E Thabethe: Local Enterprise Fund and Small Enterprise Development
Agency launch

21 July 2007

Master of Ceremonies
Honoured guests
Ladies and gentlemen

Introduction

Over the past years, government has been involved in processes that have
formulated a number of initiatives to accelerate, deepen and share our economic
growth. Central to these policy initiatives is the intention to create an
enabling environment in which businesses can operate optimally. It is for this
reason that I am particularly pleased to conclude my visit in Limpopo this week
with the launch of two initiatives, these being the Local Enterprise Fund (LEF)
and the opening of the Seda Provincial Office.

Even more pleasing, is the level of government partnership highlighted in
these initiatives. This partnership firstly started between the Department of
Trade and Industry and Limpopo Department of Economic Development, Environment
and Tourism and cascades to the implementation agencies under both departments.
This resonates well with our long held view that there should meaningful
partnerships between different spheres of government and institutions. The
Local Enterprise Fund has been made possible by financial contributions jointly
made by Khula Enterprise Finance under the Department of Trade and Industry,
Limpopo Department of Economic Development, Environment and Tourism and its
agency, Limpopo Economic Development Enterprise.

The Small Enterprise Development Agency and Limpopo Business Support Agency
will support the fund with necessary client support in preparation of fund
applications and client after-care services. This is to improve access to this
fund and access to additional services required once funds have been disbursed
to beneficiary enterprises. The Local Enterprise Fund is therefore a financial
instrument aimed at delivering comprehensive financial and non-financial
business support services to emerging enterprises.

Seda has already established 40 branches around the country. The provincial
Seda office opened in Polokwane this afternoon starts with a network of three
branch offices, specifically in the districts of Capricorn, Mopani and Vhembe.
Two more branch offices are under establishment in the Waterberg and Sekhukhune
districts. Co-operation with Limpopo Business Support Agency (LIBSA) should
help extend outreach to the more rural municipalities to ensure that all
aspiring and existing entrepreneurs in the province have access to small,
medium and micro enterprises (SMME) development services. The partnership
between Seda and LIBSA should enable us to assess progress made in
strengthening service delivery, including the impact in relation to initiatives
intended for reaching out to marginalised people and places, whilst ensuring
that more sustainable enterprises are created each year.

Economics

Programme Director, looking at the performance of the South African economy
in the past few years, one feels that there is a great deal to be positive
about. Economic growth is at its highest level in almost two decades, business
confidence has also risen considerably since the present government took
office.

Our current growth trajectory is further being sustained by inflows of
foreign investment, epitomising the confidence which foreign investors continue
to display in the performance and sustainability of the South African economy.
However, if we look closely at the performance of our economy, we certainly
note that there are areas that require further work that is aimed at improving
our performance as follows:

Firstly, although current growth is coupled with positive net job creation,
the rate at which it is increasing is not yet one that yields significant
impact on our goal of halving unemployment and poverty by 2014.

Secondly, it is characterised by two drivers. One is consumption
expenditure, which is characterised by a credit boom that is not only used to
buy locally produced goods, but also absorbing an increasing volume of imports.
The one potentially worrying factor in our Macro-Economic landscape is the
widening deficit in the balance of trade, which essentially means that we are
importing more goods than we are currently exporting.

This is contrary to the past, where the apartheid regime was forced to
intervene and hive off any growth path that reached above three percent as a
deficit on the balance of trade could not be sustained. Today we are able to do
so due to high levels of confidence, which generates short-term inflows of
portfolio investment from abroad. However, concerns still lie in the fact that
consumption growth is outstripping production growth, creating inflationary
pressures in the process and this is a matter we need to address.

The second main driver of our current growth is the commodities boom. The
rise of China and India as major economic powers that are industrialising
rapidly means that there is a new and increased demand for mineral products and
other primary products that are being generated. This has caused prices for
mineral products to increase, which we as South Africa are a major producer of
and has had an impact on the exchange rate movement (what kind of effect?)

Following from these observations, it has become evident that the South
African economy is capable of higher levels of economic performance. Through
Accelerated and Shared Growth Initiative (AsgiSA), government aims to achieve
its 2014 vision of six percent growth in Gross Domestic Product (GDP) from 2010
onwards, as well as that of halving unemployment and poverty. In order to
achieve this higher growth and development trajectory, the South African
economy needs to undergo some fundamental restructuring (is this not a bit too
strong? I don't think AsgiSA alone entails fundamental restructuring.

In this regard, the emergence of the AsgiSA initiative has enabled us to
focus our minds in respect of the nature of interventions by government that
can unlock challenges faced by businesses and as well as that can take
advantage of opportunities that exist in domestic, regional and global markets.
Most importantly, this initiative has forced us to revisit our patterns of
targeted policy development and programmes so as to give effect to the
developmental objectives that the AsgiSA initiative espouses.

Current policy environment

One of the interventions that AsgiSA states clearly is the need for a robust
industrial policy that can articulate the country's industrial development
path, build on sustainable industrial capabilities. Over the past 18 months,
the dti has been engaged in an extensive and rigorous process of developing a
National Industrial Policy Framework. The Industrial policy aims to, inter
alia, facilitate diversification of the economy; promote an employment
catalysing industrialisation path (awkward); support broad based growth and
contribute to economic development on the African continent by actively
supporting its productive capabilities and more developmental regional trade
integration. The Industrial policy seeks to promote, broaden and accelerate
economic activities across a range of industrial and service sectors.

It is important to note that the Industrial policy is not aimed at replacing
the existing policy initiatives, such as Customised Sector Programmes,
Integrated Small-Enterprise Development Strategy, the emerging Broad-based
Black Economic Empowerment (BBBEE) Codes of Good Practice and the National
Export Strategy. Rather, it is aimed at giving coherence and strategic
direction in the way government intervenes in respect of its economic policies.
The key function of the Industrial policy will be to provide coordination and
leadership, to catalyse private sector investment and employment by convening
processes to identify constraints and opportunities and to lead purposive
actions to relieve these constraints and unlock opportunities.

The Industrial policy and AsgiSA identify skills shortage as one of the
major constraints that impede economic growth, which are both economic and
developmental imperatives. We therefore have to develop and enhance our skills
base so as to provide the human resources that the economy needs in order to
grow, but also equip individuals so that they are able to raise the quality of
their lives.

We believe that approximately R370 billion worth of public investment and
infrastructure programmes, which is at the heart of AsgiSA, is directed at both
providing facilities that are needed for economic growth and at making a
significant contribution to reducing unemployment as well as providing
individuals with the opportunity to improve their lives and to acquire skills
training in the process.

Conclusion

In conclusion Programme Director, in this week alone, I have been in
Thohoyandou, Tzaneen and Jane Furse taking the dti to the people. This is a
programme I lead to foster a partnership strategy between the dti and its
agencies, the provincial government and its agencies an the local government
and its agencies, all jointly concretising government's commitment to work with
communities to ensure progress in creating awareness about government's
programmes for enterprise development support.

One thing common in this programme is the feedback from aspiring and
existing companies pointing to a positive macro-economic outlook which presents
us with the opportunity to make the economic environment friendlier to the
growth and sustainability of SMMEs and a need for continued organisation
building among small enterprises, to create and strengthen networks that can
act on behalf of their members. I hope that Seda's Provincial Office will be an
anchor for partnerships enabling a further roll out of business support centres
in Limpopo province bringing services as much closer to the people will make a
major contribution in this regard.

Issued by: Department of Trade and Industry
21 July 2007