Nedlac

Promotion of Small and Medium Enterprises in the South African Chemicals sector
APPENDICES
Prepared for Chemicals Summit NEDLAC
Blueprint Str ateg y & Polic y (Pty) Ltd Support for SMEs i n the South African C hemicals Sector
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TABL E OF CONT ENT S
AN OVERVIEW OF THE CHEMICAL AND ALLIED SECTOR REGIONAL CONTEXT THE CHEMICALS INDUSTRY IN AFRICA BUSINESS SUPPORT PROGRAMMES BIBLIOGRAPHY Publications Websites:
3 13 13 16 27 27 27
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AN OVERVIEW OF THE CHEMICAL AND ALLIED SECTOR

The complexity of the chemical and allied industry makes it difficult to define. Broadly it includes the manufacture of all products made by chemical synthesis (reaction), polymer/rubber conversion or formulation/mixing/blending of raw materials or inter mediate chemicals into final, useable products. Generally speaking, the chemical industry produces three broad types of products. 1. Organic and inorganic basic or primary (commodity) chemicals. This is the first point at w hich a chemical substance exists as an isolated and reasonably pure chemical. Prior to this stage, it w ill be present in raw material such as coal, petroleum, metallic or non-metallic minerals or w ill have been a component of a mixture such as refinery gas stream (e.g. ethylene, naphthalene, acetone, acetic acid, ammonium nitrate, aluminium sulphate, etc). Organic inter mediate chemicals A chemical for w hich a definite chemical precursor can be identified, and for w hich most of the supply w ill undergo further chemical transformation to produce a variety of other chemicals (e.g. ethylene oxide, ethyl benzene, propylene oxide). 3. End or functional organic chemicals chemicals such as insecticides, flavours and fragrances, citric acid, acetic acid, etc), w hich are not further reacted chemically but are either formulated or fabricated by other industries into end products or used directly by the final consumer.
2.
The major allied sectors to the chemical industry are the plastic and rubber conversion sectors, as well as many service industries w hich apply or use the chemicals in their specific markets. Many chemical products can how ever fall into several classes, e.g. ethylene glycol is an inter mediate chemical for the production of polyester fibres and also a functional chemical product for use in anti-freeze products. A clear categorisation is therefore not alw ays possible. The chemical manufacturing industry essentially uses tw o basic technologies synthesis (molecular transformation) of one chemical into another and formulation (mixing chemicals by blending, emulsification, solution or other physical means to perform a desired function. The chemical industry provides raw and intermediate materials for industry and a variety of synthetic and formulated products for industry, agriculture, businesses and individual customers. In turn the chemicals industry is also dependent on many of these consumer industries, e.g. mining, agriculture and petroleum for raw materials. Although closely associated to such other process industries such as paper, ceramics, glass, mining primary metals, the chemical industry is unique in that it carries its ow n basic products to a higher degree of elaboration than most other industries. Low -cost basic chemicals are converted to a series of intermediates, w hich, in turn, are reacted or
Blueprint Str ateg y & Polic y (Pty) Ltd Support for SMEs i n the South African C hemicals Sector Page 3 of 38
formulated into a w ide variety of end products, often of relatively high unit value, for many diverse consumer industries. Many chemical products are fabricated by other industries before used by consumers; examples are fibres, plastics and elastomers. Generally speaking the chemical industry includes only the steps of synthesising or formulating these materials w hile the mechanical fabrication is carried out by other industries. For the purposes of this analysis, the mechanical conversion of plastics and rubbers are regarded as allied sectors to chemical manufacturing. The chemical industry makes the primary poly mers for fibres, the synthetic fibre sector converts the polymer to fibres, but the textile industry converts them to fabrics, similarly, the chemical industry makes resins and poly mers, but the allied rubber and plastics industries convert them to usable end products. This inter-relationship betw een the raw materials and products and the consuming industries is illustrated in the follow ing figure:
CHEMICAL RAW MAT ERIALS Agricultural commodities Coal, Tar Products Petroleum Metallic m inerals Nonmetallic m inerals
ORGANIC INORGANIC INDUST RIAL GASES CHEMICALS CHEMICALS BASIC, PRIMARY AND INT ERM EDIAT E (Toluene, benzene, propylene oxide, phosgene, sodium hydroxide, hydrogen) FUNCTIONAL CHEMICAL PRODUCTS (Explosives, antioxidants, fertilizers, adhesives, plastic additives.)
PROCESSING Metals Petroleum refining Pulp & Paper Textiles Food Processing Glass, stone and clay
MANUFACTURING NON MANUFACTURING Wood products Textile products Machine and equipment Metal products Paper products Mining Agricultural Forestry Fisheries Petroleum recov ery Construction
CONSUMER NEED
FOOD CLOTHING HOUSING MEDICAL CARE HOUSEHOLD RECREATION EDUCATION
:
The follow ing sub-sectors have been identified for the broader chemical sector 1. Basic petroleum, petrochemical, primary poly mers and inorganic commodities 1.1 Liquid fuels; 1.2 Commodity (basic or primary organic chemicals) and organic inter mediate and solvents; 1.3 Poly mers and rubbers in primary form; 1.4 Basic commodity, inorganic chemicals and industrial gases. Fine chemicals Speciality (functional/performance) and other formulated chemicals 3.1 3.2 3.3 3.4 4. Speciality (functional/performance) chemicals Bulk formulated chemicals (pseudo-commodities) fertilizers, explosives; Pharmaceuticals; Other consumer formulated products
2. 3.
Plastic and rubber conversion 4.1 Plastic conversion; 4.2 Rubber conversion.
STRAT EGICALLY SIGNIFICANT SUB-SECTORS 1. BASIC PET ROL EUM, PET ROCHEMICALS, PRIMARY POLYMERS AND INORGANIC COMMODITIES
This category includes all manufacturing of basic liquid fuels, as w ell as primary and secondary organic and inorganic chemicals, w ith the exemption of advanced biochemical products. In ter ms of formulating a strategic segmentation for this sector, the major existing operations, their "pipeline" interactions, as w ell as existing underdeveloped categories have to be evaluated. Sub-sector 1.1: Liquid Fuels Definition: Liquid fuels include all liquid and gaseous products derived from mineral sources such as crude oil, coal, natural gas, bio-mass and other sources, and exclusively used in energy applications. Also included are all forms of lubricants and greases
SIC categor ies covered: 3310 Manufacture of coke oven products 3320 Petroleum refineries, synthesisers
Sub-Sector 1.2: Comm odity (Basic or prim ary) organic chem icals and organic
Intermediates and solvents (excluding prim ary polymer) Definitions: Basic or Prim ary Organic Chem icals Basic or primary organic chemicals can be considered as the first point at which a substance exists as an isolated and reasonably pure chemical. Prior to this stage, it will have been present in a raw material such as coal, petroleum, or will have been a component of a mixture such as a refinery gas stream. These chemicals are typically large, e.g. volume consumption, multiple application and generally below US $ 3 per kg. Includes those products generally referred to as petrochemicals. Organic Intermediate Chem icals and Solvents These are chemicals for which a definite chemical precursor can be identified. In addition most of the supply of an intermediate chemical will undergo further chemical reaction (transformation) to produce a variety of other chemicals. SIC categor ies covered: 3341 Manufacture of basic chemicals Major product types include: Petrochemicals such as: Olefins ethylene, propylene, alpha olefins, butadiene aromatics benzene, toluene, xylenes ethylene inter mediates and derivatives (excluding primary poly mers) propylene inter mediates and derivatives (excluding primary poly mers) benzene inter mediates and derivatives (excluding primary poly mers) toluene inter mediates and derivatives (excluding primary poly mers) xylenes intermediates and derivatives (excluding primary poly mers) Other organic commodities such as: fermentation based: ethanol lysine plant and animal derived: starches glucose and other sugars oils and fatty acids cellulose
Sub-Sector 1.3: Polymers and rubbers in Prim ary Forms Definition: All products that are manufactured by means of polymerisation synthesis into a primary form (i.e. beads), ready to be converted by means of mechanical or thermo-mechanical process into fabricated plastic and rubber products.
SIC categor ies are:

