The Committee held a workshop focusing on challenges that are experienced by Small Micro and Medium Enterprises (SMMEs) and cooperatives in accessing funding. The Minister, Ms Lindiwe Zulu attended the meeting and explained that the Department of Small Business Development (DSBD) was set up to deal with ways to unlock the challenges that had been hampering the development of SMMEs and cooperatives. The mandate of the Department was to develop programmes and effective mechanisms that would assist SMMEs to grow into big businesses. The Department also existed to review the existing legislation at national and local level. One major challenge seemed to be the lack of coordination, legislatively, between local, provincial and national spheres. There are regulations that are passed by local structures that are not enforced at national level. It will be the responsibility of the Department to ensure that regulations are enforced and this came with its complications when considering the number of local structures throughout the country.
A number of SMMEs and cooperatives made presentations to the Committee on their businesses, the challenges that they faced, positive and negative aspects, their perception and experience of the development finance institutions, how they had sought and received financial assistance, challenges to that process, and their suggestions on what could help other institutions. Those presenting to the Committee were Ezulwini Chocolat, Rise Uniforms, Green-Valley Eggs and Ugqozi-Lwethu Secondary Co-operative, King of Midlands, and National Stokvel Association of South Africa (NASASA). Some of the challenges that they highlighted, often agreeing with each other on their observations, included lack of compliance to business regulations, often through lack of business knowledge or expertise, and the fact that the finance institutions offered no support in this regard. There was sometimes, in the cooperatives, existing conflict that hindered the business, although interestingly enough the same was not seen in the stokvels. Many businesses also suffered from poor management skills. Many of the owners of small businesses complained that the red tape and requirements took up enormous time and money that could ill be afforded, and whilst many of the business had sound business plans or ideas there was difficulty in actually committing these to paper in the formats needed. Lack of access to markets and lack of access to finance remained huge concerns. For some businesses wanting to expand, lack of occupational space presented a problem. Many suffered from cash flow problems exacerbated by delays in releasing funding. There were challenges with the energy infrastructure and transport costs.
Wealth Hub had also given a presentation but the Committee requested that it be withdrawn and disregarded after the Minister had pointed out that this company was still under scrutiny and investigation by the Financial Services Board for lack of compliance and its accounts were closed. The Committee commented that the owner's failure to reveal this to the Committee when requesting to make a presentation was a form of ambush marketing that was not appreciated.
Many of the recommendations made by the SMMEs and cooperatives presenting were broadly similar. They focused on the role that the Department of Small Business Development, Small Enterprise Development Agency (SEDA), Small Enterprise Finance Agency (SEFA), Development Financial Institutes (DFIs) and National Youth Development Agency (NYDA) could play. Insofar as the NYDA was concerned, it was suggested that at least 20% of people in a company should be permitted to be above 35 years of age, and core funding should be considered to promote partnerships across departments and cooperatives. More flexibility in the disbursement of funding would be appreciated. Management of business accounts needed more attention and guidance. It was suggested that there should be at least a 30% guarantee for SMMEs to supply to government markets.
Members questioned why there was no representation from the private sector to this workshop, pointing out that this sector was providing the bulk of the funding in the country, compared to the DFIs. The question was also asked why SEDA and SEFA were not asked to present, and the Chairperson said that the Committee would try to find a slot for them to do so on the following day. Members were somewhat shocked to hear that some entrepreneurs still lacked awareness of the shift of institutions and funding from the Department of Trade and Industry (dti) or the Department of Economic Development (EDD) to the DSBD, and urged the DSBD to stop using any addresses or terminology that prolonged the impression that dti was the body to approach for funding. They asked about the involvement and support of Sector Education Training Authorities, and pointed out that a developmental approach was key to the issues. More visibility was needed in general by all those able to offer support. There were also concerns that funding was not available to agricultural enterprises, and that some contracts had been lost because of systems that blocked access to funding when needed.
Chairperson’s opening remarks
The Chairperson welcomed everyone to the workshop and indicated that the Committee had invited a number of organisations to make inputs into the workshop. The workshop had been organised by the Committee with the focus on access to funding for small businesses. The purpose was not to point fingers at the Department of Small Business Development (DSBD or the Department) but to suggest a way forward. The Department had been engaging with different structures and entities, including the organised structures in the Small Micro and Medium Enterprises (SMMEs). The Committee had observed that there was a mismatch between what was required by the SMMEs and cooperatives and what was currently being provided on the ground. It was the responsibility of the Committee to facilitate coherence between the two. The discussions should also be about ways to develop SMMEs and cooperatives, to be able to reduce unemployment, poverty and inequalities.
The Chairperson added that the target for small businesses and cooperatives was to create about 11 million jobs by 2030, as highlighted in the National Development Plan (NDP). The two day workshop would assess the relevance of the funding model for small businesses and cooperatives and also hear from them on their experiences and challenges in access to funding. The Department and Development Finance Institutions (DFIs) would have an opportunity to listen to the inputs that would be made by SMMEs and cooperatives, so as to reflect on the challenges that would be raised, to be better able to address them. The Committee would also be given an opportunity to hear about the behaviour of the officials employed by the DFIs and their clients who were the target group of the Department. She emphasised that it was not the Department who was in contact with the clients but this was the responsibility of the DFIs and intermediaries. The officials at DFIs either portrayed the Department as uncaring or excelling, meaning whatever that is done by the DFIs and intermediaries impacts positively or negatively to the Department.
The Chairperson highlighted that the DFIs would be given an opportunity to identify changes that needed to be effected by the Department in order to make the DFI financial services more relevant to small businesses and cooperatives. The Department must decide on changes that needed to be made and then the board would need to implement those changes.
She noted that the Committee had decided to send back all the entities that had made their presentations on their strategic plans because their planning had not been aligned to the Department. The Department could not develop a strategic plan without engagement with the clients and the Department could not make assumptions in order to develop services, but had to actually address the needs of the people on the ground, as determined by solid research. The current Workshop intended to ensure that the Department together with DFIs were able to provide financial services to small businesses and cooperatives. There had been complaints that there was lack of access to financial services for the SMMEs. There were a number of challenges experienced by small businesses, including unaffordable loans, complications in the filling in of forms for application for loans, red tape in government, and inadequate funding.
Pick n Pay and Woolworths had engaged with the Committee and agreed that there was a willingness to buy from SMMEs. However, the SMMEs often failed to make the grade in terms of meeting the deadlines and delivering on time. It was disappointing that there were cases where DFIs' officials were unable to sign contracts because the official responsible for signing contracts was on leave or attending a workshop.
