Minister of Small Business Development Budget speech & responses by ANC and DA

Minister of Small Business Development , Ms Lindiwe Zulu gave her Budget Vote speech on the 11 May 2016

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Chairperson
Ministers
Deputy Minister Thabethe,
Deputy Ministers
Honourable Chairperson and Members of Portfolio Committee on Small Business Development
Director General of my Department, Prof Edith Vries
SEFA and SEDA Board Members and CEOs
Organised business formations
Our special guests
Compatriots

I stand before you, inspired by the people of South Africa who in 1955, at the Congress of the People declared that "South Africa belongs to all who live in it, black and white.” Further and relevant to South Africa's economic transformation plan and the mandate of Department of Small Business Development the delegates of the Congress in their wisdom and wish for South Africa further declared "The people shall share in the country’s wealth".

Fast forward, sixty one years later, we are 22 years in freedom and democracy, we have a constitution we should be proud of and political power we should be exercising without fear or favour. We are guided by the provisions of the Constitution and the Bill of Rights and the dynamics that define our vibrant multi-party democracy.

The clarion call, "The People shall share in the country’s wealth" should today resonate not only with a wealthy minority taking into account our high level of inequality but also the millions trapped in poverty, unemployment and inequality. The black population, I may venture to say, is still generations behind the wealthy white owners of the economy of South Africa. Their legal participation in the economy is a mere 22 years.

Chairperson

While the past still haunts us, I remain inspired by the citizens, who despite the socio economic challenges, their past differences, race, gender and status in society, have bought into government initiatives and plans to change the lives of the majority.

I am, in particular inspired by the Informal Businesses, Small and Medium Enterprises, Cooperatives, Entrepreneurs, the young and old who, with or without government support, have continued to live in the spirit of Vukuzenzele! Who despite the slow pace of Economic Transformation, despite challenges of starting, running and sustaining their businesses, remain resolute and hopeful of the success and growth of their businesses. I salute you.

To those we have assisted and made a difference to your operations, shine so you can be a living example. To those we have not managed to reach, we have our sights on you.

Chairperson, Honourable Members we are all aware that SMMEs and Cooperatives can be the main drivers of economic growth, poverty reduction, and job creation. This has been proven globally that SMMEs are the heartbeat of stable, growing and better performing economies such as China, India, Germany, amongst others, and greater source of job creation, economic empowerment and transformation. Chile for example had a remarkable resurgence in economic activity thanks to new entrepreneurial initiatives in the last three years.

In an article by Jose Filomeno de Sousa dos Santos, written for the World Economic Forum, August 2015, he writes "Africa grew despite the global recession and it shows no sign of abating. The continent is on course to achieve economic growth of around 4.5% this year, a rate higher than predicted for the economies of the world. Amazingly, this is set against a backdrop of a Eurozone crises, low growth and stagnant wages in the West and a slow growth in China. Africa's economic expansion is nothing short of remarkable.

There's is something unique about what is happening on the continent now.

This time, the heart of the story is the boom in small and medium-sized enterprises SMEs. Today these small and growing businesses create around 80% of the regions employment, establishing a new middle class and fuelling demand for new goods and services. The scale of this transformation should not be underestimated".

Chairperson

Honourable Members, South Africa is in Africa and therefore cannot afford to ignore these facts. Opportunities to share experiences, innovation, enterprise development, new solutions and learn from SMMEs and Cooperatives with the rest of the continent can only enrich our own support systems towards ensuring success and possibly opening up market opportunities. The success of SMMEs in South Africa can also be tied to the African markets. Africa is open for business and opportunities exist for SMMEs, Entrepreneurs and innovators.

As we celebrate Africa Month, I appeal to local SMMEs to connect more with the continent, acquaint themselves with the continental models and markets and tailor solutions for African markets.

Evidence confirms the untapped potential of the sector, as observed in the Goldman Sachs 2015 report on Small business which states, "the South African economy can grow by 5% over the next five years if government and the private sector invest R12 billion in three hundred thousand Small businesses".

The country’s Nine-Point plan clearly identifies 'Unlocking the Potential of SMMEs, Cooperatives, township and rural enterprises’ as key to economic development and empowerment of Township and Rural Communities. President Jacob Zuma's initiative of bringing government, private sector and labour bodes well for the country and brings into sharp focus the importance of SMMES.

The recent announcement by the State President on the establishment of a fund to support small business, especially black entrepreneurs shows the commitment to growing the economy. Business further announced that they have pledged R1,6 billion. The Deputy President expressed hope that the fund could go into double digits. The fund must in the final analysis respond to the felt needs and plight of SMMEs. The Department and organised business formations must be part of shaping the design and implementation mechanisms of the fund. National economies are a product of consensus between economic players.

Indications are that the small business sector is beginning to take its rightful place as the engine for our economy. This has recently been confirmed by the landmark 2016 tax collection success in which SARS broke through the R1 Trillion Rand ceiling. The tax authority has reported that more than 18 000 new SMMEs had for the first time submitted tax returns. Naturally, growth in future revenue is dependent on us upscaling government interventions coupled with sharpened awareness for more people to be involved in entrepreneurship, start-ups, SMMEs and Cooperatives.