3342: Manufacture of plastics and synthetic rubbers in primary forms Major product types include: Poly mers - Low density polyethylene, HDPE, LLDPE, PP, PV C, polystyrene, acrylonitrile butadiene styrene (ABS), polyurethanes (rigid, foam), polyesters (saturated and unsaturated), ethylene vinyl acetate ( EVA), acrylics, polyamides, acetals, polycarbonate, teflons synthetic rubbers - styrene butadiene rubbers, polybutadiene, polyisoprene rubbers, nitrile rubbers, EPDM rubbers, Butyl rubber, Chloroprene
Sub-Sector 1.4: Inorganic Chem icals and Industrial Gases Definition: Inorganic chemicals are those products most often produced from metallic and non-metallic minerals, which have commercial properties indicating typically large consumption volumes, multiple application areas, and relative low market prices (i.e. below US$ 3/kg). Although some inorganic chemicals are used to manufacture other chemicals, the description among basic, intermediate and end chemicals is much less clear than in the organic chemicals group. Inorganic chemicals are used less as building blocks than as processing aids in the manufacture of both chemical and non-chemical products. Ammonia and its derivatives are discussed in the bulk formulated product sector-fertilizers.
SIC categor ies covered: 3341: Manufacture of basic chemicals 3342: Manufacture of nitrogen compounds Commodity inorganic chemicals such as: metal based chemicals - aluminium sulphate, antimony oxide, chrome salts, platinum chemicals, gold chemicals, hydrogen fluoride, lime, iron oxides, lead oxides, manganese chemicals, magnesium chemicals, potassium chloride, silicates, soda-ash Chlor-alkali Chlorine, Caustic soda, Hydrochloric acid, hydrogen Industrial gases Oxygen, Nitrogen, Argon, Ammonia, Carbon dioxide, Medical gases, Acetylene, Rare gases Other Acids, etc - Sulphuric acid, Phosphoric acid, Nitric acid, Hydrofluoric acid
Sub-Sector 2: Fine Chem icals Definition: Fine chemicals are specific molecules of high value typically produced in low volumes and sold at prices above US $ 3 per kg. Many cost thousands of Rand per kg. Fine chemicals include the active ingredients in drugs, pesticides, dyes, pigments and photographic products. They are also used as food ingredients, nutritional chemicals and as intermediate purified
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reagents for further synthesis, especially in pharmaceuticals, agricultural chemicals, dyes and pigments. Fine chemicals are undifferentiated products that are defined in terms of their chemical structure and are distinguished from speciality (formulated or performance) chemicals, which are differentiated products, typically sold under trade names. Fine chemicals differ from commodity (basic or primary chemicals) and specialities in terms of their technology, management focus, product application, volume produced and sold, consumer base, technical service, R & D focus, product differentiation. Fine chemicals can be categorised as end-use products. Which, together with other categories of chemicals, are consumed as key ingredients of pharmaceutical, agricultural, photographic products, electronics, flavours, fragrances, and food chemicals and products. SIC categor ies covered: 3341: Manufacture of basic chemicals 3359: Manufacture of other chemical products Major product types include: Inter mediates for end-products Active pharmaceutical ingredients (APIs) Active pesticide and other agricultural chemical ingredients Actives in flavours and fragrances Various other high-value, pure ingredients in formulated compounds, sold on the basis of chemical composition. There are literally thousands of individual compounds in this sector 3 SPECIALITY (FUNCTIONAL / PERFORMANCE) AND OT HER FORMULAT ED CHEMICALS Speciality (Functional / Perform ance) Chemicals
Sub-Sector 3.1: Definition
Speciality chemicals are differentiated products where one producers product can be distinguished from another producers, and selling involves more than quality, price and service. Prices of these products remain high enough above costs to produce superior profits.
Speciality chemicals are generally sold to performance specifications for what they w ill do rather than to composition specifications for what they contain. They are rarely identified by chemical composition, but are evaluated by users simply by their capability to perform such functions as killing w eeds, emulsifying, colouring or healing. They almost alw ays require formulating know -how, even when the products sold are complex synthesised molecules. For example, marketers of such polymer additives as antioxidants must know how they interact w ith other additives in say a completely formulated plastic compound since synergistic and antagonistic effects are common.
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There are tw o main types of speciality chemicals. One based on functionality and the other based on an industry type classification. In the first instance one functional compound is targeted at many different industries for example, flocculants going into the pulp and paper industry, mining, and w ater treatment for example or biocides going into paints, cosmetics and oils.
SINGLE FUNCTION CHEMICAL
DIFFERENT INDUSTRIES
DIFFERENT FUNCTIONAL CHEM ICALS
S INGLE INDUS TRY

