NAMAC Trust: briefing

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Trade, Industry and Competition

20 August 2002
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
21 August 2002
NAMAC TRUST: BRIEFING

Chairperson
: Dr R H Davies (ANC)

Documents handed out:
NAMAC Trust briefing
NAMAC bulletin

NAMAC website

SUMMARY
Committee was informed that NAMAC's primary contribution to the objective of economic growth is achieved by assisting in growing SMMEs to enter the mainstream economy and become sustainable exporters. NAMAC equips the SMMEs with world-class tools and techniques to become globally competitive.  NAMAC makes a contribution by assisting in saving existing and creating new jobs. Committee was assured that NAMAC has endeavoured to address issues of equity imbalances as a core priority.

Briefing by Mr Michael Boyd - CEO NAMAC Trust
Mr Boyd said that NAMAC was established in July 1997 with the Department of Trade and Industry as its custodian. NAMAC's main partners are CSIR, Ntsika and NPI and that its core programmes are manufacturing Advisory Centres (MAC), Business Referral & Information Network (BRAIN) and Franchise Advise and Information Network (FRAIN). NAMAC forms part of the Department of Trade & Industry's Group of Institutions that fall under the COTII Sub Committee on Small Business and others. He said that NAMAC is the leading implementation agency in this sector.

Mr Boyd pointed out that NAMAC's current mandate is to carry out local institutional building to facilitate business development services for SMMEs throughout South Africa. NAMAC's vision as the leading implementing and delivery agency in the SMME Support Industry is to significantly contribute to continuous economic growth and sustainable development in South Africa by improving the competitiveness and growth of SMMEs as a vehicle for poverty alleviation, wealth and job creation.

In a nutshell, Mr Boyd noted that through appropriate SMME support structures, NAMAC would supply high quality advisory and information service to current and new SMMEs in line with best practices globally.

NAMAC's primary contribution to the objective of economic growth is achieved by assisting in growing SMMEs to enter the mainstream economy and become sustainable exporters. He continued that as for competitiveness NAMAC equips the SMMEs with world-class tools and techniques to become globally competitive. In the crucial area of job creation, Mr Boyd pointed out that NAMAC, again, makes a contribution by assisting in saving existing and creating new jobs. As for the dictates of equity, Mr Boyd submitted that in all the forgoing endeavours equity imbalances are addressed as core priority.

NAMAC's products and services consist of the implementation of systems, skills, techniques and know-how to effectively serve SMMEs in all areas of the country. This process entails the implementation of targeted assistance to sectors and regions such as manufacturing and franchise.

Mr Boyd informed the Committee that currently 85% of NAMAC is contributing to saving jobs and creating new ones, access to export markets, increased sales and reduction in scrap rates. He added that NAMAC is in the process of creating a national network of low volume high impact outlets and high volume low impact outlets. He noted, however, that the challenge is to grow capacity exponentially to meet the demand side pressures as current statistics show that collectively NAMAC is serving significantly less than 1% of the available SMMEs.

Mr Boyd concluded his presentation by inviting any positive challenge to integrate and co-ordinate a strategy for the improvement of service delivery through its national network and other compatible delivery mechanisms but that this would be done in conjunction with other COTII, the private sector and other stakeholders.

Discussion
Mr Duma (ANC) expressed concern that a very small number of SMMEs actually achieved success in business growth. Why was this the case?

Mr Boyd pointed out that he could not speak for others but NAMAC's SMME program had less than 1% failure rate. Some of SMMEs that come to NAMAC do not have the correct bearing hence new opportunities have to be created for them to pursue in order to be sustainable.

Mr Duma asked about the fate of those SMME that fail to take off the ground and whether these SMMEs were based in rural areas or in urban centres.

Mr Boyd replied that during a meeting with the Committee, the Minister distributed information detailing the SMME's rural affiliates. There were liaison officers that had been designated to work with every rural affiliate for the benefit of the SMMEs. He noted that the SMMEs have access to support through these affiliates and where none existed, access to services and products could be sought directly from the DTI.

Mr Duma noted that it seemed the main problem for lack of growth in the majority of the SMMEs was inadequate financing. How, if at all, NAMAC assists its clients to secure adequate financing?

Mr Boyd clarified that NAMAC's role with regard to SMMEs was directed at capacity building to achieve international competitiveness and thereby be assimilated into the mainstream business circles.

The Chair concurred with Mr Duma that indeed very few SMMEs survive the formative stages of incorporation. He inquired about NAMAC's support in securing markets for the SMME is focused on the local markets alone or it goes international as well.