I have called on National and provincial authorities to strengthen cooperative governance. I have also consistently invited MECs responsible for economic and small business development to join me in my engagements in provinces and municipalities and we are beginning to see the concrete manifestations of these efforts.

I have met with the Gauteng and Free State MECs for Economic Development, Lebogang Maile and Sam Mashinini. In Gauteng we learnt that the MEC’s department profiled 65 townships, which informed their Township Revitalisation Strategy. In the Free State, I learnt that they aligned their strategy to the Nine-Point Plan announced by the President in 2015.

We would like to take this time to thank those who have walked with us on this path. We acknowledge the role of the Black Business Council and its affiliate, NAFCOC, who immediately joined hands with us when we were established. We also have travelled with a consortium of the AHI, SACCI and BUSA, whose support has been tremendous. We also acknowledge tireless individuals, like Xolani Qubeka, Carl Lotter, Mam’ Rose and others who share our zeal for the advancement and success of this sector. We also commend corporates who have opened their value chains to emerging suppliers. Enterprise development is an obligation for all of us.

We also take this opportunity to thank all departments that continue to support SMMEs and Cooperatives. Sadly, timely payment to SMMEs remains a challenge.

Reflection on the past two years

Chairperson, occasions such as these are moments to reflect on the road travelled, to account in line with the commitments we made and to ponder the long distance that still lies ahead.

Programme review and alignment to Mandate

As promised in last year’s budget speech we have completed the Programme Review. The review sought to align inherited programmes to our mandate and to ensure that they respond to the challenges confronting small businesses. The recommendations ranged from up-scaling, mainstreaming, discontinuing and transferring. These recommendations were then interrogated by the department, which then took the appropriate action. The implementation process is on-going.

Access to Financial and Non-Financial Support

According to 2015 Public Sector Review of Supply Chain Management, the public sector spends over R500 billion on goods and services and construction works. Given the enormous opportunity for small businesses and cooperatives to access this market, our Department is committed to take advantage of this public spend to increase the demand for goods and services produced by small businesses and co-operatives. Consistent with this undertaking, we have signed transversal agreements with the Departments of Public Enterprises, Tourism and Social Development to access small business opportunities. In addition, we have also entered into agreements with the Manufacturing, Engineering and Related Service SETA (MERSETA) and the Agricultural SETA to assist informal and micro-businesses in the field of manufacturing and agricultural businesses.

Chairperson, you will recall that last year we announced that we were working with Treasury for the issuing of Practice Notes to implement the 30% set-aside public procurement programme. It has been established that the implementation of this transformative policy shift will require an amendment to the Preferential Procurement Policy Framework Act (PPPFA).  Since this legislative review will take a longer time to complete, National Treasury, announced in December 2015, their intent to amend the PPPFA regulations of 2011 to open more opportunity. We urge National Treasury to honour this commitment.

We also made a commitment to increase the value and quality of funding for small businesses. SEFA has since its inception, increased its total approvals to R3.6 billion and disbursed into the economy over R3.2 billion to over 200 thousand small businesses. For the financial year 2015/16 alone, SEFA approved R1.1 billion of loan facilities and disbursed R1.08 billion to 45 263 SMMEs and co-operatives through its various loan distribution channels.

Sixty-one youth-owned enterprises have been funded to the tune of R17.9 million through the Cooperatives Incentive Scheme, while R35.9 million has gone to 117 women enterprises. R45.2 million has funded Three Hundred and Twenty Five (325) women-owned enterprises through the Black Business Support Development Programme. We will be monitoring these initiatives through appropriate monitoring and evaluation mechanisms.

During the 2015/16 financial year, 249 women, spread across all nine provinces, received a month long, formal seta-accredited training programme through the Bavumile Skills Development Programme. The programme is designed to increase their expertise in production processes in the creative and craft markets.

The department has entered into a Memorandum of Understanding (MOU) with the Government of the Netherlands to promote cooperation in the area of co-operatives development.  One of the focus areas is to provide technical assistance with regard to the structuring of co-operative models that will improve production efficiencies and economic viability within co-operatives.

The first co-operative to be based on this concept, is the New Generation Co-operative that was launched during the visit of Prime Minister Mark Rutte to SA. What makes this cooperative concept unique is that it incorporates members across the value chain, which makes it an ideal tool to fast track growth and development. All processes are in place to ensure operationalisation of this first new generation co-operative, which will be the torch bearer for the roll-out of more new generation co-operatives in early 2016.

Please join me in welcoming a few of the farmers who have signed the MOU to usher in this New Generation Cooperative. We have with us today members of the New Generation Cooperative Mr Piet Prinsloo- from ZZ2  whose contribution in this partnership will be mentorship as well as Mr Thomas Sadiki and Ms Shonisani Ndou.

Two special Programmes were launched since the 2015 Budget Vote, namely the National Gazelles and Finfind. The National Gazelles Programme, as one of our flagships was launched in September 2015. The first 40 National Gazelles and the remaining 160 have been selected from 507 qualifying entrants who had successfully completed the application process. They come from key sectors such as manufacturing, ICT, energy and the green economy; health and bio-sciences, and energy. The importance of the Gazelles programme is that it is post start-up. South Africa has, for the past few years, concentrated on start-ups but, it must be clear, that a strategy; whether for small businesses or cooperatives, must provide support at every phase of the SMME pipeline. Post Start-up support is crucial because it talks to sustainability.

