The Portfolio Committee for Small Business Development met with the Department of Water and Sanitation, the Department of Telecommunications and Postal Services, the Department of Transport and the Department of Energy to discuss the support, initiatives and envisioned transversal agreements between these departments and the Department of Small Business Development (DSBD). Members expressed disappointment that neither Ministers nor Deputy Ministers of any of the departments were present, and none of the Director-Generals was present either. They agreed that letters would be written to the Minister, expressing dismay at the non-attendance of the Deputy Minister, and also to the Leader of Government Business, as this failure by the executive to attend Parliamentary meetings was not limited to the Department of Small Business Development alone.
The Chairperson noted that several challenges to doing business and growing had previously been highlighted by small businesses. These included lack of access to sustainable markets, lack of access to adequate finance, red tape and disintegrated support services from government, non-payment of invoices to small contractors within 30 days, confusing and problematic approaches for registering SMMEs, lack of adequate infrastructure and lack of support infrastructure. All these required coordination between various departments. The Committee noted that transversal agreements still needed to be made available to the Committee, and pointed out that the Committee also wanted to know how many of the jobs to be created would, in line with the ANC Policy Conference of 2012, be developed through public procurement and infrastructure spending, and which departments were the prime instigators of this.
The Department of Water and Sanitation noted it had spent R75 million during the 2013/14 financial year on procurement from Small, Medium, Micro Enterprises (SMMEs). It cited challenges as the fact that the Black Economic Empowerment (BEE) Certificate did not provide the breakdown in respect to women, youth and people with disabilities; there was lack of sufficient funding for SMMEs to honour contracts and deliver, and many SMME companies found it difficult to comply with administrative requirements.
The Department of Telecommunications and Postal Services informed Members that the Digital Opportunities Pillar of South Africa Connect identified the Digital Entrepreneurship programme as one of the interventions to be implemented to accelerate the uptake and usage of ICT by SMMEs. The two main aims of the programme were to encourage SMMEs to take advantage of ICTs, social media and mobile technologies in running their business, and to support the creation of dynamic ICT SMMEs with innovative products and services. It was committed to accelerating the establishment of Incubator Hubs for ICT SMMEs focusing on developing e-applications to support e-government, in conjunction with the DSBD and Department of Trade and Industry to identify local manufacturing opportunities to develop appropriate incentives and instruments.
The Department of Transport (DoT) considered skills development as a priority element, mainly because it had direct impact on employee productivity, but other priority areas included employment equity, preferential procurement, enterprise development and socio-economic development. The DoT’s Broad Based Black Economic Empowerment (BBBEE) levels were measured across all its divisions. It particularly identified the challenges in this sector as lack of transformation, which was most apparent in aviation and maritime, low BBBEE contributions, few long-term contracts, limited access to funding by women and small businesses, lack of specific transport-related funding, and unfair BBBEE practices. It had developed programmes to target small businesses and develop related activities in transport.
The Department of Energy fully supported the development and understood the importance of SMMEs and cooperatives in the economy, and said they were important in improving living and working conditions. It aimed to collaborate with the DSBD in priority areas of Integrated Energy Centres, Independent Power Producers, solar water heaters, solar home systems, biofuels, and raising awareness on business opportunities in the energy sector. It was focusing on opportunities in the solar home system, and had already facilitated establishment of cooperatives for the installation of solar home systems.
Members felt that there was yet insufficient cooperation across and between departments and the Chairperson stressed that the DSBD must be at the centre of developments. One Member thought that DSBD should be developing guidelines for all others, and using their budgets to develop small business development, but the Chairperson thought that other departments should not be developing SMMEs and cooperatives, but partnering in this with the DSBD. Members questioned why the Department of Water and Sanitation excluded ownership targets, and questioned how failure rates would be addressed. One Member suggested that the other departments seemed to be more ready to proceed with development of SMMEs and cooperatives than the DSBD, stressed how important timeous payment by government departments was, and made specific requests to each department to clarify issues, which were to be responded to in writing, due to insufficient time in the meeting. Further questions addressed the numbers of jobs to be created through SMMEs and cooperatives, how each department was addressing poverty and reducing dependence on social grants, and noted that sector education training authorities should be taking responsibility and funding made available.
