Employment Creation Facilitation Fund (Jobs Fund) implementation: briefing by National Treasury

Standing Committee on Appropriations

29 July 2013
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Committee was briefed by the National Treasury on progress in the implementation of the Employment Creation Facilitation Fund (Jobs Fund), whose objective was to co-finance public and private sector projects which had the potential to contribute significantly to sustainable job creation. The allocation of funds was on an open, transparent and competitive basis, with all projects having to provide matching funds. An investment committee, independent from the Fund, made the allocation decisions. Two funding rounds had been completed and the third round was being processed. The Fund ensured that its funding was complementary to other public funding, as it did not want to displace that funding. It focussed on the areas of enterprise development, infrastructure development, the building of institutional capacity and supporting work seekers through training, which would lead to developing work experience or placement in a job. Business plans had to reflect the achievement of job targets within three years.

Sixty-six projects had been approved in the two rounds, with a grant value of R3.418bn, which had generated matching funds of R3.518bn. Sixty-one of the 66 projects had been contracted and these were estimated to have generated 92 717 new jobs and placed 45 891 people into vacant positions while training a further 100 877 people.  The third round had attracted 600 applications and the Fund had limited applications to only the enterprise development and infrastructure development windows.

Challenges faced by the fund included limited innovative scalable projects; insufficient identification and use of intermediaries; the large volume of applications; difficulty in appraising complex projects; delays in finalising projects; the lead time required to implement and deliver jobs; inadequate project finance and grant management capacity and the Development Bank of South Africa’s (DBSA’s) restructuring process, which had led to staff turnover. Going forward, the Fund would ensure that future rounds were more focussed and carefully designed. There would be a changed role for Treasury, with the DBSA taking a more active part. It was seeking to increase the 36-month project lifespan period, and it would target themed areas.

Members asked for examples of how funds were allocated, how many entrepreneurs had been assisted, and for an example of a public body that had been funded. Members felt that government departments had means to access funds, and therefore should not be allowed to apply, as they would be competing with the private sector for these funds. How did the investment committee make its decisions and who comprised the investment committee? Members wanted know whether the fund assisted people who had a good plan but no matching funds. How many people in rural areas were assisted?  How many government departments were making use of the funding?  What were the Fund’s links with the National Youth Development Agency (NYDA), and had the NYDA received any assistance?  In which areas was the Fund marketed?  Members asked if the jobs that had been created, provided a living wage. How were jobs categorised?  Were the projects attracting highly skilled people?

Questions were raised over what collaboration there was with other similar bodies to weed out the duplication of services, and “double dipping.”  Members said the explanations given made it clear that the Jobs Fund was a support program for the private sector similar to the retrenchment and training packages that had been offered a few years ago, and that this was not what the Members had thought the Fund would be.  The responses of the Department did not reflect the Fund’s claim that it was working towards responding to the structural unemployment in the country. Small and micro enterprises could not get funding because of the matching funding requirement, and were falling through these cracks.

The Chairperson said it appeared there was a challenge in the pace of the funding being provided.  The Fund should look at establishing a “one-stop shop”, where applicants could get what they were looking for rather than being sent to financial institutions if they were lacking finance, for example. He was worried that government departments had access to these funds, as they already had a brief to create jobs from within their own budgets. There was a need to re-look at who could, and who could not, get funding, as well as the conditions attached to funding. He wanted a list of all the government bodies that had already benefited.  How did one qualify to become an intermediary?  It was common knowledge that small business the world over created the most jobs, yet it appeared that South Africa wanted to create jobs by funding big business. When the program was evaluated, this needed to be looked at.  Members would appreciate it if the Fund were to make themselves available to visit Members’ areas when invited. He asked how the Industrial Development Corporation funding to NYDA and women differed from this Fund.
 

Meeting report

Briefing by National Treasury
Ms Najwa Allie-Edries, Head of the Employment and Social Security Management Unit in the National Treasury, said the objective of the fund was to co-finance public and private sector projects which had the potential to contribute significantly to sustainable job creation. The allocation of funds was on an open, transparent and competitive basis, with all projects having to provide matching funds -- the private sector on a 1:1 basis, and the public sector and NGOs on a 1:0.2 ratio. The allocation was competitive, because all applications had to compete with one another. An investment committee, independent from the Jobs Fund, made the allocation decisions.  Two funding rounds had been completed, and the third round was being processed. The Fund took care to ensure that the funding was complementary to other public funding, as it did not want to displace that funding.

