ATC210820: Report of the Portfolio Committee on Trade and Industry on its oversight visit to KwaZulu-Natal and Gauteng on 3 to 6 August 2021, dated 20 August 2021

Trade, Industry and Competition

Report of the Portfolio Committee on Trade and Industry on its oversight visit to KwaZulu-Natal and Gauteng on 3 to 6 August 2021, dated 20 August 2021

 

The Portfolio Committee on Trade and Industry, having visited several municipalities, companies, small businesses and informal traders which were affected by the recent unrest in the KwaZulu-Natal and Gauteng, reports as follows:

 

1. Introduction

 

The Portfolio Committee’s oversight visit was in response to the recent unrest in KwaZulu-Natal and Gauteng, in spite of level 4 COVID-19 lockdown restrictions. The unrest started on the evening of 9 July 2021 and continued in certain parts of the provinces until 18 July 2021. The unrest involved acts of looting and vandalism that affected a number of manufacturers, and small, medium and micro enterprises, as well as informal traders. These two provinces account for about 50 percent of South Africa’s Gross Domestic Product.

 

According to various sources such as Business Leadership South Africa (BLSA), provincial governments of KwaZulu-Natal and Gauteng, National Treasury and various other industry players, it is estimated that more than 200 malls were affected, over 1 000 stores were looted, and more than 100 malls completely burnt. Damages are estimated to be more than R20 billion and it is possible that more than 150 000 jobs are at risk. Several factories and warehouses were also looted and destroyed by fire. In addition, most businesses in the province could not continue their operations during the unrest. Even activities at the two major ports of Durban and Richards Bay, and transport on national routes e.g. the N2 and the N3 had been disrupted, as trucks were being targeted by rioters. However, the official data with respect to the economic impact of the unrest is still being compiled.

 

The president, Mr M Ramaphosa, announced that in response to the impact of the unrest, government would provide support and relief to poor households to alleviate the hardships they are going through and to reduce hunger, and would help affected businesses to rebuild. Subsequently, the provincial government in KwaZulu-Natal has declared a provincial state of disaster owing to the magnitude of the damage caused by the civil unrest.

 

Following these events, the Portfolio Committees on Trade and Industry, and on Small Business Development, together with the Select Committee on Trade and Industry, Economic Development, Small Business, Tourism, Employment and Labour undertook an oversight visit to KwaZulu-Natal and Gauteng from 3 to 6 August 2021.

 

1. Purpose of the visit

The purpose of the Committee’s visit was to assess and determine the impact of the recent unrest in KwaZulu-Natal and Gauteng, particularly its impact on affected businesses and on the overall economy. The objectives of the visits are, among others, to determine and assess the damage to enterprises; to understand the immediate needs of the affected enterprises including black owned black-owned businesses; and to identify possible interventions.

 

In KwaZulu-Natal, the Committee identified a number of medium and large enterprises which were affected in line with its mandate. In addition, it joined the Portfolio Committee on Small Business Development and the Select Committee on Trade and Industry, Economic Development, Small Business, Tourism, Employment and Labour to visit affected small, medium and micro enterprises and informal traders. 

 

In Gauteng, the Portfolio Committees on Trade and Industry, and on Small Business Development, and the Select Committee on Trade and Industry, Economic Development, Small Business, Tourism, Employment and Labour had a joint programme in which they all visited the affected small enterprises and informal traders in the Ekurhuleni Metropolitan Municipality, and the City of Johannesburg Metropolitan Municipality.

 

1.2   Delegation

The following Members of Parliament participated in the oversight:

Member	KwaZulu-Natal	Gauteng
Mr M Cuthbert (Democratic Alliance (DA))	Attended	Attended
Ms J Hermans (African National Congress (ANC))	Attended	Attended
Mr S Mbuyane (ANC)	Attended	Attended
Ms N Motaung (ANC)	Attended	Attended
Mr D Macpherson	Attended	Did not Attend
Mr F Mulder (Freedom Front Plus (FF Plus))	Attended	Attended
Mr Z Burns-Ncamashe (ANC)	Attended	Attended
Mr D Nkosi (ANC) (Chairperson)	Attended	Attended
Mr W Thring (African Christian Democratic Party) and	Attended	Attended
Ms Y Yako (Economic Freedom Fighters)	Attended	Attended

 

The Committee was supported by the following staff members:

• Ms Z Madalane, Researcher,
• Mr T Madima, Committee Secretary, and
• Ms Y Manakaza, Committee Assistant.