Chairperson’s opening remarks
The Chairperson welcomed Members to the meeting, together with officials from the Departments of Small Business Development (DSBD), Telecommunications and Postal Services (DTPS), Energy (DOE), Transport (DOT) and Water and Sanitation (DWS). She said in the Committee's interactions with Small Medium and Micro Enterprises (SMMEs) and cooperatives, challenges highlighted included: lack of access to sustainable markets, lack of access to adequate finance, red tape and disintegrated support services from government, nonpayment of invoices within 30 days, confusing and problematic approaches for registering SMMEs, lack of adequate infrastructure and lack of support infrastructure. These were some of the main issues which the Committee wanted to discuss with the departments present because they required coordination between various departments.
The Chairperson asked when the transversal agreements would be made available to the Committee and emphasised that all departments needed to move away from the silo approach. The development of SMMEs and Cooperatives was pivotal for job creation, poverty eradication and reducing inequality. Government was committed to the 70% local procurement policy.
She expressed concern that the Ministers from the Departments of Small Business Development, Water and Sanitation, Telecommunications and Energy were all unable to attend the meeting. This was worrisome, but of even more concern was that none of the Deputy Ministers were in attendance. She understood that Wednesdays were Cabinet meeting days, but questioned whether this would necessarily mean that the Committee would always receive apologies from Ministers unable to attend, and emphasised that Cabinet meetings did not required the attendance of Deputy Ministers, unless their Minister could not attend there, so they should try to be present at committees, for if they did not this posed the problem of how portfolio committees could hold the executive accountable?
She summarised that during its 53rd Conference in December 2012, the African National Congress resolved that it would develop SMMEs through public procurement infrastructure spend. She said government needed to be held accountable. One of the questions to be asked was how many of the 586 676 jobs that were expected to be created per year were created as a result of implementing that ANC resolution, and how many were created as a result of infrastructure spend? Furthermore it was necessary to consider which departments contributed to the creation of those jobs each year.
Mr S Mncwabe (NFP) expressed his disappointment that no one from the executive was present. He agreed that since Deputy Ministers were not part of Cabinet; they were supposed to be at the meetings of Parliament. Deputy Director-Generals from the various departments were also supposed to be in the meeting. He asked who was the Deputy Minister for the Department of Small Business Development.
Rev K Meshoe (ACDP) said Ministers were acting as though they were doing Committees a favour by attending meetings, but there was no excuse for their absence. He also noted that all Director Generals were supposed to be at meetings when transversal agreements were being discussed.
Mr H Kruger (DA) proposed that the Committee staff provide Members with statistics on how often the Deputy Minister and the Director General of the Department of Small Business Development had been in attendance. The Minister seemed to be attending more meetings than these two officials.
Mr T Mulaudzi (EFF) agreed that the attendance of the Deputy Minister of Small Business Development was lower than that of the Minister. He suggested that a letter be written to the Minister to raise the concerns of Members. This Committee was central to the proper implementation of the National Development Plan.
Mr X Mabasa (ANC) agreed with his colleagues, and suggested that, in addition to writing to the Minister, the Committee should also write to the Leader of Government Business.
The Chairperson agreed that both letters should be written, because the issue of the executive failing to attend meetings was not unique to the Ministry of Small Business Development; it seemed to be a trend among all Ministries, and it needed to be addressed.
Strategies for SMMEs and Cooperatives: Departmental briefings
Department of Water and Sanitation
Mr Mpho Mofokeng, Chief Financial Officer: Water Trading Entity, Department of Water and Sanitation, noted that he would concentrate, in his briefing, on DWS's policy for Broad Based Black Economic Empowerment.