We will be introducing the 40 National Gazelles to the nation shortly, and also begin the process of identifying the next group of growth-oriented small enterprises under the National Gazelles programme.

Please help me to congratulate the 40 Gazelles who have been selected to pilot the exciting National Gazelles Programme. Some of them are with us here today. We wish them well and trust that they will seize the opportunity and stay the 3-year journey of intensive business support and invite the private sector to take an interest in and to support these young people.

Finfind, is an online portal that has proved to be a much-needed resource for entrepreneurs seeking access to finance. This can be seen in the 11,665 users who accessed the portal during the first five months from the launch on 31 March 2016. The data from the utilisation gives us a sense of the emerging trends in respect of prevalent sectors, reasons for requesting finance and the top lenders.

Access to Markets

The ‘Women-in-Maize’ programme is another of our Flagships and a concrete example of the benefits of a partnership between government and the private sector. Working together with the South African Breweries-Miller (SAB-Miller) and the Agriculture Research Council (ARC), the project seeks to empower 5 000 women maize farming cooperatives in the next five years. The initiative will increase the inclusion of black women-owned co-operatives in SAB’s supply chain; develop skills of women farmers; improve food security; and stimulate local economies by increasing procurement from local suppliers. I wish to take this opportunity to invite you to join me on 26 May at eKangala in Gauteng to witness the first harvest. We have an director from SAB Miller Mr. Monwabisi Fandeso and participating farmers Ms Lindiwe Masilela, Ms Jabulile Mphela, Ms Elizabeth Pico and Ms Ntombi Yende.

Red Tape Reduction

We remain seized with the task of easing regulatory and bureaucratic burdens on the shoulders of small businesses. We must proceed from the premise that good policies, laws and regulations are conducive to a competitive economy. However, some policies or compliance processes may have the unintended consequences of weakening the business ecosystem.

During the 2015/16 financial year, the DSBD continued with the roll-out of red tape reduction guidelines at municipal level with 81 municipalities. We established a partnership with the International Labour Organisation (ILO) to assess the implementation of the guidelines within four municipalities in Kwa-Zulu Natal and Free State provinces. Our goal is to ease and ultimately reduce the cost of doing business.

Last year, we made a commitment in this House that we would continue to work with local and foreign traders who are operating in the informal sector to ensure peaceful and competitive co-existence. I am pleased to announce that, working with all stakeholders, I recently witnessed the signing of a cooperation agreement between South African Spaza and Tuckshop Association (SASTA) led by Mrs Rose Nkosi and Township Business Development South Africa (TBDSA) led by Mr Abbas Mkhize.

The department and its partners are implementing the National Informal Business Upliftment Strategy, which hinges on three pillars

• Building capacity of our local traders;
• Promote partnerships between locals and foreign nationals; and,
• Ensuring an effective regulatory environment, e.g. by-laws enforcement, addressing of migration issues, etc.

We are confident that the implementation of these measures will bring peace and produce better outputs from the sector.

We have registered significant progress on the implementation of the Informal Trader Upliftment Programme which was successfully implemented country-wide. 1037 informal traders and their organisations have received training and infrastructure support. We will be upscaling this programme going forward and this year we will support 7000 informal traders.

2016 budget commitments and priorities

Since the start of the 2016 Budget Vote season, this House heard Ministers commit to advancing the rise of small business through their mandates and budgets and we have heard of success stories from Ministers of Human Settlements, Science and Technology, Trade and Industry, Telecommunications and Postal Services and Agriculture, Forestry and Fisheries to name a few. Of importance, is that these departments have prioritized the development of SMMEs and cooperatives. Work needs to be done to create an overarching framework to deliver integrated support to SMME that will coordinate all of our efforts for the development of this sector. We must have a scientific approach to tracking development. In pursuit of this, the department has created policy and research function in the department headed by a Deputy Director-General that is going to have this role, among other functions. This is a very significant development in ensuring that my department plays its coordinating role. We will be engaging with other role-players in this sector to ensure success of this intervention.

The department has been allocated R1.3 billion for the 2016/17 financial year. Of this allocation 17 percent goes to administration and personnel. The remainder, which is 83 percent goes to the core business of the department, strengthening our small businesses and cooperatives. The Black Business Supplier Development is allocated R245 million and for cooperatives incentive scheme we have allocated R75 million. For National Informal Business Upliftment Scheme the allocation is R96 million and the Enterprise Incubation Programme is allocated R46 million. For the Craft sector we have allocated R10 million.

For SEDA we have allocated R634 million of which R140 million will go to Technology Support Programme, and R13 million to capacity building. SEFA has been allocated a budget of R213 million for the current financial year.

Access to Finance

Consistent with the undertakings we made last year, SEFA will over the Medium-Term Expenditure Framework approve a further R3,4 billion of loan financing facilities to SMMEs and Co-operatives. During this period, SEFA will fund 157 000 SMMEs and Co-operatives.