The Chairperson indicated that some of the complaints that had been flagged by the SMMEs and cooperatives to the Committee included the following:
- the applications for funding are often complicated and take time to be approved, resulting in applicants losing business opportunities.
- SMMEs and cooperatives that are involved in food processing had also been complaining that they had not been getting adequate funding from DFIs, and even when it was issued, it would be directed to the food processors, ignoring the fact that these businesses were dependent on primary food production
- SMMEs and cooperatives had also been complaining that most of the financial support services are designed for businesses that had been running for three years, excluding those businesses that had just been created.
- SMMEs and cooperatives had the impression from some DFI officials that the officials assumed that they were doing these businesses favours, and some officials would steal business plans and give them to relatives and friends.
- It was a grave concern that the general public is still unaware of the migration process from the Department of Trade and Industry (dti) to the Department of Small Business Development (DSBD).
She said that it would be important for the Committee to get more information on what government overall had been doing for small businesses and cooperatives in the last 20 years – this Department had of course inherited a function that had been in existence for over the past 20 years. The Committee would also look at what had been done by DFIs in funding SMMEs and cooperatives to deal with the triple challenges (unemployment, poverty and inequality).
The Workshop should focus on what had been preventing the Department and DFIs from making a significant impact to small businesses and reflect on the way forward. The Department, together with DFIs, was responsible for ensuring that small businesses and cooperatives are able to create about 751 000 jobs annually and the Committee would need to reflect on ways to make this target a reality. She appealed to the Department and the DFIs to focus on identifying some gaps and changes that still needed to be made, instead of trying to justify the funding model. Later, the focus could be on whether there was a need to change legislation in order for other changes to be made.
Mr R Chance (DA) complained about the fact that there was no representation from the private sector to make inputs in the workshop. The private sector was providing bulk of the funding in the country, not the DFIs. He wanted to know if there was any reason for the Committee to exclude the private sector from this important workshop.
The Chairperson responded that this Workshop was only focused on the funding for small businesses from government, and not from the private sector. The Committee may have a follow-up to deal with the private sector.
Mr Chance disagreed with the Chairperson's rationale and said that the purpose of the workshop should have been about bringing the private sector and government together. It was impossible to conduct work where there was no cooperation between government and the private sector.
The Chairperson responded again that the purpose of the Workshop today was to focus on the services that had been given to the SMMEs and cooperatives, and this was not to encourage the notion that government and the private sector needed to operate differently. The Committee would be engaging with the private sector, but the purpose of today's workshop was solely to look at government funding. The Committee had already engaged with the retail sector and there was a complaint about the government funding, and not commercial funding.
She noted apologies from the Deputy Minister, and Members.
Minister of Small Business Development’s opening remarks
Ms Lindiwe Zulu, Minister of Small Business Development, firstly appreciated the opportunity to be making the presentation in the Committee and then mentioned that she would not be able to participate throughout the workshop because she would be preparing for Government Lekgotla. The existence of the Department was based on the need to deal with challenges that are affecting SMMEs and cooperatives ,particularly the issue of funding. The mandate of the Department was to develop programmes and effective mechanisms that would assist SMMEs to grow. The Committee had already been presented with the vision and mission of the Department. The Department aimed to create a conducive environment for the SMMEs and cooperatives, to be able to deal with the triple challenges and ensure that there were coordinated efforts between local and provincial government to assist SMMEs and cooperatives. The Department needs to enhance the support that is given to SMMEs and cooperatives, not forgetting the informal businesses. It is clear that the informal sector is struggling and it needed to be given proper infrastructure in areas where informal businesses are operating. It is often difficult for them to even get into the local or provincial economic structures that are assisting in securing funding, not to mention the Department.
Minister Zulu added that the priority of the Department will be about reaching to those SMMEs that are furthest from the telecommunications structures. The Department has realised that most SMMEs and cooperatives in local municipalities often call the Department to get help about structures that are in local municipalities, and this once again required a coordinated effort. The Department also exists to review the legislation, and it must focus not only on legislation at national level but also at local level. The main challenge seemed to be lack of coordination, legislatively, between local, provincial and national spheres. There are regulations that are passed by local structures that are not enforced. It was the responsibility of the Department to ensure that regulations are enforced. This had its own complications, given the number of local structures throughout the country. She reminded the Workshop that the current Department was newly created, and the main concern at the moment was lack of regular meetings. The Department would need to arrange meetings with other structures to ensure that its mandate was well understood.
Minister Zulu highlighted that the programmes that are implemented by the Department had been inherited from dti. The DSBD was now continuing with those programmes, and there were many people from SMMEs and cooperatives that were already in the pipeline of support, some at the beginning, some at the end. However, the Department needs to review those programmes as the dti had already indicated that some of the programmes were ineffective. The Committee, different entities, the private sector and DFIs would all be invited to give input into the process of re-evaluation of these programmes. There is a lot that is done by the private sector in assisting the SMMEs and cooperatives, especially on enterprise development. The view of the Department is that the private sector also needed to look at its own enterprise development, as there is a lot of the money that is being spent without any significant impact in terms of contributing to the Gross Domestic Product (GDP), generation of employment opportunities and poverty reduction.
In conclusion, the Department is working as urgently as possible to ensure that all work is conducted in a properly coordinated manner in order to close the gap between national, provincial and local government,which was huge at the moment. The Department will also need to close the gap between government and the private sector. Its priority is mainly on aiding in existing programmes that had been developed by other departments for assisting the SMMEs and cooperatives. The Department is appreciative of the support from other government departments as this is an important part of the coordinated approach.
Ezulwini Chocolat Briefing
Ms Nontwenhle Mchunu, Managing Director: Ezulwini Chocalat, indicated that the company was established in 2002 with a mission and vision of creating chocolates. These are “100% African chocolates”. Her inspiration to open the business derived from her being brought up in an environment where her parents were also entrepreneurs and mostly supportive of her business. The business has experienced many challenges but the important part to understand is that a business has to go through certain steps in order to develop into a bigger business. It was unfortunate that failure in the business culture of South Africa was not viewed as part of the journey of developing a greater business idea.
The Chairperson had already picked up some of the challenges that are experienced by the SMMEs and cooperatives and it was indeed true that there is general feeling from DFI officials that those who are involved in small businesses were viewed as burdensome, and “comparable to beggars”. There is a lot of information and documents required in order for applicants to be awarded funding and this looks like an attempt to make the process as arduous and complicated as possible. The applicants spent much time and money on applications for funding which may eventually not be awarded, and this could be solved by enlisting all the business models that are considered and those that are not often considered for funding.