 

1. Purpose of the report

This report captures the substantive discussions the Committee had during the oversight visit. Section 2 covers the Committee’s visit to medium and large enterprises in KwaZulu-Natal. Section 3 provides details about the Committee’s joint visit with the Portfolio Committee on Small Business Development and the Select Committee on Trade and Industry, Economic Development, Small Business, Tourism, Employment and Labour to small enterprises and informal traders in KwaZulu-Natal and Gauteng. In Section 4, the Committee provides its concluding remarks followed by acknowledgements in Section 5 and recommendations to the Minister of Trade, Industry and Competition in Section 6.

 

1. Oversight Visit to Medium and Large Enterprises in KwaZulu-Natal

 

1. Kingspark Clothing Manufacturers

 

1. Overview

Kingspark Clothing Manufacturers is a medium-sized enterprise, which manufactures clothing including t-shirts, jeans, and chinos for some of the top retailers in the country, which includes The Foschini Group. The company also manufactures corporate uniforms and, since October 2020, it had expanded its business to include the manufacturing of masks. Before the unrest, it was one of the few domestic companies that manufactured chinos and jeans with the capacity to produce 10 000 units a week.

 

It had two factories located in the Isithebe Industrial Park and employs 600 people, mainly women. The company is also level 2 in terms of Broad-Based Black Economic Empowerment.  It had recently built its second factory with world class technology at a cost of R3,5 million. This second factory had only been in operation for two months.

 

It is one of the companies that were affected by the recent looting and vandalism of property. As a result, the second factory was destroyed by a fire started by the looters, while the other factory was vandalised with machinery either destroyed or taken apart. The company had also lost raw materials, finished clothing, office equipment, and five years’ worth of documentation due to this incident.

 

As a result of these actions, the company temporarily closed down and had recently resumed operations on a significantly smaller scale. At the time of the Committee’s visit, the company only had half of the remaining factory operational with 80 of the 600 employees working. Therefore, the company was operating below its normal capacity using machinery borrowed from other companies with the assistance of The Foschini Group.

 

1. Matters arising

The following matters were raised in an engagement with the management of Kingspark Clothing Manufacturers:

 

1. Job losses: The Committee enquired about the workforce of the company and whether any employees had lost their jobs as a result of the unrest. The Committee was informed that currently only 80 employees were able to return to work and that the company was in the process of rebuilding the remaining factory. This would allow it to become fully operational; therefore, being able to increase its workforce to 300 employees. However, it would require finances of about R9,1 million to rebuild the remaining factory. Currently, it had not officially laid off any employees and it was supporting them with food parcels. They, however, emphasised that it would not be able to sustain the R2,5 million a week wage bill under the current conditions.

 

1. Loss of Investment: In terms of losses of investment, they informed the Committee that it estimates that the capital replacement costs for the two factories would be between R20 million and R22 million, including machinery. This estimate excludes profits that would have been earned.  

 

1. Substitution of locally produced goods with imports: The Committee enquired whether Kingspark Clothing Manufacturers had engaged with companies it supplies noting that it will not be in a position to meet some of its contractual obligations. The company informed the Committee that while it had engaged with the companies it supplied, it was concerned that those companies would start importing some of these products. For example, for jeans and chinos, Kingspark Clothing Manufacturers is one of the few large-scale, domestic manufacturers.  Once a locally produced product has been replaced with an imported product, it becomes difficult for a local manufacturer to regain that market.

 

1. Support from the Department of Trade, Industry and Competition (DTIC) and the Industrial Development Corporation (IDC): In terms of support from the DTIC and its entities, Kingspark Clothing Manufacturers noted that it had contacted the DTIC and the IDC to apply for funding. They welcomed the support from the DTIC and the IDC. However, they noted that they have experienced some challenges in submitting the required documents, as these documents and their computers had been destroyed during the unrest. This would delay the processing of their request for financial assistance.

 

1. Impact on the value chain: The Committee enquired about the wider impact on the value chain and on smaller enterprises that Kingspark Clothing Manufacturers are doing business with. The company informed the Committee that not only had it been significantly affected, its suppliers have also been affected, as they would have experienced challenges with lower demand for their products, such as fabric and even consumables like tea and toilet paper.

 

1. Insurance: The Committee enquired whether Kingspark Clothing Manufacturers had insurance and if it had submitted an insurance claim. They informed the Committee that it was insured and had submitted the initial claim.  However, the process was taking long because the assessors only came after two weeks to conduct the initial assessments.

 

1. Siyaphambili Manufacturing (PTY) Ltd

 

1. Overview

Siyaphambili Manufacturing is an electric cabling company located in the Isithebe Industrial Park. The company employs 30 people. The company was also directly affected by the recent unrest. In this regard, its storage facility and offices had been vandalised, and cables, along with tools and diagnostic equipment had been stolen.

