The Minister of Small Business Development introduced the DSBD Director-General who started in the Department last September. In its two years in existence, the experience accumulated by the DSBD indicates the importance of SMMEs and co-operatives in addressing the triple challenges – poverty, unemployment and joblessness. Apart from the National Development Plan, the government decided on the Nine Point Plan, unlocking the potential for SMMEs and co-operatives.
Since the last presentation to the Select Committee, the DSBD has a new DG and advisors and areas of administration have been beefed up. The DSBD has gone through a review process to ensure that the programme responds to the needs of entrepreneurs and the informal sector which also needs to be supported by the DSBD. A collection of programmes and budgets inherited from the DTI have been changed to a collective and integrated approach. The review indicated programmes needed to be upscaled, transferred and discontinued. This was an independent review done by SizweNtsalubaGobodo.
The DSBD has an inadequate budget of R4.3 billion of the MTEF 3-year period, approximately R1.4 billion per year, which is inadequate to achieve the NDP targets. Central coordination and partnership between the three spheres of government is one of the issues very important for the partnership.
DSBD reported that the Co-operative Incentive Scheme (CIS) supported 1 542 jobs. The Black Business Supplier Development has a bigger budget and supported 11 217 jobs. SEDA, through its provincial networks, supported 2 096 jobs. Under the Incubation Programme, which is under SEDA, 2031 permanent jobs were created and 1 055 temporary jobs were created. SEFA supported 157 417 jobs in 2015/16.
As of 1 April, the DSBD vacancy rate was down to about 14.2 per cent. The presentation focused on the the format of the strategic plan.
The Department needs an integrated approach to the development of SMMEs and co-operatives through a focus on economic and legislative drivers which stimulates entrepreneurship to contribute towards a radical socio-economic transformation. In South Africa, the contribution of small businesses is far below its potential and is skipped in much of the data as there is a large part of the economy which is not formally recognised in the national accounts. If the multinationals are excluded, small businesses represent 98% of the registered businesses and employ about 47% of the work force.
According to Colin Coleman, “South Africa can achieve 5% growth over the next five years if Government and the private sector together invests R12 billion in 300 000 new small businesses every year in the next five years. In realising this potential, the DSBD is embarking on a process of mobilising all spheres of government and private sector to redefine the policy, legislative and regulatory environment to capacitate small businesses to turn the economy around.
DSBD strategic goals are an effective and efficient administration; an enabling environment for competitive small business and co-operatives with a focus on policy and research – the DSBD inherited programmes but not a Department; sustainable small businesses and co-operatives in rural and township communities. The first goal has been allocated R118 million, 9% of the Department’s budget. The second goal has been allocated R26.1 million, 2% of the Department’s budget. The third goal has been allocated R1 181 million, 89% of the Department’s budget. Various objectives for each goal were further detailed.
The total expenditure allocations were detailed. Even though the Department feels that the budget is inadequate, there has been an increase in budget allocations per year. The total three-year funding to the Department is R4.3 billion. The DSBD was allocated another R475 million and was one of the few departments which received additional funding. The Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency (SEFA) were briefly discussed.
Members raised questions about the trust mentioned in the presentation and it was clarified that the trust for SMME financing was separate to the trust mentioned recently in the media which was funded by the private sector. She conceded that the two trusts would have to be arranged to ensure optimal management.
The status of SMMEs in the tourism industry was discussed and Ms Vries assured members that the Department had signed transversal agreements with the Department of Tourism as SMMEs played a big role in this industry.
The Minister and Ms Vries answered several questions about the Department’s role in solving the unemployment problem of South Africa. They agreed that the Department could assist greatly in reducing poverty and unemployment and that this could be achieved through coordinated efforts between the three spheres of government and the private sector.
The Committee first dealt with the adoption of the minutes for 5 April, 6 April, 12 April and 3 May.
On a point raised by Ms van Lingen on the 3 May minutes, the Chairperson recollected that the Eastern Cape and Limpopo, as captured in the minutes, had said that the expectation in the Expropriation Bill of a 20-day period for people to receive registered mail was problematic. They motivated for the extension of the 20-day period to a 30-day period. It was agreed that all other concerns were sufficiently covered by the Committee.
Ms E van Lingen (DA, Eastern Cape) took issue with the contents of page 5. The electronic version of the Gauteng negotiating mandate was never circulated to members and recommendations only were given to members in hard copy. As a result the Committee were not familiar with what was said by the province in their negotiating mandate on the actual document of the negotiating mandate. It is presumed that perhaps the province supported the Bill but the Committee had not seen proof of that.
Mr E Makue (ANC; Gauteng) said that the Gauteng mandate was very concise. The Committee were given a letter which was distributed to all member in the meeting and Gauteng indicated that they support the Bill. There were no further recommendations received from Gauteng.
Ms M Dikgale (ANC, Limpopo) said that she was in the meeting and had received the negotiating mandate from Gauteng. Recommendations were not received but their support for the Bill was conveyed.
Ms van Lingen said that the Mandating Procedures Provincial Act stipulated a format for the negotiating mandate and an official format for a final mandate. She believed that what was submitted to members in the meeting were recommendations and not the formal negotiating mandate as per the format.
The Chairperson said that the difficulty was that Ms van Lingen’s statements did not differ from other members. The mandate from Gauteng was read in a fully-fledged Committee meeting, recommendations were deliberated upon and this matter was concluded. He asked why Ms van Lingen raised this through minutes which were correctly captured saying that the Gauteng mandate was negotiated upon. The process in terms of the negotiating process of the mandate could be dealt with at a later stage when the mandate was discussed.
