Development Finance Institution (DFI) workshop report; Committee Reports on Oversight Visits to KZN & Limpopo

Small Business Development

16 November 2016
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

Documents handed out:
Committee Reports on Oversight Visits to Limpopo
Committee Reports on Oversight Visits to KZN 
[All Committee Reports available under Tabled Committee Reports once published]

The Committee’s review of the report on the Development Finance Institution (DFI) workshop turned into a session of soul-searching over the reasons for the Department of Small Business Development’s (DSBD’s) failure to fulfil its mandate of sustaining and promoting the development of cooperatives, and creating employment opportunities. In 2009, there had been 43 000 cooperatives registered in South Africa, but since then only 12% had managed to survive, and the remaining 88% had died.

Members said they were frustrated at the lack of progress. The Committee needed to develop a tracking mechanism to check whether the Department was carrying out its recommendations. The Department had been told countless times that its module had not been successful in creating jobs, but it had continued to use it and nothing had changed. In the communities that the Committee had been to, they had found women in the villages who said they were part of a cooperative, but nothing was happening to support them and they had not yet received any help from the government. This was an area where the Committee could make changes, as small business development was their terrain and with only two and half years left in the term, this was the least they could do so that they were not blamed for having failed the jobless people of the country.

A Member maintained that the Committee should blame itself for not having shown a better fighting spirit. There had been a lot of talk, but little action. Another Member proposed that the Committee phrase this issue as an agenda item for the next meeting and allow time for it so that they could come up with concrete ideas and solutions and a clear direction for the Department, or devise another method of talking to other departments, until it reached the level where it could be debated in the House.

The reports on the workshop, and the oversight visits to KwaZulu-Natal and Limpopo, were adopted after discussion and amendments to terminology.

Meeting report

Development Finance Institution (DFI) workshop report

The Chairperson said that with regard to the Development Finance Institution (DFI) workshop report, everything had been dealt with extensively except for some items that had been left out of the presentation given by Mr Tookie Johnson.

Mr Sibusiso Gumede, Committee Content Advisor, stated that on page 3 of the report, the first paragraph had been re-phrased, as had been instructed by the Members. The section that was missing from the presentation that had been delivered by Mr Johnson had been included within the report and could now be found of on page 12, bullet point 4.1.5. Apart from grammatical corrections and the insertion of the previously omitted parts, there had been no other major changes. However, the Members may want to go through the recommendations, as the next section needed changes.

The Chairperson asked if the Members could start with the corrections made on page 3 as mentioned by Mr Sibusiso Gumede before considering anything else. 

Mr R Chance (DA) said that he was happy with the adjustments that had been made on page 3.

The Chairperson then proceeded to the changes made on page 12 and asked the Members to discuss that part of the report.

Mr Chance said that the summary was fine, but that it once again raised the issue of the Committee needing to carry out follow-ups. The Committee had spoken about the schedule of actions that they had asked the Department to do over the past couple of years. However, this had been difficult to track, which was why he felt as though the Committee needed a tracking mechanism. It was important for the Committee to follow up some of the requests they had made to the Department, or else it would seem as though the Committee was only there to talk and nothing else. There was also a need to see if the Department had been able to implement the request from government to assist in creating 10 000 jobs for unemployed people, and to find out if anything had happened with Biz-Town. It was important for the Committee to follow up on these kinds of issues because they did not actually get to see what happened on the ground.

The Chairperson responded that before they dealt with anything else, she did not think that the Department would engage government to see if they could subsidise the 10 000 small businesses and if they could be listed on the Biz-Town database. As a result, the Committee needed to first assess the programme to see if they saw any value in it and whether they would recommend that it got pursued. Her issue was that in 2009 there had been 43 000 cooperatives registered in South Africa and by the end of the year, 12% of the 43 000 had managed to survive and the remaining 88% had died. Now, considering the proposed 10 000 small businesses to be subsidised by the government, does this programme cater for the ones that were already running but had no access to funds and could not market themselves to be subsidised by government, or would the programme need to consider having to build new businesses to provide new services or products, which would then be subsidised by government.  Reflecting on a presentation made by representatives from Pick n Pay, they had highlighted that they were willing to buy, but the problem was that there were no suppliers and even with the people that they did give contracts to, they did not get any support in order to meet the demand or control the quality of goods being sold. For example, with Nontle, the issue had been the quality of her products, even though Woolworths and Pick n Pay had already expressed an interest in working with her and with the rest of the suppliers. The issue was with meeting the demands of the buyers. The question for consideration was who the Committee was referring to, and who they wanted to market to.