The DWS had established a supplier database which accommodated the SMMEs. The Department advertised for applicants twice a year, to ensure that the newly established companies did not have to wait for a full year to be registered on a departmental supplier database. The Department encouraged joint ventures and monitored them for the duration of contract, as well as monitoring the work allocation to ensure that there was a building of technical capacity. The Department had achieved R75 million spending on procurement from SMMEs, as at the end of December 2014. Some noteworthy challenges faced by the Department were that the Black Economic Empowerment (BEE) Certificate did not provide the breakdown in respect to women, youth and people with disabilities; there was lack of sufficient funding for SMMEs to honour contracts and deliver, and many SMME companies found it difficult to comply with administrative compliance requirements.
He described some of the major socio-economic development plans within the Department. The raising of Clanwilliam Dam project had employed over 60% of its workforce from the local communities. The raising of Hazelmere Dam had an estimated value of procurement of about R498.1 million and created jobs for local communities. Other projects were the uMzimvubu Water Project and the Greater Letaba Project.
Department of Telecommunications and Postal Services (DTPS) briefing
Mr Mashilo Boloka, Director: Broadcasting Industry Development, DTPS, said that over the years the Department (or its predecessor) had placed great emphasis on SMME adoption and Information and Communications Technology (ICT) and as a result, a Chief Directorate was established. In its 2014/15 Strategic Plan, the Department made a commitment to compile a baseline report on ICT SMMEs in the country. The Department was committed to nurturing ICT small businesses to assist them in unlocking jobs, growing the economy and transforming the ICT industry. The Digital Opportunities Pillar of South Africa Connect identified the Digital Entrepreneurship programme as one of the main interventions to be implemented to accelerate the uptake and usage of ICT by SMMEs. The two main aims of the programme were to, firstly, encourage SMMEs to take advantage of ICTs in how they ran their businesses, taking advantage of social media and mobile technologies, and secondly to support the creation of dynamic ICT SMMEs with innovative products and services
Broad areas of interventions had been identified and would be implemented in the identified National Health Insurance (NHI) sites. These included building the capacity of ICT programmes through:
- working with relevant partners to support the training and skilling of SMMEs to use ICTs to enhance their profitability
- accelerating the establishment of Incubator Hubs for ICT SMMEs with a focus on development of e-applications to support e-government
- working with key stakeholders such as the Department of Small Business Development and the Department of Trade and Industry to identify local manufacturing opportunities to develop appropriate incentives and instruments that would further accelerate the development of ICT SMMEs.
Some of the urgent priorities within the Department were to finalise the Baseline Report, to finalise the ICT SMMEs Strategy and to submit the ICT SMMEs' Strategy to Cabinet and see to its urgent implementation.
Department of Transport (DoT) briefing
Mr Moketsi Sirfudo, Director: Black Economic Empowerment, DoT, said skills development was considered a priority element within the DoT, mainly because it had direct impact on employee productivity, Other priority areas included employment equity, preferential procurement, enterprise development and socio-economic development. The DoT’s Broad Based Black Economic Empowerment (BBBEE) levels were measured on aviation, bus commuter and coach, forwarding and clearing, maritime, rail and road freight transport. Some of the challenges the DoT identified were:
- Lack of transformation across the transport sector particularly within Aviation, Maritime and Aviation sub-sectors
- Low BBBEE contribution levels within companies
- Lack of long-term contracts
- Low access to funding by SMMEs and Cooperatives and women-owned companies
- The lack of any transport related fund to assist transport related businesses
- Unfair BEE practices, especially in the freight industry
- Lack of skills and capabilities to effectively run a transport business
- Victimisation of and discrimination against women
As part of its intervention strategies, the DoT had established a Women Advisory Committee tasked with playing an oversight and monitoring role to promote issues of Women Empowerment and Gender Equality in the transport sector. The DoT had also established a Gender Desk to promote the gender agenda in the transport sector. The DoT was committed to addressing the triple challenges within the aviation industry, through the Aviation Industry Transformation Letsema. The DoT has also developed a strategy to revitalise branch lines, which would help with the movement of agricultural goods, in the main by shifting the moving of goods from road to rail. The ATNS’ Women’s Development Programme and Mentorship Programme was established to provide focused development and growth of women in the workplace. In marine transport and manufacturing, Operation Phakisa was developed by government to explore the country’s natural advantage in maritime transport and manufacturing, by capturing the benefits of growing volumes of cargo handling, sea and coastal shipping and supporting transport activities such as storage and warehousing.
