Minister of Small Business Development Budget Speech

Minister of Small Business Development, Ms Lindiwe Zulu, gave her Budget Vote Speech on the 18 May 2017.

___________________________________________________________________________

House Chairperson,

Ministers and Deputy Ministers present,

Deputy Minister November,

Chairperson, Ms Ruth Bhengu, and Members of Portfolio Committee on Small Business Development,

Director General of the Department, Prof Edith Vries;

Board Chairpersons, Board Members and Chief Executive Officers of our entities

· The Small Enterprise Finance Agency (SEFA); and

· The Small Enterprise Development Agency (SEDA)

Our Social Partners:

· Organised business formations representing small businesses, cooperatives and informal sector

· Labour

· Academia

· Community members and

· The Media

Small business owners and practitioners,

Private sector representatives,

Our special guests;

Compatriots

INTRODUCTION

It is a mere three years ago that President Jacob Zuma announced the establishment of the Department of Small Business Development in May 2014. This announcement marked a turning point in the history of SMMEs and Cooperatives development in South Africa, demonstrating Government’s commitment to place SMMEs and Cooperatives at the centre of economic growth and job creation. This is in line with the aspirations of the National Development Plan (NDP) - which we ought to achieve in 2030 – a vision the ANC led government is still very much committed to.

Consistent with our mandate to create an enabling environment to establish new and to grow existing small businesses, our collective effort to unlock the potential of SMMEs, AND Cooperatives, remains firmly on track.

In this year of Oliver Reginald Tambo, a year of unity in action, all South Africans who regard themselves as patriots carry a responsibility to

intensify efforts to create an economy that benefits all, and not to allow this goal to be an elusive mirage for the historically dispossessed.

House Chairperson, I’d like to quote Oliver Tambo’s views as expressed as far back as 1991 when he said:

“The objective of our struggle in South Africa, as set out in the Freedom Charter, encompasses economic emancipation. It is inconceivable for liberation to have meaning without a return of the wealth of the country to the people as a whole . . .

To allow the existing economic forces to retain their interests intact is to feed the roots of racial supremacy and exploitation, and does not represent even the shadow of liberation.“

1 State of the Nation Address by President Jacob Zuma, Parliament, Cape Town. 9 February 2017. Page 8

Loyal to the pledge we made during the liberation struggle, we will never consider our mission accomplished and freedom attained until all our people have been emancipated from economic bondage, poverty, inequality, unemployment and despair.

Therefore, the right of the majority to economic inclusivity will never be betrayed, not by this ANC led government! Thus, our relentless pursuit of radical socio-economic transformation continues unapologetically and without question.

What we mean by radical socio-economic transformation was clearly articulated by HE President Jacob Zuma during his 2017 State of the Nation Address, and I quote.

“We mean fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and female, as defined by the governing party which makes policy for the democratic government.” 2 Close quote.

2 State of the Nation Address by President Jacob Zuma, Parliament, Cape Town. 9 February 2017. Page 9

Thus, in pursuance of this goal, our mainstreaming of programmes ensures that 50% of our products support enterprises in township areas; 50% to women-owned enterprises; 30% to youth-owned enterprises and; 30% to enterprises operating in rural areas. In this financial year are planning greater emphasis for youth owned enterprises. During this address we will indicate to the House the extent to which we have remained true to this commitment.

THE JOURNEY TRAVELLED SINCE MAY 2014

Since our inception in May 2014, we have been mobilizing society and raising awareness around entrepreneurship, the small business and cooperatives sector and the challenges that confront it and the opportunities available to them.

Because of our collective and concerted efforts, the majority of our citizens now appreciate the value and contribution of small businesses to our economy. They realise that supporting small businesses will defeat the scourges of poverty, unemployment and inequality.

The mind-set is changing! A changing mind-set is important, as for far too long South Africa has had a big business mind-set.

It is our considered view that in order to address what the World Bank has termed Africa’s “missing middle”, serious investment must be made towards bridging the gap between big and small companies; as small business and cooperatives are the lifeblood of economic growth and development.

I can now boldly assert that we have successfully placing small businesses and cooperatives firmly on the national agenda so that we bridge this divide between too big and too small. As a result of our efforts we now have this high level of awareness within government that is encouraging. It is so fulfilling and exciting as more and more Ministers accept that small business development is a national priority and they unreservedly pledge the support of their departments. We have truly become advocates, defenders and supporters of the sector!!

Recent research confirms our view on this changing mind set. A study by the Global Entrepreneurship and Development Institute (GEDI), which we commissioned, has revealed that South Africa is making significant progress, ranked 2nd on the continent in terms of the quality of its small businesses and the development of an entrepreneurial ecosystem.  

We are also cognizant of opposing views of the maturity of our small business ecosystem. For example, the Global Entrepreneurship Monitor, generally known as GEM, highlighted the low levels of entrepreneurial activity in our country. The focus globally is around sustainability of entrepreneurs rather than the number of start-ups introduced into the eco-system. We want to have the best of both worlds by deepening our efforts to get more people starting businesses, but we are also active in graduation and scaling-up programmes that are now producing quality small businesses.