Ms Mchunu stated that her company had received funding from a DFI after a long and complicated process that took about 22 months, and it must be highlighted that the funding contract had the possibility of hampering any small business. It is important for SMMEs, cooperatives and informal business to be educated about the funding contracts signed by those applicants that had been awarded funding, in order to prevent the situation where the funding could impact on the business. The process after the approval of the funding is often followed by approval submissions and documents to be submitted in every second week and this makes it even more difficult to know exactly what is required, and this is once again another long and complicated process. She advised other SMMEs that it would be much better to be in contact with someone who is knowledgeable about the particular chosen industry, so as to get much exposure, advice and experience to deal with challenges encountered in the process of development of a business.
Ms Mchunu said she had felt that very poor treatment was given to other entrepreneurs in the process of seeking funding. There is a general sense that the interest of the DFI is far greater that the survival of an entrepreneur and this creates doubts if this is indeed a developmental institution. The lack of trust for entrepreneurs who are venturing into business out of pure passion and the lack of appreciation of the real need to develop communities was also another negative factor that had to be addressed within the DFI. The Department needed to create the space for small businesses to succeed. The environment to do that was not properly established as the funding and support was not really talking to each other. There was hope that the Department would be able to pull together all the support structures that would ensure the success of entrepreneurs in dealing with poverty, unemployment and inequality in the country.
Mr Chance asked about the current state of Ezulwini Chocolat.
Ms Mchunu responded that the company had to close the manufacturing plant in Cape Town and the business had now relocated to KwaZulu-Natal (KZN). The focus at the moment was at looking at the business model. There was a realisation of the need to create an industry that accommodates blacks and small businesses.
The Chairperson said that the Committee had met with Pick n Pay and Woolworths and they had indicated that the chocolates of Ezulwini Chocolat met their standards, and they were disappointed that the company did not receive funding to meet their demands. It would be important for the Committee to know which DFIs this company had approached and the response that had been provided for failure to offer funding to the company.
Ms Mchunu responded that the company was assisted by dti, and this assistance went up until the feasibility study. There had also been assistance from Small Enterprise Development Agency (SEDA) for packaging.
Mr H Kruger (DA) wanted to know if there was a specific reason why the company had relocated from Cape Town to KZN.
Ms Mchunu responded that one of the reasons for relocating to KZN was funding and the support from KZN government is also much better than that of Cape Town. There was a focus on looking at the possibility of growing cocoa in KZN, since the environment is more suitable for that kind of plantation. The development of the value chain was better in KZN for the company to be able to grow into a big business. In addition, she had been born and bred in KZN also meant that the support system from families played an important role.
The Chairperson wanted to know about instances where the entrepreneurs approaching DFIs are “treated like criminals”. She also asked about the kind of documents that were required to be submitted in every second week in the approval process. She thought the general rule is that the applicants should be given at least a month before making a submission.
Ms Mchunu replied that the long and arduous process of verification of information and data showed lack of trust for the entrepreneurs. In the process where the funds are being disbursed, the successful applicant for funding would be required to make submissions in every week where an item had been purchased. The entrepreneurs are also required to produce a report every time they paid suppliers and this process often made it even more complex and counterproductive for them, as SMMEs and cooperatives, to run the business.
Mr Chance asked about the specific reasons why Ezulwini Chocolat had to close down, as this was not comprehensively explained to the Committee. He asked if Ms Mchunu felt that perhaps the DFIs are not well-informed about how small businesses operate, and the flexibility that is required to ensure success of SMMEs and cooperatives. He asked if she, personally, had ever encountered any form of racism, and, if so, the impact that this had on the operation of the business.
Ms Mchunu replied that there is a general feeling that the DFIs do not understand the complexities of running small businesses and this is proven by the complicated requirements that the SMMEs are subjected to, in order to receive the funding. There is a saying that “losing one day in business is like three days” and this was something that needed to be taken into consideration in the process of funding small businesses. The closing of her business was the result of lack of adequate funding. The kind of funding offered was not responding to the demands of the business in terms of procuring very high premium products. The intention was to create 100% African chocolates, as it made no sense to import from European countries where there is capability to produce our own in the country.
The business model of Ezulwini Chocolat did not look at the issue of the supply value chain. This was presently being contemplated at the moment, including ways to get cocoa from West Africa, directly from Madagascar cheaply and then processing in South Africa, as the competitors in business have direct access to cocoa. She admitted that she had felt some intangible racial attitudes
The Chairperson indicated that the advice on the supply value chain was supposed to be something to be received from the person or body who was processing the application for funding, especially on how the raw materials were supposed to be procured and the assistance to be provided in order to be continuously provided with raw materials. The controllable factors of marketing included the prices to be charged for chocolates, the place of operation and the delivery of chocolates and also the marketing of the chocolates. The uncontrollable factors could not be controlled by the owner of business but they had an impact on the operation of business. These included raw material suppliers, policies and culture of the country. The DFIs and sister entities like SEDA were supposed to look into these aspects.
She said it was of concern to hear that the company was given inadequate funding, as it was better not to give funding to a business than given it inadequate funding that would put the owner into debt. This was also creating a false impression about the readiness of suppliers to supply retail companies like Pick n Pay and Shoprite with goods. It must be stated categorically that if these basic marketing skills were not well understood by the DFIs, then there would be no small business that could prosper in this country.
Rise Uniforms briefings
Ms Ntombekhaya Nonxuba, Director and Owner of Rise Uniforms, said that the legal name of the company is Waphakamile Industry. The company has been operational since 2007 and mainly focused on the textile industry. She mentioned that she previously worked as production manager and this was an important experience to be able to survive in the industry. She indicated that she had an experience of working with cooperatives in the sector and travelled to countries like Germany, Italy and London to meet different businesses and discuss how they operate. The company aims to do things differently by inspiring the communities where it was based and this include empowerment and support structures for development. The company operates its business in-house starting from design to practice and manufacturing. The company had just employed permanent personnel, including a lady who arrived as a cleaner with a matric, but was later capacitated and promoted to be a digitiser in the branding division.
Ms Nonxuba highlighted that the company was proud to be working with other cooperatives outside the premises and has a strong relationship with Pick n Pay. The company has 18 personnel in total and 25 women had been empowered since the establishment of the company. The company is working closely with Pick n Pay and Mr Delivery and 60% of the sales are coming from cooperatives, 20% coming from schools and public sector and 20% coming from churches. The company had received funding of R600 000 for equipment and this made a huge difference to the operation of the business as the company stopped outsourcing branding outside. The Western Cape Department of Economic Development also funded the company with R80 000 for the marketing materials. It received support from Pick n Pay through its enterprise development unit. The company received a 5 year contract with a 24 months’ probation period for staff uniforms and there was an intention to collaborate with bartender stores to provide staff uniforms.
