“The target of R700-million in new investment that was set for the 2004 calendar year was a conservative estimate because it was a lengthy pro-cess to recruit people,” she says, “but by the end of December last year, Wesgro had already secured a total of R1,536-billion in direct investment for the Western Cape. “That’s more than double our target for last year and I’m optimistic that we will meet the R5-billion target.” The bulk of the investments received were new investments of R576-million (excluding new investments in residential property), followed by the expansion of existing investments (R267-million) and facilitation (R304-million). Facilitation includes support for investors on issues such as immigration requirements for foreign investors.
The services sector attracted 87% of all direct investments secured, and includes substantial business process outsourcing and call-centre investments that Wesgro collaborated on with CallingtheCape, a sector development body that has been set up by provincial government.
Manufacturing attracted 11% of all direct investments secured, and resource-based industries 2%. This trend is largely reflective of the province’s economic structure, whereby services account for more than 70% of the provincial gross domestic product. “Interestingly, nearly 50% of these direct investments in the Western Cape came from South African investors,” says Wesgro’s portfolio manager, manufacturing in investment promotion Faith Kolala. From an international perspective Belgium, Germany and Japan, in that order, were theleading foreign investors in the province for the past financial year. The investment outlook for the Western Cape remains positive given the favourable global economic outlook and the strong growth which is expected in the province’s services sectors over the medium term.
Altogether, the direct investment secured by Wesgro has created 2 042 jobs for the province which, through the growth and development framework agreement, has set itself a target of 100 000 net new jobs by 2007.
Because of Wesgro’s restructuring process, much of its work of late has been reactive but, towards the end of last year, it initiated its first strategic, pro-active investment market.
Western Cape Premier Ebrahim Rasool, the MEC for Economic Development and Tourism Lynne Brown and Wesgro CEO Ismail Dockrat visited Turkey, the Netherlands and the UK on an international marketing trip in September 2004. In the UK they promoted opportunities in business process outsourcing and the call-centre industry.
As a result of that particular trip, which was supported by CallingtheCape, the Western Cape’s call-centre marketing agency, UK call-centre com-pany Ambition 24 has opened a 1 000-seat call-centre in Bellville.
“More business is in the pipeline,” says Modise, “in particular we’ve received a lot of interest from the Netherlands because we are training Afrikaans speakers to understand and speak Dutch.” Wesgro is funded by the City of Cape Town and the provincial government’s Department of Economic Development and Tourism.
Last year the agency received R6,5-million from each stakeholder and, although it has not received confirmation of this year’s budget Modise does not think it will be substantially higher than R13-million.
“We have numerous target markets but, due to limited resources, we have to be strategic in our approach to them and have highlighted specific trade and investment opportunities for this year,” she says.
Because of government’s new approach tofacilitating south–south cooperation around trade and industry, Wesgro has proposed a trip to India and China for later this year, which will be led by Premier Rasool.
“In India, the delegation will explore bilateral engagements around ICT, the film industry and jewellery. “Cape Town has a twinning agreement with one of China’s provinces, Shandong, and the trip to China is an initiative to revive a bilateral memorandum of understanding (MOU) which was signed two years ago and explore how we can further cooperate with our sister province around specific industries,” says Modise.
“One of the industries detailed in the MOU is agroprocessing, so we will engage with them on that, as well as jewellery and oil and gas.” In line with global trends, service industries have realised the most investment over the last year-and-a-half and are Wesgro’s strategic focus industries.
These include business process outsourcing, call centres, tourism, film and multimedia, property and construction.
In the manufacturing industries leisure-yacht and boatbuilding is a growing industry and Wesgro is working hard to profile this sector aggressively together with Bruce Tedder, who heads up the Cape Town Boatbuilding Initiative.
Kolala says that, in 2004, R243-million-worth of boats were exported from the Western Cape. Over R220-million of these consisted of yachts, pleasure boats, sports vessels, rowing boats and canoes.
The biggest market for the boats came from the British Virgin Islands, Spain, the US, France and the UK.
Akasha, a R15-million luxury catamaran built in the Western Cape for a UK investor, was launched at the Waterfront a short while ago.
It was announced at the launch that, in orderto further boost the boatbuilding industry in terms of skills, the South African Boatbuildingacademy will open in July this year.