SEFA is determined to expand access to credit and finance to informal and micro-enterprise sector. We will increase the level of economic activity of survivalist, informal and micro-enterprises, particularly those operating in rural and peri-urban areas, through the provision of access to credit, finance and business support.

Chairperson, the Emerging Enterprise Development Programme will provide support to Women, Youth and People with Disabilities in order to increase their capacity to access economic opportunities and enhance their competitiveness. The programme offers a cost-sharing grant to a maximum of two hundred thousand rand (R200 000) to eligible applicants. The grant may be used to acquire machinery, equipment, tools, raw materials and commercial vehicles.

The intent is to enable SMMEs to access opportunities in state-owned companies through the transversal agreements we have with other government departments. For example, in the agreement DSBD has with the Department of Public Enterprises small businesses will be able to access opportunities within State-Owned Companies (SOCs), through enterprise development hubs.

The Business Rescue Strategy will be implemented for small businesses in distress, which will help to reduce the mortality rate. The department is working with SEFA on the modalities of developing and implementing the strategy. As an initial investment, R84 million has been set aside for this initiative.

The Department is also working with the National Youth Development Agency and the SA Business Resources Institute (SABRI) to develop youth-owned cooperative micro franchises in the catering sector of the Western Cape Flats region, including Phillipi, Khayelitsha, Delft, Strandfontein, Manenberg, Gugulethu, Nyanga and Saldanha on the West Coast.

Secondly, the Franchise Association of South Africa (FASA) secured funding from the Jobs Fund which will be used in partnership with other funding institutions to address the funding challenges that limit participation by historically marginalised groups. FASA is also in the process of developing and launching a franchise qualification intended to build the capacity of franchisors, franchisees, professionals and employees in the franchising industry. The qualification is intended to support role players in the industry towards credible performance support.

FASA has also finalised the Franchise Code of Good Practice which will be monitored through the National Consumer Commission. In order to enhance its advocacy role for the transformation of the industry, the department and SEFA are represented in the FASA executive committee.

We are implementing the Enterprise Incubation Programme (EIP) as a pilot programme during this financial year. The objective is to support the establishment of new business incubators and for the growth and expansion of existing incubators. It will offer incubation for small businesses and co-operatives with potential but limited technical and business skills and expertise, to be mentored so that they can take advantage of market opportunities.

We have many examples of the impact of financing provided by SEFA.

• One example is Thabo Vuyo Sikukula, an East London resident and owner of WP Timber, a pine wood door manufacturing business. He approached SEFA for funding of R 5000 000 to help finance the 100% purchase of WP Timber Products CC for a total value of R 7 250 000. The remaining R 3 750 000 was funded by Masisizane Fund, an incubator owned by Old Mutual Investments Limited.
• In acquiring the business, the existing jobs of 136 women employees were retained and five (5) additional jobs have been created.
• The business has for the past four years been turning over R 21 million per annum and has now increased its revenues to an average R 2 million a month, projected to be totalling R 24 million per annum.

The Small Enterprise Development Agency (Seda) continues to demonstrate remarkable success in assisting potential and existing small enterprises and cooperatives. The agency’s client journey model, which is long-term and outcomes oriented has resulted in about 74% of assisted clients indicating that their turnover had increased following Seda’s interventions and 51% indicating that they now employ more people. Seda partners with numerous organisations that offer complimentary services, both in financial and non-financial support, and this enables the entity to provide a comprehensive support service to small enterprises and cooperatives.

Ten thousand, six-hundred and seventy nine (10 679) clients that received Seda interventions during the 2015/2016 financial year, together with the ones from previous years who continue to receive support, have created a pool of entrepreneurs that can make a contribution to the country’s socio economic growth. Cooperative support efforts resulted in 166 primary and 40 secondary cooperatives receiving support through Seda’s unit for cooperatives and community, public private partnership programmes. 

The Department and Seda hosted the inaugural Southern African Business Incubation Conference, with the Deputy President delivering the keynote address. The main objective of the conference is for SEDA to lead a dialogue on aligning the incubation ecosystem in the country.

As at the end of March 2016, the 57 Seda-supported incubators housed 2,492 small enterprises, and created 2,331 permanent jobs during the 2015/2016 financial year. The sectors that contributed the most to this performance are the labour absorbing sectors of Agriculture, Construction and Manufacturing. In an effort to strike a balance between high-technology, innovation focused incubators and job-creating incubators, Seda is remodelling some of its incubators in high-technology sectors such as ICT, Chemicals, Bioscience, and renewable energy.

Legislative Programme

Between January and February 2016, we conducted the first round of provincial stakeholder consultations on the amendment of the National Small Business Act of 1996, as amended. The next round of consultations will take place between June and September 2016. These consultations will create a platform for inputs from inter alia, Business Associations, Private Sector, Universities, Practitioners, Small Business Organisations, National Government and National Agencies. By the end of this financial year, we would have made significant progress on proposed amendments to existing legislation.

Recognising that the economy and the operating environment has undergone significant changes, and in some instances has become more complex, the envisaged outcome of the review is a conducive legislative and policy environment  that supports the growth and development of small businesses and cooperatives.

