SMME Summit Industrial Clusters to Enhance Competitiveness

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1 SMME Summit Industrial Clusters to Enhance Competitiveness Overview of Cluster Initiatives in the Eastern Cape 20 th Nov 14 1

2 Background Clusters (What, Why & Who) EC Manufacturing Landscape Sector Strategy - EC Cluster Initiatives Automotive Non-Automotive Manufacturing Agro-Industrial Manufacturing 2

3 Background The Department established the Provincial Industrial Development Strategy (PIDS) in o Economic Growth: Strengthening of existing sectors and new industrial investment, coupled with state investment in infrastructure. o Labour Absorption: Skills development, especially for the youth. o Job Retention: Protecting existing jobs and the development of sector policies and strategies to support declining industries. Focused Priority Sectors are Automotive, Capital goods, Chemical and Pharmaceutical, Agro-processing, Green Industries and Tourism. Sector specific strategies/plans have been adopted by the Department. 3

4 Sectors, clusters, initiatives and value-chains A sector is a static description of an industry (Fruit, Platinum, agroprocessing). Useful for analysis, and describing the size, trading conditions, investment etc. A value-chain is a deeper analysis of the relationships that exist across each industry, and the chain of production through to the consumer (e.g. the platinum industry value chain, consisting of servicing firms, first and second tier suppliers, mining, processors, and end-consumers) A cluster is a physical concentration of economic activity, and can incorporate elements of multiple value-chains, relationships across different sectors, and captures the competitive underlying conditions that gave rise to the concentration of activity A cluster initiative is the deliberate attempt to pull actors together from the broader cluster, to develop an action agenda and to deliver on this. 4

5 What is a Cluster? Co-located and linked industries, government, academia, finance and institutions for collaboration Organised efforts to increase growth and competitiveness of clusters (groups) within a region, involving cluster businesses, government and/or the research community A geographic concentration of interconnected businesses, suppliers, & associated institutions creating direct & indirect synergies among them Collaborative activities by a group of companies, public sector entities, and other related institutions with the objective to improve the competitiveness of a group of interlinked economic activities in a specific geographic region People from business and industry, government, research organisations, finance institutions collaborating personally and institutionally to exploit synergies for mutual benefit and advantage in the market Geographical concentration of interlinked enterprises and institutions in related branches of industry that complement each other by joint relations of exchange and activities along one or several value creation chains. Michael Porter,

6 Cluster Approach Through the cluster approach following aspects can be considered: Clusters incorporate multiple VCs Focus on strengthening the elements of the VC that exist in the locality Brings a broader perspective on the firms, through looking at the broader institutional support environment, such as the banking sector, universities and training institutions, logistics and support services etc. 6

7 Clusters requires: Importance Relative proximity geographically located close enough to participate effectively in cluster, and collaborate in cluster initiatives; Critical mass sufficient enterprises / sufficient capacity for clustering to provide significant benefits; Position / role in the value chain enterprises / sector should be appropriately positioned in value chain to allow cluster process to unlock new opportunities; 7

8 Cluster Benefits New markets, new opportunities, synergies, coordination New businesses, ventures, value-chain development Enabling policy, sector prioritisation, incentives, coordination, dialogue New products, processes, systems, business improvemen New opportunities, synergies, value-chain development Source: The Cluster Initiative Greenbook (2003). Training & skills development, training programme development 8

9 EC Manufacturing Sector 9

10 EC Manufacturing Sector 10

11 NAM Sectors NON-AUTOMOTIVE MANUFACTURING ENTERPRISES IN THE EASTERN CAPE MAJOR MANUFACTURING SECTORS ENTERPRISES Total % of Total Total % of Total Total % 27, % % of Total 65% 41% EMPLOYMENT Arms & ammunition 1 0% 6 0% Bags 1 0% 11 0% Belting 1 0% 269 1% Brushes 3 1% 106 0% Canvas 4 1% 89 0% Chemicals 26 7% 1,806 7% Clothing 36 9% 3,903 14% Construction materials 51 13% 2,289 8% Cosmetics & toiletries 7 2% 643 2% Education equipment 1 0% 9 0% Electrical 9 2% 1,750 6% Energy 2 1% 150 1% Energy systems 1 0% 18 0% Fibreglass 6 2% 223 1% Fibreglass - aircraft components 1 0% 3 0% Filters 1 0% 6 0% Furnishings 2 1% 26 0% Furniture 29 8% 1,132 4% Glass & aluminium 1 0% 20 0% Hygeine 1 0% 40 0% Jewelry 6 2% 51 0% Machinery 13 3% 898 3% Machinery & automation 3 1% 192 1% 11

