Minister for Small Business Development on plans and programmes of Department; Committee Programme

Small Business Development

02 July 2014
Chairperson: Ms N Bhengu (ANC)
Share this page:

Meeting Summary

The Department of Small Business Development, with the Minister and Deputy Minister in attendance, presented its plans and programme to the Portfolio Committee. It was the first meeting of the Committee with the new Department.

The Committee was told that the Department was currently being configured with the aim of ensuring that a structure was designed that would be fit to deliver on the aims and objective of the mandate.  It was hoped that the Department could be put in place as soon as possible, as there was a demand for what it could offer.  Its establishment had received an overwhelming welcome. This clearly indicated the need to work with speed. The Department intended to spread its operations right down to the lowest levels. This meant ensuring an effective connection with provincial and local structures.

The background to the formation of the Department was that SMMEs represented an important vehicle to address the challenges of job creation, economic growth and equity in South Africa.  SMMEs could potentially play a critical role in absorbing labour, penetrating new markets and generally expanding the economy in a creative and innovative way. Equally important was the potential to boost the development and inclusiveness in the economy of black people in particular, to address the imbalances of the past.

Members were aware that different work streams in the Department of Trade and Industry (DTI) and the Department of Economic Development performed the work of small business development and cooperatives. Work within those units would continue, so as not to collapse the existing support rendered to small, medium and micro enterprises (SMMEs) and co-operatives, while the Department worked on the legislative and other imperatives.

This Ministry was one of the core economic clusters of the economic ministries and was mandated to deal with the following areas: small business policy, small business financial solutions; business cycle support and moving the current Small Enterprise Development Agency (SEDA) into the Small Business Development Department. As far as the mandate was concerned, small business policy included transversal policies, sector policies, regulation and checks and balances, informal business sector support (which was the second economy), and co-operative and social business support. There was awareness that some Members were not happy with the fact that cooperatives were not indicated in the Department’s name. This had to be discussed.

The Committee raised several issues which they felt would be relevant for the new Department to consider.  The Incubator Support Programme, for instance, had not achieved much and should expanded, with specific targets set.  There should be “localization” at the micro-enterprise level, allowing township entrepreneurs to supply local business.  The Labour Department should be involved in discussions over labour legislation which hindered the development of small businesses.  The Department would be faced with capacity issues, and would need to focus on skills development.   Partnerships with the private sector would be essential, and government would have to demonstrate that it really was “business friendly.”  Members asked what the Department’s role might be regarding the establishment of financial institutions, like banks, to support SMMEs, and pointed out the need to fast track payments to small suppliers.  Concern was also expressed over foreigners taking over spaza shops.

The Committee urged the Department to consider incorporating “Cooperatives” into its name.

Minutes of the meeting on 25 June 2014 were adopted without amendments.  The Committee programme for the first term was adopted.
 

Meeting report

Opening remarks by the Chairperson
The Chairperson said that this was the Committee’s first meeting with the Department of Small Business Development.  There was an apology from Mr N Kwankwa (IFP).

Minister’s briefing
Ms Lindiwe Zulu, Minister of Small Business Development, briefed the Committee on the plans and programmes of the Department.  She hoped the Department had not broken any protocols, as this was the first presentation to the Portfolio Committee. The Department in office for about 30 days, and the Ministry had been proclaimed. The Department would be proclaimed very soon. 

The Department was currently being configured to ensure a structure was designed that would be able to deliver on the aims and objective of the mandate. It was fortunate that even though it had been created 20 years down the line, it would be starting with access to the experience of other departments. It was hoped that the Department could be put in place as soon as possible, as there was a demand for what it could offer.  Its establishment had received an overwhelming welcome. This clearly indicated the need to work with speed. The Department intended to spread its operations right down to the lowest levels. This meant ensuring an effective connection with provincial structures and local structures. The Department was not going to be starting from scratch with infrastructure.

