Small Business Development Budgetary Review and Recommendations Report, with Deputy Minister present

Small Business Development

19 October 2016
Chairperson: Mr X Mabasa (ANC) (Acting)
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Meeting Summary

Members met to discuss its Budgetary Review and Recommendations Report for the Department of Small Business Development. Members corrected several minor errors in the document. Comments were made about political uncertainty in the country; legislation that is directly affecting the mandate of the Department; and the impact of the Department and its sister agencies regarding job creation. Budget constraints were identified as the main issue that prevented the Department from functioning effectively and achieving its targets. The DA complained that the process of considering the BRRR is superfluous, because the Minister of Finance will not be able to take into account the recommendations of the Committee in the BRRR due to the short time frames. It was then clarified that, the recommendations that surface in the year under review will be considered by the Minister of Finance in the following year’s medium term budget report.

Members were informed that recommendations from previous BRRRs were repeated in this one to ensure that what was raised in the past is brought forward so that the Committee can comment appropriately on them, and if the responses from the previous recommendations from the Department were not satisfactory, the Members are able to raise them up again. There was agreement that the Committee needs a mechanism that is able to track what the Department has done and not done in the previous years in light of the recommendations that were submitted by the Committee to the Department. A proper tracking system needs to be put in place to ensure that recommendations are not reiterated. Members agreed to meet again on Friday to peruse the changes and adopt the Report.

Meeting report

Election of Acting Chairperson
Mr King Kunene, Committee Secretary, announced the absence of the Chairperson, Ms Ruth Bhengu, and asked the members to elect an acting chairperson so that the Committee could proceed with the business of the day.

Mr Mr X Mabasa (ANC) was elected to chair the meeting.


Mr Kunene noted that there were not enough Members to reach a quorum for the meeting. He indiacted that the party whip of the ruling party in the Committee (Mr Mabasa) is entitled to elect a member of another Committee to come sit in the meeting in order for the Committee to reach its quorum and proceed with the business of the day.

Questions were raised about whether the elected member will have voting rights in the Committee.

The Secretary said the rules permit the elected member to have voting rights in the Committee.

Mr H Kruger (DA) expressed that as an alternative member of the Portfolio Committee on Agriculture, Forestry and Fisheries he did not have a voting right in that Committee.

There was further discussion on this matter, and the Secretary reiterated to Mr Kruger that the elected member will be able to vote for the adoption of the BRRR (Budget Review and Recommendation Report) and to assist to reach the quorum of the Committee.

The matter was then laid to rest and the Committee proceeded with the agenda of the day.

Consideration of the Budget Review and Recommendation Report
Due to delays in communication, members did not receive the Report in time in order to peruse the Report and submit their contributions, comments and questions when the Committee meets. It was then concluded that the members go through the Report altogether during the meeting, and comments, questions and contributions will be raised as the meeting progresses. The Deputy Minister of the Department of Small Business Development, Elizabeth Thabethe, was present to assist and engage with the members.

Members proceeded with the consideration of the Report page-by-page, and rectified spelling and grammatical errors as well as rephrased sentences where necessary.

Mr Kruger directed the members to page one on third paragraph, and noted that perhaps the political uncertainty of the country ought to be included in that paragraph considering that the Rand had depreciated as well as the credit rating of the country. In addition, most organisations and investors are concerned about the political uncertainty in the country. He believed that that stance ought to be reflected in the Report, because it had significant implications.

Mr T Chance (DA) concurred with Mr Kruger’s point highlighted above. On page two, paragraph three, he submitted that the formal sector had been shedding jobs over the recent period, therefore, it should be clearly indicated that it’s actually the informal business sector that had been doing more in terms of creating job opportunities. He suggested that perhaps, statistics as recorded by the Stats SA should be included in that paragraph. He then emphasised that the process (of consideration of the BRRR) is actually a waste of time because there is no way that the Minister of Finance is going to be able to take into account all BRRRs in his medium term policy speech, which was taking place four days after the Committee has adopted its BRRR on Friday. Therefore, the Democratic Alliance objected to the programme of Parliament. It was impossible for the Minister of Finance to take into account the recommendations that came from the Committees emanating from their BRRRs if they are adopted three or four days before he made his statement.

