Local procurement plans of Defence, Correctional Services, Health, Basic Education, Higher Education and Social Development Departments to ensure SMMEs / Cooperatives access to market

Small Business Development

18 March 2015
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The purpose of this meeting was to give the Portfolio Committee on Small Business Development the opportunity to assess progress made by government departments in implementing the policy of ensuring that 30% of procurement was sourced from small, medium and micro enterprises (SMMEs) and cooperatives. The Committee also wished to find out how far the Department of Small Business Development (DSBD) had progressed with the signing of transversal agreements with other departments, and the success of the Poverty Reduction and Job Creation Models.

The Departments of Basic Education (DBE), of Higher Education and Training (DHET) and Social Development (DSD) were identified as having the potential to create and use a sustainable market for SMMEs and Cooperatives through public procurement and infrastructure grants. These Departments each described their strategy to create local jobs  and to meet the target of 70% local procurement set by the DSBD. DSBD was hoping that by 2030 it would reach its target in achieving the NDP goals of reducing poverty to 0% and creating 11 million jobs.

DBE ran its procurement programmes and assistance to SMMEs through the National School Nutrition Programme, which had reached over 21 000 schools and created 56 109 jobs for volunteer handlers, as well as contracting with community based and cooperative associations to supply food. The Accelerated  Schools Infrastructure Delivery Initiative had created 23 089 jobs since inception, 364 SMMEs and an amount of almost R157 million was spent. The Kha Ri Gude Mass Literacy campaign pial articipated in community works projects and provided income to volunteers from poor communities. The Workbook and Textbook programmes had also created jobs, and so did distribution of text books. 70 individuals were being employed as IQMS moderators, and the Universal Access to Grade 1 campaign had boosted teaching jobs by 1 044. Moderators and monitors were appointed each year to programmes. It rotated its suppliers and used the list to promote broad based black economic empowerment.

DHET described its own initiatives and those of the National Skills Fund, including facilitators learnerships, which had benefitted 2 870 learners during the 2012/13 and 2013/14 financial years, with an expenditure of R54.9 million. Sector Training and Education Authorities (SETAs) had assisted and supported 587 learners in various cooperatives between 2012 and 2014. An Entrepreneurial Development Practitioners course was firstly training entrepreneurs, who would in turn train others. Sector Education and Training Authorities supported and assisted 32 120 small businesses between 2012 and 2014.

DSD aimed to promote a vibrant cooperative movement by positioning cooperatives and small businesses optimally to build sustainable development and provision of services that would enable them to supply the state. Supportive legal and policy frameworks were required, and DSD also wanted to ensure appropriate funding models. Four social development programmes were run, supplying foodstuffs to this Department's Household Food and Nutritional Security Programme, as well as supplying other programmes with cooked meals and parcels, by way of a model that also specifically targeted youths. This Department would be establishing a Cooperation and Social Enterprises Coordination and Management Unit in 2015.

Members were concerned that there was no mention of the size of markets, and the presentations were too general, and missed out several potential opportunities, including the Dignity in Schools campaign, uniforms and supply of food during holidays. They questioned what was done to establish a Cooperative Training Academy and commented that some of the projects under the ASIDI programmes were put out to tender and did not benefit the broader communities. Members were disappointed to hear that the average salary was less than the social grant, so that the programmes would not lift people out of their poverty and reliance on grants. They asked for an identification of legislative hurdles. Several commented that there was not enough evidence of cooperative working between them, nor were projects synchronised. They asked if these programmes were meeting targets for employing disabled people. They asked if DBE monitored agencies regularly and wanted more clarity on whether schools were built to accommodate disabled pupils. They commented that it was important to development relationships between departments in the training and manufacturing spheres, noted that the SA Bureau of Standards had complained that it was not being approached to inspect and certify products. Members asked the DSD to explain why pensioners were being charged airtime, and why suppliers of goods were not paid on time. They stressed the importance of constant monitoring to check whether agenices were performing. They agreed that all the departments must work together, and should meet urgently and look at core functions, and  follow up on job situations with municipalities. A suggestion was made that cooperatives of around ten women should be formed around schools to take full advantage of the opportunities, using best practice. More jobs had to be created, and they should be capable of lifting people out of poverty. It was also essential that learners be absorbed in the sectors where they were trained through providing them with commercially relevant training.

Meeting report

Chairperson's opening remarks
The Chairperson noted that the purpose of the meeting was to assess progress made by government departments in implementing the policy of ensuring 30% procurement from Small Medium and Micro Enterprises (SMMEs) and Cooperatives, and to assess the progress made by Department of Small Business Development (DSBD) on the signing of transversal agreements with other departments.