Members were aware that different work streams in the Department of Trade and Industry (DTI) and the Department of Economic Development performed the work of small business development and cooperatives. Work within those units would continue, so as not to collapse the existing support rendered to small, medium and micro enterprises (SMMEs) and co-operatives, while the Department worked on the legislative and other imperatives. It was important to mention this, so that people did not have to wait long for support when they were already in programmes that had been started by work streams within the DTI. There was awareness that the Department would not necessarily take over those work streams, or take them as they stood. There was a need to make sure that the role of those work streams were fully discussed and taken into a well-established Department. The work that had already been done by those work streams had been taken into consideration.

The background to the formation of the Department was that SMMEs represented an important vehicle to address the challenges of job creation, economic growth and equity in South Africa.  SMMEs could potentially play a critical role in absorbing labour, penetrating new markets and generally expanding the economy in a creative and innovative way. Equally important was the potential to boost the development and inclusiveness in the economy of black people in particular, to address the imbalances of the past.

The objective of the government in setting up the Ministry of Small Business and Development was to improve the performance of small businesses in local economies as a means to achieve economic growth, employment and income, reduce poverty and meet social objectives.  With the appropriate enabling environment, SMMEs could make an indelible mark on the economy. There was the belief that the stimulation of SMMEs should be seen as part of an integrated strategy aimed at diversifying the economy, enhancing productivity, stimulating investment and encouraging entrepreneurship.

SMMEs contributed 57% of South Africa’s GDP and accounted for 56% of employment.  The National Development Plan (NDP) envisaged that 90% of jobs created in 2013 would be coming from small and medium enterprises.  Economies around the world had shown that jobs were not created by large corporations, but by SMMEs.    However, large corporations and big businesses should seek partnerships so that they could assist the Department in building small and medium enterprises.

This Ministry was one of the core economic clusters of economic ministries and was mandated to deal with the following areas: small business policy, small business financial solutions; business cycle support and moving the current Small Enterprise Development Agency (SEDA) into the Small Business Development Department. In as far as the mandate was concerned, small business policy included transversal policies, sector policies, regulation and checks and balances, informal business sector support (which was the second economy), and co-operative and social business support.

There was awareness that some Members were not happy with the fact that co-operatives were not indicated in the Department’s name. This had to be discussed.

As far as small business inclusion was concerned, it involved assistance and access to capital, policy instrument reviews, small business levies, remittances, the job creation fund, wages, investment subsidies, social grants, social bonds, grants and loans. Business cycle support involved business skill training, infrastructure facility access, business value chain participation, and large-scale government procurement.

The Department would be consulting with interested partners -- like relevant big business, unions, and NGOs in the SMME area -- as the formation of a department should take into consideration those outside interests. However, the buck stopped with the Department in the Ministry to ensure it delivered on its mandate.

It was hoped that this background would provide a common understanding of where the Department was starting.  Complete programmes could not be spoken about until such time as the Department had its own identity. It was conscious of the fact that the Budget Vote was around the corner, and the Department would use the opportunity to configure itself in such a way that it delivered on its mandate in the best way possible.

Briefing on Plans and Programmes of the Department
Ms Pumla Ncapayi, Acting Director-General, said that the mandate of the Department allowed it to focus on enhanced support to the development of small business and cooperatives, with an emphasis on programmes designed to advance entrepreneurship amongst women, people with disabilities and youth, to effectively contribute to job creation and economic growth. The mandate was legislated through three areas: primary legislation, supplementary legislation and other policy measures, such as a women’s empowerment strategy.

Ms Ncapayi said that the Small Business Development business streams were: Research, policy, monitoring, evaluation and intergovernmental relations; innovation, intellectual property and indigenous knowledge; incubation & technology programmes; customised intervention programmes; incentive programmes and impact assessment.  A budget of R1 billion for 2014-15 had been transferred from the Department of Trade and Industry.

The challenges for the Department were timelines and dependencies, including the proclamation processes, where process was in line with the budget vote and the issue of transversal agreements.

Discussion
Mr R Chance (DA) asked for clarity with regard to defining the sector.  What was meant by small, medium and micro enterprises?