Mr Makue made an ‘earnest appeal’ that the Committee deal with the matters before the Committee which was the minutes.
Mr W Faber (DA, Northern Cape) said that speaking under representation of the Northern Cape Province, the Committee stated that they would seek clarity on certain issues raised by the Northern Cape Province. The then-Chairperson instructed him to provide clarity on the issues and Mr Faber spoke to Northern Cape committee the previous day who said that nothing was brought back to them. The minutes do not state the points that needed clarity, which should have been sent back to the Northern Cape and this was not done. On this point, he objected to the minutes. On 6 May the Northern Cape Portfolio Committee gave the final mandate and this could not have been done without feedback from the Select Committee on the negotiating mandate.
Mr Makue said that he chaired the meeting and his recollection of what had happened in the meeting was that there was a delegate from the Northern Cape in the meeting and Mr Makue checked with the delegate whether he wanted to clarify the issues with the province. The Secretary and Mr Makue looked at notes on meeting and they concurred there was nothing substantive in terms of the content of the Bill and as a result, it was processed in the way the minutes were captured.
Mr Faber said that as they were a full Committee and if the committee made a decision and the then-chair made a decision, which was that it should go back to the province, it should go back to the province. It was not permissible for the then-chair and the Secretary to make their own decision.
The Chairperson said that the difficulty that the committee faced was that they had to discuss matters spoken about in the corridors. The normal process was that the Committee sat in the meeting and processed the issues. The following day all provinces were sent minutes and any the province was at liberty to raise issues. One assumes any other members followed up on issues which were supposed to be raised. When the meeting was concluded, the chair of that meeting processed and confirmed whether the particular province was comfortable with issues raised. The minutes were sent timeously. The Northern Cape should have made a decision based on the minutes sent to them. If the Northern Cape was not comfortable, they should indicate this in their final mandate.
Mr Faber said that if this was the way minutes were sent back to his province, how could the province ascertain that they had to make sure as this was not stated in the minutes? If it was not in the minutes how could the Northern Cape accept it? The minutes do not reflect that feedback is required from the province. The province does not know that it is required to provide feedback and this cannot be assumed by the Committee.
Mr Makue said that he agreed with the ruling made by the Chairperson that the minutes were given to the Northern Cape and if they were not happy they should have objected to them. This was supported further by reading the first sentence of item 2.7 which relates to the Northern Cape and reads as follows: ‘overall the number of issues raised in the Northern Cape negotiating mandate have already been covered by other provinces and the Bill itself.’
Ms van Lingen said although a technical point, she could not understand how a province could object to the minutes of a Select Committee. If they are unhappy, the only thing they can do is vote against the Bill but not even Mr Faber could object to the minutes. Mr Faber has to object to the minutes officially at the end when the Committee calls for a division or not.
The Chairperson said that if Ms van Lingen was going to resort to semantics, the Committee would not proceed. He said he could give an example – that she had just spoken but she was already raising her hand to speak.
Ms van Lingen said that she assumed he had finished.
The Chairperson said that he had just started.
Ms van Lingen said she wanted to speak on 2.9.
The Chairperson said that if she was going to resort to semantics the Committee could not proceed. If the Northern Cape were not comfortable, they could have raised this issue. The province was able to take a decision separately from the Committee. 2.7 says that ‘overall the number of issues raised in the Northern Cape negotiating mandate have already been covered by other provinces and the Bill itself’ except the issue that we mentioned here. He asked that the Committee not resort to semantics and appealed that the Committee proceed.
Ms van Lingen said that the Committee agreed that the legal advisors should submit a more detailed analysis of the issue and should submit information before the final negotiating mandates are considered and that the Committee had received this. She was concerned about the legal opinion by the State Law Advisor as it was trying to draw a distinction between a legal and a physical eviction and this was not valid. Whether or not this was accepted, the decision had been made. This should not be considered as the only legal opinion.
The Chairperson said that the Committee decided that legal opinion should be sourced and the time frame should be abided to and that this was done. The Member stated that this was insufficient and that was a difficulty.
Mr Makue said that for the second time, could he appeal to the Chairperson that the Committee deal with the minutes.
Ms van Lingen said that in terms of the first paragraph, ‘if a need arises the Committee should request a rapid social economic impact assessment to be undertaken to determine… in a nutshell, the Committee resolved most of the recommendations...’ First of all, in terms of the first sentence, the Committee had not seen such an assessment. A bit later it states ‘the Committee further resolved that the role of traditional authorities in expropriation processes and other land reform matters.’ There is a full stop and the sentence did not make sense. ‘The Committee was of the view that the broader consultation process with COGTA should deal with this matter.’ She said that she could not believe that the committee made such a decision because when it comes to the Expropriation Bill that is before this Committee, another Committee cannot consult on matters involving the Bill on this Committee’s behalf. This did not make sense and could not be correct. ‘The Committee agreed that section 9(2) and (3) extending 20 to 30 days and 10 days to 20 days respectively should be accepted.’ ‘Should be accepted’ was inappropriate as if it was accepted then the C version of the Bill could be accepted. It ‘should’ be accepted means something different. Respectively ‘was accepted’ or ‘were accepted’ means that there is legal grounds for acceptance of the Bill which was circulated but not to the Committee. The Committee did not get the C version of the Bill. Lastly, nothing was said of the opinion raised by the state law advisor who said that section 25 of the Bill provides sufficiently for the extension of time lines.