In the second instance a range of functional chemicals is packaged to provide a suite of products utilised in a specif ic industry for example plasticisers, colourants, flame retardants, lubricants, heat stabilizers, organic peroxides, antioxidants, chemical blow ing agents, antistatics and UV radiation absorbers all functional chemical products used as plastic additives. Specific functional chemicals (surfactants, biocides, antioxidants, defoamers, etc.) referred to are often confused w ith fine chemicals. The fact that they are not fine chemicals results from the w ay in which they are sold, namely on the basis of their performance rather than their composition. The SIC categor ies included are: 3351: Manufacture of pesticides and other agrochemicals 3359: Manufacture of other chemical products The major product types are:
Pure functional chemicals: Adhesives and sealants Chelating agents Elastomers Flame retardants Lubricants (synthetic) Resin and latex (specialities) Thickening and sizing agents Dyes Enzy mes Flavours and fragrances Plastics, engineering, ther moplastic and other specialities Flotation reagents Metallic Carbon black For mulated specialities: Automotive chemicals Coal and fuel additives Ion-exchange resins Paint additives Pesticides Photographic chemicals Plasticizers Printing chemicals Cos metic additives Industrial and institutional cleaning products Oilfield chemicals Paper additives Refinery and pipeline chemicals Textile chemicals Sub-Sector 3.2: Definition Bulk Form ulated Chemicals (Pseudo-Commodities)
Bulk formulated chemicals are formulated products compounded from high volume, commodity based chemicals. This includes mainly fertilisers and explosives.
SIC categor ies covered are: 3342: Manufacture of fertilisers and nitrogen compounds 3359: Manufacture of other chemical products Sub-Sector 3.3: Definition Pharm aceutical
Formulated pharmaceutical products include all products in final application dosage and form for use in human and animal medicinal applications
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Pharmaceutical products are in a separate sub-group due to their highly-controlled (registration, manufacturing and distribution) environment, as w ell as the impact of Government in controlling the major share of the end-use market. The SIC category included is 3353. The major product categories in ter ms of product form are: tablets capsules liquids creams steriles and injectables The major product categories in ter ms of therapeutic use include: analgesics anti-diarrhoeals anti- microbials urinary system gastro-intestinal tract respiratory system central nervous system endocrine system musculo-skeletal agents vitamins, tonics, minerals
Sub-Sector 3.4: Definition:
Other Consumer Formulated Products
Other consumer-formulated products include all products in final form for direct end-use by consumers. These products are predominantly supplied via the retail trade sector.
SIC categor ies included are: 3352: Manufacture of paints, varnishes, printing inks and mastics 3354: Manufacture of soap, detergents, polishes, perfumes and toiletries 3359: Manufacture of other chemical products Major product categories include: cleaning products toiletries cosmetics decorative paints consumer adhesives and sealants health supplements 4. CONV ERSION OF POLYM ERIC CHEMICAL SUBSTANCES INTO MANUFACTURED PRODUCTS
Conversion includes polymer and rubber conversion from primary products into end-use products. The sub-groups are:
Sub-Sector 4.1: Definition:
Plastic Conversion
The conversion of primary plastics into end-products by means of processes such as injection moulding, extrusion (excluding textiles), roto-moulding and forming.
The major products include: flexible packaging rigid packaging cables footwear pipes films flooring white goods/electrical automotive electronic Sub-Sector 4.2 Definition: Rubber Conversion
The conversion of primary rubbers into end products by means of processes such as injection moulding, vulcanising and forming.
The SIC categor ies included are 3371 and 3379. The major product categories are: tyres and tubes conveyor belting medical products seals and gaskets retreading
Sub-Sector 4.3 Definition:
Synthetic Textile Yarns
The conversion of primary polymers into textile monofilament and staple yarns by means of processes such as extrusion and spinning
The SIC category included is 3360. The major types of synthetic yarns are: polyester nylons acrylic viscose polypropylene HDPE polyurethane
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REGIONAL CONT EXT THE CHEMICALS INDUSTRY IN AFRICA As can be seen from the international trading data, Africa is a small market for chemicals (US$ 35 billion). Apart from South Africa, Africa also produces very little. In fact, if oil and basic chemicals are removed, Afric a produces an insignificant share of the worlds chemical demand.
Imports of Chemicals by Africa

