Buffalo City Growth Blueprint

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Buffalo City Growth Blueprint

• March 2006

2
Table of Contents

• I. Executive Summary
• II. Invest Buffalo City
• Overview
• Business Plan
• Organization Model
• Investment Governance
• Year 1 Business Development Budget
• Marketing Strategy
• Benchmarking Return
• III. Business Retention
• Overview
• Key Fundamentals
• Indicators Requirements
• IV. Summary

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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 Citys 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 non-profit 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.

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II. Invest Buffalo City
5
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, etcand
  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.

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Invest BC Organization Model
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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 Eligible for Board
  Seat (5 seat reserved)
• Sponsorship/Advertising Opportunities
• Invitation to all Premier Invest BC Events
• Opportunity to serve on Task Forces
• Special Recognition at Invest BC Events

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Investment Governance (cont)

• 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

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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.

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Benchmarking Return

• CEOs 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 in-country
  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 BCs organizational value in
  Buffalo City and shareholder value.

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III. Business Retention
12
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., re-training assistance,
  unemployment, etc.
• Market the available workforce
• Ownership should be public sector, suggest
  Buffalo City E/D

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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.

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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.

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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 governments strengths/weaknesses
  in service delivery to major customers.
  Leadership should use the results to prioritize
  delivery upgrades.

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Indicators Requirements (cont)

• 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

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Summary

• Buffalo Citys 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 its construction at no
  cost.
• Buffalo Citys 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 Citys first to market
  advantage is short and will require visionary
  leadership and courage.