We are working with thought leaders, academic and research institutions to enhance our understanding and the instruments to improve our entrepreneurial eco-system.

The National SMME Policy Colloquium has been an important forum where the Ministry interacts with broader private sector stakeholders as well as SMME practitioners since the advent of the Ministry in 2014. The colloquium, which is a partnership between the department and the Small Business Development Institute (SBDI), provides an important platform where key issues pertaining to matters confronting SMMEs and Cooperatives are discussed. One of the key recommendations that arose from the Colloquium was for the Department to consider introducing a National SMME Policy Master Plan linked to the National Development Plan. In this regard the department and the SBDI has established an interim Master Plan Task Team that presented this proposal to the last Colloquium which was held in October 2016, and the department is currently considering the report emanating out of that colloquium.

House Chairperson, the contribution of small, micro and medium enterprises (SMMEs) to the South African economy is far below its potential. According to the Quarterly Financial Statistics Report, the private sector earned a total of R2.3 trillion in turnover in the last quarter of 2016. Large businesses, dominant in the manufacturing and trade industries, contributed 60% to this total, followed by small and medium businesses at 40%. We need to do better and match the global average which show small businesses share higher levels of participation in various economies. This is possible if we heed the President’s directive to set aside at least 30% of government procurement budget of around R 600 billion towards SMMEs and Cooperatives.

It is significant to note that while large businesses remain dominant in the manufacturing and trade industries, their contribution to turnover was reduced from 63% to 60% and a slight growth by SMMEs from 37% to 40%.

The tax revenue collected from SMMEs also demonstrates that this sector is increasingly becoming a force to be reckoned with. The contribution by SMMEs continued to increase in terms of four tax categories, namely, Pay-As-You-Earn (PAYE), which increased from 57% to 59%, the contribution by SMMEs to the skills development levy increased from 51% to 54%. Corporate Income Tax (CIT) from 65% to 67% and Value Added Tax (VAT) from 57 to 58%.

The contribution of Small Businesses to the Unemployment Insurance Fund (UIF) also increased from 62% to 64%.

The contribution of SMMEs to the economy continued to increase despite the increasingly difficult economic conditions. Working together as the Small Business Development Portfolio comprising the Department, SEDA and SEFA including our social partners, we are determined to strengthen the small business sector to enable it to occupy its rightful place in the mainstream economy and to demonstrate that Small Business is the Big Business of the future and working together we can indeed achieve more.

Like any new organisation there are teething problems that are bound to be encountered, even organisational design experts will concur that three-years is a relatively short time in which to establish a new organisation, particularly an entire national government department that seeks to serve to such a significant sector of the economy. We will agree that the budget available is far below what is needed to deliver our mandate. Despite the above and regrettably we were unable to spend all the resources allocated for the 2016/17 financial year due to systemic reasons.

However, we have been able to set-up a sound administration in the Department, resulting in us achieving an unqualified audit outcome in the first year of operating as Budget Vote 31. And all indications are that the department will maintain an unqualified audit outcome in respect of the 2016/17 financial year. Both Seda and Sefa also maintained their record of clean unqualified audit outcomes.

House Chairperson, I am pleased to inform the House that the department’s vacancy rate is below 10%.  

The target for women in senior management positions (50%) as well as the target for people with disability (2%) have been exceeded with 3.5% and 0.5% respectively.

Despite these limitations we are proud of the services we have delivered and its impact on the sector, noting that of service delivery response has been informed by the views and proposals of the small business and cooperatives sector.

House Chairperson, I’d like to integrate our response to the key challenges faced by SMMEs with reporting on our achievements over the past year as well as our 2017/18 priorities.

POLICY, LEGISLATION AND REGULATIONS

Firstly, policies, legislation and regulations are the core levers in the control of government through which to create an enabling environment for small businesses to grow and thrive in our economy.

In our last Budget Speech, we urged National Treasury to fast-track the implementation of the 30% set asides policy and programme for small businesses and cooperatives. We are encouraged with the progress made towards achieving the implementation of the 30% set aside announced by the President in 2015 and further reiterated in his 2017 State of the Nation Address.

National Treasury has gazetted the revised Preferential Procurement Regulations in January 2017, which encourages Government and its

entities to procure at least 30% of goods and services from SMMEs and Cooperatives.

It is important to note that National Treasury is working on the Procurement Bill, which will streamline government’s procurement processes and provide for the full implementation of the 30% procurement from SMMEs and Cooperatives.

I am pleased to report that the 30% targeted procurement from SMMEs has been exceeded by provinces such as Gauteng, Kwa Zulu Natal and North West as well as some national government departments such as Public Works, Tourism and my own department. The department of small business development recorded 60% procurement from SMMEs and Cooperatives.

House Chairperson a monitoring and evaluation framework with an implementation plan for the monitoring of the 30 percent procurement directive has been developed in collaboration with the National Treasury to ensure effective monitoring.

This intervention is timeous in the light of the recent and unfortunate downgrades. Our hypothesis is that the downgrades will negatively impact small businesses and our cooperatives and their ability to absorb or recover from the potential shocks is limited. Hence, we have commissioned research and we will conduct stakeholder consultations in order to craft an appropriate response to the potential impact of the downgrade in this sector.

