Pick n Pay on Access to Retail Industry Market by Small Business

Small Business Development

02 September 2015
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The Committee Chairperson announced that the meeting was attended by delegations from Pick n Pay as a large retailer, an individual small entrepreneur, the Small Enterprise Finance Agency (SEFA), Small Enterprise Development Agency (SEDA) and the Department of Small Business Development (DSBD), and the purpose of the meeting was to work together to formulate and achieve a balance between supply and demand, ensuring that small entrepreneurs, cooperatives and enterprises could get access to the retail market.

Pick n Pay briefed the Committee on its initiatives and the impact it had on the small enterprise and small business development, and the challenges faced by suppliers in accessing the retail sector. It aimed to support, scale and sustain, and did so by providing mentorship and business development support to small suppliers, aiming to increase their productivity and delivery and facilitating small supplier development in general. The Ackerman Pick n Pay Foundation had spent R2.2 million on food gardens, and R4.2 million in grants to Public Benefit Organisations (PBOs) last year. It had R69 million worth of assets under management, 254 community food gardens were established with 4 214 beneficiaries totalling, there were 40 active entrepreneurs/small suppliers, and the Foundation had spent R41 million since its inception. In the first six months of 2015, it had purchased R2 billion of produce, of which 99.5% was locally sourced. It had shown 55% increase in spend on BBBEE company levels 1-8 in 2014, spending R1.9 billion on black owned companies and R1 billion on black women owned businesses. Challenges facing the retail industry included high production costs, which often made it cheaper to import, poor  productivity and labour relations, slow decision making with partners, high raw material costs, insufficient expertise, insufficient innovation to satisfy customer demand and lack of particular products. South Africa was ideally placed to be the “motor” of sub-Saharan Africa, but the question was whether it should concentrate on building its own industry before assisting others, and one of the main problems with export was the delay at the borders, which threatened the perishable goods. Small business owners tried to do everything themselves, and often the development of business was more of a mentoring process. Pick n Pay was able to offer good distribution centres, which meant that most small businesses had access to the distribution chain, and five employees focusing only on small business quality of goods. Although there had been complaints about the stringent quality requirements, it was pointed out that if Pick n Pay lost consumers, the whole business would collapse and so would its suppliers, so the quality must encourage repeat buying. Pick n Pay had pledged 20 jobs being created every day until the year 2020.

A small entrepreneur outlined the history and nature of his macadamia nut product-business, and indicated that his major problem now was accessing sufficient finance to take it to the next level. He said that the nature of the small business made it vulnerable to cash-flow problems if competitors dropped their prices, and he described the steps he had been to try to source funding and assistance. An example was cited by Members of another business who had received some funding from the Department of Trade and Industry.

Members were concerned with the set capped amounts the entities of the DSBD could grant to small business, saying that it was too low, and queried how that amount had been determined. Both DEFA and SEDA were asked to engage with the retail sector to get a better understanding of the market. They were asked if they felt they were ready to address the challenges, but neither of the responses satisfied the Chairperson, who commented that they did not seem fully engaged with the realities, or able to offer the right level of support that was directly related to what the market was demanding. expanding his business. Members indicated that South Africa had a very dualistic economy, and although Pick n Pay had indicated its willingness to help transform

the economy, there were challenges in its own structure that indicated that supplier development was possibly not yet regarded as core business. It was suggested – and Pick n Pay said it was willing to consider – that a confidential agreement be created based on the understanding of supply chain. Members asked if there was any engagement with the Competition Commission, how small business in rural areas was brought in, what kind of invoice discounting might be offered, what the large companies had done in order to grow their own businesses from start-ups, and what had come out of engagements with the Department of Trade and Industry. The Committee asserted that it was SEDA's responsibility to see the retail sector as a potential market for the SMMEs, and then try to understand the needs of the market in order to develop the SMMEs, and whilst local level engagements had some use, this indicated a lack of broad-scale planning. They suggested that SEFA must get a better understanding of the market that the small enterprises would serve, and asked who would fund if there was no off-take agreement. SEFA conceded that it would have to work more closely with SEDA at pre-feasibility stage. The conditions of loans were questioned, and Pick n Pay was asked to explain whether it was adding new suppliers or replacing some with others. It was agreed that SEFA, SEDA and Pick n Pay would hold a meeting to discuss the supply and demand issues that the retail market had from SMMEs.