The Chairperson asked Ms van Lingen which part of the minutes she was referring to.
Ms van Lingen said that she was discussing the same part.
Mr Makue said that he had three points. The bullet point on page seven – the role of traditional authorities – should include a comma after ‘matters’ instead of a full stop. The second point was that the Committee would not give a classroom lecture on English 101 in the meeting. There is a difference between should’ and ‘was’ and he concurred that it should remain as it was in the minutes. The third point was to formally propose acceptance of the minutes with that one change.
The Chairperson said that in terms of the second part of the sentence, the Committee should try to frame it so that it resonates with what Mr Makue said. That the ‘house of traditional leadership should be engaged as a stakeholder moving forward’ and that COGTA is removed as COGTA represents the Department. The Committee then addresses the contention that the Committee is acting under the Department. He moved for an adoption of the minutes. He asked Ms Dikgale if she was comfortable and she nodded. He stated that there had been a move for adoption.
Ms van Lingen said that she was not seconding the adoption. Under 3, the ‘Committee could not consider this due to time constraints and these were shelved.’ She said she was amending the sentence and that even though Mr Makue was referring to her doing English markings, the Committee either did things properly or they did not. If the Committee could not write minutes property, they could not write legislation properly.
The Chairperson thanked her for the amendment and asked if there was a seconder for the necessary amendments made.
Ms Dikgale said that she was seconding the move for adoption and that Mr Makue did not mention anybody’s name.
The Chairperson stated that the Committee had dealt with all of the minutes and that they were going to proceed.
Ms van Lingen said that if the Chairperson wanted to finish with the minutes she needed to officially record that the Democratic Alliance object to the minutes and that she wanted their names recorded.
The Chairperson said that they could not take the Committee back and that there was no Democratic Alliance here. They were members of the Select Committee individually representing provinces.
Mr Faber said that he wanted to object for his province because as a representative of his province and under the belief that he does not believe that his province got the time to look at the recommendations and queries sent back to it, he would have to object for his province and not just for the Democratic Alliance.
The Chairperson said that Mr Faber’s statement was much better and that this should be done in future. In future during the process of the acceptance of the minutes, members are at liberty to raise their dissenting view and the process should not be allowed to proceed and issues are only raised thereafter. Members are at liberty to raise dissenting views at the time minutes are accepted and even though Mr Faber did not do that, the dissenting view will be recorded.
Mr Makue stated that in light of what had just happened, he wanted to register that the two members of the DA were doing everything in their power to prevent the Committee from processing the Expropriation Bill and he wanted this recorded.
Ms van Lingen said that although provinces were being represented, members had a duty as Members of Parliament to make sure that things happen correctly and that she would not remain quiet because there was another member of the Eastern Cape present whom one would think would speak for the province. If members believed it was like that she did not mind as she would not let anything go through that was not correct.
The Chairperson asked if the Committee could proceed as these were issues that could be raised in the corridors.
Mr Faber said that he had listened to statement of Mr Makue and that he could not side with it as he clearly stated that he was representing his province. Mr Makue framing it as the representatives of the DA and making the issue political was wrong because he was raising the issue on behalf of his province.
The Chairperson said that the Committee would proceed to the presentation by the Department of Small Business.
Ms van Lingen asked if the Committee would do the final mandates for the Expropriation Bill.
The Chairperson said that the mandates would be done that day.
Ms van Lingen asked if it would be done now.
The Chairperson said that they would do final mandates that day.
Ms van Lingen asked why the Minister would be given an opportunity to speak while the Committee was in the middle of a discussion about the mandates.
The Chairperson stated that the final mandates would be done by the Committee that day. He said that Dr Vawda looked disturbed and asked if he was okay.
Dr Y Vawda (EFF, Mpumalanga) said that he was fine – that he was just observing the fight between the ANC and the DA for opposition.
The Chairperson said he had not been there for five minutes and welcomed him back. That Dr Vawda was raising issues he should not be raising.
Mr Faber expressed that he wanted Mr Vawda to retract his words. For someone who had not been there for months, he had no idea what was fighting and what was robust conversation about issues.
The Chairperson addressed Dr Vawda, saying that he had been directed to withdraw.
Dr Vawda said that he would like to greet all of members of the Committee. While he had been away he had been preparing the capture of the state. He said he did withdraw.
The Chairperson welcomed the Minister to a very active morning meeting and said that they were also welcoming members who had not been there for six months which was a ‘tricky situation.’
Small Business Development on Strategic Plan, Annual Performance Plan and Budget
Ms Lindiwe Zulu, Minister, Department of Small Business Development (DSBD) introduced Ms Edith Vries, new Director-General, who started in the Department last September. The advantage is that Ms Vries had been in the system and understands the processes very well. Ms Vries was the DG of Agriculture, Forestry and Fisheries and her background was in academia, she is a professor, and has worked with government extensively. She said it was a pleasure to work with her and she is a fighter for the space of small business development when it comes to other government structures. In addition she introduced her advisor, Dr Thami Mazwai, as an old hand in the area of small and medium enterprises and policy.
The decision of the African National Congress of establishing the DSBD as an independent entity and no longer falling under Department of Trade and Industry (DTI) would not be discussed. In two years of office, the experience accumulated by the DSBD indicates the importance of SMMEs and co-operatives in addressing the triple challenges – poverty, unemployment and joblessness. Apart from the National Development Plan, the government decided on the Nine Point Plan, unlocking the potential for SMMEs and co-operatives. Since the last presentation to the Select Committee, the DSBD had a new DG and advisors and areas of administration and management have been beefed up. This would be seen in the presentation.