He said that the impact of the Incubator Support Programme so far had been a drop in the ocean, and suggested that thought given to expanding that programme substantially and setting targets -- not just for the number of incubators, but the impact the incubators would have in terms of the number of business created, the size of those businesses, turnover and job creation. All policy initiatives initiated through this new Department should be measured in terms of job creation.

The Minister said that the Department had already been invited to a few Incubation programmes by the private sector, and had found them very interesting, because partnerships should be strong. The Department was clear that it could not create all the jobs needed, but it could enter into partnerships that would make job creation easier. The government could not be a buffer between the very wealthy and the poor, and partnerships were essential to the process of job creation.

Mr Chance suggested localisation should be seen at a more micro level.  Townships’ supply chains, for example, could supply township businesses. Emphasis should be more on production, and less on consumption, and one way of achieving this was to localise supply chains.

In terms of transversal agreements, he had noticed that one of the departments that had been left out of the presentation was the Department of Labour.  It was important for the Ministry to examine the impact that the current labour legislation had on the potential of small businesses to grow.

He was pleased with what the Acting Director-General had said about voluntary agreements not being mandatory. One of the very important points in the National Small Business Act of 1997 was the question of guidelines. The Act made provision for guidelines and of course, other departments could ignore guidelines -- in fact, they had been ignored. He suggested that that Act should be brought back to the Committee as soon as possible so that the terms could be reviewed in the context of the formation of new Department. It could be made much stronger, and words like ‘guidelines’ could be taken out and words like ‘mandatory’ could be inserted.

With regard to the issue of capacity, Mr Chance said that obviously the Department was facing capacity issues. He appealed to the Minister to seek out partnerships with the private sector as far as possible, because the private sector was willing and eager to help. It was important for the Minister to set out a strategy which was business friendly -- not necessarily just big business friendly, but enterprise friendly -- because the ANC had potentially developed a reputation for not being business friendly. It should be understood that ultimately business created jobs, not government.  

Mr S Bekwa (ANC) congratulated the Ministry on the presentation. He expressed concern about the urgency involved in the establishment of the Department. On the intergovernmental relations (IGR) issue, this Department would have an impact on all departments of the government.

Mr H Kruger (DA) asked if ‘Skills Development’ could be added in bullet 3 under the section ‘SBD business streams,’ as it was an important part of small business.

The Rev K Meshoe (ACDP) asked what the Department had in mind with regard to the establishment of financial institutions like banks.

The Deputy Minister said that there was not a stipulation about whether a bank had to be opened, but the Department was looking at what incentives it had. Were soft loans enough to open a bank?  Maybe such a bank would be able to assist small business people. The Department had to assess how to make it easy for people to get in at the entry level. The gaps had to be identified, and what the informal sector contributed to the Gross Domestic Product (GDP) had to be assessed.

Mr T Mulaudzi (EFF) welcomed the establishment of the Department. With regard to legislation, it would be good to include the National Credit Act as one of the primary pieces of legislation in order to assist the people. He asked what strategy was going to be used to fast track payments, because when small businesses were given the opportunity to provide services, payment was often delayed.

The Minister said that the issue of the National Credit Act was an important one, and the Department would look into it.

Mr Mulaudzi, with regard to IGR, asked if there was the capacity to manage the power struggle between the departments, because this Department had emerged from the DTI and the Department of Economic Development. If the administration of this young Department was being frustrated, then this should be mentioned the Chairperson of this Committee as soon as possible.

The Acting Director-General said she wanted to respond to the issue of the supposed power struggle between the departments. The advantage the Department had was that it sat in the Economic Cluster, so it would not be operating in isolation from the Departments. With regard to the mandate of the Department, and its relationship with DTI and the Department of Economic Development, there was often discomfort when changes had to be made. This Department would like to work very closely with the other Departments so that if it did encounter problems, then they could be dealt with expeditiously.  Obviously it was the responsibility of the Portfolio Committee in its oversight to also check how that was going, but so far the Departments had been working very well together.