Treasury had done research which showed that there was R40bn available for job creation. The Jobs Fund focused on the gap in the market that supported enterprise development, especially innovations that could create sustainable jobs. The Fund would focus on the areas of enterprise development, infrastructure development, the building of institutional capacity and supporting work seekers through training which would lead to developing work experience or placement in a job. Applicants had to provide a detailed business plan and budget, and quarterly disbursements were approved only if project milestones had been achieved. The business plan had to reflect the achievement of the job’s target within 36 months.

Sixty-six projects had been approved in the two rounds, with a grant value of R3.418bn, which had generated matching funds of R3.518bn.  Sixty-one of the 66 projects had been contracted and these were estimated to have generated 92 717 new jobs and placed 45 891 people into vacant positions while training a further 100 877 people. The enterprise development window would account for 70% of the new jobs, using 27.7% of the funds allocated.  The third round had received 600 applications by its closing date in June, and the Jobs Fund had limited applications to only the enterprise development and infrastructure development windows, based on the results of the first two rounds of applications.

Ms Allie-Edries then outlined the Jobs Fund’s aim to have an impact beyond job creation (see p16 of presentation). The Fund had undertaken road shows to market itself and there was information available on its website on how to apply. It had established links with chambers of commerce in cities.

Challenges faced by the fund included limited innovative scalable projects; insufficient identification and use of intermediaries; the large volume of applications; difficulty in appraising complex projects; delays in finalising projects; the lead time required to implement and deliver jobs; inadequate project finance and grant management capacity and the Development Bank of South Africa’s (DBSA’s) restructuring process, which had led to staff turnover. Going forward, the Fund would ensure that future rounds were more focussed and carefully designed. There would be a changed role for Treasury, with the DBSA taking a more active part. It was seeking to increase the 36-month project lifespan period, and it would target themed areas.

Discussion
Mr J Gelderblom (ANC) asked for an example of how funds were allocated, and how many entrepreneurs had been assisted.

Mr Timothy Hobden, technical advisor to the Treasury, responsible for governance policies and procedures, said the Awethu Project, which targeted micro entrepreneurs in townships and supported 1 000 entrepreneurs in creating 3 000 sustainable jobs, was a typical example.  There was no limit to the amount of funds a project could apply for, but projects were limited in that they had to supply matching funds. In the case of Awethu, Awethu had provided R4m, while the Jobs Fund had provided R20m in matching funds. Awethu had started small, employing two members who had assisted three entrepreneurs, but it now had a staff of 48 assisting 300 entrepreneurs. Awethu’s business plan had had to compete with 2 000 other applicants.

Mr L Ramatlakane (COPE) asked who guaranteed that permanent jobs would be generated, given that micro enterprises dealt with spaza shops and car washers, for example. What were the consequences if permanent jobs were not created?

Ms Allie-Edries said there was no guarantee that there would be permanent jobs, but the business plan had to demonstrate how sustainable jobs would be created.

Mr Gelderblom asked for an example of a public body that had been funded.

Mr Dumisani Hlatshwayo, Chief Investment Officer of the DBSA, said SANPARKS had received R5m to match their R1m funding, in order to train and place 50 mountain safety monitors on the Table Mountain walkways after a spate of robberies in the area. 

The Chairperson said he felt that government departments had alternative means to access funds and this should not be allowed, as they would be competing with the private sector for these funds.

Mr Hobden said all projects were held accountable for their funds.  Funds were disbursed on a quarterly basis, taking into account what had occurred in the previous quarter. There was an online reporting system covering cash flow, spending, job targets and milestones. A disbursement panel monitored disbursement.

Ms A Mfulo (ANC) asked what was meant by ‘financial sustainability of jobs’. She felt the Jobs Fund was just a duplication of the Small Enterprise Development Agency (SEDA) and the National Youth Development Agency (NYDA), and was sceptical of government departments being beneficiaries.

Mr Ramatlakane asked whether the matching funds of an applicant had to be a total amount -- for example, the R4m, as in the case of Awethu -- or could funds be matched piecemeal, as funds were released. How did the investment committee make its decisions, and who comprised the investment committee.

Ms R Mashigo (ANC) wanted know whether the fund assisted people who had a good plan but no matching funds, by introducing them to financial institutions.