We are proud to report that the preliminary stakeholder consultations on the review of the National Small Business Act, No. 102 of 1996, as amended in 2004, have been completed.

The objective of the review is to introduce standard definitions, greater policy and programme harmonisation as well as improved monitoring of the impact of government and private sector investment in small business and cooperatives development. We expect the Bill to be introduced in the legislative process in the first quarter of 2018.

House Chairperson, if there is a point of consensus between policy makers and the small business sector; it is the need to ease the burden of compliance. Our efforts to reduce the burden of regulatory and compliance by small businesses, is gaining momentum. Since 2014, we have rolled-out the guidelines on red tape reduction to about 165 municipalities. Building on these guidelines at least two provinces (Kwa Zulu Natal and the Western Cape) have adopted these guidelines into a provincial response.

The red tape reduction programme has been enhanced to cover further analysis and research areas to minimize challenges faced by small businesses. Our plans for the future include assessments of regulatory protocols within various provinces and the introduction of ICT as one of the instruments of creating efficiencies.

We would like to acknowledge the insight and constructive proposals that we consistently receive from organized business.. We are confident that through collaborative efforts we will progressively gravitate towards a simplified business environment.  

House Chairperson, we are embarking on an evidence-based review of the Integrated Strategy on the Promotion of Entrepreneurship and Small Enterprises. As we are all aware the current strategy has been around for over 15 years. The evaluation will be finalised by December 2017. The research will inform the design of the strategy, which is relevant and responsive to the economic and social needs with the expectation of achieving social and economic transformation.

We are also embarking on a process to review the cooperatives strategy. Our goal is to promote the growth and development of cooperatives on a sustainable basis and drastically reduce their mortality rate.

ACCESS TO FINANCE:

Secondly, access to finance has consistently been raised as a challenge by Informal businesses, start-ups, existing SMMEs and cooperatives. In response to the felt needs there are a range of instruments, grants and loans available in the Small Business Development Portfolio.

The department has, through the Black Business Support Development Programme (BBSDP) supported 611 small businesses and has disbursed grants to the value of R268 million during the 2016/17 financial year.

During the same period, the Cooperative Incentive Scheme (CIS) supported 237 cooperatives and disbursed grants to the value of R64.85 million. In total, R333 million was spent towards supporting cooperatives and small businesses.

In the current financial year the department is targeting 641 beneficiaries to the value R256 million for BBSDP and for CIS has targeted 302 beneficiaries whose projects are valued at R78 million.

In this financial year we will review the Cooperatives Incentive Scheme and BBSDP. The objective of the review process is to enhance the programme’s effectiveness to ensure sustainable and growing cooperatives in the economy. These instruments are part of our strategy to design relevant policy instruments in response to the need to bring about radical economic transformation in the development of cooperatives and enterprises.

Our entity, sefa, continues to contribute to the stimulation of the economy through the financing of small enterprises. Since its establishment in 2012, it has financed over 237 000 businesses and facilitated the creation and maintenance of about 262 000 sustainable jobs.

During the 2016/17 financial year alone, sefa disbursed just over R1 billion to SMMEs and Cooperatives, which benefited approximately 44 000 enterprises. We are confident that if we proceed along the same path, we will make a meaningful contribution towards achieving the target of 90% of the 11 million jobs as per the National Development Plan.

Since 2014, sefa has disbursed funds to over 50 thousand (50 583) Youth owned enterprises to the value of R955 million of which R222.4 million was disbursed in the past financial year alone.

Honourable House Chairperson, I am pleased to say that women entrepreneurship remains a major strategic focus for the country. The  

House will be pleased to hear that sefa has disbursed over R400 million to Women-owned enterprises in the past year.

We are aware of the challenges that confront entrepreneurs with disabilities. In response to this challenge and through sefa, we launched a R30 million Amavulindlela Fund dedicated to entrepreneurs with disabilities. Through this fund, we seek to empower existing and aspiring business owners with disability to access funding and business opportunities to enable them to participate actively in the mainstream economy. To date, a total of R9.3 million has been approved.

I am certain the President of the South African Informal Traders Alliance (SAITA) Ms. Rosheda Muller and Ms Rose Nkosi (Chairperson of South Africa Spaza Shops Association SASTA will both be pleased to learn that sefa has allocated R25 million for Micro Loans targeting informal businesses.

One of the major challenges faced by small businesses is late payment of their bills. This is one of the main challenges consistently raised by organised business. And, as government departments are the main defaulters, government has through the PFMA compelled all spheres of government and its entities to pay service providers within 30 days of receiving valid invoices. We have introduced a Hotline operated by Seda and monitored by the department of Planning Monitoring and Evaluation. This service has been highly successful in resolving the late payment of SMMEs. 15

Since its inception in 2009, invoices to the value of R523m were resolved. Between 01 April 2016 and 13 February 2017, 1199 calls reported to the Hotline and 1112 were resolved leaving only 87 still pending.

