Page 18 - Estimates of Public Entities Revenue & Expenditure 2023

PROVINCE OF THE EASTERN CAPE ESTIMATES OF PUBLIC ENTITIES REVENUE AND EXPENDITURE 2023/24

8.2 Key challenges

SMME development finance and support

The key challenge is that of insufficient liquidity and capital reserves to provide high-value financing
solutions for clients and programme implementation. The Eastern Cape has a highly diversified
market leading to overstretched resources (both financial and human resources) and there is a
constant competition from other national development finance institutions and commercial lenders.

Since ECDC focuses on lower end of the lending spectrum, there are high loan default rates due to
a number of factors including a culture of entitlement, fraud, direct payments (non-adherence to

cessions) and the general risk of exposure resulting in high impairment rates. This then also affects
debt collection coupled with the loan book heavy with “historical” loans affecting impairment
calculations and performance perceptions.

With respect to business support, there is a lower than average quality of final products namely
business support interventions due to low levels of entrepreneurial expertise amongst SMME’s
compared to the use of third parties to provide business development services. Many of these

challenges are predominantly historical in nature. In adopting a more targeted approach, ECDC
hopes to depend less heavily on SMMEs supported by contracts in the provincial and/or municipal
government-spending arena and source clients operating outside of government fiscus and from the
private sector.

The entities also struggle to have the required information to qualify for the incentives offered by
DEDEAT through ECDC. Most entities do not qualify due to compliance issues related to laws of the

republic.

Innovation, Trade, and Investment Promotion

Eastern Cape’s competitiveness and reputation is a major challenge especially since ECDC is active
within the global arena. However, the competitiveness of provincial offerings and development support
on the international market will impair its outcomes.

The cost-competitiveness of energy, labour, and logistics remain key challenge for the Province
coupled with the current fiscal constraints also posing a major constraint. The investment downgrade

for South Africa’s credit rating remains a challenge especially since the delivery of this Unit hinges on
external factors such as national stability, land tenure and balance of payments.

With respect to trade, the rising export costs, high levels of competitiveness in the export industry and
access to trade finance remain binding challenges. The unit has highlighted the lack of updated
information with regard to exporters and manufacturers in the province, and that the number of black-

owned businesses that are export-ready remains very low.

Despite these challenges, the Unit has improved exports of agricultural animal products to the Middle

East with the intention of unlocking further value chains. During 2020, the impact of Covid-19 was

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