The regulations for the implementation of Co-operatives Amendment Act No. 6 of 2013 have been finalised should be proclaimed within the next 6-months. Chairperson, you will be pleased to know that the Amendment Act provides for a differential dispensation for primary co-operatives that lowers the cost of doing business for small primary co-operatives, in particular. It encourages small businesses to form co-operatives that will enable them to benefit from shared services. It allows for the organic growth of the co-operative movements based on their own needs and requirements to form a national apex co-operative to represent the needs of all co-operatives in South Africa. Principles of good governance have also been developed for co-operatives so as to better serve the needs of their members.

Conclusion

South Africa continues to be a player in the creation of knowledge on entrepreneurship on a global scale. Having hosted two previous international conferences on entrepreneurship and small business I am pleased to inform the House that in March next year we will host the Global Entrepreneurship Congress (GEC) in Johannesburg.

This year’s International Cooperatives Day will be co-hosted with the Mpumalanga Provincial Government from the 1st to the 2nd of July.

I am also happy to announce to you that I will be interacting with Small Business organisations tomorrow at the University of the Western Cape. Further interactions will be held with academia, traditional leaders and sector based business organisations. These interactions will inform the national integrated business strategy.

We remain determined and committed to build viable and thriving small businesses and cooperatives. We have no illusions about the enormity of the tasks that lie ahead. Like true entrepreneurs, we do not adopt a defeatist posture in the face of daunting challenges. True entrepreneurs are not quitters. They remain resolute and determined for they know that obstacles in the way of progress are never insurmountable. Whatever they do, their inner voices keep telling them: “I know I can make it!”

Chairperson, my task as the Executive Authority for small business development has been eased by the support of many around me.

Firstly, I must acknowledge my Cabinet colleagues for their support. Colleagues, thank you for your advice to me and the leadership you provided to your departments to support small businesses.

Deputy Minister, Elizabeth Thabethe, thank you for your support and the experience that you have generously shared.

The Members of the Provincial Legislatures responsible for economic development, the MECs, thank you for your collegiality and for showing that the cooperative governance we aspire to, is possible.

Chairperson of the Portfolio Committee on Small Business Development, Sis Ruth Bhengu and Committee Members, thank you for your patience over the past two-years, while we were establishing our department, for your collective passion to see the delivery of our mandate to the people of South Africa and for your guidance.

We have been encouraged by the media interest in small business development and I want to express my sincere appreciation to the progressive media houses and teams for their coverage of our work and opinion pieces.

I must express my sincere appreciation to the Director-General, Prof Edith Vries and the entire department, the people who work closest to me for their dedication and commitment in order to keep up with my diary, your hours have shaped a “new normal” for the public service .

My family, the people who are closest to me, who I go back to after long and sometimes tough days. Thank you for surrounding me with your unconditional love and support.  Know that I do not take your love and support for granted.

Chairperson, I herewith present Budget Vote 31 on Small Business Development for 2016/17.

Together we move the South African economy forward through small businesses and cooperatives development.

I thank you

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Responses

 

2016/2017 Budget Vote Debate on Small Business Development delivered by Bhengu Hon Nozabelo Ruth ANC

Hon. Chairperson
Hon. Members
Fellow South Africans

The ANC supports the budget of the Department of Small Business Development.

The ANC believes that this budget though not enough would take the country a step further towards radical transformation of the economy that is currently in the hands of a few white monopoly capital leaving the majority of the South Africans surviving on government handouts and abject poverty.

While appreciative of social grants and free services to the poor we are mindful that they are not a permanent and sustainable solution to poverty therefore need to be complimented by interventions that are aimed at enabling the poor to become self-sufficient.

When the ANC assumed power in 1994 it inherited a skewed economy controlled by white monopoly capital.

South Africa is perceived to be a mixed economy driven by three pillars :

State owned companies
Cooperatives and
Private sector
This in reality is an ideal economy which would be achieved through radical economic transformation to reverse a racially based capitalistic economic system inherited by the ANC government which continues to enrich a few leaving the majority in abject poverty.

It was based on this understanding that the ANC in its 53rd Conference resolved to radically transform the economy.

The establishment therefore of the Department of Small Business Development is part of a radical economic transformation process through Small businesses and Cooperatives owned by blacks in general and Africans in particular.

Chairperson

In the report of the Portfolio Committee on 2015/2016 financial year Budget Vote of the Department of Small Business Development,

The Committee recommended to the Department an assessment of programmes inherited from other departments so as to determine their relevance to the mandate of the Department and their effectiveness in reducing poverty, unemployment and inequality moving forward.

The Department adhered to this and reported back to the Portfolio Committee.

The Committee supports the implementation of programmes that are in line with the mandate of the Department and those that address challenges and felt needs of SMMEs and Cooperatives.

We advised the Department to further engage and consult the affected beneficiaries on programmes where there were disagreements either between the Minister and the Deputy Minister or the Department and the Portfolio Committee.

The committee also identified that the assessment by the Department, SEDA and SEFA looked more inwardly ignoring oversight reports of the Portfolio Committee and consultation with SMMEs and Cooperatives especially those that had not been serviced by
the Department and its entities.

