1. Emerging chemical manufacturers and market access
Phineas Letsoalo
10 February 2016

2. Background Information
Established in 2012
100% Black owned company
Manufactures flux for mining & exploration laboratories
The Chemical Industry Education and Training Authority (CHIETA) was established to facilitate the skill development in the chemical sector.
Their role is that of a catalyst for enhanced skills, economic growth and employability.
In order to understand the challenges facing emerging chemical manufacturers, particularly in accessing markets, Purechem was appointed to conduct a study.

3. Summary IN A NUTSHELL Industry is still characterized by past legacies
SMMEs mainly operates outside mainstream
Focus is on household & FMCG
Many have been in business for less than 5 years
Education and prior industry experience are key to success.
Many respondents have turnover of <R1M
Clear line of disconnect between SMMEs and big corporates
The benefits of government programs not fully realized

4. South African Chemical Industry
Most developed on the African continent
Contributes to downstream value chain
both internal and external to itself
2.7% of GDP
1.2% of employment
8.8% of all exports
OPPORTUNITIES
Great growth potential into African Market
Since 2000, exports into Africa growing at 14% p.a

5. Small Medium & Micro Enterprises (SMMEs)
South Africa’s SMMEs is estimated to contribute 60% of employment compared to global average of 77%
Despite their significant contribution, South African SMMEs continue to have exceptionally high failure rate
As many as 70% fail in their first year.
In addition to the high failure rate, we have a relatively low participation rate of SMMEs in the economy.
Majority operates outside the mainstream of the economy, and are not linked to CHIETA

6. Sectors responding Manufacture of soap and other cleaning compounds
Chemically-based general household and personal care products
Manufacture raw materials and chemical compounds used in agriculture, including fertilizers
Manufacture, sale and/or distribution of diversified speciality chemicals for industrial use
Manufacture of plastics in primary form and of synthetic rubber
Manufacture of pharmaceuticals, medicinal chemicals and botanical products
Manufacture of beauty products
Petroleum refineries/synthesisers
Manufacture of paints, varnishes, coatings and printing ink

7. Findings
A large number (67%) sells to local market (neighbors, schools & creches)
Very few (6%) sells to established retail
Marketing is mainly through word of mouth
Few advertise.

8. Key customer Requirement
Quality - This is measured in terms of compliance to national standards, such SABS and ISO-accreditation
Cost - SMMEs are expected to be cheaper and still
offer better quality product.
Delivery – On time delivery is essential.
Product testing costs
Method
Quantity
Sample
Cost
SANS: 825
2 X 2L
Dish washing
Liquid R
SANS: 296
Bleach R
SANS: 1344
Furniture polish R
SANS: 1224
Polymer floor striper R
SANS1923
Vim type powder R
SANS: 1922
Toilet Bowl cleaner

9. Hindrances to corporate partnership
Lack of capacity to meet stringent quality requirement
Complex and time consuming process of in-house testing
Concerns over security of supply
The level of education, has direct positive effect on the success rate of SMMEs.

10. Critical support needed
Seed – assistance with ideas, product development
Start-up – help with setting up business, branding, marketing, sales
Growth – need capital - get there faster with capital, but cannot be offered until entrepreneurs have developed some products and gained business experience

11. Support for different business phases
Seed – assistance with ideas, product development
Start-up – help with setting up business, branding, marketing, sales
Growth – need capital – get there faster with capital, but cannot be offered until entrepreneurs have developed some products and gained business experience

12. Recommendations
Establishing the CHIETA Emerging Manufacturer’s Advisory Committee (ChEMAC) – This committee will engage with CHIETA a few times a year to suggest high impact activities that should be supported through the funding window.
Specific funding – To set aside funding for specific support such as testing of products, access to technical experts to assist with product development and mentorship.
CHIETA Emerging Manufacturers Support Index (CHEMSI) – Set up a database of emerging chemical manufacturers, make funding available and have companies to report progress, increased turnover and what further support is needed.

13. END
QUESTIONS