Ms Nonxuba indicated that the main challenge in the contract with Pick n Pay was the cash flow and this is generally one of the most common challenges of SMMEs and cooperatives. The pace of doing work was also required to improve tremendously in order to meet the deadlines and accommodate the demands of the contract with Pick n Pay. The other challenge was lack of space for the operation of the business as the business continued to grow with demands. The company also struggled to receive the funding to ensure that the business was able to operate sustainably. As with other applicants also, her company had not been told the reasons for her previous unsuccessful applications. It must be highlighted that the company almost lost a contract with Pick n Pay because of lack of funding to meet the quality demands that were required for the awarding of the contract. The application for funding was turned down by dti in 2014, because of lack of guarantee from the market.
Ms Nonxuba suggested that there should be a coordinated approach between the DFIs and the Department in the processing of applications for funding, so as to make the process as quick as possible,. It was counterproductive for any entrepreneur to make a submission of 100 documents for an application that will be eventually rejected. There is a no doubt that the funding institutions are relevant to the needs of the SMMEs and cooperatives, and this is proven by the flood of applications for funding. There is also no doubt that small businesses are capable of creating the 11 million jobs by 2030. Her company employed 25 people without any funding. The 30% public sector procurement process was achievable, but this required the Department to look at the existing gaps. It was impossible to expect the private sector to provide the market and the funds.
Some of the challenges that the company experienced included the long and complicated funding application process, lack of skills and competence in the people who were making determinations on the funding applications. The general feeling from SMMEs is that there is enough funding to move the country forward but they lack access to that funding. The problem of red tape was also highlighted as the main challenge causing delays in funding.
Mr Chance asked about the time for the repayment of R8 million that was received by the company. It is important to know if the company was considering any equity at the moment so as to ensure the sustainability of the business
Ms Nonxuba responded that according to the agreement that was reached, the R8 million could be repaid over the period of 8 years. The company has not considered any equity at the moment as the business has not grown to where it was originally envisioned. There is also a fear of bringing an investor whose only interest would only be on the “bottom line” of the business. In essence, the company could consider the possibility of bringing in an investor in the future but not at the current moment.
Rev K Meshoe (ACDP) wanted more clarity on why dti had turned down the funding application to ensure that the company was growing and employing more people. He also asked why Small Enterprise Finance Agency (SEFA) did not approve the funding for bridging finance of R150 000 in 2014.
Ms Nonxuba responded that the company did not get the funding from SEFA because she had missed a meeting that was delayed by two weeks. The company only demanded an explanation from SEFA for the reasons for unsuccessful application for funding through an e-mail, instead of a meeting, as a meeting was not going to change the fact that the application had been declined. The priority of the company at that moment was to get as much funding as possible to respond to the needs of the clients. It was clear that dti did not see any value in the business model of the company, as there was no explanation that was offered for the rejection of the application for funding and therefore the company eventually developed through incubation.
The Chairperson appreciated that young people are coming on board to start their own businesses especially young women. She wanted to know if the company had approached any other departments for assistance in the training of employees, especially the Department of Labour (DoL). It was unclear if any of the Sector Education Training Authorities (SETAs) had funded the training programme of staff members in the company, The developmental approach was more about the capacitation of employees. It was impressive to observe that the company was particularly targeting unemployed people and had already identified a sustainable target market for the selling of uniforms. She wanted to know if the company had referred to other funding institutions like SEDA after being rejected by SEFA.
Ms Nonxuba responded that she had an experience in working with SETAs as she was involved in Cape Peninsula University of Technology (CPUT). She previously applied to SETA in 2010 for funding in an informal business. The funding was only approved in late 2011, but the money was never transferred, and the training of staff members was never undertaken. The company did not even attempt to consider applying for funding to SETA this time because of her appalling past experience in their processing and approving of funding. The company did not consider applying for the DoL for assistance in training of employees. The company was not even referred to other funding institutions after being rejected by SEFA.
Green-Valley Eggs briefing
Mr Musa Khomo, Director: Green Valley Eggs, stated that the company was essentially farming eggs and was composed of 50% youth, 67% women and 17% disabled. The company was officially registered in 2006, but it was only in 2012 that the company acquired a one-hectare piece of land where the focus was be on the expansion of business to generate more revenue. The eggs are sold to the tuck shops and walk-in customers. There was an engagement with the Department of Agriculture, Forestry and Fisheries (DAFF) in 2010, as they were impressed by what had been achieved by the company. The Department also promised to contribute funding of R4 000 for the operation of the business, but there had been major delays in securing this funding. The business plan of the company was funded by the National Youth Development Agency (NYDA). The business had been growing and gaining more clientele as the demand for eggs had been growing. The company was compelled to buy in eggs from white commercial farmers in order to meet the growing demand.
Mr Khomo said that the company was servicing a private medi-clinic and the Nestle canteen, and also providing eggs to hospitals at provincial level in KwaZulu-Natal (KZN) through the partnership with the Department of Health (DoH). The company currently had a contract with PCK Distributors, which was received through pushing for preferential procurement from the DoH, in order to supply the hospitals with eggs at provincial level and this had assisted the company as it was always going to be difficult to compete with other big players. The challenges of the company at the moment included limited profit margins, since the company was not producing its own services, transportation and fuel cost. The company had managed to maintain the markets in order to generate revenue. The company could address the issue of transport costs by buying a truck, to purchase more goods in bulk and provide bulk deliveries to different sites. The priority of the business is to ensure that the ordered products are delivered on time without any delays and avoid any non-delivery which could impact the revenue of the business. There is a concerted effort to ensure that the business is sustainable, well-marketed and all overheads are well covered.
Mr Khomo mentioned that the company had been engaging with the DFIs since 2012, attempting to acquire funding but the application was rejected as it was said that the DFIs are not funding primary agriculture. It was hugely disappointing to get this response, particularly so late in the day. The company was then referred to Landbank in order to secure funding for the operation of the business, but this was also not successful. The challenge with getting funding from DFIs is that most of the informal business often fail to comply with complicated and costly requirements to secure funding. The attempt to get funding from NYDA for the second time was also rejected, on the grounds that the company no longer comprised 100% youth.