Apparent Market Size: 199 9-2001 (tons)
600,000 500,000 400,000 300,000 200,000 100,000 0 1999 SA Imp ort Market* 2000 Oth er Import Market** Total 2001
* Minus Urea Imports ** With Urea but adjusted to reflect imports from countries outside of survey The graph above shows that South Africa is the largest supplier to the rest of the subcontinent. How ever, other exporters have begun to target this market, and SA has lost some of its share. The reasons for the shift aw ay from South African dominance of the regional demand market are likely to be several-fold, not least of which is the recent surge in mining and energy-related activities in many other African countries. Although African markets are small individually, several of them have shown good growth over the last three years. Angola, having endured decades of conflict, has shown promising signs of peace and rehabilitation in the last year. This coincides with some of the largest oil discoveries in sub-Saharan Africa off the coast of Angola. Nigeria and Zambia both experienced massive grow th over the last three years, again coinciding w ith times of sustained industrial activity. Nigerias expansion reflects similar patterns to that of Angola largely oil driven w hilst the rehabilitation and expansion of
Zambias copper mines saw exports of inputs into the sector soar. 2002 may see a more sober reflection for Zambia how ever, as the copper sector faces renew ed crisis.
Total Imports by Country, 19 99-20 01 (tons ) 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Mozambique DR-Cong o Malawi Tanzan ia Zambia Zimbabwe
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1999
2000
Mauritius
Ang ola
2001
Kenya, Mauritius, Mozambique and Tanzania also experienced growth between 1999 and 2001, w ith the former being a small but consistently grow ing economy, and the latter two entering new phases of resource-driven growth. In Tanzania the mining sector in particular has taken off, and the country is now Africas third largest gold producer behind South Africa and Ghana, from almost zero exports a decade ago. Mozambique continues to benefit from the ongoing development of the massive Mozal project, the SASOL gas pipeline project, as well as an expansion of mining and manufacturing activity in other areas. On the negative side of the balance sheet, the DR-Congo, Malaw i and Zimbabw e all faltered. The conflict in the DRC and Zimbabw es crumbling economy are well documented, and are as likely to have resulted in declining levels of imports as much from declining demand as from a lack of w illing suppliers. Malaw i is facing something of a crisis both in the domestic economy as a result of both floods and drought, as w ell as a government that is experiencing increasing difficulties w ith the donor community as a result of overspending in the public sector. Exporters Share of the SADC Market The key exporters have divided into four groups: the EU, South Africa, USA and Other, based on the statistics. From the data, it emerges that South Africa is the key exporter to the countries in question, w hich does not come as a surprise given the relative proximity of
Nigeria
Ken ya
South Africa to most of these countries. The share of South Africa in the regional market has declined how ever, from 65% in 1999 and 69% in 2000, to just 44% in 2001. Again, the fact that South Africa no longer produces urea is the key consideration in this regard. In 1999 the other main supplier to SADC w as the EU w ith 29% of the market, w hilst the US share was negligible. In 2000, despite a decline in urea exports, South Africas overall exports increased sharply in fact almost doubling to roughly 88,000 tons. The other exporters showed gradual growth, but it was not until 2001 that the picture changed dramatically. South Africas exports declined largely on the back of declines in urea sales and the share of the export market of the other exporters took up the slack. The EU and the basket of countries in the Other category made the biggest gains in this respect, w ith the US being a marginal player in the market.
Change in Total Exports by Source: 1999-2001 (Tons) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 EU South Africa 1999 2000 USA 2001 Others
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BUSINESS SUPPORT PROGRAMMES

