In what is likely to be a ground-breaking move in the furniture manufacturing business, the Eastern Cape Development Corporation (ECDC) has spent R2,5 million of its funds toward two pilot projects for testing the development of furniture from polyfibre.
The project has already secured the interest of the Department of Trade and Industry (“thedti”) which has set aside R54 million from its employment creation fund for the project on commercialisation. Polyfibre is the result of a mixture of plastic and plant material to develop furniture. Mixing fibre from plant material and plastic is a very effective way of hardening furniture and to prevent cracks and deterioration.
The polyfibre project came about when the Department of Economic Development, Environmental Affairs and Tourism (DEDEAT) brought to ECDC a funded project to establish buy-back centres around solid waste disposal sites. The development financier was asked to turn unemployed people who collect plastic material at these sites into entrepreneurs.
“The people were then organised around co-operatives with the first buy-back centre established in Stutterheim followed by Grahamstown and Port Alfred.In this arrangement, the co-operatives organised around the buy-back centres collect plastic in all forms which is then packaged and sold to ECDC partner Iwars. A woman’s co-operative in Port Alfred has also been set up to collect waste from pineapple leaves from farmers and strip it into thin fibres which is then sold to Iwars which is the second ingredient in the furniture making process. Iwars is then responsible for mixing the plastic with fibre from plant material and produce furniture.
“In the first pilot, R1 million was spent in the design and preparation of the pilot site and setting up two buy-back centres. A total of R1,5 million was spent on the second phase which was a commercial pilot,” says ECDC risk capital specialist Phakamisa George.
The pilot is now in its final stages and it is awaiting certification from the South African Bureau of Standards (SABS) in order to commercialise the project. George says for the commercial pilot, machines and a small plant in Port Alfred have been set up for manufacturing window and door frames, outdoor furniture and other types of furniture. The Department of Human Settlements has already indicated an interest in acquiring the furniture for RDP houses once SABS certification has been received.
The “dti” funds will be used to set up a fully-fledged plant to put up machinery and for working capital. The plant will be 30% owned by the buy-back centres in the form of the co-operatives. ECDCs R2,5 million will be converted to equity as well.
“This is only one of many high-value projects ECDC is pursuing toward economic growth as well as employment creation. ECDC committed R10 million for its risk capital facility on 2013/14 and by then end of the year had spent R8,7 million on the scoping and implementation of projects. The financier is delighted that it also secured R104 million in third-party funding for the implementation of development projects,” says George.
Furthermore, ECDC is continuing with the implementation of the R250 million Karoo Catch aquaculture project in Graaff Reinet. In 2013/14, the Blue Karoo Trust completed the construction of two fishing ponds, nursery and training academy which will focus on aquaculture training for young people.
ECDC spent R400 000 on marketing and producing samples for the market as inputs into a market acceptance survey.
“By the end of the financial year the project had secured an off-take agreement to produce 10 000 tons of catfish per year. Another R10 million was secured from “thedti” to build an additional 13 ponds. The project has a capacity of 52 ponds and the ability to produce 13 728 tons out of 15 ponds.
“The project is looking at creating 300 direct jobs at the plant and the ponds. A R56,9 million funding application to ECDC and the Industrial Development Corporation (IDC)has been made for the construction of the factory for processing and working capital. There will be 16 co-operatives that will farm the fish and sell to the factory. The factory will be owned by the Blue Karoo Trust,” George says.
In addition, ECDC has provided one of its factories to establish a production facility for Khuphukani Leather, a Mthatha-based shoe-making operation by disabled entrepreneurs. It was funded by DEDEAT’s LRED fund with R2 million and R1,7 million by ThinaSinako. ECDC has been appointed as project and fund manager.
The project, which employs 21 people, produces mainly school shoes and it has purchase agreements with schools in the King SabathaDalindyebo Municipality. It makes about 200 pairs of shoes per day. It’s now past the pilot stage and ready to produce for the market before year end to expand to include new line.
“The strategic intent for ECDC’s risk capital facility is to increase investment in catalytic initiatives that unlock the economic potential of low income areas through innovation, local beneficiation and new product development. It is envisaged that this increased investment will lead to the establishment of new viable enterprises, expansion of existing enterprises, creation and saving of jobs and creation of sustainable economic growth in the province.
“This work requires ECDC to invest in a portfolio of projects that are still at conceptual stages and therefore would not ordinarily be fundable by commercial banks. In so doing, ECDC takes a relatively high risk in partnering with project drivers/initiators during the exploratory stages of their ventures. However, ECDC takes on such projects with a medium-to-long term view of converting its contribution into equity once the feasibility results are positive or the project has reached its commercial stage,” ends George.
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