Mr Khomo took the Committee through the challenges that he suggested still need to be addressed in NYDA and in government overall, which included:
- The age limit of 35 for securing funding needed to be resolved by allowing at least 20% of the people in the company to be above that age limit
- NYDA should consider giving core funding in order to encourage partnership between different departments
- NYDA needs to allow small businesses to use the business plan that they understand without having to resort to utilising consultancy to submit the commercial business plan
- There should be flexibility in the disbursing of funds in order to allow SMMEs to have options in the way of spending the funding
- The management of business accounts is an issue that needs to be addressed in order for SMMEs to secure funding
- There should a 30% guarantee for SMMEs to supply government markets
Mr Mziwakhe Ngwane, Facilitator of the Workshop, indicated that one thing that could be picked up from the three presentations that had already been made is there is a lot of potential from young people. The intention of the workshop was to see that people are not begging from government but working hard to ensure that their businesses will become successful. It was also impressive to see that the three SMMEs that had already presented were venturing into businesses that most small businesses would not dare to go, like chocolate making, agriculture and manufacturing. The challenges that had been mentioned by the SMMEs were all universal and similar and these ranged through lack of funding, delays in the processing of funding and the funding instruments that are used by the funding institutions.
Mr Chance also added that the presentation by Green-Valley Eggs was impressive and came up with good recommendations that could be taken on board. However, it must be emphasised that every business had to have a management and control of accounts in order to grow. The best that could be done by the Department would be to ensure that SMMEs are able to manage their accounts without incurring additional costs by approaching consultancies. There had been a lot of businesses like Green-Valley Eggs that had a potential to grow into big businesses but failed because of inability to control the business accounts.
Mr Khomo responded that he was currently studying financial management and this was indeed important for the success of any business.
The Chairperson said that Statistics South Africa (Stats SA) had revealed that most of those who are unemployed are young people who had dropped out of school and graduate employment. It would be important for South Africa to learn from countries like Cuba which had managed to recruit unemployed graduates (through learnerships and apprenticeships) to play a meaningful role in addressing the challenges of capacity from most SMMEs, including the management of accounts. This would assist in “killing two birds with one stone” by putting a dent in the high numbers of unemployed graduates and those who had business plans but lacked business management skills.
Rev Meshoe wanted to know the reason for the delays in the completion of the construction of the bed layer facility by DAFF in 2012. It was also important to know if the company had received any feedback from DAFF after laying a complaint from the Presidential hotline about the failure to complete the bed layer facility up until this day.
Mr Khomo responded that the bed layer facility was built in 2012, and there had been engagements with DAFF but there is still no clarity as to why the project was still not completed. There had been no feedback from DAFF or the Presidential hotline as to why the project had not been completed.
Ugqozi-Lwethu Secondary Co-operative Briefing
Ms Harriet Nkosi, Director: Ugqozi-Lwethu Secondary Co-operative, stated that this cooperative is a Gauteng based establishment whose sole stakeholders will be incorporating to meet the objectives and responsibilities of the business. There are five directors, all with different expertise in different areas. The company has a staff complement of 12 people and with a footprint in Johannesburg, Durban and Limpopo. The main intention of the business was to form a consultancy that would deal with challenges that are experienced by cooperatives. This was done by mobilising other consultants who are specialising in development of cooperatives.
Ms Nkosi took to the Committee through the challenges that are often experienced by cooperatives which included:
- Lack of compliance to the business regulations
- Existing conflict amongst the cooperatives
- Lack of business knowledge
- Poor management skills
- Lack of access to the market and finance
- Lack of occupational space
Her company will take the cooperatives on a “three stages of incubation” programme which would assist the cooperatives to be able to grow into big businesses. The first stage is focused on making sure that cooperatives are able to comply with registrations, tax regulations, financial and administrative issues, and BEE certificates and business profiling. The second stage is focused on taking the cooperatives through an operational phase that looks into the day-to-day running of their businesses. This is achieved by soliciting support from dti, SEDA and other government organisations. The company saw the need to have a Human Resources Department that would assist cooperatives with governance. The third stage looks into the marketing of the cooperatives by building relationships with corporates and government institutions, and to achieve and signing of the partnership and bilateral agreements in order to access markets. The company has five segments under its business model, with 35 cooperatives that fall under the professional services. There are also people who are responsible for youth initiatives and ways to ensure that young people are able to access business opportunities.
Rev Meshoe wanted to know if there were any government policies that were not conducive to growth of SMMEs and cooperatives.
Ms Nkosi responded that there are cooperatives that have a good business case but they are sometimes unable to access certain support and funding from government because they had been in existence for a very short period of time. There are many cooperatives with good business cases who are also struggling with the business management side and this is a gap that government needed to fill.
Mr Chance firstly asked if there were any kind of businesses that were more suitable to becoming cooperatives than others. He asked if support measures should be put in place by the Department in order to ensure that secondary cooperatives like Ugqozi-Lwethu Secondary Co-operative were more effective. In relation to the issue of access to funding, he wanted to know if the company had had any direct contact with the Cooperative Bank. What are issues that are facing the cooperatives when it comes to providing security for funding, in cases where there is common ownership?
Ms Nkosi responded that businesses like sewing and security companies could potentially develop as cooperatives as those already had markets in place. The company has a mid to long-term plan where different cooperatives would be put on the same hub. The assistance that could be offered to the company is the big operational space where the cooperatives could be incubated together. The Department could also assist the company to access the needs of cooperatives and this could be achieved through collaboration with government institutions like SEDA, dti and SEFA. The company had never contacted the Cooperative Bank and she had only heard of this now for the first time.
The Chairperson repeated that the Committee had called the Workshop in order to hear about the challenges, experiences and victories of SMMEs and cooperatives. It was of great concern that most of the presentations still made reference to dti as responsible for offering funding to SMMEs and cooperatives, instead of DSBD. The Minister had already explained the mandate of the newly established Department, which is precisely to assist SMMEs and cooperatives. She wanted to know if there was any particular reason why none of the presenters today made reference to the newly established Department.
Ms Nkosi replied that the Department was not really visible on the ground and this might be explained by the fact that this was a newly established Department. The information around the formulation of the Department was not clear at the moment. It was previously reported that the Department was still dependent on dti for funding, and this was perhaps what was adding to confusion.
Mr Trevor Tshuma, Executive Chairperson: KOHWA Holdings; indicated that the company was quite startled to note the existence of the DSBD aimed at assisting SMMEs. It is quite clear that the marketing of the Department amongst the cooperatives was somewhat lacking. This Department was still using emails with a dti address, which added to the existing confusion. The communities, SMMEs and informal businesses needed to be made aware that there is now a separate Department from dti which is aimed at assisting small businesses to access funding, infrastructure and other necessary resources. The public also needs to be educated that SEFA now falls under the Department and not dti.