The Chairperson noted that the DSBD was looking at the year 2030 as the target for achieving the National Development Plan (NDP) goals of reducing poverty to nil and creating 11 million more jobs. The Portfolio Committee had adopted a Poverty Reduction and Job Creation focused model. This model sought to create an exit of families from the social grant register by improving their livelihoods, and to bring indigent registers of municipalities in line with the NDP goals. The model had identified government departments and state owned companies (SOCs) as a sustainable market for SMMEs and Cooperatives through public procurement and infrastructure spend.

The model had also identified the Presidential poverty nodes as priority areas for development and poverty reduction. A target of 70 % local procurement had been set by the DSBD. The model had identified child headed households, women with no source of income, households dependent on social grants, households on the indigent register, unemployable youth lacking skills, unemployed youth with skills and destitute former freedom fighters as their target groups.

The Chairperson highlighted the benefits of the model which were:

- Increased revenue for municipalities.

  • Alignment of resources to achieve maximum results
  • Service delivery goals achieved during training phase
  • Reduced dependence of poor families on social grants
  • Moving the country towards becoming a developmental state

The Chairperson’s main concern was that there was no interaction between the DSBD and the other departments on how they would work together to develop SMMEs and Cooperatives. The other issues she wanted to know were the market and skill development opportunities that existed in the sectors that each department covered, and the measures taken to achieve the target of 30% procurement from SMMEs and Cooperatives.

She noted the apologies of the Minister of Small Business Development, Ms Lindiwe Zulu, who had gone to Italy, the Deputy Minister, Ms Elizabeth Thabethe, who was in New York, and the Minister for Higher Education, Dr Blade Nzimande, who was busy arranging the funeral of the late Minister Collins Chabane.

Department of Basic Education briefing
Ms  Vivienne Carelse, Deputy Director General: Strategic Planning, Department of Basic Education (DBE) and Ms Neo Rakwena, Director: National Schools Nutrition Programme, Department of Basic Education, gave a joint presentation on how the Department of Basic Education (DBE or the Department) considered and promoted SMMEs.

Ms Neo Rakwena firstly highlighted the National School Nutrition Programme (NSNP) and how it contributed to employment creation. The NSNP programme provided nutritious meals to learners in quintile 1 – 3 primary and secondary schools. The NSNP programme reached a total of 21   236 schools and created 56   109 jobs for volunteer food handlers. This programme also contracted 5113 community based SMMEs.It had 580 Local Women’s Cooperatives currently supplying food to schools.

Mr Anthon Schoeman, Deputy Director General: Finance, DBE, discussed the Accelerated Schools Infrastructure Delivery Initiative (ASIDI) whose objective was to address 2   646 schools that needed to be repaired and brought to functionality by 2016. This programme was aimed at fast tracking the provision of basic infrastructure. The ASIDI had created 23   089 jobs since inception, out of a target of 30   000 work opportunities. The ASIDI local economic development programme created 364 SMMEs and an amount of almost R157 million was spent.

Ms Rakwena then proceeded to highlight the Kha Ri Gude Mass Literacy campaign which played a significant role in alleviating poverty by providing volunteers in the poorest communities with a small income. This programme participated in Community Works programs in Khujwana, Limpopo and in Tombo, Eastern Cape.

The Department had also created jobs through its Learning and Teaching Support Materials (LTSM) campaign. The Workbooks and Textbooks Project had created 73 permanent jobs, three Directors and 3 000 casual workers through a tender of R850 million for the development and distribution of workbooks. The workbooks project provided employment for 5 600 people and the text book distribution in provinces provided SMMEs with an opportunity to be subcontracted, thereby creating jobs.

The Integrated Quality Management System (IQMS) had created jobs for 70 individuals as IQMS moderators.

The DBE Internship and Learnerships programme had placed 39 interns for the 2014/15 financial year.

The DBE Universal access to Grade R Campaign created 1 044 jobs for teachers in grade R throughout the country.

The DBE Annual National Assessment and the National Senior Certificate examinations necessitated the appointment of School Based Assessment (SBA) moderators and part time monitors. As a result of this the Department was able to appoint 30 provincial based monitors every year, on a part time basis, and the Chief Directorate appointed 1 293 SBA moderators on short term contracts between 2013 and 2015.