The academy, based in Westlake, will offer formal skills training programmes to learners.
“So, in the manufacturing industries, boatbuilding is our shining star, but we are also lookingat profiling and marketing automotive components, metals and engineering, clothing, textiles, furniture and crafts,” says Kolala.
“Another manufacturing sector we are con-centrating on is jewellery; we are looking at how we can add value and also looking at forming clusters in our small-and-medium jewellery enterprises.” In resource-based industries, Wesgro’s strategic focus is around agriculture and agroprocessing,mariculture and aquaculture and oil and gas.
“We are looking at niche products that offervalue-adding opportunities,” says Modise.
“Over and above the farming of certain species of fish, such as eels or abalone, and exporting the raw fish for the value add to be done elsewhere, we want to explore what other processes can be undertaken within the Western Cape, and export the final pro-duct – oil or sauces or canned fish for example.” To attract investment into these sectors, Modise explains that Wesgro has value propositions that are sector specific.
“For example, for the call-centre industry, our value proposition includes the language skills of our people and the quality of life in the Western Cape,” she says.
To complement these packages, Wesgro uses several of DTI’s incentives to promote investments.
These include the Strategic Industrial Programme; the Small and Medium Enterprise Development Programme, the Skills Support Programme,Foreign Investment Grant and Industrial De-velopment Corporation financing options.
Some projects, because of their public sector nature, are not marketed to international investors but to local investors or other public entities such as the IDC, which could assume an equity stake.
The Western Cape has several of these public- sector-driven projects which are strategic in terms of what government is aiming to achieve around infrastructure development.
“For example, the Dreamworld Film Studio involves the development of the world’s largestHollywood-style film studio in the Western Cape,” says Modise.
That is strategic for government and for the film industry as it would profile South Africa, and the Western Cape in particular, internationally as a world-class film destination.
In addition, the R400-million investment in Faure, just outside Cape Town, will benefit disadvantaged communities along the N2 corridor.
In other strategic projects, government is aiming to improve infrastructure in previously-disad-vantaged areas and link those areas into the urban hub of the Western Cape, Cape Town.
For example, the 20 km Klipfontein Road Corridor, which runs from Mowbray towards Athlone and then to Khayelitsha is to be upgraded and has been chosen for a rapid-bus transport system.
This is expected to be the catalyst that draws investment for refurbishment of existing buildings along the route and economically transform the desolate stretch of road.
Other major public sector projects in the Western Cape include PetroSA’s spend of R3,6-billion in the 2006/07 financial year on acquisitions for the explor-ation and production of oil and gas to ensure its declining reserves are replaced and even increased, and the R6-billion Cape Power Project, which involves piping gas from fields off the shores of Namibia to meet South Africa’s energy demands.
The construction of a combined gas cycle/gas turbine power plant with a generating capacity of not less that 1 000 MW is proposed.
Other projects are the R300-million initiative to develop the Khayelitsha business district, the R1-billion airport expansion and a new R200-million plant for the manufacture of refrigerated stainless-steel containers to be built in Paarl.
Another part of Wesgro’s mission is to increase exports from targeted sectors to key global markets, and the agency is grooming and growing the number of exporters in the Western Cape. “In 2004, there were 4 000 exporters and we’ve given ourselves a target that an additional 800 new exporters have to be groomed and established by 2007,” says Modise. “There are several programmes within Wesgro’s trade department that are working towards that,” she says.
One is its exporter development programme that assists exporters at different levels: exporter readiness assessment for small businesses that do not export yet, but would like to export, exporter capacity building for companies that have been exporting for some time but require additional training, and exporter mentoring programmes for established exporters of over five years that need to adhere to new trends.
Modise thinks many investors are uncomfortable about black economic empowerment (BEE), not because they believe it is a risk but because they do not understand it.
“While we are not prescriptive, we do encourage BEE and point out the benefits of having an empowerment partner such as diversifying risk and tapping into somebody who has a thorough understanding of the local environment.
“We encourage that some management is representative and we encourage skills development because, at the end of the day, these support sustainable economic growth,” she says.
“If you are an investor, you don’t want to invest in a country where 60% of the people who are potential customers cannot afford what you are going to produce; it is not sustainable to your own business.
“Those are the benefits of BEE, and the more investors become informed about it the more acceptable it becomes,” she says.