 

1. Matters arising

The following matters were raised during the engagement with Siyaphambili Manufacturing:

 

1. Loss of jobs: The Committee enquired about the employees and how they have been affected. Siyaphambili Manufacturing informed the Committee that of their 30 employees, only eight had been requested to return to work. However, it should be noted that these employees are part of the clean-up team assisting with fixing the damaged building. At the time of the visit, the company was not operational.

 

1. Company losses: The Committee enquired about the losses to the company as a result of the recent unrest. The Committee was informed that the company was still in the process of determining the extent of its loss, which may be estimated to be a few million Rands. However, the company highlighted the loss of electric cables costing approximately R500 000 and the loss of very expensive diagnostic equipment.

 

1. SA Amcor

 

1. Overview

SA Amcor is an international company whose investors are mainly based in the United States. The company is listed on the New York Stock Exchange. The company manufactures packaging material for food, beverages, pharmaceutical, medical, home and personal care products. It bought its factory from Nampak six years ago. SA Amcor employs approximately 390 people mainly from communities surrounding Pinetown in KwaZulu-Natal. The company has other significantly smaller factories in Cape Town (70 people employed) and in Gqeberha, formally known as Port Elizabeth (12 people employed).

 

The company was directly affected by the unrest. As a result of the looting and vandalism, it had lost three delivery trucks, all its equipment, including a printing press it had purchased two months prior to the value of R80 million, and office equipment including laptops, computers, and printers. In addition, its building had been totally burnt down.

 

 

1. Matters arising

The following matters were raised in an engagement with the management of SA Amcor:

 

1. Loss of jobs: The Committee enquired what would be the impact on employees. The Committee was informed that while the company has not dismissed any of its employees, they are currently not working because the factory had been completely destroyed by fire.  However, the company acknowledged that there could be job losses given the fact that it would not be in a position to pay employees for a period of two years, as it would be rebuilding the factory during this time.

 

1. Rebuilding: The Committee enquired what the reasons were for the two-year delay in rebuilding the factory. SA Amcor management noted that it would probably take more than two years to get the factory operational again. This timeframe includes eight months to demolish the remaining structure and clean up the rubble, as well as about 18 months to rebuild the factory and source equipment. They emphasised that as the factory had housed hazardous chemicals, the cleaning up operation requires a lot more time and specialised skills. Furthermore, because the company used specialised equipment which can only be imported, there is a longer lead time to receive this equipment.

 

1. Replacement costs: The Committee enquired about the financial impact to the company. The company informed the Committee that the replacement cost of equipment, inputs, and stock was estimated at approximately R1,3 billion. This estimated loss excluded salaries and profit.

 

1. Measures to meet contractual obligations: Given the current position of the factory, the Committee enquired whether it would be able to honour its contractual obligations. SA Amcor informed the Committee that to honour its contractual obligations it has to import packaging from other international Amcor subsidiary companies to ensure that its customers are not affected. This will substitute local production over the short- to medium-term.

 

1. Insurance Claim: The Committee enquired whether the company had insurance and had submitted a claim. The company informed the Committee that it had lodged a notification for a claim with the South African Special Risk Insurance Association (SASRIA) and was estimating their losses to lodge the actual claim.

 

1. Foreign Direct Investment: As the company is wholly owned by international investors, the Committee was concerned about whether the investors would continue to invest in this plant given the instability in the areas. SA Amcor informed the Committee that the shareholders had wanted to grow their business into Africa; therefore, they had chosen South Africa as a base from which to grow. Furthermore, they emphasised that they had put forward proposals to the shareholders for rebuilding but were still awaiting their decision.

 

1. Law enforcement intervention: The Committee enquired about the intervention of the police during the looting. SA Amcor informed the Committee that the police were contacted but were unable to reach the factory because the streets surrounding the factory were blocked off. Furthermore, when the fire erupted in the factory, the local fire department was also contacted but was also unable to reach the factory.

 

1. 3 Core Engineering and Electrical

 

1. Overview

The company is a 100% black, and woman-owned company (a Black Industrialist) which supplies electric cable to government and other companies. The company has 48 employees.

 

The impact of the looting and vandalism on this company was significant. The building had been burned, 13 cars taken with some burnt, and all its cables looted. At the time the Committee visited, there was no activity at all in the company; therefore, none of the employees had returned to work.

 

1. Matters arising

The Committee was unable to engage with the owners of the company as they were not available at the time of the oversight visit. The DTIC’s Acting Chief Director for Special Economic Zones and Economic Transformation, Mr Thami Klaasen, accompanied the Committee through this site.