Mr Xolisile Mxhathi, Content Advisor of the Committee, explained that according to the process, the recommendation or input of the Committee emanating from the BRRR was not aiming to address the medium term report of the Minister of Finance in the year under review. The Minister’s speech will address issues from the year under review and take into account the previous year’s recommendations that emanated from the previous year’s BRRRs and report on the progress of the implementation of those Recommendations. So recommendations emanating from this year’s BRRRs will be addressed in the next financial year for MTEF as the parliamentary procedures and processes permit.

The Deputy Minister addressed the point raised by Mr Chance on job shedding in the formal sector. She concurred with him but at the same time, she highlighted that there is job creation in the formal sector but because the rate of unemployment is high, that job creation is consumed by the high unemployment level. Consequently the effect is not evident. Secondly, South Africa had a constitutional democracy that was fully effective; therefore, Members should be weary about submitting statements about political uncertainty and exaggerate matters. In terms of the downgrading, the Government was given up to six months to provide some statistics on employment and growth. There have been signs of some growth happening in the country but it’s not as significant as it should be. The political uncertainty argument is not relevant. Due to the effectiveness of the constitution of this country the ruling party accepted the local government election results, and losing some of the biggest Metros in the country. Members should be clear about that and not exaggerate and send out wrong messages to the public about the political uncertainty in the country. All the problems existing in South Africa today are everyone’s problems including the private sector, opposition parties, and civil society. So it’s important that members do not make statements that paint a certain picture but rather contribute effectively towards coming up with solutions that will benefit the country.

The Chairperson highlighted that the Members should not debate on issues of principle but rather comment on the Report. If it’s an issue of political principle, members are bound to differ, but the focus is the BRRR today.

Mr Kruger stated that when he spoke of the political uncertainty, he was referring to the fact that this uncertainty emanates from, for instance, the FeesMustFall protest, amongst others. It was being said on the news everyday that this might be pushed by a political agenda. Therefore, if there is uncertainty in the country it will be difficult for investors to predict the future outcomes, and consequently invest. He emphasised that he was not referring to the ruling party but the political landscape as a whole due to unfavourable events that are occurring and slowing the down the economic growth and development of the country.

Mr Chance pointed to section 2.2 on page nine, and stated that the Department had a responsibility to implement the NDP (National Development Plan). He did not agree with the following statement, ‘that the NDP takes form from the government’s New Growth Path’. There was a significant strategic disagreement between the NGP and the NDP, because they emanated from totally different sources. The NGP is a totally different document from the Department of Economic Development. Therefore, one can not conflate the two because they are completely separate documents, and they have two strategic thrusts. So the sentence should be worded as follows, ‘the NDP sits along side the New Growth Path’, because they are both policy documents that are different, but seek to foster economic growth and development in the country.

Mr Kruger asked the Content Advisors why the recommendations from past BRRRs were included in this one. 

Mr Sibusiso Gumede, Content Advisor for the Portfolio Committee, said that this was done to provide the members with the opportunity to go through some of the issues that were raised in the past and be able to reference recommendations and issues that were raised before, because there were legislations that were being reviewed at the establishment of the Department that would not necessarily serve or compliment the mandate of the Department upon its establishment. For instance, the Business Act of 1991 and others, that would not be favourable for the mandate of the Department going forward.

Mr Chance asked for clarity whether some of the recommendations included previous ones that were included in 2014 and 2015 BRRRs.

Mr Gumede confirmed that they were quoted verbatim and were matched with the responses from the Department, and some of the recommendations had just disappeared without any responses. The main focus of this exercise was to ensure that what was raised in the past is brought forward so that the Committee can comment appropriately on them, and if the responses from the previous recommendations from the Department were not satisfactory, the Members are able to raise them up again. 

Mr Mxhathi explained that the recommendations outlined in the Report were encompassed with the responses from the Department and if the Members were not happy with those responses that is something that they need to take up with the Department not with the Content Advisors. The Content Advisors provided those responses and previous recommendations solely for the purpose of assisting Members to have a point of reference.