Department of Energy (DoE) briefing
Mr Mthokozisi Mpofu, Acting Deputy Director General: Programmes and Projects, DoE, noted that the DoE fully supported the development of SMMEs and cooperatives and understands the role the SMMEs and cooperatives play in reversing inequalities that existed in the economy. SMMEs and Cooperatives were important in improving the living and working conditions of people, facilitating essential infrastructure and services even in the most nodal areas, and bringing about sustainable development. DoE was intending to collaborate with the Department of Small Business Development in the following priority areas:
- Integrated Energy Centres (IeCs)
- Independent Power producers (IPPs)
- Solar Water Heaters (SWH)
- Solar Home Systems
- Ensuring payment of invoices of SMMEs and Cooperatives in 30 days
- Building public awareness on business opportunities within the energy sector
He said the economic development elements, which had been structured to address the objectives of the DoE, were job creation, local content, ownership and management control, preferential procurement, enterprise development, and socio-economic development. He explained that the solar home system was a part of the DoE’s electrification programme, and was aimed at achieving 90% of household electrification through high-quality non-grid solar systems to address current and future backlogs.
In collaboration with the Department of Small Business Development and municipalities, the DoE had facilitated the establishment of eight cooperatives in the Eastern Cape (two in Engcobo and six in Mbashe), and two in KwaZulu Natal for the installation of solar home systems. More were under way. Cooperatives were currently receiving training on business and technical skills on how to install and maintain Solar Home Systems. Training was provided by the Small Enterprise Development Agency (SEDA).
The DoE's Integrated Energy Centres (IECs) programme focused on ensuring access to affordable, accessible, clean energy services; contributing towards job creation and poverty alleviation, enterprise development through community cooperatives and trusts, and nodal areas identified and in in line with the Comprehensive Rural Development Programme. Small Enterprise Development Agency and Department of Trade and Industry (dti) had a collaborative relationship with DoE on IECs in respect of enterprise development, capacity building and cooperative incentive scheme.
The Chairperson thanked the departments for the presentations. She said there was a serious disjuncture between the DSBD and those other departments which were supposed to have transversal agreements with the Department. The departments made presentations on the opportunities for SMME and cooperative development, but there did not seem to be a strong working relationship between these departments and the DSBD, which was charged with developing SMMEs and cooperatives, and should be at the centre of any of the developments.
Mr Kruger thanked all departments for their informative presentations. He raised a concern that all the representatives from the Department of Transport were male, and diversity was one of departments’ biggest challenges. Not one of the presentations however seemed to be prioritizing the reduction of regulatory administration costs to SMMEs, and he asked what strategies the departments might have to reduce red tape.
Mr R Chance (DA) suggested that the DSBD develop guidelines for how other departments in government should be approaching the issue of small business development, rather than each department going off in its own way, wasting a lot of time, money and efforts on experiments. Over the last 20 years small business development had featured very low down on the list of priorities within departments, but it was a priority of the DSBD to urgently have guidelines which it could share on an interdepartmental basis. He disagreed the Chairperson's assertion that the departments should not be doing their own work, for he believed that they should.
Chairperson Bhengu clarified that it was not the responsibility of other departments to develop SMMEs and Cooperatives. Instead, the departments should be partnering with the DSBD; which was charged with the responsibility to lead the process of small business development.