Based on these shortcoming of the assessment report the Portfolio Committee advised the Department to broaden the assessment and consult with the affected groups before terminating some of the programmes that the Department wanted to terminate or transfer to other departments.

We hope that the DG would find wisdom in the advice of the Committee and speedily resolve these issues, applying constructive change management tactics to prevent unnecessary tensions between the Minister and the Deputy Minister regarding transfer and termination of programmes which were under the Deputy Minister.

The Strategic Plan of the Department for 2016/2021, MTEF and the Annual Performance Plan for 2016/2017 financial year is a combination of reviewed programmes inherited from DTI and EDD as well as new programmes which are informed by a broader
mandate of the Department.

The Committee`s report on 2016/2017 financial year budget vote of the Department of Small Business Development raises a concern on the merger of SMMEs Development Programme and Cooperatives Development Programme into Programme 2

Our concerns Hon. Minister are based on the following:

1. SMMEs and Cooperatives play different roles in a space of economic development

SMMEs are profit driven businesses
Cooperatives are a social capital with community socio-economic development interests.
Therefore pursuing different economic policies and supported by different financial and non financial systems.

Ngabe sesakucaza kahle loku siyi ANC ukuba lendlu yesishayamthetho yasinikeza ithuba lokuba nenkulumo mpikiswano yeziphakamiso ezihambelana nokushintshwa komnotho kulelizwe.

Kodwa ke lendlu ibilokhu iphindaphinda inkulumompikiswano yesiphakamiso se DA sokuthi lendlu ithi ayisamethembi u Mongameli Jacob Zuma nakuba kwaziwa ukuthi lendlu angeke isithathe isinqumo esinjalo.

Lokhu kusibambezele kakhulu. Sicela ukunikezwa ithuba lokukhuluma ngokutshintshwa komnotho walelizwe ubuyele ezandleni zabomsinsi wokuzimilela. Maqembu aphikisayo Yekani ukusibambezela.

1. The Integrated Strategy on the Development and Promotion of Cooperative 2012- 2022 document of DTI has this to point out:

Registered cooperatives as at 31 March 2009 were 43,062. KZN being the highest with 26% and Northern Cape the lowest with 2%.
Sector spread indicated that agriculture was the highest with 5680 which is 25% and fishing being the lowest sector with only 46 registered cooperatives which is .0%.
Mortality and survival per province was as follows in 2009:
KwaZulu-Natal survival rate 12% failure rate 88%
Eastern Cape survival rate 7% failure rate 93%
Western Cape survival rate 7% failure rate 93%
Northern Cape survival rate 2.5% failure rate 97.5%
Limpopo survival rate 22% failure rate 78%
Mpumalanga survival rate 12.5% failure rate 87.5%
Gauteng survival rate 17% failure rate 83%
Free State survival rate 8% failure rate 82%
North West survival rate 13% failure 87%
The said strategy also points out that there were more registered agricultural cooperatives before the promulgation of Cooperatives Act N0. 14, of 2005.

By 2009 there were 18 cooperative sectors. The best performing sector being:

Housing cooperatives at 32 % survival and 68% failure rate
Arts and Culture at 30% survival and 70% failure rate
Social and burial at 29% survival and 71% failure rate
Baking at 25% survival and 75% failure rate
Concerns raised by the Portfolio Committee about putting SMMEs and Cooperatives under one programme overseen by one Deputy Director General as well as moving away from a sector based development approach are partly informed by this analysis.

Hon. Minister, we urge you to relook at this issue and provide the Committee with more tangible information and a political policy direction that influences this direction other than recommendations of the consultants assigned by the Department to assess programmes inherited from DTI and other departments.

In conclusion

I thank all members of the Portfolio Committee who participate in meetings of the Portfolio Committee, to ensure that the Department rises to the challenge.

I thank the support staff to the Portfolio Committee led by King Kunene the Committee Secretary assisted by Nola Jobodwana.

Our Content advisors Xolile Mgxaji and Sibusiso Gumede, the long hours that you spend in the office sometimes up to 04: 00 am, to ensure that both the Department and the Portfolio Committee meet parliamentary deadlines is a demonstration of your commitment beyond the call of duty.

To the Acting D. D.G. Mr. Lindokuhle Mkhumane who was a former Acting D.G. for sometime in the Department thank you for stabilising the Department and putting the foundation for D.G. Prof. Edith Vries to build on, to all staff members in the Department and Ministry thank you very much.

I thank the Deputy Minister Ms. Elizabeth Thabethe for sharing her knowledge and experience of the road travelled by government with SMMEs and Cooperatives since 1994 to where we are today.

Last but not least may I thank Minister Lindiwe Zulu for providing political direction in the Department and building relationships with other Ministers, the business sector and other spheres of government.

The ANC supports this budget

I thank you.

Minister Zulu must champion entrepreneurship as an apex priority: Toby Chance DA Shadow Minister of Small Business Development

Chairperson, Minister, Deputy Minister, members of the portfolio committee, honourable members, visitors in the gallery – good afternoon.