The DBE currently had 1 500 suppliers on the system. It aimed to give SMMEs an equal opportunity to engage in business with the state, through rotation. Advertisements were placed through the media every financial year, as well as on the DBE website, to allow for new prospective suppliers (with turnover less than R500   000) to register. This list should also be effectively used to promote Black Economic Empowerment and the promotion of businesses owned by other Historically Disadvantaged Individuals (HDIs)

Department of Higher Education and Training briefing
Mr Mvuyise Macikama, Chief Director: National Skills Fund, Department Higher Education and Training, then briefed the Portfolio Committee on this Department's strategy and policy for SMMEs and Cooperatives. Department of Higher Education and Training (DHET) had strategies in place for encouraging and supporting cooperatives, small enterprises, worker initiated non-governmental organisations and community training. Several important training interventions by the National Skills Fund (NSF) were established. These included 187 Cooperative Development Facilitators Learnerships, which targeted 5 000 learners of cooperatives. This had benefitted 2 870 learners during the 2012/13 and 2013/14 financial years, with an expenditure of R54.9 million. Sector Training and Education Authorities (SETAs) had assisted and supported 587 learners in various cooperatives between 2012 and 2014. Mr Macikana identified several key training interventions by the National Skills Fund (NSF) in assisting SMMEs. Over 100 unemployed youths participated in the Entrepreneurial Development Practitioners course and 450 emerging entrepreneurs finished their training in 2011. The roll out of the training interventions commenced in 2014 with 194 active Entrepreneurial Development Practitioners (EDPs) learners in training at 18 sites. Once their training was completed they would then in turn train about 2 000 emerging entrepreneurs. The SETAs assisted and supported 32   120 Small Businesses between 2012 and 2014.

Department of Social Development briefing
Mr Peter Netshipale, Deputy Director General: Integrated Development, Department of Social Development, presented the strategy of this Department (DSD) to unleash the socio-economic potential of cooperatives and social enterprises.

The Strategic Objectives of the DSD were to promote the development of a vibrant cooperative movement in South Africa, to position cooperatives and social enterprises as builders of sustainable development through provision of services that enabled them to access economic opportunities within the control of the state. The DSD wanted to ensure the existence of supportive legal and policy frameworks for cooperatives, and the Department also wanted to ensure that there was an appropriate funding model for social development cooperatives. The DSD ran four social development programmes that offered several economic opportunities for Cooperatives. The main opportunities were the supply of vegetables, bread, milk, meat, maize products and nutritional drinks for the Department's Household Food and Nutritional Security Programme.

Cooperatives could also benefit by supplying the Bana–Pele programme and the Social Grants programme. The possibilities here included supplying cooked meals, food parcels and feeding organisations through purchases from cooperatives. The Department had set up a Household Food and Nutritional Security Model and it outlined proposed new targets for the provision of services by cooperatives.

Targets for the establishment of cooperatives and for youths participating in skills development programme were set out in full (see attached document).

Finally, he noted that the DSD aimed to establish a Cooperation and Social Enterprises Coordination and Management Unit in 2015.       

The Chairperson thanked the Departments for their presentations and stated that the initiatives seemed promising but no one had talked about the size of the market.

The Chairperson noted that the Department of Higher Education and Training had only spoken in general about training, with no specific details, and she stressed that specific opportunities needed to be sought. Another development that it could become involved in but had said nothing about was the training of people to manufacture sanitary towels for schoolgirls. She believed that the entire supply chain for the manufacture of school uniforms could also be developed, and that wool and cotton could also be grown by cooperatives for their manufacture.

The Chairperson noted that the Department of Basic Education had failed to identify the market, and were apparently far behind in this. There did not appear to be any strategy to establish a Cooperative Training Academy. Responding to the figures for maintenance done on schools, she said that most of it was done by tenders. There were, however, many opportunities for schools nutritional programmes and the purchase of uniforms, which could be undertaken by cooperatives at community level.

Mr H Kruger (DA) thanked all the presenters and asked all departments what was the average salary being paid for those jobs created. He wanted clarity on whether there was any labour legislation which was an obstacle to job creation.

Ms N November (ANC) thanked all the presenters and asked when all the Departments were going to meet under one roof, and how frequently this might happen. She noted that most of the Department of Basic Education work was done through agencies and wanted to know how frequently were these agencies were monitored and assessed. She asked for clarity on the Council for Scientific and Industrial Research (CSIR) and asked how involved were the Professional Councils in these programmes. On the issue of Employment Equity, she noted that the DBE was apparently trying hard to meet targets for employing women and youth. However, it was showing disappointing results in employing the disabled. She wanted clarity on whether new schools were planned for disabled people. She also stressed the importance of grade R for children and noted that children who missed grade R were unable to read and write when they did go to school.