Minister’s response
The Minister said that the Department acknowledged the support that the Ministry and Department had received. The oversight role of the Portfolio Committee was clearly understood, and this meant that the Department had to be robust. The Department would listen to everyone who had a contribution to make.  Most of the inputs had been contributions, rather than questions. They would be taken as such and incorporated into Departmental discussions.

It was the Department’s responsibility to make information easily available to the people of the country. The Department was aware that in terms of registration of businesses, most people complained bitterly that the process took too long. Research had been done about this process in other countries. In Rwanda, for example, their turnaround time for registration of a company was less than a day. In Ghana and some other countries, people did not have to travel long distances to get information. The Department was conscious of the fact that everyone did not have ready access to laptops and computers to get information. The Department was also looking into communities and community structures for ways in which to bring information closer to the people.

As far as the issue of blacklisting was concerned, compliance very important, irrespective of the level one was on. People should get assistance, but should also take responsibility. She was conscious of the fact that this had not been inculcated in people before, so there was a responsibility now -- not only for government, but also for everyone -- to inculcate the culture of compliance and of taking responsibility.

A big challenge for the country was the lack of a culture of saving. The Department was committed to assisting in developing that culture.

The Minister said that the President has often spoken about fast-tracking payments.  Many people, including government employees, did not pay within the stipulated 30-day period.  If there were partnerships, then transversal agreements were needed.  The Department would be engaging with the structure within the Presidency that was appointed specifically to look into this matter.   Bureaucracy, red tape, and corruption had to be dealt with decisively. Having said this, it was important for people to understand that fighting corruption and applying pressure was not a one-way process. 

Partnership with the private sector was very important.  Support for the establishment of this Department had been overwhelming, not only from SMMEs, but also from the private sector, which had reached out to the Department, asking if there was a way to work with each other. They did have a big role to play, but the Department had to make sure it established itself so that it could be focused in its approach.

The Minister said that it should be taken into account that the DTI might have decided to look at 90 incubation programmes on the basis of the resources that were currently residing within the DTI. This would certainly up-scale all intervention measures.

In the area of implementing the transversal  agreements, the Minister envisaged an engagement with both the Basic Education and Higher Education Departments to ensure that the curriculum considered studies on cooperatives, as well as small business. She believed that those measures would assist in advancing the objectives of the current Department.

Deputy Minister’s response
Ms Elizabeth Thabethe, the Deputy Minister, said that the questions raised and the comments made needed more thorough discussion. Not everything could be covered at one Portfolio Committee meeting.  The Department would have to look at existing policies and see where blockages existed and how to overcome these.  Questions of migration and division of the units would be informed by the mandate. Some of the inputs did not concur with what the Department had to do, and there would surely be collaboration with other Departments. The National Credit Act was not in the scope of what the Department had to do, but there might be elements of that Act that were prohibitive for the effective running of small businesses.  

There were mechanisms that assisted people to move out of blacklisting, and there would be collaboration with other departments in this regard. There was the Small Enterprise Development Agency (SEDA) especially to assist small business.

The Deputy Minister said that in terms of the role of government and the private sector, it was known that partnerships worked. There were issues, however.  If the private sector did not come on board, then market failure would result and there would have to be an intervention as a developmental state. This was what the ANC was doing and the ANC-led government had not been unfriendly towards business. One could not support everyone.  NEDLAC had been formed to ensure dialogue and consultation. Government’s role was to create the conditions for business to do business. The ANC had looked at the situation and decided that there had to be a focus on small business development.  Twelve municipalities had already started to work with, and deal with, the Department. There was a need to see where the impediments were and ask if amendments were needed to drive the small business sector.  Partnerships were needed.

The Department was very clear how people with small businesses needed to proceed. A process was in place and people needed to apply and get exemption and then go through the process, get exemption and grow with process. The Department was now trying to follow the proclamations.

Mr B Mkongi (ANC) welcomed the presentation from the Department on the progress they had made and the establishment of the Ministry. The establishment of the Department was a milestone in the achievement of economic transformation of South Africa. It was a response to what the ruling party had called a radical economic transformation, particularly for the vulnerable sector of society that was made up of small business and cooperatives.