Mr N Capa (ANC) suggested that perhaps the Committee needs a mechanism that is able to track what the Department has done and not done in the previous years in light of the recommendations that were submitted by the Committee to the Department. A proper tracking system needs to be put in place to ensure that recommendations are not reiterated.

Mr Chance highlighted that within the same token it must be recommended that the Department should come back to the Committee and produce a quarterly progress report in the BRRR so that the Committee can be able to track implementation of the recommendations.

Mr Gumede submitted that if the responses of the Department do not speak to what the Members have suggested in the past then, those previous recommendations must be rephrased and included as part of the recommendation in the current BRRR.

Mr Kruger said there are pieces of legislation that will have an impact on the Department. The Department should have looked at that because its mandate was to ensure that there is a smooth environment for small businesses to operate. The Department should have done something about this at inception to say that these are the pieces of legislations that will affect the smooth process of creating an organic or smooth environment for small businesses.  Therefore, the Committee should recommend that by next year April the Department must provide the Committee with a list of all legislation that will have an impact on small businesses. In addition, the Redtape Bill should also be put under recommendations because it has been tabled and will be referred to the Committee in due time, and there will be money involved.

The Deputy Minister replied that the private member’s bill must first go through the parliamentary processes and does not deal with the budget review process, which the Committee was considering. Therefore, that process needs to take its course first, and once completed and under the scrutiny and perusal of the Committee, only then will the budget review processes and inclusion in the BRRR will be considered.

Mr Mxhathi added that the Redtape Bill will be submitted to the Committee in the near future after parliamentary due processes have taken course, and by then its financial implications will probably be effective in the following year’s BRRR not the one currently under consideration. Therefore, it can not be included in this BRRR based on anticipation; the parliamentary processes must unfold first.

Mr Chance pointed the Committee to page 28, and stated that as outlined in the Report ‘non-achievement of the set targets will mean that the country will not be able to achieve the 11 million jobs expected from SMMEs and Co-operatives by 2030..’. The DSBD’s direct impact on job creation is so minimal, therefore, it can not be said that this will impact on the targets. Even the agencies (Seda and Sefa) are making minuscule impact on job creation. If the Department achieved its targets then it would contribute towards the creation of the 11 million jobs by 2030, therefore, it is utterly an overstatement and should be re-phrased.

The Deputy Minister differed with Mr Chance, and stated that the statement is correct. If the targets are set, resources will follow to meet those targets. Therefore, it is correct to say that the resources will be channelled towards the Department in order to meet those targets.

Mr Chance said that is not the case here because; there is a scarcity of resources as we speak. The budget allocated to the Department is not sufficient to meet its targets as it is now, and the sentence is not addressing the role of the Department but the achievement of its set targets. So if you relate the set targets to the creation of the 11 million jobs, there is an enormous disparity in those set targets and the possible achievement of the 11 million jobs and the targets do not come anywhere close to what the Department should be doing in terms of its targets due to scarce resources. The impact of the Department on the ability to contribute towards the creation of the 11 million jobs is very minuscule.

Mr Mxhathi emphasised that the reason behind the stagnancy of the Department towards achieving its targets (150 000 jobs by 2017) is due to the lack of resources, therefore, this possesses a major failure towards contributing to the 11 million job creation. If Mr Chance feels that the above statement is over-exaggerated, perhaps, it can be re-phrased, but it is important to keep aware of the fact that resources are major constraints for targets to be reached and ultimately the 11 million jobs.

Mr S Mncwabe (NFP) agreed with the Deputy Minister and Mr Mxhathi that if the resources continue being cut it will consequently affect the set targets of the NDP, because the Department was established to facilitate some of the goals and targets outlined in the NDP stemming from the small business co-operatives sector. So if the Department is not allocated sufficient resources, its contribution will be very insignificant.

Mr Kunene clarified that what Mr Chance is saying is that the targets of the Department are way too small in terms of job creation to have an impact on the 11 million job creation set target outlined on the NDP. Furthermore, the members are coming from a budget constraint perspective, whilst Mr Chance is focusing more on the impact of the Departments’ set targets for job creation contribution towards the 2030 target.

At the end of the meeting the Members agreed to meet again on Friday to peruse the changes and adopt the Report.

The meeting was adjourned.


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