12 93.4% of all NAM enterprises are located in the NMB (58.8%) and Buffalo City (34.6%) areas; 93.8% of all manufacturing enterprises in the Top 10 NAM manufacturing sectors are located in the NMB (59.7%) and Buffalo City (34.1%) areas; Only 3.9% of the NAM enterprises are located in the old Ciskei / Transkei areas; Excluding NMB and Buffalo City, the Metal, Construction Materials and Furniture sectors have the broadest distributions in the Eastern Cape; NAM Sectors 12

13 AIM Sectors 13

14 77.1% of all AIM enterprises are located in the NMB (43.5%) and Buffalo City (33.6%) areas; 16.4% of the AIM enterprises are located in the old Ciskei / Transkei areas; Excluding NMB and BC, the Food and Wood sectors have the broadest distributions in the Eastern Cape; AIM Sectors 14

15 Cluster Development EC Manufacturing Landscape Nelson Mandela Bay (NMB) and Buffalo City (BC) have meaningful current concentration of manufacturing enterprises; NMB / BC lie too far apart for effective clustering in one cluster initiative separate sub-clusters or Chapters, each with own leadership but with aligned programmes; Enterprises outside main nodes - limited benefit from cluster process unless a structured program is developed to drive benefits to those outliers; Selection Criteria Number of enterprises in sector and employment figures 15

16 NAM Cluster Design 16

17 AIM Cluster Design AIM Cluster Design

18 Overview: Commenced in EC Automotive Cluster Supported by OEMs and associated suppliers, BCM, NMBM, Coega IDZ, ELIDZ, ECDC, NMMU, DEDEAT, ECSECC and AIDC. Resourcing: AIDC appointed by DEDEAT as administrator of this cluster. Dedicated project coordinator appointed to act as cluster facilitator. Dedicated project leaders selected from private sector to support sector work. Operational funding provided by DEDEAT. Focus Areas: 3 areas of importance identified Supplier development, Skills development and Logistics Development. Common needs identified for each area and packaged for execution by work streams. 18

19 EC Automotive Cluster Initiatives Implemented Supplier Development Total Productive Maintenance (TPM) programme Cleaner Production programme Logistics Development Green logistics information brochure. Logistics optimization Preferred trader initiative accreditation programme Supply chain and logistics training programme Freight, Customs and Port management lobby 19

20 Skills Development EC Automotive Cluster Initiatives Implemented Leadership development programme Tier 3 companies, coaching and mentoring programme Value Stream mapping training programme Procurement/ Strategic sourcing training programme Operations Management training 20

21 Overview: EC NAM & AIM Clusters Commenced in Participants Metal sector companies (9), Chemical and Plastic companies (9), Coega IDZ, ECDC and DEDEAT. Resourcing: Service provider appointed by DEDEAT as administrator of cluster and as cluster facilitator. Advisory committee established for Metals (NMB)- and Chemical and Plastics (BCM) sectors from private- and public sector. Operational funding provided by DEDEAT. Focus Areas: Skills development and Supplier Development. 21

22 EC Clusters (Institutional Arrangement) Cluster Entity e.g. NAM or AIM 1. Furniture Sector 2. Metal Sector 3. Chemical and Plastics Sector 4. New Sector Added Advisory Team Advisory Team Advisory Team Advisory Team Project Teams Project Teams Project Teams Project Teams SERVICE PROVIDER - MANAGEMENT OF CLUSTERS DEDEAT PROJECT STEERING COMMITEE 22

23 Mr Marius Coetzee Senior Manager: Manufacturing Tel no: +27 (0) NAM Cluster Web address - AIM Cluster Web Address

24 Thank you Beacon Hill Hockley Close King Williams town Tel: P/Bag X0054, Bisho, South Africa,