 

 

 

 

 

1. United Pharmaceutical Distributors (UPD)

 

1. Overview

UPD is the largest wholesaler and distributor of medicines in South Africa, one in three medicines in the country goes through their distribution centres. The company has offices in KwaZulu-Natal, Johannesburg, Cape Town, Gqeberha, and Bloemfontein. The company plays a critical role by servicing all the private hospital groups, public hospitals, retail pharmacies (including more than 1 300 independent pharmacies), and independent doctors.

 

During the recent unrest in KwaZulu-Natal, UPD’s warehouse in Mahogany Ridge was lost pharmaceutical products with an estimated value of R31 million, while the Clicks Distribution Group, which is situated in the same warehouse, lost approximately R180 million worth of stock. These products were either looted, or destroyed. There was also an attempt to burn the building. The looting and vandalism at the distribution centre took place from 12 to 14 July 2021. Over that period, there were significant disruptions to the supply of medicines to UPD’s clients, particularly hospitals in the KwaZulu-Natal area. This compromised the provincial healthcare sector. To mitigate against this, UPD had to airlift 20 tons of medicines from Johannesburg, particularly for patients with life threatening conditions.  

 

Among the medicines that were looted or tampered with were schedule 6 drugs such as narcotics. Further, during the destruction, the fridge that stored COVID-19 vaccines was unplugged, resulting in these vaccines having to be destroyed as they were no longer safe for use.   

 

In addition, computers, laptops, and printers were looted, while office equipment was damaged.  Furthermore, a number of vehicles and six trucks were burned; therefore, the company had to hire vehicles to resume its distribution.

 

Despite the fact that significant damage had been caused to UPD’s warehouse, the business had prioritised reconstruction repairs and had successfully restocked the facility within just ten days. This was critical, as it is a key stakeholder in ensuring access to medicines and other treatments, which hospitals and pharmacies depend on for life-saving treatment. The speed in response would not have been possible without the commitment and dedication of the UPD staff, collaboration with suppliers, partners and other stakeholders as well as the support of their Clicks colleagues and the Group Executive.

 

1. Matters arising

The following matters were raised during the discussion with UPD:

 

1. Arrest of the perpetrators: In relation to whether there had been any arrests made, UPD informed the Committee that all the cameras were either damaged or tampered with, therefore, at the time of the visit, there had not been any arrests. However, they had been waiting for camera feed to be accessed from their server(s), which they hope could provide some information about the perpetrators.

 

1. Impact on COVID-19 vaccination drive: The Committee enquired about the value of the COVID-19 vaccines that had been destroyed and what had been the impact of this on the vaccination drive. UPD informed the Committee that the vaccines were valued at approximately R4,9 million, with the schedule 6 medicines approximately valued at R200 000. The impact of the lost COVID-19 vaccines was a reduction in the supply of vaccines, which compromised the vaccination drive in the province.

 

1. Impact of the looting on the healthcare sector: The Committee enquired what the impact of the looting at the distribution centre had been on the healthcare sector. UPD informed the Committee that the impact of the looting on the healthcare sector in the province was somewhat mitigated due to the fact that branches in other provinces could supply medicines when the KwaZulu-Natal branch could not distribute medicines. However, had this situation continued, other branches would have been under severe pressure and the provision of medical care would have been compromised.

 

1. Transpharm / Shoprite Distribution Centre

 

1. Overview

Transpharm is one of the largest pharmaceutical wholesalers and distributors in South Africa. The company acquired the Shoprite Group in 2010. Transpharm distributes a variety of products, such as toiletry, and veterinary products, as well as specialist medical and surgical equipment, nationally. The company has three branches in Pretoria, Cape Town and recently opened a branch in Kwazulu-Natal in the Mahogany Ridge area.

 

There had been mass looting within the Mahogany Ridge area, which started in Goodwood Road next to Transpharm at Liquor Depot and Cash & Carry, on 12 July until 14 July 2021. During the looting, Transpharm undertook to protect its premises and medicines by stationing 21 heavily armed guards around the premises and barricading doors with its own trucks. The company concluded that the protection was sufficient, and, therefore, requested staff to return to work from15 July 2021. On 16 July 2021, it started operating to deliver critical medical supplies to hospitals and independent pharmacies and were fully operational by 19 July 2021. While Transpharm was not directly impacted by the unrest, it was affected by the total shutdown of supply chain channels during the unrest. Furthermore, after the unrest, no local supplier was fully capable to deliver supplies; therefore, the company had to transfer stock from the Pretoria Distribution Centre.