The registration issue had to be looked at and fast-tracked. The challenge would be the slow migration of functions, and personnel in other departments who were dealing specifically with those issues.

Mr Mkongi said that the Department had to be capacitated to make sure it had strong small businesses and cooperatives. The secondary vision was fundamental, and would take the Department forward as far as localisation was concerned. The state should set the example, and buy from local small businesses and cooperatives. This would talk to the matter of capacitation. The Department required a tailored programme for the capacitation of small businesses and co-operatives. The lack of a capacity to save was a serious challenge.

Mr Mkongi said that the success of the Department could be assessed when it moved closer to the objective of an inclusive economy and the shared growth trajectory. This was because if the government was to be supported in its drive to achieve six million jobs, an inclusive economy and the shared economy had to be supported, especially with regard to small business development and cooperatives for black people.

The Rev Meshoe raised the issue of people losing their spaza shops to foreigners. The Department had to look at what measures could be put in place to deal with this issue. The sale of RDP houses to foreigners was also a serious matter. It was not known if the government was aware of this. He asked if there were measures in place to help those with established businesses to sustain and not lose them.

Mr X Mabasa (ANC) supported the suggestion to include ‘Cooperatives’ in the name of the Department.  Another challenge to face was to ensure continuous discussion regarding the migration of staff from the DTI and economic development, so that those relationships were executed with consultation. This would keep morale high.

He suggested that the Department of Higher Education should handle the training of young people and women for SMMEs and coooperatives.  Another challenge was that to make sure the standard of achievement for SMMEs and Cooperatives was high to ensure continuity during productivity.

The social aspect of cooperatives had to be explored further by the Department.  Eskom and Telkom had important roles to play in the capacitation of SMME’s and cooperatives. The Department had work closely with Statistics South Africa (StatsSA) in order to assess strengths and weaknesses, and to know what was expected. The establishment of the new Department should not become an excuse not to empower SMMEs and coooperatives.  He disagreed with the Member who suggested the ANC was not seen as being business friendly. The ANC had programmes that involved taking businesses overseas to display their products.

Mr Chance said that the unfair competition from some foreigners should be investigated. The ANC’s supposed anti-business stance was a nuance issue. The language often used by some government people, and some ANC office bearers, had been interpreted by business to be anti-business.

The Chairperson said that in this session, the Portfolio Committee was not expecting this Department to account for its activities.  At the beginning of the meeting, it had been stated that its purpose was to get a briefing from the Minister on the mandate given to this Department by the President, so that together the Committee could look at how to hold it accountable. The comments should identify the gaps the Department should look at.

With regard to issue of the ANC not being business friendly, a broader perspective should be used, not a few general statements, as had been given. One could not generalise and say that the ANC was not business friendly, because then one was saying that this government did not have a heart regarding the business sector. The ANC had opened the gateway in the business sector. As a result, South Africa was accepted in the international business arena. A negative statement had the potential to destroy what the Committee and Department were doing.

The Portfolio Committee needed a strategic planning session to assess what was coming in real terms. This Department had to be nurtured and developed.

The Chairperson said her input was an attempt to change the approach from questions, because questions should have been only to seek clarity regarding the presentation. Then there should have been recommendations, and problems had to be identified that the Department had to look into. So today, questions were not really questions -- they should have come as suggestions.

The Chairperson said there had been a good engagement at the meeting.  The Committee had a clear understanding of the mandate and the programme, and where the process was. The meeting had enabled the Committee to understand their relationship with the Department. A workshop was needed to provide a better understanding of the institutional design of the Department.  

The Portfolio Committee appealed for a change in the name of the Department, to include the word “Cooperatives.”

Adoption of Minutes
The minutes of the Committee meeting dated 25 June 2014 was adopted without amendments.

Proposed Programme
The proposed programme for the first term was adopted.

The meeting was adjourned
 

Share this page: