Small businesses are struggling to access finance, markets and adequate infrastructure. Consequently, they end up operating on pavements and in buildings that lack water supply and sanitation and have tripping electricity. The attitude of big businesses was exacerbating this problem because they are hell-bent on blocking the way for small players to develop.
The Chairperson echoed this sentiment in her introductory remarks when the Small Enterprise Development Agency (Seda) and Small Enterprise Finance Agency (SEFA) presented their strategic and annual performance plans. The main focus of the Department is to transform the socio-economic situation of the country in a radical way and to create a balance between big businesses and small ones in order to create jobs through the SMMEs and cooperatives. There should be coordination between the Seda and SEFA in servicing the SMMEs and cooperatives; the country was practising a mixed economy that comprised state involvement, private sector and cooperatives.
The Seda informed the Committee about its three strategic objectives aligned to those of the Department. These objectives are carried out through various programmes that focus on technology transfer, incubation, supplier development, basic entrepreneurial skills development, cooperative support, one-stop shops, advocacy and co-location.
The entity presented its target market entrepreneurship and franchise awareness, business start-up training and business planning, access to local markets and export opportunities, incubation and access to technology, quality and standards testing, advice and implementation and a hotline to assist with late payments to SMMEs, social facilitation and mobilisation, and cooperative development and registration.
Key focus areas for the 2015/16 period would be on the roll-out of the small business incubation; focused attention on cooperative support including collectively owned large scale projects; implementation of the Gazelles programme to identify and profile high performing entrepreneurs; facilitation of timeous payment of SMMEs; and public and private partnerships.
Developmental areas would focus on ensuring Seda has sufficient funding for key programmes; attracting and retaining skilled staff; ICT controls and enterprise architecture; developing focused programmes for the small and medium size segment; and in-depth research and understanding of the upper end of the SMME sector.
SEFA could not present its strategic and annual performance plans because its plans were not aligned with those of the Department, and the entity asked to withdraw its presentation and be given enough time to prepare a new one aligned to the Department. SEFA reasoned its plans were aligned with those of the Economic Development Department though it partook on two strategic planning sessions with the Department. The entity was not aware they had to be aligned with those of the Department because it was still reporting to EDD. A heated debate ensued. One member of the opposition was adamant the entity should present while the rest opined it should be allowed to draft a new presentation.
Members asked how the Seda was relating to the 12 outcomes of the government; wanted to know if the movement of Seda to the Department has brought any changes to the organisation in terms of the reporting structure, culture change and mind-shift, and asked for clarity on the staff vacancy rate that appears to have not changed and on why the CEO has been acting for a long time; enquired who within Seda is subsidising foreign owned businesses because it was learnt from a reliable Spaza owner in Soweto that some foreign owned businesses had support from Seda; and wanted to establish why the entity is spending money on opening satellite offices when there are municipal offices where personnel could be deployed.
Mr Lusapho Njenge, Chief Strategy and Information Officer, Seda, informed the Committee that the three strategic objectives of Seda are aligned to those of the Department.
Strategic Objective 1 enhances competitiveness and capabilities of small enterprises through coordinated services, programmes and projects. This objective is carried out through Business Advisory Services, Incubation, Supplier Development, Quality and Standards Training and Implementation, Export Readiness and Facilitation, and Technology Transfer.
Strategic Objective 2 ensures equitable access to business support services. This is executed through the Cooperative Support Programme, Basic Entrepreneurial Skills Development Programme, Co-location, One-stop shops, Advocacy, and Gazelles Programme.
Strategic Objective 3 strengthens the organisation to deliver on its mission. This is done through incubation and supplier development.
For survivalist and micro-enterprises, Seda offers entrepreneurship and franchise awareness; business start-up training and planning; and business registration and start-up advice.
With small and medium enterprises, the entity presents access to local markets and export opportunities; incubation and access to technology; quality and standards testing, advice and implementation and a hotline to assist with late payment of SMMEs; and business mentoring and facilitation of access to finance.