First let me acknowledge and welcome my guests, Vuyisa Qabaka and his group of young mentees from Nyanga East. Vuyisa, through his example as a successful entrepreneur and commitment to building the next generation of entrepreneurs, is showing the way towards a more prosperous South Africa. Malibongwe!

Chairperson, the Department of Small Business Development is approaching its second birthday. At our first EPC I portrayed our minister as Cinderella and urged her to avoid the clutches of her ugly sisters, Ministers Davies and Patel, whose antagonism to business is well known. Rather, she should be outspoken as the first truly business-friendly minister in the cabinet.

Then, a year ago, Minister Zulu had seemed to fall into a deep sleep from which we in the DA were desperately trying to wake her up. Our Sleeping Beauty minister was asleep on the job while her department drifted along with no clear leadership, purpose or strategy.                                                              7

This, against a backdrop of the falling contribution of SMEs to the economy as reported by Stats SA.

A further year later we are mystified why her department is still so ineffectual and has barely made an impact on the economy. This, with 8,9 million people unemployed and small businesses continuing to suffer from over-regulation and un-kept promises.

Meanwhile, Minister Zulu allowed herself, seemingly with great enthusiasm, to be placed in the role of chief government defender and Zuma cheerleader rather than doing her job by leading the charge to unshackle small businesses from a web of regulations and red tape.

Why is Minister Zulu defending the indefensible to Parliament, first in the Al-Bashir debate then in the President Zuma no-confidence debate?

Does it instil confidence in the business community when our Minister of Small Business Development provides political cover for one President who’s a fugitive from justice and another who refuses to have his day in court?

But delve a little deeper and some answers emerge. Your see, Chairperson, the fairy-tale land inhabited by our Minister and her cabinet colleagues is not some random wonderland.

Whilst the Brothers Grimm have given us Cinderella and Sleeping Beauty, events of the past few months have revealed a more sinister co-scripting team: the Brothers Gupta, whose attempts to control the state know no bounds.

It would be a travesty if the Grimm Guptas are found to be deflecting state resources and depriving the Minister and her department of the means to do its job.

Why is the National Gazelles Programme in the Minister’s department struggling to get R100 million to support small business while the DTI’s Black Industrialists Programme has been promised R21 billion?

Perhaps the answer is that small business is small pickings to the Guptas, while juicy contracts with SOEs through carefully chosen and pliable black industrialists are far more appealing.

On Monday evening President Zuma announced the formation of an entrepreneur fund, the outcome of one of the three task teams established by business and government in February to boost growth and avoid a ratings downgrade.                                                                                                       5

The DA has called for the formation of such a fund for the past three years. We are happy government and business are finally listening. Initial funding of up to R3 billion will be injected on a 50:50 basis and is targeting high-growth businesses like the Gazelles.

The fund is being set up under the watchful eye of Finance Minister Gordhan, and we hear will be private-sector driven thus bi-passing Minister Zulu. This raises questions of relevance regarding the Department’s programmes and how they will interact with the fund.

An examination of their performance over the past year, and projected impact in 2016/17, reveals just how insignificant the department’s programmes are to stimulating growth and creating jobs.

This is because Minister Zulu’s department’s driving motivation is poverty alleviation, not promoting enterprise; redistribution, not growth. Want, not opportunity.

Which is not to say poverty alleviation, redistribution and supporting the needy are unimportant. They just should not be Minister Zulu’s priority.

So how does her Department measure up?

The programme review released in November recommended it adopt a broad, facilitative focus instead of its current deep, execution focus. With its very limited budget of R1,3 billion, the scope for making an impact on the ground where it counts is very limited.

Starting with the smallest part of the budget, support for cooperatives, the Department has admitted to the committee it has no strategy at all. Cooperatives can play an important role in our economy, particularly in rural areas, and we urge Minister Zulu to address this issue.

Turning to the Small Enterprise Finance Agency (Sefa), of its R542 million projected 2016/17 disbursements, roughly 10% will be spent on funding 46 000 micro and informal enterprises, supporting 69, 000 jobs – that’s 1 and a half jobs per business financed. In a sector employing up to 3 million people, this is a drop in the ocean.

40% of Sefa’s budget will be lent directly to 163 SMEs, creating 817 jobs. 817 jobs, created by the country’s flagship small business finance agency! It’s a pitiful number, roughly 1 000 times less than the NDP expects South Africa to create every year until 2030.

What’s just as worrying is that on historic performance, 58% of these loans to SMEs will not be repaid. Meaning the businesses they are funding are either going bust or the money is being misused.

Sefa’s sister agency, Small Enterprise Development Agency (Seda), is equally ineffective. Consuming half the Department’s entire budget, or R663 million, it measures impact by the number of businesses supported, not by their long term growth and survival rates. Its strategic objectives are to increase this and that but not by any measurable metric.

This box-ticking approach fails to measure turnover, profit, jobs created, taxes paid, patents registered, exports achieved etc. – in other words, things that are tangible and making a real contribution to the economy.

What is depressing is that the DA and the Portfolio Committee have been saying this for two years, repeatedly. But nothing changes.

Perhaps this is because Seda has been headless for this entire period and still does not have a permanent CEO. No organisation can perform without leadership and direction. Minister Zulu has yet to respond to my call for her to urgently rectify this intolerable situation.