Meeting report

Chairperson's opening remarks
The Chairperson welcomed everyone, noting that those in attendance included small delegations from retail chain Pick n Pay, the Department of Small Business Development (DSBD or the Department), Small Enterprise Finance Agency (SEFA), Small Enterprise Development Agency (SEDA), and an individual young entrepreneur. She noted that there had been accounts from an emerging entrepreneur who could not meet the contractual demands from Pick n Pay, because she had not had adequate support from the DSBD, and had lost that potential contract. This meeting needed to look at the situation, and try to formulate a proper balance between supply and demand, and to ensure that small and large business did manage to get access to the retail sector market, as there had been recurrent complaints in the industry. It served no purpose if entities such as SEFA and SEDA, who had instruments to help, were not actually facilitating in creating a balanced situation. During this engagement, the Chairperson hoped that the expectations from the side of the retail sector would be outlined, so that the DSBD could then determine if it had the correct instruments to develop small, medium and micro enterprises (SMMEs) to a level where they managed to supply in a way that would not disappoint the retailer. The Department had to serve the interests of the SMMEs and the retailers. It needed to be determined whether the Department's instruments were realistic, and would managed to develop SMMEs and cooperatives to a point where the 30% procurement from small business was happening. If the initiatives from the Department were found not to be adequate then the Department needed to establish how the Department could better aid the SMMEs in meeting those demands from retailers.

Pick n Pay briefing
Ms Suzanne Ackerman-Berman, Transformation Director, Pick n Pay, outlined that her presentation would cover the footprint of the Pick n Pay enterprise and supplier development (ESD) programme, the key drivers, the multi-faceted approach taken to responsible retailing with regard to enterprise development, skills development and entrepreneurship, the impact of the Ackerman Pick n Pay Foundation, the impact of enterprise and supplier development, the benefits of local procurement and the various challenges faced by the retail industry.

Ms Ackerman-Berman said the key drivers of Pick n Pay ESD were to support, scale and sustain. By way of support, Pick n Pay would empower and build entrepreneurs and small suppliers by providing them with mentorship and business development support. In terms of scale, strategies and programmes would be developed with the aim to increase productivity and delivery of SMMEs within the Pick n Pay supply chain. It would be sustained through promoting and facilitating all aspects of small supplier development within Pick n Pay. The Ackerman Pick n Pay Foundation had spent R2.2 million on food gardens to date, and R4.2 million in grants to Public Benefit Organisations (PBOs) last year. There was R69 million worth of assets under management, 254 community food gardens were established with 4 214 beneficiaries totalling, there were 40 active entrepreneurs/small suppliers, and the Foundation had spent R41 million since its inception. The impact of enterprise and supplier development was outlined. There had been R26 billion purchases for the first 6 months in 2015. A total of R2 billion value of produce was purchased, of which 99.5% was locally sourced. This had the potential to be a great source of export for the country as well. Pick n Pay only spent 1.71% on imports. There had been a 55% increase in spend on BBBEE company levels 1-8 in 2014. R1.9 billion had been spent on black owned companies and R1 billion spent on black women owned businesses.

The benefits of local procurement were value creation, consistent quality, fresh and bigger range, greater availability. The consumer trends inspired innovation. There had been creation of local jobs and skills development.

The challenges faced by the retail industry were the very high cost of production in South Africa, poor productivity and labour relations, slow decision making with partners, the fact that it was often cheaper to import, high raw material cost, insufficient expertise, insufficient innovation to satisfy customer demand and a lack of products/industries such as technology, including TVs and fridges, toys, sports, DIY and plasticware.