NON FINANCIAL SUPPORT

House Chairperson, we see support for informal businesses as one of our priority areas. Through the Informal and Micro Enterprise Development Programme (IMEDP), 7519 informal businesses were supported with training in 2016/17. This is an impressive progression from the pilot of just over 1000 informal enterprises supported during the 2015/16 financial year.

We are determined to upscale informal business infrastructure through the Shared Economic Infrastructure Facility (SEIF) programme, which is geared towards providing appropriate infrastructure for small enterprises in rural and township areas, Mqanduli (Ingquza Hill); Mnambithi Municipality, Tshakuma Fruit and Vegetable Market amongst others.

We continue to do everything in our collective power to ensure that cooperatives grow and thrive. During the last financial year, 342 cooperatives in all provinces were trained in cooperative governance and management, bookkeeping and quality management systems, and product improvement.

Last year, we made an undertaking to establish the Cooperatives Development Agency (CDA), which would provide financial and non-financial support services to cooperative enterprises in the whole economy. We were unable achieve this goal due to budgetary constraints.

The process of establishing the agency will be accelerated as soon as the Cooperatives Development Amendment Act (2014) is proclaimed.

In the previous financial year, Seda, through its branch network, managed to support 12 215 aspiring and existing entrepreneurs. Through specialist programmes, Seda has supported 167 clients through the supplier development programme, 353 clients through trade facilitation, 41 clients on systems implementation, 256 clients on mentorship and coaching and a further 893 clients on training on local and international standards.

Over the same period, a total of 115 primary cooperatives were established and 45 secondary marketing cooperatives were also established. 1 747 emerging enterprises were supported through the Basic Entrepreneurial Skills Development (BESD) programme, which is a collaboration between Seda, GIZ and the National Skills Fund.

Seda entered into 76 partnerships during the year in areas such as co-location, access to markets, supplier development, access to finance and other much needed services by small enterprises and Cooperatives.

Through the Seda Technology programme (STP), 2 582 new jobs were created to date by its network of 57 supported incubators.

The enterprises within Seda-supported incubators enjoyed growth in revenue and have generated a collective turnover of approximately R825 million. To highlight one specific market access success from an incubator, Timbali Technology Incubators, located in Mpumalanga Province incubates entrepreneurs in the agricultural sector.

Timbali’s incubated enterprises and cooperatives used to sell 100% of their produce to the wholesale market due to difficulties in entering the retail market.

Today, these famers are supplying 56% of their produce to the retail market and deliver predictable high quality products to retailers. I must indicate that Woolworths is one of their customers. These are ordinary people who were unskilled but had the necessary entrepreneurial spirit.

Another entrepreneurial success story to share is from a newly established renewable energy incubator, the South African Renewable Energy Business Incubator (SAREBI). iSolar manufactures solar water heating systems for the low-pressure roll-out facility by the Department of Energy (DOE). iSolar has been a client of SAREBI since 2013 and took up residence at SAREBI in April 2015. They are graduating in the coming months and have already secured the rental of a 3 000 m2 facility in Atlantis where they will be continuing trade. In the last financial year alone, their revenue has grown exponentially and are now employing over 35 full-time staff members.

Overall, 47% of all enterprises supported by Seda through its various non-financial support interventions are women-owned. In addition, 43% of enterprises supported for technology transfer are also women-owned. We believe that with some concerted effort Seda will reach the Portfolio target of 50% of all investments favouring women-owned enterprises.

ACCESS TO MARKETS:

Thirdly, SMMEs and Cooperatives have pointed out to us that their growth and sustainability is hampered by lack of access to markets. As such much of the interventions by Seda are to make enterprises investment-ready and incubators serve as a platform for making them expansion ready. I’d like to share a few of our endeavours in respect of creating access to markets.

The first is access to the public procurement opportunities, which I referred to earlier in discussing the revised PPPFA regulations. These regulations increased possibilities for the sector to benefit from the R 600 billion budget.

In February this year we launched PEEK an e-commerce platform for small businesses in the crafts sector. PEEK, with its technology, links these entrepreneurs into the ever-expanding national and international networks of market opportunities, putting them on a growth and profitability path. It highlights the very best of what South Africa offers in the crafts sector.

Our National Gazelles Programme, which we launched in 2015, has taken small business development to a higher trajectory. As this is a three-year pilot, we annually evaluate its effectiveness to identify gaps and strengthen the programme. Three weeks ago, we had a workshop to evaluate the programme and I am excited to inform you that many successes are emerging. The entire cohort of 40 Gazelles has during the first year demonstrated an increase in turnover and job creation.

One of the Gazelles, Gribow, a 100% woman-owned entity has had access to Global markets. They secured a contract from a Dubai based

Company, Aggreko, on a Project was for the construction of a Specialized Substation at Dema Power Station in Harare, Zimbabwe.

According to Gribow, and I quote, “Our association with the Gazelles and the fact that this was a Government backed initiative, led to the Aggreko Team awarding us the Contract in Zimbabwe based on the fact that the Government had backed us as one of the Top 40 Small Business in the country.”

Their sterling performance in the Zimbabwe contract led to Gribow being appointed to join a project aimed at constructing a gas plant in Benin.

