Transcript Buffalo City Partnership

Buffalo City Growth Blueprint
March 2006
Table of Contents
I.
II.
Executive Summary
Invest Buffalo City
Overview
Business Plan
a.
b.
Organization Model
Investment & Governance
Year 1 Business Development Budget
Marketing Strategy
Benchmarking Return





III.
Business Retention
a.
b.
c.
IV.
Overview
Key Fundamentals
Indicators & Requirements
Summary
I.
Executive Summary
Since 1998, Buffalo City has lost 40,000+ textile jobs. Unemployment is 40%;
the figure is higher in semi-skilled and unskilled labor sets. The net loss in
consumer spending is incalculable.
Buffalo City’s economy is narrowly premised on auto manufacturing and export
through the Port of East London. Development of the Port of Coega is a
significant challenge. Broadening the economy is a prudent hedge in response to
future uncertainty.
This report recommends two immediate actions: First, the creation of a nonprofit marketing corporation to increase capital inquiries and employment; and
second, the development and execution of a robust business retention program.
Failure to significantly recruit new employment or retain existing industries will
weaken racial economic integration, increase unemployment, erode long-term
economic growth and balloon government spending.
II. Invest Buffalo City
Overview



Investors are drawn from local firms with sales linked to economic growth, e.g.,
Phone Company; Utility (Public or Private); Banks; Developers; Construction;
Realtors; IDZ; IDC; Port of East London; SAA; Marine Shippers; Architects,
etc…and largest employers seeking community investment, e.g., DCSA, auto
suppliers, truckers, Buffalo City Municipality, etc.
Four annual investment levels (US currency): $5,000.00 Bronze Member;
$10,000 Silver Member; $25,000 Gold Member; $50,000+ Diamond Member.
This can/should be adjusted to fit local norms.
36-member board and nine member Executive Committee (investors determine
true size). Board elects the Executive Committee and meets bi-annually to
determine annual strategic objectives, goals and progress; Executive Committee
meets monthly for management and financial review. Organizational control is
vested in the full board through the Executive Committee. CEO is fully
empowered to achieve annual objectives.
Invest BC Organization Model
Shareholders
Board of Directors
Executive Committee
CEO
Sales
Marketing & Promotion
Market Research
Investment & Governance
$50,000+ Annual Investment
Automatic Seat on Executive Committee
Logo on Invest BC Website & Materials
Meet with Recruited Companies
Quarterly Economic Briefing
Sponsorship of all Premier Invest BC Events
Other Executive Level Benefits
$25,000 Annual Investment
Automatic Seat on Board of Directors
Logo on Invest BC Website & Materials
Quarterly Economic Briefing
One Sponsorship of Premier Invest BC Event
Other Corporate Level Benefits
$10,000 Annual Investment
reserved)
Eligible for Board Seat (5 seat
$5,000 Annual Investment
reserved)
Eligible for Board Seat (2 seats
Sponsorship/Advertising Opportunities
Invitation to all Premier Invest BC Events
Opportunity to serve on Task Forces
Special Recognition at Invest BC Events
Weekly electronic newsletter
Listing in Invest BC Investor Directory
Listing on Invest BC website
Investment & Governance (con’t)

Three Common Models:





Managed Board: Strong CEO serving as Chair; board; CEO selects board;
passive investors.
Directed Board: Strong directors, CEO and Chair positions held
separately. Operates independent of CEO and management; significant
input in daily management decisions.
Shared Board: Strong outside directors, strong CEO, strong committee
structure. Board nominees selected by outside directors with CEO
assistance. Board determines its influence, key issues and role.
Recommended Structure: Directors determined by $ investment with a fixed #
of seats; Executive Committee (EC) is elected by Board to staggered terms;
Executive Committee determines ENDS, CEO determines MEANS.
Suggest government have a voting seat on BOD and a non-voting
advisory seat on EC
Invest BC Marketing

Two-Fold Strategic Intent:
Quickly elevate Invest BC profile in key business circles, industry targets

Score early employment success
Goal is (1) immediate impact, investor return and (2) identify, grow Year 2-4
investment opportunities.
Jobs Now, Jobs Later




Multi-year marketing strategy is best (Yr 1-3) for employment results/investor
return.
Suggest annual employment target based population growth, life-expectancy,
etc. See Slide 16 for example.
Benchmarking Return