Mr Paulo Peereboom, Merchandise and Supply Chain Director, Pick n Pay also made a few additional comments. He began by giving positive facts about the situation the country was in currently and said it had everything to become “the motor of sub-Saharan Africa”. It had one of the most proper democracies, had highly recognised institutions for training and tertiary education, had the raw materials and enviable access to the sea. He suggested, however, that South Africa should focus on conquering itself first,before taking on sub-Saharan Africa. One of the biggest challenges found with small businesses was that the entrepreneur would have to do everything from recruiting, putting in orders, buying raw materials and also going to the market to sell it to the big corporations, which would then put him at an extreme disadvantage because he simply did not have the time to attend to all of this, unlike a company that had a thousand employees to take on different tasks. Often, developing a small business was actually more of a mentoring process. Pick n Pay had good distribution centres, which meant that most small businesses had access to the distribution chain and did not have to drive from store to store any more. Another advantage was that Pick n Pay had a fairly large quality department consisting of five employees which focused only on small businesses, mainly because the food quality was of utmost importance. Sometimes it may seem that the quality standards expected by Pick n Pay from its suppliers were too stringent, but it had to be this way, since if Pick n Pay failed to produce the best quality of products, it would not get repeat customers and there would not be a Pick n Pay at all.  Pick n Pay had its own in house packaging and therefore could help the small suppliers in developing their packaging. It was important that the suppliers had the skill to produce quality products that could be put into the packaging and on to the shelves and that would encourage the consumer to repeat the buy. It was said that there was a big opportunity for South Africa to export, but mainly to sub-Saharan Africa. Here, Pick n Pay could also help as it had structures in other countries,. The problem here was the bilateral relationships between the countries, as sometimes the perishable goods would stand ten days at the border. He concluded by saying that South Africa was currently at a point where it could look at conquering overseas markets and sub-Saharan African markets.

The Chairperson suggested that comments and questions relating to lack of support or access to the market could be posed to Pick n Pay, the Department, SEFA or SEDA.

Mr X Mabasa (ANC) asked the Department of Small Business Development whether it had engaged with the Department of Economic Development (EDD) in as far as the trade across the borders and the time that was spent at the borders when taking across fresh produce was concerned.  He asked how SEFA and SEDA would respond to the proposals, recommendations and frustrations heard. He noted the comments on the time it takes to train the entrepreneurs and cooperatives but also wanted to hear more about the funding of them.

Mr R Chance (DA) said that it was evident from the presentation, and from presentations from other retailers in the past, that South Africa had a very dualistic economy, as there were very highly sophisticated elements including retailers and multi-national suppliers, but also a very basic and under-developed sector such as spaza shop retailers, and sometimes under-development in the production of goods and services. As illustrated today, that there was a willingness from one of the country’s major retailers to help transform the economy, but this in itself had big challenges relating to entrenched business practices, which suggested that supplier development was not seen as a core business for the retail sector. It was evident from the large retailers that buyers could not be bothered too much about small businesses, as it was not their business to mentor suppliers. This issue could only be addressed if it was seen to become everyone’s responsibility. He suggested that a confidential agreement be entered into with Pick n Pay, based on the understanding of the supply chain, so that the impact of changing the supply chain could be well understood. The BEE scorecard of Pick n Pay had been improved from a level 7 to a level 6, but this was still not good enough. He asked what was Pick n Pay’s goal in terms of the scorecard, and which factors would be focused on to improve the rating. He asked if Pick n Pay was substituting existing suppliers with small business suppliers or whether it was rather allowing the small businesses to grow organically, along the growth patterns that had been experienced.

Mr Chance said that he had a meeting recently with SEFA and it was found that SEFA required the debt books of the companies to be ceded to them, in order for them to be granted a loan, as otherwise the risk in paying the loan back would be too high. He wondered if SEFA did enter into such agreements with manufacturing companies and companies prepared to offer invoice discounting to their suppliers, to enable them to raise working capital.

Mr Chance wondered if there had been any engagement with the Competition Commission in regard to the retail industry, and whether there was any investigation specifically into malls which put pressure on small and local retailers, which in turn made them less competitive and could lead to them going out of business. He wondered what Pick n Pay was doing about bringing small businesses in the rural areas into the supply chain?
Mr T Ramokhoase (ANC) asked Pick n Pay what had been done previously with the now-large companies and producers when they had been small businesses, in order to accommodate them and get them to the point where they were today.  Taking into account the economic situation in general, he asked for the viewpoints on the National Development Plan? He also wanted to know what had come out of the relationship with the Department of Trade and Industry (dti) so far.