The 4th Industrial Revolution, characterized by digitisation and automation, is gaining momentum. It will fundamentally change the way is which we live, work, transact and trade. It thus stands to reason that the small business and cooperatives sector must future-proof their core business offerings and business models, in order to be part of a digitised world and economy, failing which they will fall behind and remain trapped in a survivalist mode. We will support the building of the right digital capabilities into companies and sectors so that they remain relevant in the new environment and resultant markets. This not only ensures their survival in the digitization megatrend as companies need to be clear about their digital strategy to ensure it sharpens their competitiveness.

Developing countries, including South Africa must leapfrog to minimise the divide. After all this revolution comes with opportunities just as it comes with challenges. It is a golden opportunity for our youth who, in any case, are already in this intellectual space.

It is for this reason that digitalization is a key focus for Seda, especially their incubators. Seda cannot talk of enterprise development and not prepare their clients for the future. Focus trends include digital innovation and product development, digital supply chain and operating systems, digital marketing, sales and service. Our incubators must also play a role in levelling the playing field.

Hence we were very excited by the launch of the French-SA Tech lab in February, the second of two on the continent. It is an incubator where entrepreneurs can design and test their innovative IT solutions to resolve real world problems and create answers to new opportunities. The Department of Science and Technology is supporting the development of these innovative solutions and products and seda is supporting the entrepreneurs in the translation thereof into a business enterprise.

Other initiatives which we will vigorously pursue in the current financial year, is an implementation for the Transversal Agreement with the Department of Telecommunications and Postal Services and their SMME ICT strategy and the Seda ICT incubator.

We are excited about the PUBLIC-PRIVATE PARTNERSHIPS we have concluded to advance market access. We have signed partnership agreements with private sector organisations such as Pick n Pay, Anglo Platinum, SABMiller now AB-In Bev, Sumitomo Rubber South Africa (Dunlop), Nestle SA amongst others.

The Women-in-Maize programme is proceeding apace. The partnership between the department, South African Breweries-Miller (SAB-Miller) and the Agriculture Research Council (ARC) is focused on implementing the

Women-in-Maize programme. Since its execution, the partnership has seen 32 Cooperatives linked to SAB Women-In-Maize supplier development programme under CROP 16 and 17.

The programme will empower 5 000 women-owned farming Cooperatives and SMMEs over the next five years and will increase the inclusion of black women-owned Cooperatives in SAB’s supply chain; develop skills of women farmers; improve food security; and stimulate local economies by increasing procurement from local suppliers.

A similar effort must be made with executing transversal agreements with other departments. Talking more broadly, coordination between all spheres of government has to be a priority. I have not gone to a single community without contacting and working with the Provincial MEC and appropriate MMCs. I have already met with the MECs for Economic Development in Gauteng, Free State, North West and Mpumalanga. I will in the next few weeks meet with the remaining MECs to better coordinate our efforts to build our small business sector.

In any case, there is R15 billion in small business support in various pockets of Government which will be coordinated to ensure a greater return on investment. We have been talking to Treasury in this regard. This coordination will be far more effective in our small business development strategies than the current silo approach in which we duplicate support, and thus waste valuable resources. Seda and Sefa will be part of this coordination. We will come back to this House in the next Budget Vote to give a detailed account of the impact of these agreements.

INTERNATIONAL RELATIONS  

In 2016/17, we introduced an International Relations function. We have been overwhelmed by the enormous opportunities it offers for the sector and the department in terms of creating an optimized the ecosystem to accelerate the growth and ensure the sustainability of small business and cooperatives.

In March this year, we hosted, with our various partners, the first Global Entrepreneurship Congress (GEC) on the Continent. It was a resounding success. One of the legacy projects emanating from this Congress was the establishment of the Global Entrepreneurship Network Africa (GEN Africa) which I will lead with my counterparts on the continent. We will host GEC Africa in 2018 as an inaugural entrepreneurship forum for and by African countries.

There are strong synergies between GEN Africa, the outcomes of World Economic Forum on Africa and the African Union’s Agenda 2063 in terms of the promotion of entrepreneurship in order to enhance Intra Africa Trade amongst small businesses in Africa. We are committed to taking leadership in opening this opportunity.

We have concluded a multi-year grant to the value of 52 million Euros form the European Commission, to support employment creation through small business. This programme will start operating in October 2017.

I want to appreciate the Her Excellency, Ambassador Thygesen and her team at the Danish Embassy in Pretoria for the recent Study Tour to Denmark they arranged for our team. Denmark ranks 4th in the world in terms of the ease of doing business and No.1 on the Transparency

International ranking hence, offering us for us much to learn from. The team was exposed to the entire Danish ecosystem built over many years to support their SMEs, comprising 98% of businesses in the country. An invigorated and energised team returned on Saturday past and we look forward to seeing the translation of the lessons learnt into our “youthful” ecosystem.

THE 2017/18 BUDGET

The process of building a fully independent department continues rapidly. Despite all the challenges of setting-up a new home with limited resources, the department was invigorated by an unqualified audit opinion from the Office of the Auditor General for the 2015/16 financial year. The department continues to build on this baseline to ensure an effectively governed environment.