 

1. Matters arising

The following matters were raised during the discussion with Transpharm:

 

1. Challenges to the supply chain: The Committee enquired about the time lags in the supply chain that were affecting Transpharm. The Committee was informed that the normal turnaround times are 48 hours, however, since the looting, suppliers are struggling with backlogs, which led to time lags of up to two weeks. To mitigate this, Transpharm keeps two weeks’ worth of additional stock.

 

1. Protection strategy: The Committee commended the strategy implemented by Transpharm to prevent the business from being looted. It further enquired about best practice strategies in situations such as this. The Committee was informed that a critical part of Transpharm’s response was the support offered by the Shoprite Group which access to specialised expertise and resources to manage similar crises.   

 

1. MAHLE Behr South Africa (Pty) Ltd

 

1. Overview

MAHLE is a subsidiary of MAHLE Germany and is 100% foreign-owned. It is a supplier of aluminium used in the production of aluminium seam-welded tubes and turbulators. Approximately 50 million vehicles are fitted with an Intercooler/charge air cooler per annum, and MAHLE has a 31% market share in producing the cooling systems for light, medium and heavy duty vehicles. Internationally, 95 percent of the tubes MAHLE produces are produced in its South African plant.

 

The business was not directly and immediately impacted, as it has a good network with employees, community, taxi operators, and NUMSA officials.  A group of approximately 50 employees came out to defend the concourse. Furthermore, the company had received support from the DTIC, Trade and Investment KwaZulu-Natal, the Chamber of Commerce, the South African Police Service, METRO police and private security companies.  

 

Despite not being directly affected, production had been halted for a week. Therefore, production losses included sales of R27,4 million; R10,1 million in profit; 50% of the wage bill (R2,4 million) which was paid without any work done; and an increase in security costs.

 

1. Tiger Brands

 

1. Overview

Tiger Brands had three affected facilities, namely Albany Bakery, Tastic Rice plant and Beacon Snacks and Treats plant. The presentation focused on Albany Bakery. Albany Bakery has the capacity to bake 62 million loaves of bread per annum. It services 2 300 stores located in the following municipalities: eThekweni, KwaDukuza and Ndwedwe. It does this with a staff complement of 531 employees, inclusive of contractors and 61 delivery trucks.

 

Due to the looting and violence, the Bakery operations were stopped from 12 to 16 July 2021. As a result of the unrest employees were unable to access transport to work; the roads leading to its markets were largely closed; delivery trucks were possibly being targeted; and the stores were either closed, looted or burnt down.

 

This resulted in lost sales of 700 000 loaves that week and total revenue loss of R10 million. Albany spent additional costs on security to guard the bakery facility. Furthermore, the company lost over 15 000 crates that were damaged or lost in the stores. Such a loss would cost them R500 000 to replace.

 

With regard to the medium-term impact on the bakery operations, over 400 stores were closed following the burning of buildings and property in both the townships and the suburbs. Due to the risk faced by its drivers, the company was forced to ensure that its trucks were accompanied by armed security escorts in selected areas such as Umlazi, Lamontville, Ntuzuma and KwaNdengeszi.

 

In addition to Albany, two other Tiger Brands plants were affected by the looting and vandalism, namely: Tastic Rice and the Beacon Snacks and Treats plants. Both plants were affected by the looting and sustained significant damage to its equipment. At the time of the visit, the company was in the process of repairing the equipment at these plants and the majority of the 800 employees were back at work.

 

1. Matters arising

The following matters were raised during the discussion with Tiger Brands:

 

1. Capital loss and damages: The Committee enquired about the extent of loss to the Tastic Rice and Beacon Snacks and Treats plants. The Committee was informed that the full extent of the loss has not yet been determined, particularly around equipment and plant damage. However, approximately R20 million had already been spent in repairs to equipment. In relation to stock, the Tastic Rice plant had lost approximately R55 million worth of finished products that had been looted; R150 million was lost in sales due to its inability to deliver during that time; and in August, a further R28 million would be lost in sales. The Beacon Snacks and Treats plant had lost stock estimated to the value of R58 million.

 

1. Getting operations back to normal: The Committee enquired when the plants would be in full operation. The Committee was informed that the focus after the incidents was to ensure that production in these plants resumes, and that it has the majority of the staff back at work. However, the restoration to full and efficient production would take time, as some of the machinery that was damaged needs to be imported.

 

1. CIPLA Medpro

 

1. Overview

CIPLA is one of the biggest manufacturers of medicines and Antiretrovirals (ARVs) in South Africa and in the Southern African Development Community (SADC) region. Approximately one in four ARVs consumed in South Africa and SADC are produced by CIPLA.