Ms N November (ANC) said the Committee had done good work, as one of the small businesses had, through one of the Committee's workshops, been uplifted now. She asked each of the DBSD and the entities SEFA and SEDA about their state of readiness to assist small businesses.

The Chairperson, for purposes of clarity, wanted to rephrase the comment about Ms Ntombi, a small entrepreneur who had been given R800 000 towards her business from the dti. She asked the DSBD whether its service was really designed to help small businesses and cooperatives and, if so, why had Ms Ntombi's grant come from the dti; it had been the Chairperson's understanding that all support services that were designed for small businesses had to migrate to the DSBD so as not to cause confusion. Secondly, she asked about the R7.5 million needed by Ms Ntombi in order to take her business to the next level and to reach the demand. Currently, she was only supplying 12 stores but could expand if adequately supported, since Pick n Pay was happy with the standard of the products. She asked which of the three entities present today – from the DSBD, SEFA and SEDA -  would assist her in attaining the required funding?

The Chairperson asked how Pick n Pay provided funding to SMMEs. She noted that the Committee had been working now for a year with SEFA and SEDA and asked whether these entities were ready to close the gaps that had been identified throughout this time, including assisting the suppliers to reach the demands from retailers.

Mr Nomvula Makgotlho, Chief Director: Market Access Support, DSBD, responded that the dti dealt with trade and export-related investment assistance to SMMEs. He did not know which scheme from the dti had assisted Ms Ntombi with the funding and would investigate this further. Most of the instruments from the dti relating to small businesses had migrated to the DSBD, but excluding the Incubation Support Programme (ISP), and he could recall that discussions had been ongoing between the political heads of the two departments towards taking a decision on when and how that last migration would happen. SEFA would be the right place to provide Ms Ntombi with the financial support she had been seeking, because the DSBD could only grant funding up to R1 million to small businesses, and she was seeking R7.5 million.

The Chairperson asked what programme of the DSBD could grant the R1 million.

Mr Makgotlho responded that it was the Black Business Supplier Development Programme (BBSDP).

The Chairperson asked what informed the maximum amount of R1 million.

Mr Makgotlho responded that the main consideration was the availability of funds and the fact that this Department would want to cover as many small businesses as possible, so it was decided at the time that the funding would be capped at R1 million per applicant. However, this figure was not cast in stone and the executive authority of the DSBD could change the capped amount in future, after considering the availability of funds.

The Chairperson said that the response given by the DSBD was a very interesting one, as it showed that the funding would be determined according to the numbers of small businesses and the viability of the small businesses. That was a point that would be “parked” for further engagement with the DSBD.

Mr Lusapho Njenge, Acting Chief Financial Officer, SEDA, responded to the questions posed to SEDA. With regard to the relationship of SEDA with the retail industry, he said that SEDA had conducted research on supply development and the challenges faced by small businesses. It found that there was a need to set up incubation for products to get tested, in order to certify that they could meet the standard set by big buyers. In terms of readiness, SEDA was ready, as there were successful models in place which supplied big businesses. However, its financial constraints meant that it could only go so far.

The Chairperson said that he had only partly answered the questions. She asked whether SEDA had interacted with the retail sector to understand their business, and what their expectations were, so that SEDA would then understand the role that it had to play in providing the financial support to SMMEs. SEDA was charged with the obligation of providing non-financial support to small businesses. SEFA was charged with the obligation of providing financial support to these small businesses.  The Committee had made the two entities aware of the recurring issues raised, which included access to the market, access to finance, adequate skills training in technical and business skills, own operational infrastructure to allow the business to operate, and external support infrastructure to make the business work, which would include transport, energy, telecommunications, water and sanitation. There was also an issue of red tape. Entities working together as a part of government should find a way to make the small business owners capable of easily accessing the larger retail sector. She wondered whether matters were simply carrying on as they had under the dti.

Mr Njenge responded that SEDA had held interactions with the retail sector, with companies such as Boxer Superstores, Woolworths and Spar, but admitted that this was as yet on a small scale with a few small businesses supplying a store on a local level. It had not yet reached the level whereby small businesses could supply large amounts of produce to the major retailers. It had been suggested that he should have a discussion with Pick n Pay to find out how the small businesses could be up-scaled to a level where they could do so.