On financial allocations:

· Transfers and Subsidies take up 84.8% or R1.24 billion of the allocated R1.46 billion.

o Seda is allocated 51.9% or R743.1 million,

o whilst the remaining 33.2% or R484.6 million is administered through the following four grants:

§ Black Business Supplier Development Programme (BBSDP) is allocated R256.8 million;

§ Cooperatives Incentive Scheme (CIS) is allocated R78.7 million;

§ Enterprise Incubation Programme is allocated R49.7 million, and

§ The National Informal Business Upliftment Scheme (NIBUS) is allocated R99.4 million for the current financial year (2017/18).

· Compensation of employees is allocated 9,5% or R139 million

· Goods and Services are allocated 5.5% or R80.1 million

· Whilst Capital Assets are allocated 0.2% or R2.6 million.

Sefa’s total budget for the current financial year is R223.8 million.

We have been in existence for three years and with the benefit of hindsight organised ourselves to function as a portfolio. The aim of our portfolio is to lead an integrated approach in the development of SMMEs and Cooperatives. We are being pragmatic about it and providing coordination, direction and leadership on policy, planning and mobilizing resources and strengthening accountability, partnerships and communication with sector stakeholders for the development of SMMEs and Cooperatives across the three spheres of government. This is a major step-change for the Portfolio.

CONCLUSION

House Chairperson, the 2019 aspirations that we set ourselves to realize, is to

· ensure growth in the contribution of SMME to GDP from 42% to 45%,

· increase the number of SMME and start-ups from 2,15 to 2,56 million

· increase the total number of jobs created by SMMEs from 7,33 million to 9,09 million

We remain confident that these aspirations we set in 2015 emanating from the Nine-Point Plan are still attainable.

The performance of small businesses and the Portfolio in delivering these aspirations demonstrates that we are on course to achieve the key indicators of radical economic transformation and the National Development Plan: Vision 2030.

ACKNOWLEDGEMENTS

Chairperson, I would like to express my appreciation for the support I have received from my family, colleagues, the people of South Africa, and the team in the Small Business Development Portfolio.

To my family, thank you for your unconditional love and support. You remain my pillar of strength.

I would like to acknowledge my Cabinet colleagues for their continued support, advice and leadership.

I want to appreciate the former Deputy Minister, Ms. Elizabeth Thabethe who unselfishly shared her depth of experience in the sector and worked

with me to establish the Small Business Development Department since its establishment until March 2017. Thank you Deputy Minister.

Deputy Minister, Nomathemba November, thank you for your support. You may be new to the department, but you remain a veteran when it comes to issues of small business and Cooperatives.

Members of the provincial Executive Councils (MECs) responsible for economic development, I wish to say: Thank you for your contribution and for giving concrete expression to the notion of cooperative governance.

Chairperson of the Portfolio Committee on Small Business Development, Cde Ruth Bhengu and Committee Members, thank you for your guidance and support. Your dedication and passion for delivering the small business development mandate to our people has been an unwavering beacon that beckons us to honour our reason for existence.

I must express my sincere appreciation to the Director-General, Prof Edith Vries and the entire department; and the CEOs and teams in our entities seda and sefa, for your dedication and commitment to delivering our mandate. You are a small team carrying ever-increasing load and I appreciate your hard work and the incremental improvements in the maturing portfolio service delivery model.

To the entrepreneurs, owners of and operators, practitioners and experts in the small business and cooperatives sector, thank you for your dedication to the small business development agenda which you drive, with or independent of our support. Your support, advice and patience with us is appreciated.

 

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

Together we move South Africa forward through small business and cooperatives development.

I thank you.

_____________________

ADDRESS BY THE DEPUTY MINISTER OF SMALL BUSINESS DEVELOPMENT, MRS NOMATHEMBA NOVEMBER (MP) ON THE OCCASION OF THE BUDGET VOTE 31 ON SMALL BUSINESS DEVELOPMENT

Honourable Chairperson;
Minister Zulu,
Ministers and Deputy Ministers;
Honourable Chairperson of the Portfolio Committee on Small Business Development, Ms Ruth Bhengu and members of the committee
Director General of the Department, Professor Vries
SEFA and SEDA Chairpersons, Board Members and CEO’s;
Social Partners,
Organised business formations
Organised Labour;
Government and
Community’
The private sector
Ladies and gentlemen

The establishment of the Ministry and the department of Small Business Development remains one of the most pragmatic interventions since the dawn of democracy to radically transform our economy and obliterate despair whilst propelling our township, rural and peri-urban areas to the main stream economy.

Radical economic transformation is here and is alive! 2

Honourable Chair,

Believe you me when I say, I am convinced that if we are radical enough, the triple challenges of poverty, unemployment and inequality that have given us sleepless nights for ages would be reduced to significant low proportions even before 2030.

I know so, because I have just joined a very progressive ministry fighting for the inclusion of our people in the economy. Many had lost hope, many had no aspiration to even start, and today I can assure South Africans that under the astounding leadership of Minister Zulu, the ministry is fast turning the corner to develop and promote small enterprise and cooperatives with resultant employment and economic development.