From the last time presentations were made, the DSBD has gone through a review process to ensure that the programme responds to the needs of entrepreneurs and the informal sector which needs to be supported by the DSBD. A collection of programmes and budgets were inherited by the DTI have been changed to the collective and integrated approach. The review indicated programmes needed to be upscaled, transferred and discontinued. This was an independent review which was done by SizweNtsalubaGobodo. The review was implemented through workshops where staff were familiarised with what had been reviewed. A two-day workshop was held with an independent consultant to ensure that programmes would benefit SMMEs and co-operatives.
The DSBD has an inadequate budget of R4.3 billion for the MTEF three-year period, approximately R1.4 billion per year, which is inadequate to achieve the NDP targets. She mentioned the budget because it is still an issue. SMMEs and co-operatives would be in a better position. Two years have shown the DSBD that, particularly with SMMEs of black people which started only two years ago, financial and non-financial support is an issue. Most are supported by government or the private sector but many struggle to fulfil their plans due to inadequate finances. The DSBD continually advocates for more funds. Part of the discussion between government and the private sector is that a fund should be set up to ensure the survival or SMMEs through this economic period. This is a step in the right direction although discussions about the management of the fund needs to be encouraged. Central coordination and partnership between the three spheres of government is very important for the partnership. The NCOP would play a big role in this regard because the three spheres of government were not coordinating properly to support SMMEs.
Lastly, the DSBD would support the agencies Small Enterprise Finance Agency (SEFA) and the Small Enterprise Development Agency (SEDA) and would be able to participate in the fund spoken about. The connection of the two agencies to all other agencies related to financial assistance to SMMEs, are included in this regard. SARS has crossed the trillion rand threshold, which is largely due to contributors who are SMMEs. The Department will continue to work with SARS to ensure that SMMEs contribute.
The Chairperson thanked the Minister and said that the members would look at the kind of work being done in different provinces as members represent provinces.
Department of Small Business Development on Strategic Plan, Annual Performance Plan and Budget
Ms Edith Vries, DSBD Director General, said the DSBD had a big team present as they were voting on their budget the following day. At the end of the second quarter the DSBD had a vacancy rate of over 25% which was largely due to the incomplete review which would impact on how vacancies were filled. Ms Semphete Oosterwyk, Chief Financial Officer: DSBD, was introduced as someone with lots of experience and the previous CFO of Statistics South Africa and the Department of Economic Development. Ms Brigette Petersen, Head of Corporate Services, DSBD was also introduced. At the end of the financial year the vacancy rate had dropped to 16.3% although it was still high. As of 1 April, the vacancy rate was down to about 14.2 per cent. Ms Vries explained that it was a long presentation as she was unsure about time limitations.
The presentation outline on page two focuses on strategic overview and the presentation would follow the format of the strategic plan. The Committee might have interest in the DSBD actual work plan. The Department needs an integrated approach to the development of SMMEs and co-operatives through a focus on economic and legislative drivers which stimulates entrepreneurship to contribute towards a radical socio-economic transformation. Slide four states that there is a tension between supporting the dynamic, established enterprises that are focussed on growth and those that are focussed on social poverty eradication, social services and programmes and render those much needed services in our poorer communities. The growth focus enterprises are those ready to export and ready to take up trade off agreements, they have greater return on investment and they have gone through the phase of business development. The businesses ready to access mechanisms in the Black Industrialist Programme differ substantially from the other programmes geared towards micro- and rural enterprises from townships which brings economic dignity to households. The DSBD has to focus on the entire continuum and find the balance so that it can achieve the highest impact in those areas.
Slide 5 expresses the vision of the Department – this is to be a radically transformed economy through effective development and increased participation of SMMEs and co-operatives in the mainstream of the economy. The mission of the Department is to create a conductive environment for the development and growth of small businesses and co-operatives through the provision of enhanced financial and non-financial support services, and leveraging on public and private procurement. The values of the Department include integrity, professionalism, accessibility and commitment.
There are several sections in the Bill of Rights stating the DSBD’s mandate. A particularly relevant one is in section 22 which states that every citizen has the right to choose their trade, occupation or profession freely and the practice of the trade, occupation or profession can be regulated by law. That section goes further where it says that a government entity can target particular previously excluded persons.
The DSBD’s policy mandate comes from the NDP and a key pillar of the NDP is that the Department needs to diversify the economy and tackle it in a concerted way on all fronts in order to grow the economy and create a more inclusive, dynamic, equitable economy. The DSBD regards their mandate closely linked to implementing Chapter six of the NDP that deals with the economy and rural and inclusive growth. The New Growth Path talks about creating five million jobs by 2020 and about an inclusive, more labour intensive economy, the NDP talks about creating 11 million new jobs by 2030, 90% of which will be created by small businesses.
Creating decent work, eliminating poverty and reducing inequality can only happen through new economic growth path founded on restructuring the South African economy. The Medium Term Strategic Framework (MTSF) 2014-19 is the first 5-year implementation plan of the NDP. It has 14 mandates and the DSBD plays a role in certain outcomes. The Department is tasked to contribute to two outcomes of the MTSF, namely Outcome 4: Decent employment through inclusive growth, and Outcome 7: Rural development. Other policy mandates which have been drawn from include the State of the Nation in 2014 and 2015 where the President spoke about small business as big business which emphasised the need for the economy to prioritise small businesses, co-operatives and the informal sector. The President also spoke about the 30% set-aside policy which has been adopted for procurement from SMMEs, co-operatives, townships and rural enterprises.