King of Midlands Cooperative briefing
Ms Sthandiwe Mthembu, Spokesperson, King of Midlands, stated that King of Midlands is a co-operative founded by taxi owners from the Grange and Westgate Taxi Association in KZN. Its business model aims to build a petrol station, tyre fitment centre, spare parts shop and a co-operative bank. The Committee also heard about the social responsibility programme of the co-operative. The King of Midlands clothes and feeds the poor; giving out food parcels and blankets to the disadvantaged members of its community. It has a School Outreach Programme. The co-operative gives out school uniforms to 100 under-privileged children in its community each year so that they can attend school properly clothed. The co-operative has also decided to purchase sewing machines for inmates in the Westville Prison so that they could provide more uniforms to children each year. It believed this would decrease the number of re-offenders and help integrate them back into the society. Lack of funding is proving to be a hindrance in carrying out their work.
The King of Midlands has a co-operative bank. The members had started it because commercial banks charged high interest rates and this resulted in perpetual debt and repossession of taxis. The co-operative saved money and purchased 26 vehicles for its members, so that no owner stood to lose a vehicle. The co-operative bank assists members and community members with savings and loans, and it strives to instill the culture of saving in members. It also wants to provide loans to people at reasonable interest rates, to start their own businesses.
Ms Mthembu concluded that the King of Midlands had exhausted its resources and channels to find assistance and funding. It would like to see government subsidise unemployed graduates to assist them in their co-operatives and to have a manager, who would be paid by the government, to ensure that funds are appropriated correctly. The King of Midlands would like to expand its school outreach programme and provide uniforms for a larger number of children. This could end up in a partnership with the Department of Social Development (DSD) to provide uniforms to children while making use of and transferring more skills to prison inmates. This would help inmates to form their own co-operatives when they get out of prison. The members of King of Midlands are all entrepreneurs and visionaries who have ideas but do not have the know-how for implementing them because their education and qualifications are limited. For this reason, they needed the assistance of a project manager and they hoped government would see their co-operative financial institute as a worthwhile cause.
Mr Ngwane reiterated that there are people in South Africa who are willing to wake up every morning in order to change their lives and earn a living. The presentations also show that there are innovative people who need financial support in order to ensure that their businesses are able to succeed and this is where the funding institutions should come on board to execute their mandate as stipulated in the NDP.
National Stokvel Association of South Africa (NASASA)briefing
Mr Sizwe Mazwai, Chief Executive Officer, NASASA, stated that the company was based on the principle that people are able to achieve more things when working together and these groups of people could be involved in anything, including grocery-buying schemes. NASASA is a self-regulatory organisation authorised by the South African Reserve Bank (SARB) in terms of Government Notice 404 in Gazette 35368 25 May 2012. Membership to NASASA is free to all existing stokvels. It must be noted that the company does not facilitate the formation of stokvels and does not give certificates of membership. However, all registered members are listed on its stokvel registry. The public may contact NASASA to verify the validity of a stokvel. NASASA has a database of over 110 000 stokvels, which is approximately 1.9 million people. Through its operations it had found that it could utilise its relationship with stokvels to assist brands in accessing the R49 billion in the industry and enhance its own service to stokvels. This demonstrated that there is a platform available for use by brands. The company also holds stokvels indabas, where the emphasis is on visiting different communities, talking to stokvel groups that are interested in joining the hub of other stokvels.
Mr Mazwai added that NASASA regularly conducts research in the stokvel market, which could be useful to both government and private companies wishing the access the stokvel market. This research can be segmented by region or by type of group, depending on the needs of our client.
Wealth Hub Briefing (see later note: this presentation was disregarded)
Dr Ngaoto Takalo, Chief Executive Officer, Wealth Hub, said that the company is an online stokvel which signed up more than 200 000 interested people within weeks. The company was established in 2015 with an intention of ensuring that disempowered people are able to lift one another; this uses the spirit of one person helping another. The mission of the company is to rekindle the ethos of ubuntu, where people would realise that partnership is critically important for the success of any business. The business model is based on two examples - network business and stokvels. This aims to develop new entrepreneurs and business development, and this is where the business training begins. The company raised funds through the stokvels, in order to do the training of the members who had registered.
Dr Takalo added that the company was targeting three groups of people, including young people in higher education institutions, in order for them to be able to fund their education, communities and small businesses. The funding of small businesses would also assist in further developing the culture of entrepreneurship in the country. The company was still very young but had a vision to work with everyone, including the regulatory bodies like NASASA, in order to further enhance the concept of stokvels in South Africa.
The Chairperson noticed that the two presentations by Wealth Hub and NASASA did not mention anything about asking for funding, as they are self-funding. It was impressive to hear that NASASA had the means to deal with defaulters in the stokvels, without paralysing the development of the defaulters. South Africa still has a society that was oppressed, and in which black people are not offered access to loans in order to start businesses. The target market of the Department is mainly poor black people, who are interested in starting businesses. Stats SA has revealed that the majority of small businesses in the country are self-funded, and these included spaza shops, the taxi industry and other informal traders in the streets and shopping malls.
Mr Ngwane stated that the issue of awareness of the existence of the Department came out strongly in the previous presentations and this is definitely something that the Department needed to deal with. The presenters had also highlighted that the funding institutions should be upfront about the requirements that are required in order to access funding, as this would save money and time. Small businesses cannot afford to waste time, as this can severely impact on their development. The issue of lack of trust between the SMMEs and funding institutions was a matter that also came out strongly. The funding institutions would need to deal with the triple challenges that are facing the majority in the country and this could be achieved by prioritising quality education that responds to the needs in the labour market. The coordination of funding institutions would be important to ensure that these institutions are effective in dealing with challenges that are facing SMMEs and cooperatives.
Minister Zulu requested that Wealth Hub should put its business on hold at the moment. There are some regulatory issues that still need to be addressed. She said that she was not any way trying to put the company in the spotlight but was merely flagging issues that are already in the public domain.
The Chairperson responded that the Committee was generally unaware that the company still had unresolved regulatory issues, and this was something that had to be taken very seriously. This company had approached the Committee asking to make a presentation.
Dr Takalo responded that the company had approached the Committee requesting that it be allowed to make a presentation to the Workshop precisely because there was great t potential in the business model of the company to deal with the challenges of unemployment and poverty. Wealth Hub is a registered company and is running, but the banking accounts of the company were shut down after two months of operation. The Financial Services Board (FSB) was currently investigating the business model of the company, as there were some questions and concerns from the South African Reserve Bank (SARB) around the operation of the company. The company is prepared to listen to criticism of where it may have gone wrong and is willing to comply with all regulations that are governing the operations of companies. The vision and quest of the company is to assist all entities and business that want to uplift our society.