I am privileged to be part of this paradigm shift that seeks to empower our people by providing realistic opportunities for small businesses and Cooperatives. We have already done so much in providing financial and non-financial support to both SMME’s and Cooperatives.

Although I have been part of this ministry for merely a month, I am taking the baton from a committed and very competent cadre, cde Elizabeth Thabethe, my predecessor who has indeed laid the foundation for me and my task would have been much more difficult without the support experienced in our encounter from my days as the Portfolio Committee member on Small Business Development.

I know that I used to hold them accountable and now the tables have turned. They are holding me accountable.

FINANCIAL SUPPORT FOR COOPERATIVES

House Chairperson,

The minister has alluded to the financial support towards supporting cooperatives and small businesses but I must mention, that through our stakeholder engagements it has become abundantly clear that the support towards cooperatives lags behind that which is provided to SMME’s and it is for this reason that we have begun to relook at the existing Cooperatives model with a particular focus on the manner in which we provide support to Cooperatives both financial and non-financial. It is therefore a response to the needs of the people but we urgently have to provide a comprehensive support that 3

will ensure that our cooperatives are sustainable and profitable in pursuit of radical economic transformation agenda.

Statistics have been quoted demonstrating the capacity of Cooperatives across the globe but very few have successfully shown improvement here at home. The question is why? Why is that the only cooperatives that are successful today are the ones that were funded pre democracy? Why?

What did the previous government do differently? These are the questions that we should be bold and answer in order to streamline our support with a sole purpose to demonstrate the potential that cooperatives have.

Daar is talle navorsing en statistieke beskikbaar wat die sukses van kooperatiewe wereldwyd bevestig, maar die teenoorgestelde is die plaaslike werklikheid. Die vraag is hoekom?

Hoekom is dit dat slegs die kooperatiewe wat bevonds was voor demokrasie, die enigstes is wat vandag nog suksesvol is? Wat is dit wat die apartheid staat verskillend gedoen het?

Hierdie is die vrae wat ons prontuit moet vra en beantwoord. Dit is eers wanneer ons hierdie antwoorde het en verstaan dat ons die oplosings kan skep vir vooruitstrewendheid.

Having said that, Chairperson, we continue to do everything in our collective power to ensure that cooperatives grow and thrive. During the last financial year, 342 cooperatives were trained in cooperative governance and management, Bookkeeping and Quality Management Systems, and Product Improvement covering all nine provinces.

We will, during this current financial year, review the Cooperative Incentive Scheme. The objective of the review process is to enhance the programme’s effectiveness and enable the support of sustainable and growing cooperatives in the economy. The instrument is part of the strategy of the department to position its policy instruments to respond to the need to bring about radical economic transformation in the area of cooperative development in the whole economy. 4

Last year, we made an undertaking to establish the Cooperatives Development Agency which would provide financial and non-financial support services to cooperative enterprises in the whole economy. We were unable to achieve this goal due to budgetary constraints. I wish to assure Honourable Members that the process remains firmly on track. The process of establishing the agency will be accelerated as soon as the Cooperatives Development Amendment Act (2014) is proclaimed.

We are also embarking on a process to review the cooperative strategy with the view to formulate an integrated cooperative strategy development model geared to promote the growth and development of cooperatives on a sustainable basis and drastically reduce the mortality rate of cooperatives.

Chairperson, I am pleased to inform the House that 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 (NGC) that was launched during the visit of Prime Minister Mark Rutte to South Africa. The department, in partnership, with The Netherlands Embassy, ZZ2, the RSA Group, and North West University is continuously supporting the NGC pilot in Nwanedi Area, Limpopo province. Special thanks to our Director-General, Prof Edith Vries who, together with the Netherlands Ambassador in South Africa, Her Excellency Marisa Gerards, visited some of the NGC members on 16 July 2016. The Co-operative is currently registered and has made an application to the Enterprise Incubation programme (EIP) Programme of the Department of Small Business Development.

House Chair,

Last year, we successfully hosted the International Cooperatives Day Celebration in collaboration with Mpumalanga provincial government. The event took place in Mbombela Nelspruit and it was attended by the 3 SADC Ministers (Zimbabwe, 5 Lesotho, and Botswana) who came to share best practice on cooperatives development with their South African counterparts as well as deliberate on SADC Economic Policy and SADC Industrial Strategy. 1 200 members of cooperatives and general public participated in this programme. I wish to extend an invitation to all Honourable Members to this year’s International Cooperatives Day which will be held in Sasolburg, Free State from the 30th of June to the 1st of July.

ON COORDINATION AND INTERGOVERNMENTAL RELATIONS

Chairperson, we are of the firm view that the spirit of cooperative governance and intergovernmental relations is one of the most effective instruments in the hands of government to promote the growth and development of small businesses and cooperatives. As a department, we have developed a culture of involving and engaging local and provincial governments in all our programmes and initiatives.

Indeed, all the enterprises we are funding and supporting can only be effectively monitored by local and provincial spheres of government. The success of these small enterprises is also the success of local economic development. We therefore make a call to all municipalities to support and capacitate their Local Economic Development units as part of our collective agenda to grow local economies through small business development.