CHEMIN: (The follow ing information is available on the BRA IN w ebsite, available on line at http://www.BRAIN.org.za) CHEMIN is a chem ic al technology incubator. It offers business and technical assistance to those requiring it. It also offers training servic es to those in the chemicals industry and provides office space and use of equipment to those w anting to operate in the chemicals industry incubator. In terms of financial assistance, CHEMIN offers assistance in sourcing development funds, venture capital, equity or asset financing. CHEMIN also offers technology incubation services such as technology feasibility studies, analytical services and technical and economic evaluations. It also offers partnering and netw ork assistance as well accounting and financial management support. All clients\incubatees of CHEMIN undergo a skills gap analysis to determine w hich areas may require training and development. If areas are identified that require training, CHEMIN provides the training. It offers entrepreneurial training, legal management training as well as financial management training and other necessary business skills training. DEPARTMENT OF TRADE AND INDUSTRY (the dti): (The follow ing information is available on line at http://www.dti.gov.za) Accelerated Depreciation Scheme - Aimed at the manufacturing sector w ith the hope of attracting investment in manufacturing and so expand the existing plants. The main aim of this scheme is to provide for the depreciation of land, buildings and machinery in manufacturing plants. The scheme is available to all fir ms country w ide as w ell as to new manufacturing firms w anting to set up plants in South Africa. Critical Infrastructure Program This fund is considered to be a top-up grant for private and public sector providers of infrastructure funding. It makes funds to value of 10-30% of actual infrastructure costs available. Competitiveness Fund The fund makes grants available to South African firms. The funds are to be used to improve the competitiveness of these firms. The Fund demands that a 50% contribution be made by the firm itself while the remainder of the grant w ill be provided on a reimbursement basis to the fir m. Bumble Bee Program This program is in fact a sub-component of the Competitiveness Fund. It provides free consulting services to micro-manufacturers. EM IA The Export Marketing and Investment Assistance Scheme provides exporters and traders with primary export market research, trade missions and exhibitions. The assistance is available to all exporters but special provisions are made for SMMEs involved in exporting.
Rebate Provisions This w as setup to promote the manufacturing and exporting of goods from South Africa. Provisions are made for the rebate of certain duties applicable to the import of raw materials and other goods utilized in manufacturing, processing and export of products. Sector Partnership Fund the fund w as setup to promote collaborative projects so as to improve the competitiveness and productivity of the manufacturing and agro-processing sector. Skills Support Program the program w as setup to encourage training, improve existing industry training and make w ay for the introduction of new and more advanced skills. This will be beneficial to SMEs w anting to become competitive as it w ill make available to them a means of improving their w orkforces capabilities. SM EDP The Small and Medium Enterprise Development Program w as established to create w ealth, encourage entrepreneurship, generate employ ment, promote empow erment and make use of local raw materials (labour, skills and know ledge). The focus is on improving the competitiveness of South African SMMEs in local, national and international markets. Frain: The DTI has realised that w ithout w ork experience, a young graduate w anting to start up his ow n small business, may lack the necessary experience required to successfully operate in working w orld. The DTI have felt the need to provide an opportunity for graduates to gain experience before entering the w orking w orld. As a result, FRAIN w as established to provide graduates w ith the opportunity of being accepted into a training program in w hich they w ill experience the running and managing of a franchise. They w ill receive the necessary experience and training deemed necessary to run a small business. The main aim of the programme is to empow er these graduates and give them the confidence and correct mindset to successfully establish their ow n small business. Business Regulatory Com pliance Advice Program : The DTI offers various incentives and initiatives to SMMEs w ishing to better their current performance levels. They have also established programmes and other incentives for those aspiring business ow ners w anting to start their ow n small businesses. One such offering put forward by the DTI is the Business Regulatory Compliance Advice program. With this, the DTI makes available all the laws governing small business. The DTI how ever does not go out to each and every small enterprise making sure that they are complying w ith relevant laws, but merely makes it know n that they w ill assist and provide information pertaining to the laws governing the small business sector to any enterprise that w is hes to familiarise themselves w ith these relevant laws and ensure that their businesses are complying w ith these law s. Brain: The Business Referral, Advice and Information Netw ork, is a feature implemented by the DTI which assists all existing business owners and aspiring business owners w ith almost any
issue relating to the start up, managing, financing and monitoring of small business. BRA IN has many programmes in place w hich offer services to business ow ners. The main aim of BRA IN is to improve the competitiveness of SMMEs in South Africa and also to promote grow th in the small business sector. The Incubator Program : This program is a joint venture betw een the DTI and DACST. The program makes the necessary funds available for consortia w ith expertise in a particular field/industry to establish a technology business incubator for that industry. This program is not targeted at one particular industry or consortia but to any consortia with the required expertise willing to form an incubator. The funds for the setup are made available and access is granted to anyone w ho may benefit from the services and products offered by the consortia. Small businesses benefit tremendously from such establishments because often these incubators provide facilities and services required by the relevant SMME to better their service or product. The small business utilises the services to better their position in the market. MAC Programme: The Manufacturing Advisory Centre Programme w as a combined initiative betw een the DTI, the CSIR, Ntsika and the National Productivity Institute. The programme has made the establishment of tw o centres possible. These centres offer assistance and expert advice to SMME manufacturers w anting to improve their competitiveness and position in the local, national and international markets. The centres how ever tend to place an emphasis on providing these services to previously disadvantaged individuals w ho now own their own business. NAMA C Trust has recently been merged w ith Ntsika to form the Small Enterprise Development Agency (SEDA).
WESGRO: (The follow ing information is available on line at http://www.wesgro.co.za) This is the Trade and Promotion Agency for the Western Cape. WESGRO is responsible for increasing exports from the Western Cape, attracting business investment to the Western Cape as w ell as promoting the Western Capes business image as a lucrative area in which to invest. WESGRO w orks w ith the DTI, IDC, Khula and Business Partners. They have an interest in all industries in the economy and offer assistance to those wanting to enter relevant industries. WESGRO offers assistance for Exchange Control, Telecommunications, Taxation, Work and Business Permits, required infrastructure and ultimately quality of life. They also offer assistance on how to start up a business in SA and provide aspiring business ow ners w ith a link to Incentive and Financial Assistance Schemes. IDC: (The follow ing information is available on line at http://www.BRAIN.org.za)