The Chairperson interjected and said it was unfair for this company to make a presentation in the Committee while still under scrutiny and investigation by FSB. It could be considered as “ambush marketing” for the Committee to allow a company that had had its accounts frozen because of a questionable business model, to present in the Workshop. She suggested that the presentation of Wealth Hub should be withdrawn as it may be construed as misleading.
Dr Takalo apologised for making the presentation to the Committee and made it clear that it was not her intention to mislead the general public.
Mr Chance mentioned that the reason stokvels had been successful in South Africa was because they are based on saving and spending. Stokvels rarely keep their money in the banking institutions. Cooperatives, on the other hand, are based on production for profit although this profit might be circulated amongst members. He wanted know if there were cases of jealousy and squabbles between members of stokvels. He wondered what might be the cultural factors that are holding back the success of stokvels? The question that had been asked by the Chairperson on the difference between the stokvels and intermediaries was very important and this went to the heart of the culture of what drives an organisation. The country would need to find mechanisms through which to direct funding and know how to get that money back with an interest, in order to resolve the matter of what was at the “bottom of the pyramid”.
Mr Ngwane reiterated that indeed the question that had been asked by the Chairperson on the difference between stokvels and intermediaries was important, and it was perhaps advisable to get a response on this question from DFIs.
The Chairperson said that the main issue that was highlighted by most of the presenters was lack of funding for the operation of the SMMEs and cooperatives.
Mr Mazwai indicated that the current credit models were quick to label creditors as” good, bad or ugly” but what NASASA had discovered was that behaviour is contextual and that people generally choose to behave well in the stokvels. It was advisable for DFIs not to rely on conventional methods in attempt to police how the beneficiaries are to use the funding that had been offered, as people might be immune to being blacklisted.
Mr Nkosinathi Ntombela, Acting Property Executive, Ithala Development Finance Cooperation, admitted that most of the SMMEs are faced with a challenge of complicated application forms for funding which are sometimes even difficult even for educated people to understand. The funding institutions should clearly explain all the necessities that are required for small businesses to be able to access funding.
Ms Mchunu indicated that one thing that most businesses could take from the stokvels is the communal and collective approach of doing things. Entrepreneurs often spend very little time together in order to listen to each other on ways to collectively address their similar challenges.
Mr Tshuma said that the one thing that was unique about the stokvels was that they had a system of accountability, and this is commendable. He noted that most of the cooperatives had been failing because they did not have a funding experience or background or technical knowledge on the business management side. The KOHWA Holdings had been successful in addressing these shortcomings by bringing people with expertise, including chartered accountants, consultants and other people who understand the financial side of business. It would be imperative to work together with the Ministry, the Department, government and funding institutions in order to bring together all the services that are offered by different institutions.
Mr Khomo commented that the stokvels show more accountability because every member is to benefit purely based on his/her monthly or weekly contribution. The issue of compliance to the funding requirements was still complicated for the SMMEs and cooperatives, and this is where the funding institutions would need to make the funding scheme a lot simpler and easier. The skills development centres should be prioritised so that small businesses could benefit immensely. Government needed to be upfront in reserving the markets for the SMMEs and cooperatives, as it remains a challenge for small businesses to secure a sustainable market.
Mr Mzuvukile Nkabinde, representative of Informal Business, clarified that stokvels are like organic cooperatives as there are binding agreements or aims that would naturally compel a group of people to come together to form a partnership that would be aimed at achieving similar goals. However, this is not seen in the case of cooperatives, where there is often lack of trust amongst each other, so the bond is not as strong as it is with the stokvels.
The Chairperson pointed out that there are actually a lot of similarities between the cooperatives and stokvels. A stokvel is a “solidarity based association”, meaning it is people with similar goals and they come together to achieve those goals. Some of the stokvels are formed for burial purposes and these are often people who cannot afford to take out insurance. It must be highlighted that most of the stokvels do not start for the purposes of making money, but to instil a saving discipline and the ability to work together with people who share common needs. There are also stokvels that serve the purposes of saving and borrowing. The borrowing, in some instances, is compulsory for stokvels to generate income. A stokvel is a foundation for the development of cooperatives and if South Africa was serious about developing cooperatives, then it would need to emulate the model that is used by many stokvels. The difference between a stokvel and an intermediary lay in the principle of solidarity and self-discipline and self-policing that is often exercised in stokvels. The presentations that were given by NASASA and King of Midlands showed an unconventional way of dealing with defaulters.
The Chairperson continued that it would be important to understand the African culture of solidarity and ways in which Africans used to live together when they were denied opportunities. The mandate of DFIs is to focus on the people on the ground, and these included street vendors and the spaza shop owners and this was not happening effectively at the moment.
Mr Ngwane proposed that the Committee should now open up to suggestions on the way in which the Department could be more visible to the general public.
Ms Mchunu pointed out that it was difficult to see how the Department is structured at the moment and how it would work going forward. It would be important for the DFIs and supporting agencies to be structured in a way that anyone who is interested in starting a business is made aware of where to go for advice, and to be assisted with registration. The most critical factor that should be prioritised by the DFIs and supporting agencies is to ensure that the assistance that is offered to SMMEs and cooperatives is sector-specific. The Department should bring together all different government institutions that would work together for the success of SMMEs and cooperatives,. This kind of cooperation was already done brilliantly by stokvels.
Mr Malo Matusame, Acting Business Financial Executive, Ithala Finance Development Cooperation, indicated that the presentations that had been given showed that the issue of funding was complex in South Africa. The way the funding of SMMEs and cooperatives is structured is presently very low scale and is making it extremely difficult for them to grow into big businesses.
The Chairperson added that most of the cooperatives had been started by people who felt exploited. The mandate of the DSBD is aimed at addressing poverty, unemployment and inequality. There is cognisance of the fact that cooperatives have great potential the turn around the whole system of capitalism in the country.
She highlighted again that the purpose of the two-day workshop was not for the executive to defend the Department on what had been done to assist the Department to be visible on the ground. The Committee was interested on why a lot of presenters had made reference to dti instead of the DSBD.
Minister Zulu responded that the Department was still using the instruments of dti and this was adding to the confusion that was already in the public domain. The Department would need to develop its own instruments, mission, and vision and mandate so as to clear this confusion. She had already indicated, at the outset, that the DSBD was still running some dti programmes and these programmes would not be “thrown away” as this was one government with a common aim. The DSBD still relied on dti in terms of the budget allocation and this was a particular matter that would be addressed as the Department stabilised and became more visible on the ground. The DSBD had been set up at possibly the worst time in terms of the economic climate in South Africa, and this was another issue that was contributing to lack of effectiveness in the Department. The focus of the Department would be on reviewing the existing programmes that had been inherited from dti, so as to observe which were effective and those that still needed to be enhanced to become effective.