Mr Boyd replied that NAMAC's sights are set on the international market but that the local market is an unavoidable stopover.

The Chair asked why the coverage of the SMME was not expanding fast enough to cast its net deep into the rural areas.

Mr Boyd replied that through its BRAIN and FRAIN facilities, NAMAC was fast reaching the deep rural out-posts.

The Chair noted that NAMAC was a leading implementation agency yet it still operates as of the DTI's institutional structure. He questioned the appropriateness of this positioning.

Mr Boyd replied that NAMAC had only been in existence for over three years and that the question of its independence would be relevant after progress in its projects had been noted.

Ms Ntuli (ANC) pointed out that the very small SMMEs  go to micro-lenders for financing yet these institutions charge exorbitant interest rates. Had NAMAC put in place the necessary structures to assist the SMMEs access finance at affordable rates.

Mr Lockey (ANC) questioned the viability of the SMMEs in the manufacturing industry as internationally competitive industries must produce on a mass scale.

Mr Boyd disagreed with Mr Lockey on the question of the viability of SMMEs in the manufacturing industry. He pointed out that in the USA there were over 400 centres for the SMMEs, which produced over 70% of the manufactured goods. He noted that  capacity building for the SMMEs was required to achieve international competitiveness.

Mr Lockey said most of the major manufacturing industries had been forced by global imperatives to lay off a considerable size of their work force.

Mr Boyd acknowledged this fact but hastened to point out that SMMEs project helped to  absorb those who had lost their jobs in the mainstream industry.

Dr Rhoda (NNP) requested NAMAC to make available to members of the Committee the physical address of the identified SMME in provinces for purposes of helping in fulfilling their oversight role.

Ms Ntuli (ANC) asked why three stop shops existed for the SMME's service instead of one.

Mr Boyd replied that these structures correspond to the city and rural imperatives and added that as of July NAMAC had planned for six more stop shops throughout the country.

Ms Ntuli lamented that high quality raw material was not made available for people in the rural areas and inquired whether NAMAC had put in place necessary structures to assist people in deep rural areas in this regard.

Mr Boyd pointed out that through the BRAIN network, the rural business people had access to quality raw material but that where this was impractical they would approach the national office, which then provides this service through research.

Mr Duma submitted that the small business entrepreneur had to contend with competition from the established local industries before hoping into the nternational market..

Mr Boyd said that one of the priority areas that NAMAC gives consideration is the spectre of the local competitor and that since this is the first hurdle for the SMMEs before becoming international it is of primary concern to NAMAC. NAMAC overcomes this obstacle by structuring the SMMEs to work in collaboration and corporation with these local entities in particular to improve on the product range.

Ms Ntuli pointed out that NAMAC's presentation had unveiled 222 cases as representative of its success story yet the SMMEs that had been assessed were many more.

Mr Boyd clarified that the 222 sighted cases only represent the current processing structure noting that numerous other cases had already been processed and turned over to the market. He reiterated that NAMAC's failure rate was only 1% hence theirs could correctly be termed a successful venture.

The Chair asked how NAMAC would go about prioritising on expansion if it had been stated that capacity was the teething issue.

Mr Mulaw explained that NAMAC worked through provincial structures in spite of the fact that SMME is a national project. Through these structures BRAIN had tapped into new areas and it was beginning to understand the true needs of the SMMEs. He pointed out that NAMAC project was still far in its infancy and that it would take some time before a proper audit of its impact could be validated.

The Chair acknowledged the enormity of the challenge posed by the need to revamp the SMMEs and pointed out that members were working in their respective parties to see how to broaden areas of SMME coverage. Would expansion be demand driven?

Mr Mulaw explained that there were provincial representatives on NAMAC's board who assisted with in-puts on expansion and that they help point out areas of priority.

Ms Ntuli asked how NAMAC went about rolling out SMMEs centres throughout the country in view of the fact that the Mpumalanga Province in its expansiveness had little to show in terms of sustainable SMMEs.

Mr Mulaw reiterated that the provincial in-put is crucial in the decision to establish SMMEs facilities and that it was the local affiliates who diagnose the projects on the basis of an established structure that had proper accountability, computer connectivity and premises. He said that once these structures had been established then they immediately became the local satellite centres.

Chair said the Committee looked forward to another brainstorming interaction with NAMAC in a year or so. However, the Committee would have to interact with NTSIKA first.

Meeting adjourned.

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