 

As a result of the looting and vandalism, the regulatory standards and conditions for which CIPLA is required to manufacture medicines were compromised. People entered the plant in a forceful manner without wearing any gowns as is required when entering a medicine manufacturing facility. Therefore, the standards of safety and security were breached. Secondly, the Active Pharmaceutical Ingredients (API), which are the main ingredients in medicines were thrown on the ground in efforts to take the drums in which they were stored. People wanted the drums to store goods such as canned fish and rice which they had looted from other factories in the area. This is a significant loss to the company as the API lost is worth approximately R150 million. It would take up to four months for API to be delivered once an import order has been placed.

 

In terms of other damage to machinery and the plant, CIPLA estimates the loss could be around R180 million.As a result, the plants were not operational as they needed to be repaired and brought back to conditions and standards required to manufacture medicines. In this regard, the plant is being re-evaluated against these requisite standards. Therefore, no manufacturing could take place until that has been finalised.

 

Consequently, the supply of ARVs was interrupted, as there is currently no available stock of ARV medication. Normally, CIPLA keeps 3 to 4 months of stock of ARVs but these have been compromised. Further losses would accrue to CIPLA because customers would find another supplier, which would result in a loss of its market share.

 

1. Matters arising

The following matters were raised during the discussion with CIPLA:

 

1. Getting the plant operational again: The Committee enquired when CIPLA would be able to be fully operational. The Committee was informed that it would take three to four months to get the plant operational again. Therefore, alternative supply chains are being considered. In this regard, CIPLA is engaging the Department of Health in terms of getting special permits to import the medicines. However, it should be noted that according to CIPLA it would be difficult to find a manufacturer at short notice that would be able to produce the medicines because manufacturers already have their manufacturing schedules which means it would take a few months for any manufacturer to produce on behalf of CIPLA. 

 

1. Import tariffs and public procurement law: The Committee enquired about the import tariffs and whether there are any laws in relation to local public procurement that may inhibit the importation of the medicines. CIPLA informed the Committee that there are no trade or public procurement laws or regulations that would prevent the importation of medicine. However, in terms of health regulations, the South African Health Products Regulatory Authority (SAHPRA) has what is called a “dossier” which outlines everything about the manufacturing of medicines including where API should be sourced, where medicines could be manufactured, and which manufacturers were registered with SAHPRA, among other things. These regulations create a challenge for CIPLA importing from India.

 

1. Security breach: The Committee enquired about the security arrangement around the facility. CIPLA informed the Committee that they had security, however, the security was unable to deal with this incident. Subsequently, they have upgraded their security and appointed a private security company that is more equipped to deal with such incidents.  

 

1. Tongaat Hulett

The Committee also visited Tongaat Hulett, however, its presentation did not focus on the looting which was the main purpose of the oversight visit. Its presentation focused on the broader sugar industry such as transformation of the sector, sustainability, and the development of small-scale growers. Hence that information is not included for the purpose of this report.

 

The Committee drove past the local Shoprite and the surrounding stores which had been burned. There had been significant violence and looting which led to several businesses losing a lot of stock and income. Workers also lost their jobs and some businesses were reportedly still struggling to recovery. Unfortunately, the Committee was unable to interact with the mall operators and shop owners or the hawkers since it was already dark at the time.

 

 

 

 

 

 

1. Oversight Visit to Small Enterprises and Informal Traders in KwaZulu-Natal and Gauteng

 

The Portfolio Committees on Trade and Industry, and of Small Business Development as well as the Select Committee on Trade and Industry, Economic Development, Small Business, Tourism, and Employment and Labour had a joint programme where they visited affected small enterprises and informal traders in KwaZulu-Natal and Gauteng.

 

In KwaZulu-Natal, the Committees visited the King Cetshwayo District Municipality, and the uMhlathuze Municipality, where they engaged with informal traders as well as the owners of a salon, a tshisa-nyama, and a pharmacy.