Mr Gelderblom asked how many people in rural areas were assisted. How many departments were making use of the funding? What were the fund’s links with the NYDA, and had they received any assistance?  In which areas were the fund marketed.

Ms Mfulo asked if the jobs that had been created provided a living wage.

Ms N Mkhulisi (ANC) asked how the jobs were categorised. Were the projects attracting highly skilled people?

Mr Ramatlakane asked what collaboration there was with other similar bodies, to weed out the duplication of services and double dipping. 

Mr Hlatshwayo said business plans and finances were checked, as well as the capacity of the applicant to deliver the goods or services. The sustainability of jobs was thus checked up front, and the required regular reporting would indicate whether the business was sustainable. The fund wanted applicants to have a track record of at least two years.

Ms Liezel Eksteen, Treasury representative, said that the Jobs Fund was trying to attract funding from the private sector and use it as a catalyst for job creation. It provided 1:1 funding for the private sector and the requirements for non-profit organisations (NPOs), NGOs and government bodies were much lower at 1:0.2. Matched funding from NGOs was mainly from foreign donors, and cooperatives obtained their matched funding from cooperative saving schemes.

Mr G Snell (ANC) asked if the fund had looked at smaller companies that could be assisted through linkages to larger companies or manufacturers.

Mr Ramatlakane said the explanations given made it clear that it was a support program for the private sector, similar to the retrenchment and training packages that had been offered a few years ago.  This was not what the Members had thought the fund would be.

Ms Allie-Ederies said there was confusion on what the Jobs Fund was. People thought they could get employment because of the term ‘jobs’ in it.  She wanted to provide more detail on what the Jobs Fund was. She said the Jobs Fund worked with the public and private sectors and NGOs, and grew jobs through enterprise development and infrastructure development. The support for work seekers recognised that there was a supply of unemployed people who needed to be better matched with the market’s requirements

Ms Mfulo said the responses of the Department did not reflect the Jobs Fund’s claim that it was working towards responding to the structural unemployment of the country.  Small and micro enterprises could not get funding because of the matching funding required, and were falling through these cracks. She said she thought this was what the Jobs Fund was for.

Ms Eksteen said it would have been difficult for the Fund to apportion the R9b into small amounts. It did, however, target small and micro businesses through supporting agencies such as Awethu. It was forced to form these partnershipsn as it did not have the capacity to provide the support services.

Mr Hlatshwayo added that the Fund did not fund projects below a certain amount of money.

Ms Allie-Edries added that sometimes the projects were partnerships, with the partners bringing together funding and the different skills that were required.

On double dipping, she said that projects had to disclose other sources of funds. This was particularly relevant in the case of government departments.   

Mr Hobden said that an investment committee made the final decision on whether to invest in a project. It was made up of four board members of the DBSA -- independent of the executive of the DBSA -- and two members of Treasury. The Committee was chaired by Mr Frans Baleni, and his deputy was Mr Brian Whitaker. In essence, the Jobs Fund had to convince the Committee to invest in a project, but the committee had the final decision. Decisions were based on the investment strategy of the Fund -- for example, which sectors of the economy it wanted to support; weighted criteria; the risk management of the portfolio of projects between the different windows; and taking into consideration the amount of money available.

Mr Hlatshwayo said that the Fund went out on the road to assist in the origination of projects, and had marketed itself through most of the radio stations, and had been invited on to TV shows.

The Chairperson summed up the meeting, saying that it appeared there was a challenge in the pace of the funding being provided.  The Fund should look at establishing a “one-stop shop”, where applicants could get what they were looking for rather than being sent to financial institutions if they were lacking finance, for example. He was worried that government departments had access to these funds, as they already had a brief to create jobs from within their own budgets. Some departments and municipalities were under-spending their own budgets, so there was no need to seek further funding. There was a need to re-look at who could, and who could not, get funding, as well as the conditions attached to funding. He wanted a list of all the government bodies that had already benefited.  How did one qualify to become an intermediary?  It was common knowledge that small business the world over created the most jobs, yet it appeared that South Africa wanted to create jobs by funding big business. When the program was evaluated, this needed to be looked at.  Members would appreciate it if the Fund were to make themselves available to visit Members’ areas when invited. He asked how the Industrial Development Corporation funding to NYDA and women differed from this Fund.

The meeting was adjourned.
 

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