Minister Zulu added that South Africa could be commended on its good governance institutions but what was lacking was the way these institutions were talking to each other. The Chairperson had already pointed out that all government institutions should be aware that South Africa was dealing with the triple challenges, and that whatever was done must directly address and respond to those challenges. One challenge that is often taken for granted is the fact that ministers and deputy ministers sometimes work with officials who do not fully grasp the triple challenges that are facing South Africa, and the rationale for choosing to address those triple challenges. The DSBD challenges the perception that “everything is doom and gloom” as there are many SMMEs and cooperatives that have benefited immensely from funding institutions like SEDA and SEFA. The priority, from now on, will be to focus on the lowest level of the structure of economy, where there are informal businesses that are often ignored.
Minister Zulu said that there would be a need to do road shows throughout the country, to make the public aware of the existence and the purpose of the Department. She agreed that this was one of the issues that came out strongly in the presentations. There are already provinces that are working very well with the Department, as their MECs and Premiers are willing to engage the Minister and the officials of the Department, to assist the SMMEs and cooperatives. The Department, together with funding institutions like SEFA and SEDA, would need to go and engage with the communities through the mobile outreach programmes. The Department should be able to give confidence to SMMEs and cooperatives and this would not happen in the vacuum. There is a realisation that the Department would not achieve its mandate by itself and it did need the assistance of the private sector. The Department would not exclude any SMMEs or cooperatives based on their colour of their skin, but the reality is that the majority of the people that had been excluded from the business mainstream are black people.
Mr Chance commented that last week there was a Workshop convened by the dti, on the financing and supporting of township industrial parks. There was, however, no clarity as to whether those parks were owned by SEFA. The question was why the dti was financing and supporting parks that are necessarily small business parks, instead of DSBD doing so.
Minister Zulu responded that the Department was well aware that there are some issues that are not necessarily and specifically only for SMMEs and cooperatives, but are bigger and broader. Here, the dti may well need to come to the rescue. It would not be fair to expect that the Department would be fully-fledged and operational within a period of a year. There was also a challenge on the capacity, which was not optimal at the moment, and this was another reason why it would take time before the DSBD was able to act alone. Government wanted to ensure that each department is held accountable.
The Chairperson indicated that the Committee had written a letter to the Department of Finance requesting the unit within National Treasury that deals with Cooperative Bank to be part of the public hearings. However, there seemed to have been a misunderstanding because the Committee was told that “the Treasury is responsible for ensuring that resources are distributed proportionally to all South Africans and not to decide on the funding model of the SMMEs and cooperatives”. She wanted to know if SEFA still fell under the Department of Economic Development (EDD) and was a subsidiary of IDC.
Minister Zulu responded that the migration of SEFA from EDD to DSBD was “done and dusted” and there was no ambiguity on the matter. The Department would need to engage with the National Treasury as to why there was still confusion on the location of the SEFA. The Department had been making presentations to the Committee on the migration of SEFA and therefore the confusion was surely on the Treasury side. The Minister of Economic Development and the Board of SEFA are both fully aware of the current location of the entity, and how it seeks to further assist small business. The Memorandum of Understandings (MoUs) between the DSBD and EDD and IDC had already been ratified and completed.
Ms Nonxuba admitted that she had been pinning her hopes on the ability of the Department to assist SMMEs and cooperatives, and this was a good thing. However, it must be pointed out that there is still an existing gap between the funding institutions and the technical know-how that is required, especially for cooperatives or SMMEs. There are SMMEs or cooperatives that had good business plans but lacked business management skills, and this was where the Department would need to offer assistance beyond just funding. This would assist in preventing SMMEs or cooperatives being given funding for businesses that are not sustainable or profitable in the long run.
Mr Lusapho Njenge, Acting Chief Executive Officer, Small Enterprise Development Agency, admitted that there was a need for the funding institutions to change the way they had been treating SMMEs and cooperatives. The non-financial services that are provided are not adequate to respond to the needs of SMMEs and cooperatives. SEDA would need to look at issues of compliance of SMMEs to the funding requirements, and the management of business accounts, to ensure that these small businesses are able to grow into big businesses. The type of services that are offered to the SMMEs or cooperatives should be more accommodating of the needs of small businesses and prioritise the developmental agenda. SEDA is also aware of the challenges in capacity and this would be where there would be a focus on the type of people that are deployed to render services to small businesses.
Mr Matusame wanted to know if there was any specific reason why the officials in the Department and funding institutions that deal with small business and cooperative development were not given an opportunity to make their presentations in the workshop.
The Chairperson responded that this was a valid point. The programme for the public hearings was focused on funding institutions. It was, however, fair for them to also voice their opinions and facts on the complexity involved in access to funding. The Committee would re-look at the programme and try to find a slot for the funding institutions.
She summarised that today's Workshop was held to look at what had been done by the funding institutions in the last 20 years in assisting in the development of SMMEs and cooperatives. The support of SMMEs and cooperatives should be looked into the context of the triple challenges that the country seeks to address by 2030. The Committee was not in an appraisal meeting, where the focus would solely be on the good things that had already been achieved, but also wanted to delve into challenges that are still hampering the development of SMMEs and cooperatives.
The Chairperson summarised the similar challenges that had been flagged by SMMEs and cooperatives, which included:
- Lack of access to funding
- Lack of reserved government markets
- Lack of technical and business management skills
- Lack of adequate occupational space
- Challenges with energy infrastructure and transport costs
- The issue of red tape in the processing of funding applications
- The delays in the release of funding
The Chairperson added that it was hugely embarrassing to the DFIs to hear that Ezulwini Chocolat did not receive a contract of R20 million from Pick n Pay because of systems that block access to funding. The priority of government institutions is to uplift the standard of living of those that were previously marginalised, especially since the country had one of the highest youth unemployment and income inequalities in the world.
The other concerns that had been raised included that most of the people that are assisting SMMEs and cooperatives in the funding institutions had no business knowledge, and this was adding to the stumbling block in accessing to funding.
The Department should publicly admit that it was wrong for continuing to use the website and email of dti, as this had contributed to the fact that the Department was not known in the general public.
She concluded by appreciating the way in which Ithala Development Finance Cooperation had been turned around and showed capability to respond to the challenges that are experienced by SMMEs and cooperatives.
The meeting was adjourned.
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