Mr Chance agreed that the DSBD was leading the process, but said that all departments had a supply chain and big procurement budgets which should be used to develop and boost small businesses.
Mr Chance asked why the Department of Water and Sanitation had excluded ownership targets from the BEE scorecard, and wondered how the new scorecards would change the DWS's way of reckoning. He pointed out that there was a very high failure rate between levels 1 and levels 2 under the CIBD, and asked what the DWS was doing to address the high failure rate? He also asked how the DWS chose its nominated enterprise development beneficiaries. In respect of the DTPS, he asked who was being invited to the workshop late in March, and who would run the incubator hubs, and whether these would be out-sourced to specialised private sector businesses. He also enquired how much money had been spent on IEC oil mergers so far.
Mr Mncwabe said the departments which had presented seemed to be more ready to take the development of SMMEs and Cooperatives forward than the DSBD itself was. The presentation by the Department of Transport gave a clear picture of how the department was running with its vision of SMME and cooperative development, together with the Department of Energy. These departments also prioritised the payment of invoices within 30 days. Failure to do this was perhaps the most frustrating element for small businesses. Many small businesses collapsed because departments did not comply with this requirement to pay invoices on time. In relation to the telecommunications presentation he said the categorisation of ICT development was not clear in the presentation, especially around women, youth and people with disabilities.
Mr Mulaudzi thanked the departments for the presentation, but reminded them that the next occasion that they came to present; the relevant timeframes and numbers should be presented as well. With regard to broadband connectivity he asked whether it would be possible for the relevant entities to roll out that programme in rural areas to assist learners in secondary and high schools. Connectivity was a serious problem in the rural areas.
Mr T Ramokhoase (ANC) agreed with the Chairperson Bhengu that departments were still working in silos and there was very little coordination. He said sometimes small businesses were taken up as sub-contractors to big businesses, even though they had proper certification, but once the contract ended these companies had no work. He said joint ventures were good but were very dangerous for small businesses, as big businesses claimed to do administration on behalf of small businesses and very little money was allocated to these small businesses at the end of the project. He thanked the Department of Transport for providing such a clear presentation. He commended the Sihamba Sonke as a great initiative, especially in the rural areas. He said, however, that many departments did not seem serious about working with the DSBD.
Mr X Mabasa (ANC) asked how the departments were working with the Department of Higher Education and Training (DHET) to foster greater skills development, especially among young people. He said there needed to be a geographic spread of the work the departments were doing for the development of SMMEs and cooperatives. He wanted to know if any of the departments were utilising labour brokers.
The Chairperson Bhengu said the country had a target of 11 million jobs by 2030, articulated in the National Development Plan (NDP), yet none of the presentations indicated the number of jobs that each department was set to contribute towards reaching that target. 80% of the jobs to be created, according to the NDP, should come from SMMEs and cooperatives. She asked how many jobs would come from the solar heater programme. She asked what targets departments had in place to reduce poverty, All departments had a responsibility to reduce the number of dependents on the social grant system and current social grants recipients needed to become self-reliant. The Sector Education Training Authorities (SETAs), who would be responsible for skills development, needed to be established and funds needed to be made available through Development Finance Institutions (DFIs) to fund people who wanted to establish their SMMEs and cooperatives. Social grants could not be a long term solution to poverty. South Africa was a developmental state, not a welfare state. She thanked the departments for the presentations and asked them that questions should be answered in writing, as the Committee had run out of time.
The meeting was adjourned.
- Department of Telecommunications and Postal Services (DTPS) notes on Strategy/ Policy for SMMEs and Cooperatives
- Department of Transport (DoT Presentation: Strategy/ Policy for SMMEs and Cooperatives
- Department of Telecommunications and Postal Services (DTPS) Presentation: Strategy/ Policy for SMMEs and Cooperatives
- Department of Water and Sanitation Presentation: Strategies for SMMEs and Cooperatives
- Department of Energy (DoE) Presentation: Strategies for SMMEs and Cooperatives
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