For collectively owned enterprises, Seda offers social facilitation and mobilisation; cooperative development and registration; and access to local markets and all other relevant products and services.
For people with disabilities, the entity has developed programmes with DeafSA and SANCB.
On performance indicators on strategic objective 1, on client satisfaction surveys still to be conducted, the entity is targeting 94% of clients to express satisfaction with the quality of Seda services. 54% of SMME clients are targeted to show an increase in their turnovers. The target set for 2017/18 is 58%. 35% of SMMEs to be surveyed are expected to show an increase in their number of employees.
On supplier development, trade facilitation and mentorship and coaching programmes to be implemented to clients, the target set is 75 respectively. The entity is planning to support 55 new and existing incubators during this period of 2015/16 and the target set for 2017/18 is 57. The number of new SMMEs to be created in this period is standing at 331.
With regard to performance indicators on strategic objective 2, the number of clients Seda is planning to assist is standing at 11 400 and for those in the upper end of the SMME sector it is 372. The percentage of clients in the priority growth sectors to be assisted with interventions is at 40% and the target set for 2017/18 is 60%. The number of secondary marketing cooperatives to be supported and primary cooperatives to be established is 36 and 90 respectively. The number of clients to be supported in townships and peri-urban areas is standing at 1000.
Concerning strategic objective 3, on financial expenditure, the percentage of direct service versus total costs is set to be at 73%. The vacancy rate is to be reduced by 12%. Annual Stakeholder Forums are to be held every September in order to augment advocacy and lobby initiatives to be implemented.
Mr Njenge reported that key focus areas or themes for the 2015/16 financial period are the following:
- Roll-out of small business incubation
- Focused attention on cooperative support including collectively owned large-scale projects.
- Implementation of the Gazelles programme to identify and profile high performing entrepreneurs
- Facilitation of timeous payment of SMMEs
- Public and private partnerships
- Directing specific interventions at medium sized enterprises and cooperatives such as access to markets, mentorship and coaching, supplier development and technology transfer
- Repositioning of support functions from a reactive role to a proactive strategic support role, especially in areas such as ICT, advocacy and lobbying, and human capital.
Developmental areas are going to focus on:
- Ensuring Seda has sufficient funding for key programmes
- Attracting and retaining skilled staff
- ICT controls and enterprise architecture
- Developing focused programmes for the small and medium size segment
- In-depth research and understanding of the upper end of the SMME sector
- Service provider competency levels
- Elevating the SMME agenda and discourse
- More private sector involvement especially on procurement opportunities
- Prioritisation of high impact programmes
(See document for more information)
Ms N November (ANC) asked how Seda related to the 12 outcomes of the government.
Mr Sipho Zikode, Acting Chief Executive Officer, Seda, said the entity does contribute to some of the outcomes. Though it is an agent of the Department, it cannot contribute to all the outcomes but it champions inclusive economic growth.
Mr R Chance (DA) asked whether the movement of Seda to the Department has brought any changes to the organisation in terms of the reporting structure, culture change and mind-shift. He also asked for clarity on the staff vacancy rate that appears to have not changed and on why the CEO has been acting for a long time.
Mr Zikode explained that under the new Ministry they have got the opportunity to engage with the Minister on how to do things and they know exactly what to do. The executives of the entity are working closely with those of the Department in terms of developing strategies. On vacancy rate and culture change, he stated they had a different target in the past and the current target is 10%. At present, they are training people to be able to train other people on business development. Poaching remains their biggest challenge because banks and other institutions take people from them at higher salaries. Pertaining to the acting CEO, he said the appointment of the CEO came to a halt after the establishment of the new Department. It is work in progress because the Minister is looking into that.
Rev K Meshoe (ACDP) enquired who within Seda was subsidising foreign owned businesses because he had learnt from a reliable Spaza owner in Soweto that some foreign owned businesses had support from Seda.