Focus in the current financial year included the promotion of entrepreneurship and small enterprises as well as a review of the Small Business Act of 1996 as amended in 2004. This Bill should be in the parliamentary system in the first quarter of next year.
It is important to consider the world in which small enterprises operate. SMMEs are key drivers of job creation in the better-performing, more stable economies. Economies such as India, Germany, Malaysia and China, small businesses represent over 95% of the total businesses and employ between 60 and 85% of the total work force. In South Africa, the contribution of small businesses is far below its potential and is skipped in much of the data as there is a large part of that economy which is not formally recognised in the national accounts. If the multinationals are excluded, small businesses represent 98% of the registered businesses and employ about 47% of the work force. The labour force statistics released the previous day were specific about small businesses and were in the process of being understood by the DSBD.
There is ample evidence showing that small businesses are the key to unlocking growth in South Africa. According to Colin Coleman, “South Africa can achieve 5% growth over the next five years if Government and the private sector together invests R12 billion in 300 000 new small businesses every year in the next five years. In realising this potential, the DSBD is embarking on a process of mobilising all spheres of government and private sector to redefine the policy, legislative and regulatory environment to capacitate small businesses to turn the economy around. Government has, through the nine-point plan, committed to provide greater opportunities for SMMEs to access the public procurement system through legislative reform, which includes the revision of the Small Business Act and Preferential Policy Framework Act. The target announced by the President last year requires an amendment to the Preferential Policy Framework Act and interim measures in order to provide a window of opportunity for access to SMMEs.
There are enormous opportunities in the public sector. The 2015 Public Sector Supply Chain Review procurement confirmed that in 2013/14 government spent R500 billion on the procurement of goods and services and construction work and the DSBD’s view is that if 30% of that amount is directed to small businesses, a huge difference would be made. The focus on small businesses is one of the key focuses of the Nine-Point Plan and the DSBD is at the forefront of leading and coordinating this concerted effort to advance the development of small businesses.
Slide 14 was not examined extensively but an analysis of strengths, weaknesses, threats and opportunities is indicated which was a result of the review process. On slide 15, the three strategic goals are listed. The first is an effective and efficient administration. The second is an enabling environment for competitive small business and co-operatives. This area focuses on policy and research – the DSBD inherited programmes but not a Department and this is geared towards that. The third is sustainable small business and co-operatives in rural and township communities. The first goal has been allocated R118 million, 9% of the Department’s budget. The second goal has been allocated R26.1 million, 2% of the Department’s budget. The third goal has been allocated R1 181 million, 89% of the Department’s budget.
Slide 16 presents the strategic objectives of the DSBD. Strategic goal one of an effective and efficient administration looks at promoting compliance and good governance, to drive sound financial management and controls, to drive sound performance, developing the planning, reporting, monitoring and evaluation system, to build human resource capability, to promote a high performance culture and to promote internal and external communication work of the Department. The DSBD has only dedicated 9% of the budget to administration. The second goal is new – to create a conducive legislative and policy environment for SMMEs and co-operatives, to drive integrated planning and monitoring for development and this integrated planning refers to coordinating efforts of national government, provincial government and the private sector. The third is to drive a comprehensive research agenda which is in the process of being designed. Another is to develop a comprehensive international relations strategy, recognising that the DSBD has much to learn from international experience. The research function has a small budget of 2% - the DSBD has been encouraged by private funding.
Slides depicted the organisational structure and the programme structure, including the sub-programme structure, which were briefly outlined.
The total expenditure allocations are detailed on slide 19. Even though the Department feels that the budget is inadequate, there has been an increase in budget allocations per year. The total available to the Department is R4.3 billion. The DSBD was allocated another R475 million and was one of the few departments which received additional funding. The Department inherited staff of 10 employees from the DTI who were steeped in the culture of compliance and the Department has learnt from the best. In previous years, the DTI was hand-holding the Department under a cooperation agreement but the Department has been able to break away and establish their own brand.
Slide 22 details the expenditure estimates for Programme 1. Compensation for employees accounts for the largest share and goods at 49% and services counts for 42 per cent. Slide 23 contains a numeric representation of how the budget has been sub-divided.
Programme 2 deals with policy and research and creating an enabling environment for small businesses and co-operatives. The review of the Small Business Act should be complete by the end of the fourth quarter. The review of the Promotion of Entrepreneurship framework should be completed by the authority by the end of the financial year. This takes long due to the process of consultation required. An area taken quite seriously is the issue around red tape. The Department is doing research on regulatory and legislative protocols that hampers the growth of SMMEs and co-operatives. The Department of Planning, Monitoring and Evaluation approached the DSBD with a funded proposal to do this research and the DSBD were able to influence the research and is supported by other organisations. In terms of the Procurement Policy, there is a legislative review of the PPPFA which should be concluded during the financial year and when this happens the DSBD should be in a position to implement it. Slide 16 indicates a monitoring framework in terms of this.
There were about six youth programmes focussing on women. There is a new target in the programmes inherited which centres on mainstreaming these programmes. 50% of the total number of enterprises will be women-owned. 30% of the total number of enterprises supported will be youth-owned. It is difficult to give more detail on this but research will guide the Department to areas which need to be focussed on. Two research reports on key areas of support to SMMEs and co-operatives is also listed as a performance indicator – this target is vague but as the Department hasn’t undertaken a research role before, the DSBD has to learn this area. The programme review has required certain restructuring of programmes and the international relations strategy which is a new area of work.