The Industrial Development Corporation uses its financial assistance activities to contribute tow ards and improve economic grow th, industrial development and economic empow erment in South Africa. The IDC does not only service South African clientele but also extend their services to prospective clients throughout Africa. The IDC is considered to be the first South African Development Finance Institution. The IDC plays a huge role in Black Empow erment Equity and is the largest, centralized and multidisciplinary project evaluation group in Africa. The IDC focuses on sectors and regions in Africa which display potential for growth. As of late they have shown an increase in involvement in non- metropolitan areas. The IDC offers various financial assistance products to operators in all industries. The products have been adapted to suit the differing needs and environments for the different industries. It is important to remember that there are minimum requirements or criteria that small businesses need to exhibit or fulfil in order to qualify for and so be granted the differing financial assistance schemes offered by the IDC. The first scheme offered by the IDC is the Bridging Finance Scheme. With this scheme, the IDC provides financial assistance to those organisations w ho have been awarded contracts with government and/or private entities. There is a limit attached to this scheme and it is the fact that the IDC w ill not grant bridging finance of less than R500 000. As w as mentioned, there are other criteria in place and these criteria can be view ed on the WESGRO w ebsite. The second scheme providing finance to small businesses operating in the Chemical or Manufacturing sectors is the Empowerment Finance Scheme. Here the IDC provides finance to Industrialist Entrepreneurs w ho operate in the manufacturing sector. Again there are criteria in place w hich to which the small business needs to adhere in order to qualify for this assistance. Also, the minimum amount that is provided through this scheme is R5 million. The IDC also has a scheme know n as Finance for the expansion of the Manufacturing Sector. Here finance is provided by the IDC so as to increase the capacity of the manufacturing sector. Finance is provided to those entities w ishing to establish new manufacturing operations. Again, criteria are in place for those w anting to benefit from this scheme. The minimum amount made available for this scheme is R1 million. The IDC also offer a Support Programme for Industrial Innovation. This scheme tends to focus more on the manufacturing sector as w ell. This program provides support for South African organisations that develop South African based products or services that exhibit technological advances. These products or services must show a commercial advantage over existing products or services. The IDC also assists w ith export finance as w ell. They offer export finance to assist w ith the promotion of capital goods and services. They offer this financial assistance in rand and dollar ter ms. SPII: (The follow ing information is available on line at http://www.BRAIN.org.za)
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The Support Program for Industrial Innovation w as established to promote technology development for South African manufacturing industries. It aimed at achieving this by supporting innovation for competitive products and processes. The SPII is funded by the Department of Trade and Industry and administered by the IDC. The SPII offers three schemes. The first scheme is the Matching Scheme and provides small business w ith grants of up to 50% of the direct costs incurred during the development stages. The maximum amount granted by this scheme is R1.5 million. The Partnership Scheme is similar to the Matching Scheme in that it provides of 50% of the direct costs of development but for this scheme there is no maximum amount for the grant. Repay ment of the grant takes the form of a levy on sales. This fund tends have a focus on more large-scale R&D. The third and final scheme is called the Feasibility Scheme and provides finance to prepare and setup feasibility studies. A grant of 50% of the costs of a consultant to conduct the feasibility studies is provided by this scheme. This grant is limited to R30 000. THRIP: The Technology and Human Resources for Industry Program has a focus on supporting and improving research and technology development. It aims to enhance the quality and quantity of people involved in R&D. THRIP brings together researchers, academics and industry players into a funding partnership so as improve the quality of the product and services of those involved in the partnership. It aims to generate innovation w ith the plan that an increase in innovation w ill lead to an increase in competitiveness w hich w ill ultimately result in grow th. THRIP offers various funding programs w hich are available on the National Research Foundation w ebsite. No THRIP funding program is cast in stone and varies according to each partnership formed. Innovation Fund: This fund aims to promote economic competitiveness through investing in technological innovations that lead to the establishment of new enterprises and the expansion of industry. Again, no parameters are in place for these funding exercises but vary according to the projects selected by the Innovation Fund. Project proposals are submitted to the fund and the relevant pow ers make the selection based on criteria laid out by the Fund to select a project that the Innovation Fund w ill invest in. KHULA: (The follow ing information is available on line at http://www.khula.co.za) Khula provides financial assistance to Retail Financial Inter mediaries ( RFIS). Again, these businesses need to meet minimum criteria in order to qualify for the financial assistance.
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The three different types of loans offered by Khula are Capitalisation loans, Seed Loans and Pioneer Loans. They also assist w ith Institutional Capacity Building. Business and Capitalisation Loans are granted to the RFIs w ho in turn provide financial assistance to entrepreneurs. Individual entrepreneurs cannot approach Khula directly. They need to go through the RFIs in order to benefit from the finances made available by Khula for business start-ups. Pioneer Loans are interest free loans granted by Khula to RFIs w ho have no experience in loan financing. Capitalisation Loans are granted to RFIs that have graduated from Pioneer Loans. They have developed the relevant experience as deemed necessary by Khula and are now given access to loans at an interest rate of 5%. Business Loans is another step up the ladder after Capitalisation Loans. Here RFIs qualify for loans at an interest rate of prime less 3%. How ever, this rate will vary depending on the RFIs profile. Seed Loans are provided to RFIs so as to assist them w ith their lending activities. These loans are also interest free and can be converted to a grant if the RFI successfully achieves standards that w ere agreed upon at the beginning of the business relationship betw een themselves and Khula. Capacity Building funds are granted to RFIs that qualify for assistance from Khula. These grants are used for Human Resource Development by the RFIs. The grant funds can be used for research or other management system implementations. The