A year ago the DA advocated that Seda and Sefa be merged to create a single point of entry for small business support at a national level. This was supported by the programme review.

Now, with the formation of the new entrepreneur fund, a better solution could be to disband them altogether and re-direct the funds to the new entity. I am sure Minister Gordhan is keen to avoid an additional burden on the fiscus and any savings in wasteful government expenditure must be welcomed.

Through a diligent mix of grant, loan and equity finance, backed up by mentorship support, and widely distributed through approved retail channels, the new fund can have a catalytic impact.

It can play a role in the informal and micro enterprise sector by funding badly needed infrastructure.

It can support promising start-ups as well as high-growth potential businesses, to stimulate the entire entrepreneur pipeline.

Just as important, it can help big companies integrate small business into their supply chains by providing working capital.

The DA has high hopes that big business will get firmly behind it. It must not simply be co-opted by government, but in return demand root and branch reform of the regulatory environment and labour market to reduce the cost of doing business.

A growing and inclusive economy will not come from throwing money at SMEs and hoping some will stick. It will come from targeted lending and equity investment, opening up market linkages to new and innovative suppliers so improving competitiveness in these sectors.

A radically transformed economy is more likely to emerge from this approach than an obsession with funding ineffective state entities. These are open to abuse and capture by cronies like the Grimm Guptas or else provide protected employment for useless cadres.

It is time for Minister Zulu and her cabinet colleagues to enter the real world and leave their fairy-tale world of the developmental state far behind.

Regulatory Reform another failure of the ANC Government: Henro Kruger DA Shadow Deputy Minister of Small Business Development

House Chairperson

Today’s debate takes place against the conditions of an economic decline and bottlenecks that hamper the growth and development of small businesses and cooperatives.

The truth of the matter is that when governments fail to implement appropriate legislation the economy, society and business fail.

It is commonly known throughout the world, that bad governments introduce bad legislation.

Having said this, the minister of small business must, without fail, implement an action plan to reform the regulatory system to ease the business environment.

Chairperson,

South Africa’s Small Businesses and Cooperatives are estimated to account for over 60% of employment compared to a global average of more than 75%. Minister Rob Davies stated that more than two thirds of small businesses fail in the first year.

A critical challenge facing start-ups is a result of inconsistent policies, excessive regulations and extreme compliance administration costs across government departments and municipalities. In fact, recent research shows that a Small Business spends not less than 8 working days a month on Red Tape. Therefore it makes business sense to implement strategies that cut red tape and streamline application processes. We have seen the success of this approach in the Western Cape Provincial Government and the City of Cape Town.

Chairperson

In our view, the minister failed to support small businesses by not bringing support services to the door step of potential entrepreneurs – the SEDA and SEFA concept is outdated and she failed to protect small businesses, cooperatives and street traders from the consequences of bad regulatory measures.

Every consultant, political advisor, economist, business owner and even the president warned that if government does not take the reduction of red tape seriously, the already high small business failure rate will increase even further. A study done by Dr Wim Marneffe of the Hasselt University in the Netherlands found Red Tape cost as much as 1.6 % of the GDP in the Organisation for Economic Co-operation and Development (OECD).

Geagte voorsitter, die vorige regering het al politiese geluide in 1980 begin maak oor die vermindering van rompslomp.

Die ANC regering poog al vanaf 2004 om hierdie knelpunt op te los.

Uit die aard van die saak het hierdie poging gefaal en is die sakegemeenskap meer bekommerd as ooit oor die invloed van rompslomp op die groei van Suid Afrika se ekonomie.

Die DA glo in ʼn samelewing wat vry en regverdig is, ons glo ook dat kleinsake die drywers van die ekonomie behoort te wees en daardeur geleenthede skep wat werkskepping sal bevorder. Daarom is dit nie ʼn verassing dat die DA ʼn wetsontwerp in die staatskoerant gepubliseer het, wat daadwerklik sogenaamde red tape sal verminder nie. Die DA het die beste praktyke wêreld wyd bestudeer en met ʼn produk vorendag gekom wat verseker dat ʼn omgewing deur die regering daargestel sal word waarin kleinsake en koöperasies suksesvol sal wees.

Chairperson
The “Red Tape Impact Assessment Bill” is aimed at assessing legislation in order to identify and reduce the regulatory burden it places on small businesses.

The Bill seeks to address the following problems associated with red tape in South Africa:

•   The general absence of red tape impact assessments
•   Lack of cost calculations of red tape to business
•   A regulatory environment that is not “Business Friendly” and fraught with inconsistencies
•   Co-ordination across the different spheres of government.

By providing for the mapping and assessment of regulatory measures, the Bill seeks to create a business friendly environment by reducing negative unintended consequences and their cost to business.

Ultimately the Bill aims to create an enabling environment that will stimulate small business growth and create jobs.

Well-designed legislation on regulatory reform will give the South African economy an opportunity to accelerate growth and development.

The DA will continue to find ways through which red tape can be reduced in order to create real jobs for the millions of unemployed South Africans.

Pansi Red Tape Pansi