – can it start next week – will there be a visible difference within three months

1. Opportunities for local firms to reduce transport costs Set up Internet-based system to identify opportunities for part loads / load sharing Ithala – create opportunity for transport broker Business – drive process Ithala – start-up support

2. Enhancing the marketing and promotion of Isithebe Creating targeted and aggressive marketing –Attracting complimentary businesses that will improve local competitiveness –Explicitly address the perception that Isithebe is in decline: Emphasize emerging new profile of Isithebe Enterprise Ilembe and Ithala to define the marketing opportunities

3. Creating a safer business environment To improve local visible policing and resources Fast-track proposals to redefine Police Station boundaries BAC, Ilembe and Ithala to meet the Provincial Commissioner to press for urgent decision

4. Establishing opportunities for Emerging Enterprises? Emerging enterprises to define what they have to offer and package it in such a way that it is attractive to established Isithebe business Establish emerging entrepreneurs database to be used for linking and outsource opportunities with establish business Champion?

5. Addressing the impact of HIV/AIDS To get business to know what to do and how to do it Ask Brad Mears from Durban Chamber of Commerce and Industry to brief business next week on what they could do and the resources available to assist Business Maximise synergy with the existing Love Life local interventions and resources that business can use

Other ideas and opportunities? Labour Broker Agency Labour Relations and HR services An on site stationary outlet Linking traditional herbalists to the DEDT Agri-unit initiative Developing basic trading infrastructure for emerging business in Sundumbili