grant funds can only be used in compliance w ith Khula policy and nothing else. The Danida Business to Business Programme is a credit guarantee scheme offered by Khula. The main objective of the scheme is to strengthen business opportunities and create work for entrepreneurs from previously disadvantaged communities. Khula do not only offer financial assistance, but also have a mentorship program in place. The Thuso Mentorship Program has a focus on pre-loan and post-loan services. Pre-loan services include advice, counselling and business plan development assistance. Post-loan services cover all areas of successful business management techniques. KhulaStart is an intervention strategy that provides financial support to the low er end of the micro-enterprise sector. It targets PDIs in rural and peri-urban areas. The micro-credit outlets are initiated by NGOs or Community Based Organisations. The program uses the group solidarity method of financing meaning that loans are given to groups and not individuals. Loans of betw een R300 and R3500 are issued on incremental basis to each member in the group. The Emerging Entrepreneurial Scheme enables entrepreneurs to access funding from bankers for the establishment, expansion or acquisition of new business. The maximum indemnity is betw een 60 and 70 % and the maximum tire is R75 000.
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The Standard Credit Grant Scheme w as established for the same reason but has a maximum tire of R600 000. The Equity Fund provides finance for SMMEs w anting to expand their operations, enter into joint-ventures or those w anting to buy-out existing shareholders. The Technology Transfer Guarantee Fund makes finance available to SMMEs for the sole purpose of purchasing manufacturing technology. BUSINESS PARTNERS: (The follow ing information is available on line at http://www.businesspartners.co.za) Business Partners is a specialist investment group providing debt and equity investment as well as mentorship and property management services. Business Partners provides venture capital and private equity for high-yield business, it offers assistance to entrepreneurs for property investment, they offer mentorship and consulting services as well as property broking and management services. It offers its services to all SMMEs. Business Partners offers its services to the Manufacturing, Travel and Touris m, Leisure, Franchising and Retailing, Professional and Personal Services and the Marine industries. Unfortunately, Business Partners does not extend it services to the Farming, On-lending and Non-profit sectors of industry. Business Partners offers various financial services, including funding, to its clients. The agreement into w hich you enter is dependent on the state of your business be it that your business is an idea w aiting to be materialized or be it that your business is already in operation. They are a viability-based investment group and do not have the same security requirements that commercial banks have. They base decisions on the soundness of the business plan and tend to favour entrepreneurs w ith integrity, drive, vision and the appropriate experience. Business Partners structures their investments using equity, shareholder loan accounts, royalties and ter m loans. As w as mentioned, each investment is different and is based on the assessment of risk and potential return of the investment. Business Partners considers most s mall businesses to be Lifestyle Business meaning that the business generates returns that allow the owner to lead and live a comfortable lifestyle. As a result, they have termed their investment initiatives Lifestyle Investments. They offer the SMME ow ner a choice of three dif ferent investment packages depending on the SMME overall performance and position in the industry. Business Partners invest anything betw een R150 000 and R15 million in lifestyle businesses using innovatively structured investment packages. The amount they invest again depends on the risk/return ratio, the contribution size of the owner and the amount collateral that the business ow ner can put forw ard as security. The first package is the Equity Package. This investment option is available to SMMEs that are already established and profitable and require capital funding for expansion. The investment compr ises of a shareholders loan and an equity component. The amount of equity taken is in proportion to the amount that Business Partners invests in the SMME.
During the investment period, Business Partners shares in the risks and returns of the small business benefiting from capital appreciation and taking the risk of losing out during the period as w ell. The next lifestyle investment package is the Risk Partner Investment Package. This package is made available to business ow ners w ho have viable businesses but limited capital to contribute to the business and limited security to offer for funding for expansion or starting up a new business. Such an investment is structured like a loan but w ith an unsecured risk portion. Business Partners compensates for this unsecured loan portion by claiming an equity stake in the business. Business Partners w ill only grant this loan to small businesses that w ill have the capability to generate a cash flow that w ill allow them to repay the loan in the stipulated period. The third Lifestyle Investment Package is the Royalty Partner Package. This package is made available to those small ow ners w is hing to convert their business into a company, but the small business is considered to be a high-risk venture. Again, the package consis ts of a loan portion but in this instance, Business Partners get compensated for the risk by being offered royalties in the small business. The size of the royalty is calculated as an agreedupon percentage of the annual turnover and the small business is liable to pay this sum for the duration of the investment period. There may exist a situation in w hich the risk is so high to Business Partners for investing in a small business that they offer a combined Risk and Royalty Partner Package to the business ow ner. Here, the combination of the tw o and the w eight of the royalty and equity share w ill be clearly conveyed in the contract. Business Partners also offers an Innovation Investment Product to those innovative entrepreneurs that need to turn their ideas into w orking business models. Business Partners will invest up R1 million in ideas that it deems innovative and viable. The Contract Investment Product is a funding option made available to s mall businesses that have been aw arded contracts by other big business or government, but unfortunately do not have the capital to purchase materials and complete the contract in the short time frame. The Contract Partner makes amounts ranging from R150 000 to R2 million available to small businesses for such circumstances. Again, the contract is customized and Business Partners w ill play an active role in monitoring the s mall business activities and assisting when necessary, for as long as the contract stipulates. Business Partners also offer Business Partners Mentors (Pty) Ltd, w hich is a mentorship program w hich assigns a mentor, w ho has in the past exhibited high-quality business vision and business management skills w ith their ow n businesses, to assist the small business ow ner w ith improving the efficiency and profitability of the business as well as stimulating grow th in the business. GODISA: (The follow ing information is available on line at http://www.dti.gov.za) GODISA is a partnership betw een the dti and the Department of Science and Technology, and also receives assistance from the European Union. Its focus is to enhance the