 

In Gauteng, the Committees visited the affected small enterprises and informal traders in the Ekurhuleni Metropolitan Municipality and the City of Johannesburg Metropolitan Municipality. The following areas were visited where the Committees engaged with mall owners and/or managers, shop owners, and informal traders:

1. Cambridge Centre/Esangweni Taxi/Tembisa Plaza
2. Mayfield Square/Daveyton Square
3. Sontonga Mall
4. Jules Street, Malvern
5. Pan Africa Mall, Alexandra
6. Jabulani Mall, Soweto
7. Kliptown, Soweto
8. Eyethu Orange Farm Mall and Palm Springs Mall, Orange Farm

 

The following matters were raised during the engagements:

 

1. The extent of the damage: The two provinces, particularly various local municipalities experienced extensive looting, damage to property and infrastructure, with emergency and municipal services severely interrupted. The impact and extent of looting included:

• Destruction through vandalism and/or burning of malls, which impacted mall infrastructures such as building structures, electrical, water and sanitary infrastructure, shop fittings and equipment.
• Loss of stock of small enterprises mainly within malls, informal traders, and the destruction of a number of Automated Teller Machines (ATMs) both in KwaZulu-Natal and Gauteng.
• In KwaZulu-Natal, the N2 highway being blocked, as it was one of the targeted and severely affected routes during the unrest, which added to supply chain disruptions.

 

1. Loss of stock and income/profits: The looting significantly impacted on small businesses and informal traders. For example, a salon in Nseleni Shopping Mall, outside Richards Bay, was looted, and vandalised. She lost equipment valued at more than R80 000, which was looted, and her business has not been operational since the looting.

 

Mainly informal traders operating from outside the malls have lost stock, and most of them had to borrow money to be able to restock while others are still not operating as a result. Informal traders such as those that sell vegetables outside malls lost as much as R15 000 each.

 

In terms of the shops in the malls, most are still not operational particularly those that had been burned because the building structures have been compromised. It is estimated that it will take months to repair or rebuild. In the meantime, those owners are losing their potential income in addition to the lost stock.

 

1. Loss of income/jobs to employees: As a result of the closure of businesses where people worked, significant numbers of employees had to be temporarily or permanently laid off. Those that are temporarily laid off are from companies who can rebuild and recover. So while companies are either rebuilding or are in the process of cleaning up, employees were left without work because those businesses are not operational. Any permanent job losses would be due to businesses that would be unable to fully recover or are shutting down permanently and have to lay off employees.

 

Livelihoods have been adversely affected. It is estimated that each person that has been employed supported six to seven people in their family or community. The extent of loss is therefore significantly greater than the number of jobs lost.

 

1. Loss of properties: In addition to the looting, properties had been vandalized and some even burned. Most of those that have been burned would need to be rebuilt while others that have been partially burned or vandalised would need to repair aspects of their buildings such as electrical, and plumbing infrastructure, etc. Those companies that have insurance may be able to rebuild using their insurance pay-outs, while those that do not have insurance would need to find other sources of funding. In the latter case, many small, independent and/or black-owned enterprises are affected.

 

1. Limited access to healthcare:  Several companies, both small and medium enterprises, visited were in the healthcare sector. Those enterprises provided medicines and medical care to surrounding communities and other companies. The provision of medical care in the communities where people live alleviates the burden from local clinics for patients with chronic conditions such as HIV and diabetes. However, with the recent looting, those businesses are now unable to provide healthcare and medicines, therefore, patients are compelled to go to clinics that may be far from their local communities or are already overburdened. Furthermore, having to go to the clinic has additional transport costs for those who live far from them.

 

1. Linkages between informal traders and malls: The impact on smaller, informal traders and shops in the malls is interlinked. Firstly, informal traders benefit from the mall being operational because as people come to the mall they buy some goods from the surrounding informal traders. Therefore, with malls closed down, informal traders are adversely affected. Secondly, informal traders that source their goods from some of the shops in the malls now have to travel far to buy their products.

 

In addition to the impact on businesses and surrounding communities, looting and vandalism have had an impact on the local municipalities.

 

1. Loss of income for the government, in particular municipalities: The main sources of income for municipalities are property rates, refuse removal, and water and electricity. With a significant number of businesses not operational, the affected municipalities have to consider suspending some taxes and will lose millions monthly as a result. The taxes that are based on use, such as water and electricity, will also not accrue. Furthermore, with the vandalism and burning of properties, even when those businesses become operational, the property rates that municipalities may collect may be significantly less due to possibly reduced values of these properties.

 

1. Making services more accessible: With business under pressure, local municipalities are required to support and facilitate the recovery of local economies. Among the support offered is the issuing of trading permits to informal traders at no cost. The issuing of trading permits is critical for informal traders to apply for government funding. However, it was alleged that the issuing of trading permits and business licenses is a source of conflict between the local municipalities and informal traders because some traders including foreign nationals seemingly have trading permits without having gone through the proper application processes.

 

In its engagement with small businesses, the Committees were accompanied by the DTIC and the Small Enterprise Development Agency (SEDA) which provided information on government support.

 

1. Small Business Support: Traders were briefed on how to access financial and non-financial support offered by Small Enterprise Finance Agency and SEDA, as well as on the recently announced financial package administered. It was also stated that other government departments i.e. Tourism, Agriculture, Employment and Labour as well as the DTIC were all in the process of finalising various schemes to support businesses affected by the unrest.