Programme 2 has an allocation of R81.5 million over the MTEF. The Policy, Research and Legislation sub-programme has 71.8% (R58.5 million) of the budget.
The allocation of the budget over the MTEF is on slide 29, as well as the breakdown of the cost of employment. It is unsurprising that the greater part of the budget is towards staff employment as specialists are required.
Programme 3 performance indicators include informal businesses supported through the Informal and Micro Enterprise Development programme (IMEDP) and the annual target for 2016/17 is 7 000 informal businesses (even though the budget does not currently accommodate this). Other indicators include informal business infrastructure through the Shared Economic Infrastructure Facility (SEIF) and business rescue strategies. Research indicates that the attrition rate for small business is larger than greater businesses. Banks have a low-risk appetite for funding small businesses – if a business survives beyond the first six months it is a miracle. The Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency (SEFA) will help the Department develop the various strategies.
The Department wants to establish the Co-operatives Development Agency (CDA) although this is currently not being supported. Legislation was developed in 2013 although regulations have not yet been issued. The Department intends to conclude this in the current year. The Co-operatives Incentive Scheme (CIS) gives R350 000 to new co-operatives established through infrastructure and other means although there has been lobbying to increase this amount. The Black Business Supplier Development Programme has a target of 600 enterprises to be supported. Given other targets such as the women and youth targets, these will be incorporated into all programmes. There are about 75 incubators which are SEDA owned in the country. Most have been relatively successful. The first South African incubator conference showed that the role of a national department is to pilot the programme and new methodologies. The partnership agreements are either with other departments or the private sector.
Slides show how the budget has been allocated and slide 38 indicates that the largest part of the budget is transfers to specific programmes such as the Black Development Programme or co-operatives or incubation programmes.
Slide 41 states the number of SEDA branches and incubators, co-location points, and info kiosks. The challenges SEDA faces include the finalisation of the CEO appointment, insufficient funding to cover the broad mandate and the capacity of practitioners to service. Corrective measures to address these challenges include the DSBD finalising the appointment which has recently been done, the discussion of a transversal agreement to unlock opportunities and programme funding and the competency framework and profiling to determine gaps and appropriate measures to improve capacity, respectively.
The competency framework of practitioners and business advisors is addressed on slide 42. If the DSBD receives ten complaints from clients a month, some will be about the business advisor who was unscrupulous or asked for a cut in the business. SEDA will be developing a competency framework to address this. Slide 43 illustrates a map of where the SEDA points are.
There is some information on SEFA and the financial services that they provide for micro-enterprises, SMME funding. A new area introduced to address the attrition of businesses is the pre- and post-business support, realising that they have to hold the hands of businesses. SEFA disbursements of close to R1.3 billion in 2014/15 is reflected on slide 45 and shows an acceleration of 1% compared to the previous financial year. The tough economic conditions over the past financial year has had a dampening effect on demand and could not allow SEFA to sustain such momentum. There has been a slight ease in unaudited disbursements to R1.1 billion.
There is an analysis of sectors funded by SEFA on slide 46, followed by success stories on following slides. One not contained in the presentation is the partnership with SAB Miller and the Women in Farming initiative. The first harvest of the women is soon happening.
Ms Vries noted the challenge around SEFA, was the need to re-capitalise SEFA, which was one of the reasons for the slow payments. In this climate, some businesses are struggling to meet commitments. Slide 53 gives an indication of where all of the SEFA and co-location points are. The governance of entities has been tightened up to ensure a seamless service.
The Chairperson thanked Ms Vries and said that going forward, they would give the Department timelines so that the members had sufficient time to ask questions. Members would ask questions specifically of interest to their provinces and that the Department should do its utmost to answer these questions.
Mr Makue asked about slide 28 whether the percentage of 71.8% was referring to the budget or or to Programme 2.
Ms Vries answer that it referred to Programme 2.
Mr Makue referred to slide 42 where the trust is mentioned. He asked whether the trust was the one spoken of after the group of South Africans had the meeting at the Union Buildings. R1 billion may have been received but it is important to find out who the trustees are to fulfil the committee’s oversight function. He asked if DSBD had received complaints about bank charges and banking fees and whether they have feedback for the small businesses which make such enquiries. The final question relates to tourism as it has been recognised as an industry for job creation. It was not mentioned specifically in the presentation but did the Department have plans to engage with the tourism industry.
Mr J Londt (DA, Western Cape) said that with unemployment figures released the day before - which do not paint a pretty picture for South Africa - the Department has touched on the role of the small business creating jobs in other countries. When would this Department start showing its effect in the job market so that unemployment starts receding and stops increasing? This is primarily why this Department was established.
Ms Dikgale thanked the Department for the presentation. Slide 14 refers to the Department’s weakness with integrated planning with provinces and she asked what plans the DSBD had, to move this weakness towards a strength. What progress has DSBD made since the last budget? This question went to Mr Londt’s question.
Ms Vries asked Ms Dikgale to repeat her question about unemployment.
Ms Dikgale said that she wanted to check on the Department’s progress in terms of job creation.
Ms Z Ncitha (ANC, Eastern Cape) said that her question related to slide 11 where the report said that small business in South Africa currently constitute about 98% and account for 47% of jobs. This is linked with the latter part of the presentation where Ms Vries said that there existed a challenge concerning payments. It is important that payments are sorted out. The Department has the intention of doing research, prioritising certain provinces. Could the Department be more specific with the timeframes of this as the Committee had specific interest, especially with the more rural provinces?