Mr Zikode emphasised that foreign companies that had support from the Department of Trade and Industry are those that are legal to operate in South Africa. No support is given to Spaza shops, whether foreign or locally owned. The Minister has appointed a task team to look at how small local businesses can learn to operate smarter.
Mr S Mncwabe (NFP) asked why the entity is spending money on opening satellite offices when there are municipal offices where personnel could be deployed.
Mr Zikode explained that spatial arrangements of the past make it easier for people to get into towns than to go to poorer areas. A huge effort has been made to ensure branches are in areas where people could access them.
The Chairperson disagreed with Mr Zikode saying there are many Presidential Note areas that need Seda services including local municipalities and that could inform the allocation of the Seda offices or branches.
Mr Zikode stated they did not take note of the Presidential Note. They only focused on people who had bank accounts, which is why they disregarded those who never had employment. That was a mistake. The aim of Seda is still to have an outreach programme to train people in rural areas. The challenge is the personnel. Some of the offices have two people and it is difficult for them to travel to these rural areas because they spend most of their time attending to people visiting the offices for financial support and registration.
Mr S Bekwa (ANC) commented that it did not seem that the entity would reach people in rural areas. It appeared it would be difficult to deliver on the plans. He suggested the entity work closely with the Committee so that it could assist.
The Chairperson asked if Seda has really identified the market it is talking about because there are many schools with dilapidated buildings and small towns with potholes.
Mr Zikode enlightened the Committee that 95% of their clients are micro enterprises and they are mainly in trading and services areas. The other 5% is in the high end of the market. It exports its products and employs people. It generates jobs. But to generate jobs, there is a need to support the high-end market. In terms of identifying markets such as schools, the entity would need to talk with the departments concerned.
The Chairperson asked whether SEFA aligned its strategic plans to those of the Department.
Ms Sizeka Magwentshu-Rensburg, Chairperson of the Board of Directors, SEFA, said they had not aligned their strategic plans to those of the Department, but only to those of the Department of Economic Development (EDD). The entity followed the process it has been following with the EDD. The entity has participated in the strategic planning sessions with the Department on two occasions. She asked to withdraw their presentation so that they could align their plans with those of the Department.
Mr T Mulaudzi (EFF) suggested the entity be given a chance to align its plans with those of the Department.
Mr R Chance (DA) objected, saying SEFA must present and be interrogated; he was keen to hear the presentation.
Mr X Mabasa (ANC) likened this to a Grade 10 learner who goes to an examination only to be told he/she is with Grade 12s. It is pointless to write the examination. So, SEFA should be given time to prepare for the presentation so as to align its plans to those of the Department.
Rev Meshoe said the request of SEFA should be acceded to because it would be embarrassing for them to present what the Committee does not want to hear.
The Chairperson said SEFA did not do that deliberately; it was a result of developments that happened in the country. The entity is having one leg in EDD and the other in the Department. The entity is caught in the middle. For SEFA to present would be a waste of time. The entity has to finalise the issue of migration and know the department it is reporting to. At this stage, SEFA does not know the department it is reporting to.
Mr Chance objected, it was a missed opportunity. He wrote a letter to the Chairperson asking for the Minister of EDD to appear before the Committee and account on the Gauteng Industrial Parks. SEFA could brief the Committee on that.
The Chairperson told Mr Chance SEFA is in the process of migrating to the Department, and indicated it is wrong of Mr Chance to single out one thing that came out of many issues that were observed during the oversight visit and want to speak to Minister Patel. That is cheap politicking.
Rev Meshoe suggested the Chairperson to stick to her ruling.
Mr Chance said the issue he raised appeared in the Business Day. The Gauteng Industrial Parks were in dire straits and small businesses operating in the parks were falling apart; Minister Lindiwe Zulu admitted to that.
Rev Meshoe noted a withdrawal is not a denial. By asking for a postponement, they are not running away with responsibility. The entity is still going to come back to report to the Committee.
The meeting was adjourned.
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