 

1. Conclusions

The Committee raised the following issues:

 

1. The Committee noted with concern the nature of the unrest, where it would appear that a first group of rioters had gained access to buildings and premises targeting ATMs, and safes holding cash and other valuables before the masses arrived. This gave the impression that there could have been an orchestrated attempt to destabilise the economy.

 

1. The resultant direct socio-economic impact on manufacturers, small and micro businesses, informal traders and on workers has already been significant in terms of lost property and loss of income. This loss is still ongoing, as many businesses are still recovering and re-establishing themselves where possible. Therefore, this cost to the economy is expected to escalate going forward, especially as manufacturers may lose their domestic market share due to a short-term increase in imports to meet the resultant local demand. Further, the Committee noted that the cost to the economy would be additional job losses.

 

1. There has also been a knock-on effect on businesses that have not been directly impacted by the unrest, as they have experienced challenges with either lower demand for their products or the ability to access supplies required for production.

 

1. The Committee is concerned about the impact on the healthcare sector in particular healthcare for patients with chronic illnesses, and the vaccination roll-out programme with several pharmaceutical manufacturers and distribution centres being targeted. This will have a negative effect on the government’s efforts to facilitate economic recovery.

 

1. Furthermore, the Committee is concerned that business confidence may have declined leading to disinvestment, especially by foreign investors/multinationals, and the impact of this on the broader economy.

 

1. In addition, the Committee is of the view that black economic empowerment and economic transformation has been dealt a massive a blow, as many of these businesses were not insured.

 

1. Affected communities were also negatively impacted, as they would no longer have access to certain services and products locally.

 

1. Where businesses were insured by the SASRIA, the delay in processing these claims may compromise their ability to re-establish themselves. This would lead to an even higher impact on unemployment levels.

 

1. The Committee welcomed government’s announcement for dedicated financial support of R3,75 billion for the areas affected by the unrest.

 

1. Given that many businesses directly affected by the unrest have lost critical documentation that would ordinarily be required for financial applications, the DTIC and its development finance institutions should review how best to process these applications from affected businesses.

 

1. The Committee was of the view that while it is necessary to comply with the strict requirements to ensure accountability, in such cases, flexibility is required to allow affected businesses to access funding thus ensuring that recovery and rebuilding can be fast tracked. The Committee also noted that given the fact that medium-sized enterprises were struggling to comply with these requirements, the impact on smaller enterprises to comply may be greater.

 

1. However, this flexibility should not compromise its due diligence processes, and financial and other support should be provided swiftly to qualifying businesses.

 

1. The Committee was of the view that the DTIC should engage the private sector regarding support for the recovery efforts of businesses that have been affected by the destruction and loss of property.

 

1. Furthermore, as far as possible, government should ensure that available finance should be allocated and disbursed to affected businesses to facilitate the speedy reconstruction and recovery of the economy in the affected areas.

 

1. The Committee encouraged closer inter-governmental cooperation to ensure an effective and holistic response to the affected businesses so that these local economies can be rebuilt in the shortest time possible.

 

1. The Committee also noted that the role of the State is to protect and defend its citizens and property; however, the recent unrest has shown significant shortcomings, which resulted in the loss of lives and would have a negative impact on the broader economy. In this regard, the Committee was concerned that the South African Police Service had not adequately dealt with the unrest.

 

1. The Committee is of the view that law enforcement should investigate the alleged instigators’ attempt to destabilise the economy.

 

1. Furthermore, the Committee would welcome a comprehensive review on factors that contributed to the recent unrest in KwaZulu-Natal and Gauteng. 

 

1. The Committee would like to encourage private businesses to explore developing preventative mechanisms that would ensure their protection. This should include insurance and security, among others, to mitigate against possible future unrest.

 

1. Acknowledgements

 

The Committee wishes to thank its support staff in particular the committee secretaries, Mr A Hermans and Mr T Madima, the content advisor, Ms M Sheldon, the researcher, Ms Z Madalane, and the committee assistant, Ms Y Manakaza, for their professional support and conscientious commitment and dedication to their work. Furthermore, the Chairperson wishes to thank all Members of the Committee for their active participation during the process of engagement and deliberations and their constructive recommendations reflected in this report.

 

1. Recommendation

Informed by its deliberations, the Committee recommends that the House requests that the Minister of Trade, Industry and Competition should consider engaging the Minister of Finance on whether additional public funding could be sourced to assist affected businesses in the areas.

 

Report to be considered.