As the President asserted during the Presidential Local Government Summit which took place during the 6th and the 7th of April this year, the key component of phase 2 of Back to Basics is Local Economic Development and as a department, we are ready to partner with municipalities.

At national level, the department has signed nine transversal agreements with various public sector organizations. This gives concrete expression to our position that small business and cooperatives development is everyone’s business. Indeed, all departments and state-owned entities have something to offer to small businesses.

Currently, we are working with our partners to deliver support to informal and micro enterprises. Some of the key partners in this regard are MerSeta, Services SETA,

6 International Labour Organization (ILO), UN Women and the Department of Public Works. Through the Department of Public Works, we reached more than 100 entrepreneurs with disabilities. Our gender and youth interventions are also in line with the mainstreaming targets.

We will, in due course, be rolling out the implementation of Public Sector Transversal Agreements involving eight national departments, namely, Public Enterprises, Tourism, Defence, Social Development, Rural development and Land Reform, Labour, Public Works, and Telecommunication and Postal Services targeting key sectors of the economy that can contribute towards growing employment and ensure the sustainability of cooperatives.

House Chairperson, Co-location is one of the key priority areas that responds to the need of small businesses to access enterprise support services under one roof – from registration to funding. Through partnerships with our agencies as well as local and provincial governments, we have already established a number of co-location points. We will this year launch more co-location points as this is a very important intervention.

As part of our commitment to support the establishment of new business incubators and to help grow and support existing incubators, we implemented the Enterprise Incubation Programme in the last financial year. The programme will assist with the identification and guaranteeing of specific markets and provide focus and direction to the incubator’s work of preparing entities. To date, seven incubators are being supported to offer incubation for small businesses and Cooperatives with potential but limited technical and business resources and expertise. The target for this year has been increased to 12 incubators.

I would like to take this opportunity to invite Honourable Members to the launch of Matsila Development Trust Incubation which has been funded by the department’s Enterprise Incubation Programme to a total amount of R8 million. The fund will assist the Trust to uplift the Matsila Community by enhancing their entrepreneurial skills throughout the Vhembe District Municipality and beyond the Limpopo Province. The launch will take place on the 2nd of June this year.

7 Through Seda, we are rolling out the Rapid Incubation Programme in TVET colleges that host the centres for entrepreneurship programme. These programmes are meant to unearth innovative and entrepreneurship talent for youth in these colleges and their surroundings. Early this year, we launched two such centres in Welkom, Free State and Mogwase, North West.

THE CREATIVE INDUSTRY

House Chairperson,

The Department of Small Business Development has long identified the creative industry as a sector with the greatest potential to create temporary jobs in the immediate and sustainable projects in the long run. We know that most people see our artists by the side of the road and only view them as artist as opposed to entrepreneurs that we know have a potential to help us achieve the much needed jobs in this country.

As the department we have been tirelessly working with various partners in both the public and private sector to foster relations that will help empower the sector but also provide comprehensive support to these entrepreneurs.

Through the SA lifestyle hub in Atlanta that we re-established two and half years ago, we continue to receive orders for our local manufactures throughout the country and what remains inspirational to all of us is the fact that many of them are rural based. Ms Agelina Masuku that the former DM reported to this house that she got an incredible order to supply Disney World with handmade baskets has reported that she is still supplying them and interestingly, they are now also ordering “place mats” on monthly basis. This is true economic empowerment for rural women because she now has over 15 employees with a potential to employ more.

The statistics about the creative industry point to an urgent need for interventions that seek to promote and underscore the growth and development of the domestic and local creative economy as a key driver for job creation.

A range of policy and strategic tools ranging from local production incentives, tariffs, government procurement, as well as local content quotas across all creative industries would need to be instituted to stimulate accelerated domestic growth. 8

As the department, our focus should be on stimulating domestic demand because consumption is central for the development of the Creative Industries and their contribution to economic growth and job creation.

The focus on domestic demand, local production and consumption is not at the exclusion of export development and growth, but emphasises a strong local market as a springboard for export

House Chair,

The Department supported 100 craft enterprises to participate in the national Decorex exhibition at Gallagher Estate, Johannesburg, which took place in August 2016. These enterprises collected revenue in excess of R1, 8 million which is a direct cash injection into their respective businesses. This is money that they otherwise would not generate for their businesses if the department did not provide financial support for their participation in the ever growing Decorex.

It is also vital that I share with you our National Tour of the USA with our local creatives.

The Department of Small Business Development firmly believes that the main sustainability factor for SMMEs and Cooperatives is access to markets and sustainable business opportunities. In the interest of realising the goal of supporting their market access aspirations, the department also supported 20 visual arts enterprises on a national tour of the United States which were presented at the Santa Fe Contemporary Art Fair, the San Diego, Miami and New York Art Fairs which took place from July 2016 to April 2017. This is again a practical demonstration of our commitment as a Department to unlocking and creating market opportunities for SMME’s and Cooperatives especially in the creative industry.

Our participation in various market platforms here at home and abroad demonstrates a continued demand for South African creative goods in the world. This is further evidence that the Creative Industry is an important growth area and a job creator for women and young people in rural and peri-urban areas. 9