CEO’s Year 1-3 objectives are quantitative, qualitative and organizational:



Quantitative: (1) increase new employment annually, suggest this be
tiered by salary – annual or hourly - for clear measurement; (2) Increase
capital investment annually. Board will determine numerical targets. (3)
Organize and execute 8 foreign marketing trips annually, two each quarter,
to develop a database of 12 future investments; organize and execute 8 incountry marketing trips annually to develop a database of 12 future
investments. Board will define future investment.
Qualitative: (1) design and launch a IBC-controlled marketing website;
design and launch a monthly HTML-based consultant newsletter; design
and launch a monthly investor newsletter.
Organizational: Stand up Invest BC; develop internal controls and
productivity measurement; establish Invest BC’s organizational value in
Buffalo City and shareholder value.
III. Business Retention
Overview




Purpose is to track existing employment to prevent industry-flight and
encourage plant expansions. Retention is Preventive Medicine.
Program is vitally important for communities with 20% or more of
total workforce employed in two sectors, e.g., automotive and
government.
Core practice addresses four goals:

Identify at-risk companies

Intervene with local, provincial, national agencies to avert lay-offs and/or
announced closings.

Reduce the impact of lay-offs by providing rapid response services, i.e., retraining assistance, unemployment, etc.

Market the available workforce
Ownership should be public sector, suggest Buffalo City E/D
Key Fundamentals


Program begins with a community assessment of resources and long-range
economic outlook.

Population Growth (current and future)

% Employed and Unemployed

Per capita income; Poverty level

Loans to deposit ratio; pace of new construction

% industrial occupancy last five years

New business start-ups (3 year measurement)

% sales/property taxes generated from industry

H/S drop out rate

% growth of city public works projects and infrastructure upgrades

% growth/loss of traffic through Port of East London
Purpose is to baseline key economic and industrial indicators for future-year
analysis, trend identification.
Key Fundamentals (Interview)



Meet bi-annually with key employers (city determines thresh hold).
Results are calculated, analyzed and reported to City Leadership for
action
Interview example








Facility staff expanded /declined in last 18 months?
Change in operation hours weekly, monthly?
Regularity of production?
Increase/reduction in plant maintenance?
Increase/reduction in power usage?
Plant or firm acquired or divisions merged?
New plant or equipment installed at other like-product facilities?
Intent is to create picture, pre-empt fixable issues.
Indicators & Requirements

Key Requirements



Staff Training: Manager - 89 hrs annual training in retention; Staff – 65 hrs
annual training in retention. Cost, including travel, averages $17,000 $25,000 annually.
Software:
Blaine-Canada, the preferred US retention adviser, sells
Synchronist, a retention client tracking software for $18,000+. Buffalo City
can purchase the South Africa license and sell the program for profit in the
Eastern Cape or nationally.
Reporting:
An effective retention program will illuminate government’s
strengths/weaknesses in service delivery to major customers. Leadership
should use the results to prioritize delivery upgrades.
Indicators & Requirements (con’t)
Indicators:




Demonstrates pro-business attitude to major employers
Provides data for economic development planning
Assist firms in solving local problems that may encourage flight
Early warning of plant closings
Success Factors:




Manufacturing focus
Develop written recommendations of priority projects
Manager actively involved in interviews
Use volunteers: meet with firms, establish priorities, author final report
Summary






Buffalo City’s development landscape includes a world class Chamber, a global port, the
IDZ, the Development Authority and ECDC, to name a few. Each is effective in its sphere,
but is weakened by the absence of dedicated marketing and retention programs.
Government must manage retention and the private sector must manage recruitment. The
division will leverage the core competencies that each sphere brings to development.
Effective retention will require that BCM Economic Development be reorganized and
prioritized as a development agency. Current staff and management are exceptionally
talented and experienced.
Effective recruiting will require that business invest in a concept new to South Africa. If
the leadership agrees the concept is worth exploring, I am willing to assist it’s construction
at no cost.
Buffalo City’s economy will continue to flourish without the suggested actions, but, with
increased urban migration, persistent unemployment and development of the Port of Coega,
the rate of growth may be inadequate and destabilizing.
Each of the suggested programs is common to other mature economies and will eventually
become a staple of the South African economy, as it matures. Buffalo City’s “first to
market” advantage is short and will require visionary leadership and courage.