The Minister said that she would answer a few questions because she need to do an interview and then would return. In terms of stakeholders, there has been consultation and engagement in rural areas, including traditional leaders. The Department went on a programme with the Department of Rural Development in Limpopo last year where under-progressive areas were visited. Some traditional leaders want to open up communities for their subjects whereas others want consultations to go through them only. The Department needs to respect this and ultimately create trust between the Department and traditional leaders. The Department has been working closely with the Bakgatla-ba-Kgafela people in the North-West by revitalising old areas of the previous regime which were not supported by the provincial government. As a Department, they cannot zoom into those areas without engagement. Engagement must be encouraged. The Department is about to sign an MOU with Bakgatla-ba-Kgafela to revitalise old industrial areas. There has been some criticism as people say that there is a court case that is ongoing around them – the Department does not want to get involved in the court case but wants to find practical solutions.
The Limpopo one was exciting as KwaZulu-Natal traditional leaders were invited to experience what was being done by the Department in partnership with the Department of Rural Development and Land Affairs. The DSBD believes that the strength in supporting SMMEs lies in a coordinated approach. A lot of money is lost in the process when the three spheres are not talking to one another. DSBD wants to find out why there are no results from the money spent in this area. The Department decided that there must be monitoring and evaluation so that DSBD does not have to wait for the results of the Department of Monitoring and Performance Evaluation.
The previous day there had been an announcement by the private sector about R1.5 billion that they are willing to put aside to support SMMEs. One of the things raised by the Department was that the voice of SMMEs must be the voice of SMMEs and not what businesses want. This is why the Black Business Forums and others are managed. To this effect, there is a special office with somebody focussing on stakeholder relations.
Research is very important. The research unit involves discussion with the University of Pretoria, the University of Johannesburg, the GIBS Institute and others. The Department is in discussion because their research can be augmented by institutions which have an interest in SMMEs. Various MOUs are also being signed. For example, GIBS does a lot of training, including the informal sector.
The unemployment figures released will be interpreted by the research, which will enable the Department to find practical solutions. The Minister said that Ms Vries would handle the other questions.
Ms Vries said that the trust is not the same one which was announced at the Union Building the previous day. This trust had been on the cards for a while. SEDA is the implementing agency for the National Gazelles Programme which the Minister launched last year. In the next few weeks the Department will announce to the nation which 40 gazelles have been selected. The Department does not have the funds to carry the 40 gazelles over the next few years. The private sector committed to supporting the programme but does not want to give the funds to government directly but wants these funds to be managed in a private fund. This preceded the announcement about the trust by the Minister of Finance and it is likely that these efforts will have to be integrated.
The Department also has complaints about bank fees and charges but charges are also made by Development Funding Institutions (DFIs). This goes back to the funding model mentioned earlier. DFIs are expected to show that they have sustained the money once they have received a capital injection. DFIs, as a rule, charge the prime interest rate plus two per cent. The poor are penalised and this is an issue. Part of the Department’s work will have to champion this as the poor are affected. The impairment rate on entities is quite high.
Ms Vries stated that tourism was one of the first transversal agreements signed and Tourism is a progressive department. About 63% of their services are delivered by small businesses. The Department of Public Works similarly procures a high percentage of small businesses – 84% of their goods, services and construction work is attributable to small businesses.
DSBD can only speak to the employment that they have created and maintained. In terms of job creation and employment, the challenge is that there is not a coherent, nationally-accepted definition of small businesses. The definition is in the Small Businesses Act but the Act is 12 years old and the environment has changed. Statistics South Africa uses a different set of parameters, as does SARS. There is a report about small business, following SARS breaking the R1 trillion ceiling, which states that there has been a sharp increase in the number of small business taxpayers – 80 000 more. That sector is becoming more mature and SARS has a different set of figures.
Mr Lindokuhle Mkhumane, Acting Deputy Director General for Policy, Programme Implementation and Support, DSBD, said that the Co-operative Incentive Scheme (CIS) supported 1 542 jobs. The Black Business Supplier Development has a bigger budget and supported 11 217 jobs. SEDA, through its provincial networks, supported 2 096 jobs. Under the Incubation Programme, which is under SEDA, 2031 permanent jobs were created and 1 055 temporary jobs were created. SEFA supported 157 417 jobs in 2015/16.
Ms Vries said that in terms of the 30-day payment, the Department complies with the rules – 17 000 invoices were paid within 30 days and there was a 100% payment rate. The Presidency coordinates that and every month government departments must comply. SEDA also has a helpline which SMMEs can call. The main culprits are municipalities and provincial governments. In terms of coordination with provinces, the Department has a provincial structure with provinces and every month different people are sent. Ms Vries said that she chaired the meetings and ensured agendas were exciting so that HODs would attend.
Mr S Mthimunye (ANC; Mpumalanga) said that in the situational analysis, globally SMMEs are a key driver for growth and job creation. The point is made that there is almost 95% of small businesses which account for between 60 and 85% of the total work force in countries such as Germany, India and others. The quote form Colin Coleman says that for South Africa to achieve the five per cent growth in the next five years, government and the private sector needs to invest R12 billion in small businesses.= and demystify the low growth profile. There is now the availability of R1.5 billion towards achieving this goal of five per cent growth - what is being done in terms of government investment to bring the economy into a positive growth path?