The Chairperson pointed out that the DSBD is a national department and the agencies are national agencies, which meant that if there was any working relationship with the retail sector then it would not be engaged upon on a local level and be dragged down by a small supplier. It was SEDA's responsibility to see the retail sector as a potential market for the SMMEs, and then try to understand the needs of the market in order to then develop the SMMEs. The fact that there was interaction at a local level and a local store meant that there was no macro-planning involved to open the retail sector as a market for SMMEs and cooperatives. The SMMEs could only survive if there was a sustainable market and it was SEDA’s duty to support the SMMEs in the market. From this, she commented that it seemed that SEDA was in fact not ready.

Mr Njenge responded that SEDA was not ready in terms of understanding the market, and that was an area that needed to be worked on.

The Chairperson said that at least it could now be agreed that SEDA needed to get an understanding of the market in order to develop SMMEs.

Mr Rian Coetzee, Executive Manager, SEFA said that SEFA acknowledged that it was critical to realise this point, in order to make an impact, especially in the rural economies. There was a strategy in place to engage with rural sectors and other fast moving consumer goods sectors. SEFA had engaged with Pick n Pay and the Industrial Development Corporation (IDC) in a steering committee where a number of projects were identified, and designated this to the different development finance institutions who were now in the process of developing those business cases in order to fund them. Admittedly, the process did not move as quickly as should be possible because of some constraints. One of these constraints lay in determining what made something fundable, and there were many discussions around that. There had also been interaction with Woolworths.  He asserted that SEFA was “in the process of becoming” ready and was busy with strategic planning, coming up with a new corporate plan and bringing in a hybrid instrument whereby cooperation agreements were made with large corporations, after which individual investments will flow. The staff of SEFA had also been up scaled to a point where there was direct funding and where SEFA would fund start-ups and not just bridging finance loans. SEFA had tried to deal with all the issues raised by the Committee but it was difficult to focus on a specific area because of the demand from the SMMEs, since every value chain needed an intervention. There should be good results seen after the engagements between the DSBD and SEFA.

The Chairperson was also not satisfied with the response given by SEFA. She suggested that SEFA, when providing financial support to an SMME, should first establish what Pick n Pay or another major retailer wanted in order to assess what amount of funding was required by the SMME to satisfy the demands of the retailer. In order for SEFA to play a meaningful role in providing adequate funding to SMMEs and the cooperatives, it needed to understand the market the SMME was going to be serving. Internal policies and funding instruments that would not make it possible for the SMMEs to meet the demands of the market should not be developed. She asked who would fund SMMEs that did not have an off-take agreement?

Mr Coetzee noted what had just been said, and responded that SEFA did not only fund when there was an off take agreement,  and this was not in SEFA’s investment policy. If there was a start-up then the entrepreneur must have a marketing strategy and provide details on how the risks would be addressed. He added that in terms of developing entrepreneurs, SEFA, during the pre-feasibility stage, needed to work more closely with SEDA, in terms of the incubation, developing the case and other systems. Those types of enterprises did not generate income yet as they were still in the development phase, so that grant funding or equity funding would be the most appropriate in those cases.

The Chairperson asked SEFA whether it granted loans with a holiday period, and what informed the capped amount for funding from SEFA.

Mr Coetzee responded that SEFA granted such loans and almost all its loans had that condition. He noted that there were different stages of development and different instruments to be used on the various stages. With regard to Ms Ntombi’s case, SEFA had an issue with the R5 million cap on its funding. The amount capped was set when SEFA was formed and this was something that would be looked at again. He did not know what the determining factors were in deciding to set the amount.

Mr Makgotlho answered the question whether any gaps were being filled by the DSBD, noting that the DSBD was embarking on a process, with its agencies SEFA and SEDA, of reviewing. At the core of this there would be people assisting with the market and ascertaining the interventions and the impact of those already put in place, both financially and non-financially.  It was anticipated that once that work had been done, then the DSBD would be in a better position to assess.
Ms Ackerman- Berman said that the Chairperson had correctly pinpointed the issue about the confusion of which agency to approach regarding funding.  Mr Coetzee was correct in saying that SEFA had been engaging Pick n Pay and the IDC for the last 18 months, on about 10 projects, to the value of over R10 million. Credit should be given to SEFA, as it had been the only one that had visited the projects with Pick n Pay, and hopefully R800 000 will be granted to a specific framing project which was now ready to up-scale. She added that she and her colleague were very willing to sit around a table with the various stakeholders and agencies to discuss how the small businesses could be taken to the next level, and find other solutions together.