competitiveness, productivity and sustainability of SMMEs in South Africa. By focusing on these areas, they feel that long-ter m employ ment, economic development and sustainable grow th will all be possible. GODISA, along w ith its partners, have set up several technology incubation centres and Innovation support centres to assist small business in the Chemical and Manufacturing sector. SALMAR: (The follow ing information is available on line at http://www.BRAIN.org.za) SALMAR assists in the establishment of consumer or industrial chemical companies or plants. They focus on the complete Greenfield startup of businesses operating in the chemical industries. They offer marketing assistance to their clients as w ell as financing services. SALMAR assist their clients w ith finding finance and do not provide finance to their prospective clients. BeeHive Entrepreneurial Development Centre: (Mpumalanga) This initiative provides loan finance to those entrepreneurs w ishing to start up their ow n business. Loans are also provided to those SMMEs requiring additional finances. Loans betw een R500 and R30 000 are provided by this initiative. For loans larger than R5000, security in the form of assets is required. For loans greater than R12,000, a detailed business plan is required. Mpum alanga Econom ic Em powerment Corporation: (Mpumalanga) This establishment again offers financial assistance, be it short ter m loans or equity funding, to aspiring entrepreneurs as w ell as existing business ow ners. Loans betw een R1000 and R 5000 000 are granted based on the respective businesss performance and business plans for those businesses waiting to be established. In order to qualify for financial assistance from this corporation , South African citizenship is required , a minimum of 10% of the ow ners contribution in the form of cash or assets must be offered as security for the loan and the business plan needs to be approved by the M.E.E.C (formerly the Mpumalanga Development Corporation). Trade and Investment Development Program : This program is funded by the European Union and assists SMMEs in entering into international mar kets. This program also assists South African SMMEs already competing in the international market, to improve their competitiveness.
NTSIKA: (The follow ing information is available on line at http://www.ntsika.org.za) Ntsika is an agency of the DTI. It offers non-financial and business development services to the SMME sector in South Africa. Their aim is to identify and service SMMEs so that these
small businesses can better service their respective markets. They also perform the corollary to this in that they identify and service and develop markets so as to increase opportunities for SMMEs in those markets. Ntsika offers various programs and services to SMMEs contributing to the South African economy as w ell as those competing in international markets. This first programme offered by Ntsika is SMME Promotion Programme. Ntsika assists with and helps promote SMMEs and their products and services. They organize and participate in trade show s and exhibitions. The Business Linkages Programme was setup to assist SMMEs w ith forming strategic alliances so as to strengthen their competitiveness and capacity in their markets. They assist small business w ith finding partners and brokering the deal until the alliance is formed. Ntsika also provides SMMEs w ith information on local, national and international market conditions. By doing so, they allow the small business to identify potential opportunities, be it locally, nationally or internationally. Ntsika has set up Tender Advice Centres (TACs) which provide SMMEs w ith techniques and training on how to w in both public and private sector tenders. Information on business opportunities and information on procurement in general is provided by Ntsika through these centres. TACs facilitate sub-contracts and joint-ventures for the SMMEs. TACs also provide a link to Project Management services. Ntsika is also continually conducting research into factors that affect capacity, efficiency, effectiveness and competitiveness of SMMEs. Ntsika have setup Local Business Service Centers to assist small businesses in the area with business plan drafting , business start-up training , financial management training , marketing training , business counselling, tender advice , technical support and incubation support. EDC: (The follow ing information is available on line at http://www.BRAIN.org.za) The Enterprise Development Centre is part of the CSIRs Material and Manufacturing Group. It focuses on establishing new manufacturing SMMEs and offering support existing manufacturing SMMEs. They have a focus on enterprise establishment and sustenance, incubation and competitiveness improvement and are also responsible for the design and implementation of national support programs and incubators. The EDC has an Enterprise Development Model in place w hich assists SMMEs. They assist SMMEs w ith Market Feasibility, Technical Feasibility as w ell as Economic and Financial Modelling. They assist with business plan formulation and also assist the SMME w ith Funding and Investment opportunities. They offer SMMEs technical, market and business support. The EDC also assists SMMEs w ith competitive improvement assessments as w ell as offering assistance to SMMEs for improvement in areas such as logistics, change management and project management.
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Technology Station in Chem icals: This technological support is provided by the Mangosuthu Technikon. It provides technological support to those SMMEs manufacturing chemicals and chemical related products. It offers various technology transfer servic es to SMMEs and is supported by the Chemistry and Chemical Engineering Departments of the Technikon. The transfer services offered include technology audits, product design and development, setting product quality standards, process design and development, w aste and effluent management, environmental pollution control , technology information and a pilot batch processing unit.
Sizanani Scheme: This assistance program provides start-up capital and assistance to those aspiring business ow ners wanting to start up their ow n SMME. It takes the form of a mentorship program where an applicant w ill be assigned a mentor w ho will guide the prospective ow ner through the stages of starting up their ow n business and obtaining the required finance. This scheme is run by Business Skills South Africa. Loans ranging from R500 000 to R20 million are granted by this scheme. Black Business Supplier Development Programme: BBSDP is a grant incentive scheme w hich offers support to black ow ned small businesses. The programme offers black ow ned small businesses access to business development services w ith the intention of improving their core competencies, bettering their managerial capabilities and restructuring them to become more competitive. The scheme aims to fast-track SMMEs into the mainstream economy, form linkages betw een SMMEs and large scale established businesses in the public and corporate sector and to assist small businesses to improve their capacity so as to improve their competitiveness in their industry. The maximum grant offered by the scheme is R100 000.
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Promotion of Small and Medium Enterprises in the South African Chemicals sector

Prepared for Chemicals Summit NEDLAC

TABL E OF CONT ENT S

AN OVERVIEW OF THE CHEMICAL AND ALLIED SECTOR

SIC categor ies are:

Sub-Sector 3.1: Definition

SINGLE FUNCTION CHEMICAL

DIFFERENT FUNCTIONAL CHEM ICALS

S INGLE INDUS TRY

Sub-Sector 3.4: Definition:

Other Consumer Formulated Products

Sub-Sector 4.1: Definition:

Sub-Sector 4.3 Definition:

Synthetic Textile Yarns

Imports of Chemicals by Africa

BUSINESS SUPPORT PROGRAMMES

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