Sunday, October 17, 2021

LEA then and now…what is the difference?

Government being the sole shareholder means that LEA relies on it for funding to do such activities as assisting SMMEs in the preparation of business plans and market surveys; improving their business skills and competences; creating on their behalf growth opportunities and promoting business linkages between themselves and big industries to mention but a few.

One would expect that an entity that assists enterprises to identify and pursue growth opportunities within markets would likewise follow its own prescriptions such that it moves away from relying largely on government funding to carry out its function. A form of funding which LEA receives is the capital grant to use in buying property, plant and equipment. Such acquired assets allow LEA to derive economic benefits through their use. It could be said that LEA should have by now accumulated enough assets and as such be in a position to fully support its activities from the income it generates from them.

The 2016/17 annual report cites that LEA received funding from government to the tune of P139,910,140 and in the previous financial year it had been given P147,708,000. Prior to that in 2015 it had been provided with P144,200,000. “The government as the shareholder has pledged to support the Authority in the next financial year through a government subvention of P141 681 150,” says the report. The income statement, as well as those from past financial results, does not clearly indicate possibilities of growth in terms of establishing self sustainability. As highlighted the bulk of money received is from government. Its other operating income, amounting to a total of P3 479 969 does not demonstrate clear predictability in terms of guaranteed sources of income over the long term. In fact, the majority of this income is sundry income at P1 212 748 which is money generated from sources other than the Authority’s primary operations or services. It is followed by rental income at P962 290. The Authority generates its revenue primarily from its training and resource centre services but even so income from such services falls below that of sundry and rental income at P624 898. The Authority’s rental income comes from the letting of its incubators and training properties. LEA currently has four fully operational incubators and one which is expected to be commissioned post year end (2017). Business incubation refers to a programme designed to support the successful development of start-up enterprises by offering infrastructure and other services in a controlled environment. The Kutla incubator, which will soon be delivered, was funded from capital grants received from government. The incubation project is expected to train entrepreneurs in the making of detergents, tomato ketchup, cornflakes and sunflower oil extract. “At the reporting date all the necessary work was completed for the opening of the project,” says the report.     

The Citizen Entrepreneurial Development Agency (CEDA), which provides financing and technical support to SMMEs, maintains on the other hand that it is on a path to sustainability. CEDA Chief Executive Officer (CEO) Thabo Thamane said previously that the government subventions it receives do not go to operations but is used in funding projects. He said that money used for operations is generated internally by the Agency.

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