Ms van Lingen said that on slide 24, or before that, she was missing the KPIs numbers 1 to 14. On slide 41, what criteria are being used for the SEDA facilities? Is it population pro rata or which province the DG or the Minister comes from? In terms of the slow payment of loans in slide 51 and the capital involved versus the slow payments, what was the return on the capital per annum and what was the cost of recapitalisation and the effects that that has on the budget in the current financial year?
Dr Vawda said that Colin Coleman stated that five per cent growth would result after an investment of R12 billion. Could the Department give an indication of what the Department would do about this and whether the Department had any plans for implementing this? Another issue is that removing R160 billion might not be possible. The Department may not have the capacity to commercialise this amount. Everything that is done in creating small business must be done knowing that there has to be a market for that small business. The difficulty in South Africa is that South Africa has over 50 million people but something like 80% do not have the buying power. The market is there but the buying power is not. The Department has to look at alternatives and to start looking seriously how buying power can be created. This can be done by going back to the minimum salary that has been spoken about and advocating for very strongly. When the small business is set up, the first challenge is that there is not sufficient buying power and the second challenge can be explained via an example. In a township which has 50 spaza shops and a mall is opened in the area, half of the spaza shops close down. The reasons is that playing field is not equal. Government needs to determine how to overcome this. Financial support for small businesses is essential, especially those set up to grow small businesses in areas previously disadvantaged. When nationalisation is spoken about, everyone feels uncomfortable but it is about making finances available to the people. The hard copy presentation needs to be changed in this regard. The DSBD needs to tell the Committee how its research programme will inform the long-overdue paradigm shift in structure and mind-set such that South Africans and black people in particular, move away from the mind-set of everyone considering searching for employment to rather starting their own business. The second question was that the DSBD needs to show the Committee to overhaul the legacy of the Group Areas Act and the Bantu Authorities Act which still reflects dominance of small business activism along racial lines.
The Chairperson said that there was sufficient evidence to attribute economic growth to SMMEs and co-operatives. This was tangible proof that to grow the economy, that sector must be involved. In the tourism indaba, the bigger part of what was discussed was the SMMEs in that sector and how they could grow, be sustainable and how there is market penetration. Dr Vawda is correct – South Africa is far ahead compared to some countries but not in terms of SMME growth. The Department has a difficult job. Sasol has offered R54 million for incubation into that sector but the DTI has to be engaged. On slide 4, growth-focussed support and poverty alleviation are intentions. In the budget, how did the mandate intentions find expressions?
Ms Vries said to achieve the vision expressed by Coleman, research suggests that there is R37.3 billion in the private sector for enterprise development. It is about building the partnerships for the private sector to invest that money. Government alone has allocated R15 billion to small businesses across different national departments. The Department of Rural Development, the Department of Tourism and other departments. It is about co-ordinating it. She apologised for slide missing and said that the Secretariat would be sent the entire document. In terms of slow payment by SEFA, SEFA should accompany the Department at the next meeting. The question concerning how growth proposed by Coleman can be achieved, the growth sectors need to be identified. Statistics South Africa indicated that big business still controls or creates about 64% of the value overall. In mining, big business controls 98 per cent. Small and medium business command about 45% in construction and business services. Small businesses might not be ready to provide the volumes required in various sectors. The Department is in the process of finding out which sectors present opportunities for small businesses.
In terms of changing the mind-set of South Africans, the research unit is a month and 11 days old so the Department is still working on the research agenda. The transformation of the remnants of the Group Areas Act and apartheid spatial patterns cannot be handled by this Department alone – it is an inter-governmental issue and the targets in the nine-point plan should address that. In terms of what percentage of the budget is geared towards transformation, 30% of the 89% of the budget will be allocated to rural areas and 50% to townships. ICT-enabled is a huge catalyst which will put small businesses in a different league.
The Chairperson thanked Ms Vries and the team. He asked if the Committee could agree that the Department presented the annual performance plan and emphasised the need for proper coordination with relevant stakeholders and that these can be moved to a better platform.
This was accepted by the Committee.
Final mandates for the Expropriation Bill
The Chairperson checked that everyone had copies of the final mandates of the provinces. Members nodded that they had copies.
Ms van Lingen asked if the Chairperson could outline the procedure and whether members should read the mandates.
Ms Ncitha asked if the Chairperson was asking about mandates of the provinces.
The Chairperson said that this was correct and that he wanted to establish that members had mandates before them so that the process could proceed and whether members were adequately prepared so that they could move forward.
Ms van Lingen said that they are prepared and asked the Chairperson whether he could stall for much longer.
Ms Dikgale asked if they could defer this for the following morning’s meeting so that it could happen before meeting of International Relations as the same members would be present.
Mr Mthimunye said that he wanted to second the proposal by Ms Dikgale.
The Chairperson said that there was a proposal to defer the mandates to the following morning and said that he hoped the Department would be available the following morning.
Ms van Lingen said that this was a deliberate effort on the Acting Chairperson’s part to stall because he had insufficient mandates the previous night. This is what was called filibustering. If the Chairperson wanted to defer it, she would object to that.
The Chairperson said that Ms van Lingen’s dissenting view was recorded
The meeting was adjourned.
- Committee report on Department of Small Business Development 2016 Annual Performance Plan
- Department of Small Business Development on 2016 Strategic & Annual Performance Plan presentation
- Department of Small Business Development on 2016 Annual Performance Plan
- Department of Small Business Development on 2016 Strategic Plan
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