Mr Peereboom understood that the agencies of the DSBD, as well as Pick n Pay, were constrained by statutory provisions such as the funding caps.  He responded that Pick n Pay would not shy away from a confidentiality agreement with the Committee, which could in turn facilitate job creation. Pick n Pay was definitely adding suppliers, and was not taking away the big suppliers as the small suppliers needed to get their own market. Pick n Pay was considering special endorsements which would be called “local at heart”, but there were some challenges. The SMME products needed to be more than just one of the 83 000 products Pick n Pay was selling. Pick n Pay was in the process of establishing this special endorsement. He defined success of a SMME as the enterprise not needing support from anyone any more, and being able to “do it on their own”. Straight replacement of products was possible in instances involving products from agriculture, such as tomatoes, whereby a customer would select not two but one tomato. The opportunities were there for rural agriculture producers. There were conditions in place on all levels of the supply chain, and the conditions would continue to apply. When the small business grew, it would have realised already that the conditions were there, and would continue. 

He noted that Pick n Pay had been engaging with the Competition Commission and would welcome any inquiry. He commented that Pick n Pay was not supporting the demands of the big buyers but rather the demands of the customers, and repeated that it would be any exercise that resulted in no customers to buy the products would be futile. He said that he had six companies that would like to invest in South Africa, and the challenge was that two of these companies mentioned had already been lost through the media, because these companies found it very difficult to establish themselves in the market.  He would welcome support to help him convince these companies to invest in South Africa. He believed that “In every negative there is an opportunity” and said the fact that currently the rand was very weak presented an ideal opportunity as it was very cheap for foreign countries to invest now in South Africa. His leadership team on the supply chain would welcome a meeting with SEFA and SEDA to discuss the requirements and challenges that small businesses are facing.

Ms Ackerman-Berman corrected Mr Chance's statement on the Pick n Pay BEE scorecard. It had moved from level 6 to level 4,  and that was due to better reporting structures and a committed focus to small businesses and supplier development. Pick n Pay may, however, drop a level if things stayed the same as the new codes which would come into effect in 2016 were very onerous and the formulas were based on net profit after tax. The margins in the retail industry were very small, but the turnovers were big, and because of this some of the figures in terms of skills and small business development were unattainable. She would appreciate a discussion between Pick n Pay’s CEO and Minister of Trade and Industry, Dr Rob Davies, as to how this could be made to work. This would ultimately help the entire industry going forward.

Mr Ramokhoase said that some of the Ministry officials had recently visited Japan and China to persuade foreign investment. He asked for elaboration on some of the stumbling blocks in bringing in foreign investment into South Africa.
Mr Peereboom responded that some of the main stumbling blocks were the strenuous and complicated visa application process, since companies that wanted to invest in South Africa would like to bring in their management, to report back home about it and then locally scale up the business. The outside media on South Africa had not always given the most encouraging picture, especially around the outbreak of xenophobia attacks in KwaZulu Natal. Another challenge was the performance of the energy sector, which led to prospective investors not believing that there was a clear plan in place to mitigate the situation in the short term. Often, as was seen in many other countries as well, a high unemployment rate did not equate into a high pool of talent but rather the other way around, so that where there was high unemployment there was a huge lack of skills in the market. There was a waste in talent in the country, which needed to be addressed. He concluded by saying that he could not answer the question on the National Development Plan, as he did not know enough about it.

Lentibex: Small retailer briefing
The Chairperson gave the young entrepreneur a chance to share his story with the Committee.