She was also concerned that, on one DSD project she had visited, the woman were only getting paid R850.00 per month, and she wanted to know who was monitoring all these jobs created in every province.

The Chairperson stated that if the Department of Social Development was following the model properly, then people should be earning more than a social grant. She noted that the average salary in the Food and Nutritional Projects was a problem, as no changes in people's social status had been achieved through that programme. Again, she emphasised that the number of people who were able to exit the Social Grant Register and the Indigent Register would be used as the determinant of success of a project.

Mr X Mabasa (ANC) thanked the presenters and noted that South Africa should try to preserve everything it had on the manufacturing side, and see what it was not capable of making. He felt that the challenge South Africa had to meet was related to manufacturing and entrepreneurship. Whatever product was purchased, it was necessary to ask where it came from so that it was possible to identify the manufacturer. He noted that school shoes and school uniforms could be made by a cooperative unit. He stressed that the relationship between the four departments was important in both training and manufacturing. The South African Bureau of Standards (SABS) had made a plea that it was under-utilised by South Africa's own departments who did not use SABS to conduct inspections.

Mr Mabasa wanted clarity on whether toilet bowls could be locally manufactured.

Mr S Bekwa (ANC) agreed that the challenges needed to be identified and that things on the ground must work. He asked for clarity on whether follow ups on the ground were being done. He stated that the DSBD must create jobs, but all the departments would have to work together on this. One of the challenges cited was that, in the rural areas, people were supplying food but sometimes they were not paid on time, and this would have to be addressed. He asked if school children could be supplied with food over the holiday period as well.

Mr Bekwa asked if DHET was doing follow up on municipalities to see that they did have jobs.

Mr Bekwa asked for reasons why the South African Social Security Agency (SASSA)  had charged pensioners R90 airtime by government.

Ms Carelse responded to the question on the toilets, saying that indeed DBE had been building toilets, although this was not included in the current presentation.

The Chairperson requested clarity on how the building of toilets was aligned with the necessary training, and how many school toilets needed upgrading, and in which schools.

Ms Carelse responded that monitoring of implementing agents was done fortnightly and monthly.

Mr Bekwa  noted that it was critically important that these departments must meet urgently. The DBE seemed to have presented in a vacuum and it needed to engage with other parties as a starting point. He stated that as a national department, DBE must first look at its core functions. Central procurement was a major challenge for the government, and DBSD must engage with macro scale challenges on how to get going. He noted that amongst the indigenous community there was a rich knowledge which could be drawn upon, so that local communities must get involved in the school maintenance programme, and also participate in growing vegetable gardens for the NSNP. He asked for a report on whether there was any legislation that prevented small cooperatives and SMMEs from expanding their businesses. They must work with the Department of Higher Education and gather more knowledge. He praised the School Dignity Campaign, because it prevented school absenteeism. 

Ms Rakwena responded on the NSNP questions. Legislation stated that the amount of R900 per month should be paid to those working with the Programme, for 2013/2014. Ms Rakwena stated that Volunteer Food Handlers were not contracted but worked on a permanent basis, and the Department followed the Department of Labour policy on paying stipends for public works programmes.

The Chairperson suggested that cooperatives of ten women should be formed around schools, and these cooperatives must replicate the best practices followed by cooperatives in the country. Activities such as cleaning, gardening, repairs and maintenance, and growing of food could be all done through cooperatives and this would enrich the income levels of more people. The Chairperson noted that it was necessary to multiply the number of jobs created. When people were able to earn an income of R4   000.00 they would be able to exit the indigent register.

Mr Kruger stated that the slides presented were misleading about the number of jobs created. The NSNP indeed created many indirect jobs but the aim should be to get people to earn more than they earned on a social grant.

Mr Netshipale noted that the DSD was paying R1 500.00 and would be a real battle to pay anything in the region of R4 000. The DSD was dealing with issues to discourage deductions of airtime from a pensioner’s allowance. Mr Metshupale stated that the Chairperson had really challenged the Department's way of thinking and that a paradigm shift was needed.

Mr Macikama replied to the question of a National Cooperative Academy, and stated that the Minister had set up a task team to establish a cooperative training academy, and the Department was working with UNISA on this. Mr Macikama stated that the average salary earned was R4 000.00 for the DHET projects, but that depended on what learners would be trained for.

The Chairperson noted that learners were not absorbed to do what they were trained for, and that training needs were not aligned to the needs of service delivery challenges.

Mr Macikama replied that a lot of training was being done for the Department of Public Works (DPW) which was linked to different projects, such as the removal of Alien Vegetation and Working on Fire, and this cost in the region of R300 million.

The meeting was adjourned.


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