Thabang Mokopanele
1 December 2008
Johannesburg — TAKING on a dysfunctional institution with all the hallmarks of incompetence and corruption since inception is not for the faint-hearted -- just ask Eastern Cape Development Corporation (ECDC) CEO Mxolisi Matshamba.
Despite enjoying the advantage of having two ports within reach for export-orientated businesses -- Port Elizabeth and East London -- the ECDC, which is mandated to fund start-up companies and exporters in the region, has disappointed many entrepreneurs over the years.
Matshamba is frank in his admission of this, and blunt about the huge task the corporation faced in redeeming its reputation, which he believes is a good example of the best of intentions going wrong.
The ECDC has had qualified audit reports nearly every year since its inception in 2001. This year, however, for the second year in a row, it has been given a clean audit report. But it still falls short of fulfilling its mandate of funding viable start-up businesses.
Two years after taking on the job Matshamba is starting to see the fruits of his turnaround strategy for the ECDC.
Exporters in the province are being provided with a new, one-stop link to 500000 potential international markets.
The corporation's trade promotion unit has developed an "e-platform" using experience from best practice nationally and internationally to enable manufacturers to register and market their products to international buyers.
"Our experience is that one of the more difficult components of exporting is establishing initial markets and the e-platform does this at no cost," Matshamba says.
Releasing the corporation's results last month, he said the appointment of qualified financial executives was beginning to pay off after years of mismanagement.
Due diligence investigations on businesses seeking funding used to be outsourced, but these are now done in-house, he says.
After inheriting practices that made no business sense, the corporation has established a fully functional board to implement proper internal control systems and best practice governance procedures.
"We have been trying to get rid of our residential portfolio for a long time, but we are held up by complexities of selling these properties. The provincial government also has a moratorium on evicting people from the houses we own, but have promised to address the issue soon," Matshamba said.
The ECDC has a property portfolio worth R481m split between residential, commercial and industrial. It more than doubled bottom line profits to R38m for the 2007-08 financial year from R15m previously. But at the operating level there was a loss of R42m, and Matshamba says the goal is to break even in 2010.
The ECDC made R7m in micro loans to rural businesses in agroprocessing, business processing outsourcing, tourism and the automotive sector, in line with the provincial government's strategy. It also helped 1907 start-up businesses set up shop, while the provincial government contributed R151m so that the corporation could project manage infrastructure roll-out in the Ugie and Maclear area for PG Bison's R1,3bn chipboard plant. The infrastructure roll-out included the construction of roads, the upgrading of a power substation and the provision of water and sanitation.
The plant is expected to create 3000 jobs, excluding temporary employment.
ECDC chairman Wiseman Nkuhlu says a lot still needs to be done to address the corporation's management issues.
"We have managed to recruit a new chief financial officer and executive manager for development finance and we are making progress. We are addressing reputation issues because quite frankly the ECDC is not seen by entrepreneurs and business people as the number one solution to their problems in the province," Nkuhlu says.
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