Mr Thabo Mooketsi, Managing Director, Lentibex (Pty) Ltd said that his company's name was Amacwa which meant “what comes from the ground”. The company produced products that were made from macadamia nuts. The product that was on show was a cooking oil extracted from the nut, which had good nutrition benefits and, unlike olive oil, could be used for deep frying as it had a higher burning temperature . The other product on display was a butter made from the nut. Both products were organic. The company started in 2013 from a small pop-up shop in Johannesburg. When it established that there was a need, a few products were selected to go ahead with as a start to the business. The South African Bureau of Standards Design Institute was approached and packaging was then created and tested for consumption, before being approved. The products were currently being sold in seven stores, mainly consisting of family Spar retailers. However, an agreement had recently been established with Pick n Pay to list the product.

He noted that the macadamia tree which bears the nuts took approximately six years to grow, and it was initially thought that the manufacturing could be done on the nut, but unforeseen complications arose and there were issues with machinery and financial constraints. It was then decided that farmers would be approached. There were various farmers who were interested but a farmer in Nelspruit was selected as he provided a quality nut and gave a reasonable price. There were thoughts of targeting the lower supply markets, and Dischem and Checkers-Hyper were also interested. However, there was now a challenge, for expansion funding was needed. The company began selling in the seven stores in May, In the first and second months it was sold out. In the third month profits dropped drastically, and it was found that other competitors had lowered their prices in order to drive the products out of the market. The prices were dropped, and profits were rising again, but this price-drop had a big impact on the business. Many small businesses had issues with cash flow.

Mr Chance asked whether the business was self-funded. He wanted to know if there had been mentors along the way and if so, who were these mentors? He asked what the needs of the business were, in terms of finance, and what other challenges were being faced, as well as what the growth plans were for the South African market and in terms of export.

Mr Mooketsi responded that the business had been self-funded to this point, but now it was looking into exporting because the demand for the product was much greater in Europe, Asia and the USA. His needs now were for expansion capital and he would like to get to the point where people could be hired to do the manufacturing process. The listing sought from Pick n Pay was to introduce other products, so therefore a research department was needed, to go out there and look for other plants that were found locally, in order to branch out into other products, and that would in turn help the community at large. Exporting was also looked at, but was currently a challenge.

Mr T Mulaudzi (EFF) said that SEDA and SEFA should assist young entrepreneurs such as this before these people were “suffocated” out of business. He asked if Mr Mooketsi had approached farmers in Limpopo, saying that he could help him with the contact details of some in Limpopo.

Mr Ramokhoase asked whether he had approached the Provincial Government in Gauteng because he was based there.
Mr Mooketsi responded that this was not the first business that he had started, for he had been engaged in business since the age of 18, in 2002. That business was based on cultural exchanges between countries and was a success, and was then sold in 2008. He had engaged with the Gauteng Provincial Government, but it responded frankly that it did not have money and could not assist, and said he should wait until government allocated funding.
Mr T Khoza (ANC) asked SEFA and SEDA whether it could meet with Mr Mooketsi and find a way to assist him.
Mr Coetzee responded that SEFA would like to meet with Mr Mooketsi to see if it could assist him.

Mr S Mncwabe (NFP) asked how much funding was needed.

Mr Mooketsi responded that he was seeking R5 million over three years. This would cover marketing costs, transportation and listing costs. He added that he went over the contract with Pick n Pay and the contract read that even a mistake with the barcode could result in the company being fined R10  000.

The Chairperson said that the reason that a specific focus and emphasis had been placed on agriculture was that it was central to everything that human beings do. South Africa would do much better if it was positioned as a food basket, as there was plenty of under-utilised land. The SMMEs in rural areas should make agriculture their number one priority. There was a market, and there was demand, but  the funding and support instruments from the DSBD and its entities needed to be addressed. The DSBD and its entities would be called back to the Committee again, to determine whether engagements were made with the retail sector, so that there could be a common understanding on the needs of the sector and the SMMEs, which would then allow the DSBD to provide adequate services. These services included financial and non-financial services, adequate skills and business management and infrastructure.

Mr Chance said that the National Development Plan had made estimations and had set out that 11 million jobs would be created in the next 15 years, and each sector had given input as to its job creating potential. The agricultural and retail sector should be looked at in light of job creation, and the National Planning Commission should be brought in to discuss and unpack the model so that it could be understood.

Ms Ackerman-Berman said that Pick n Pay had pledged 20 jobs being created every day until the year 2020.

The meeting was adjourned. 

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