Mr P Capa (ANC) said that he wanted to address the second sentence, bullet point 4.1.5, where he suspected that the sentence should include the word ‘company’ before the word ‘act’. Secondly, he understood the report as something that needed to be accepted and if there were still any problems, those issues should be discussed.

Mr H Kruger (DA) agreed that they needed more feedback on proposals made by outside bodies because the Committee needed to know how far those proposals were in being considered or implemented. He said that yesterday he had tabled a motion on exactly what the Chairperson had just spoken about. The problem was with the module that the Department had been using in trying to create jobs. The Department had been told countless times that the module had not been successful in creating jobs, but they had continued to use it and nothing had changed. He felt that this issue needed to be taken to another level and pushed to such an extent that it could be put on paper and taken to the public, so that a debate could be held on possible modules to address the issue that current the strategy being used had not been working. He suspected that if the Department were to be asked whether the current module they were using was successful, the answer would be no. It was precisely because of this that he wanted a mandate from Parliament, instructing that it be changed.

It seemed as though other departments had been able to do as they pleased, including the Department of Agriculture, because it used its own module and they were busy developing a new module for their businesses. The Department of Rural Development and Land Reform had also been seen using their own module, doing their own thing and the Small Enterprise Development Agency (SEDA) had been very mechanical, ticking all the right boxes as an exercise, while people continued to suffer.

In the communities that the Committee had been to, they had found women in the villages who said they were part of a cooperative, but nothing was happening to support them and they had not yet received any help from the government. This was an area where the Committee could make changes, as small business development was their terrain and with only two and half years left in the term, this was the least they could do so that they were not blamed for having failed the jobless people of the country. He concluded that he strongly believed that the discussion should be put on paper, discussed in conjunction with other departments, lobbied for a budget and that there should be a new module to facilitate the process.

Ms N November (ANC) said she felt as though the Committee should first accept and adopt the report with the proposed amendments before tackling anything else. She added that the Committee needed to go directly to the Department if they really wanted to see some change which would in the long run affect the entire country.

Mr X Mabasa (ANC) said he felt the same frustration shared by the two Members, which could sometimes lead to desperate things being done. He agreed that at some stage, the Committee would need to profile the Department and cooperative teams, but it would need to be very sure of itself and very clear about what it intended to do before taking its frustrations to other people. If the Committee was to turn to other people for help, and be asked how they could be helped, the Committee should have already gone through the entire process of having anticipated the questions and have an answer for them. He did not expect that solutions would come from other departments, so if they were to raise problems, they should also suggest solutions. 

Mr Capa was of the opinion that all Members had the same feeling about the lack of clarity on the role and essence of the cooperatives. It was clear that they had not done enough to talk about this in such a way that they could bring it forward, highlighting the issues and how they wished to change them. He felt that time should not be spent talking about other things when discussing the report. He agreed that there was justification in what Mr Kruger had said, because all Members felt that way, but he thought he had to remind the Committee that there was still the report to be considered.

Mr Kruger said it was clear that everyone agreed, but that it was time to stop protecting the Department and air this issue fully. There needed to be a mandate from Parliament, but when the Ministers were present at the Committee meetings when these issues were brought up, it seemed they did not take them to the Cabinet as the Committee would hope. A figure of R15 billion had been quoted by the DG at a colloquium, stating that this was the amount spent by other departments on small businesses. He believed that if that money was put to work, all the different problems they had picked up could be solved. However, all they seemed to do was talk, with no action taken, hence the need for a debate to be held on the issue so that the President could make an informed decision on revising the current module.

Rev K Meshoe (ACDP) said it was obvious that there was a sense of frustration among the Members, and after hearing that 88% of cooperatives had failed in 2009, this meant that there were people out there who were still in need of help. He suggested that maybe instead of looking at quantity – the number of businesses to be assisted and the ways in which they have been assisted -- they needed to focus on a few promising businesses and work with them to make sure that they succeeded. He proposed that the Committee identify cooperatives that were struggling, that had a will but no funds, and see how they could help via the government and the Minister, so that at the end of the term the Committee would be able to say they had achieved something. Woolworths and Pick n Pay had mentioned that they were willing to be supplied by cooperatives, but had highlighted that often the quality of products produced by the cooperatives was not the same as their current standards, and there were also often times where they were unable to keep up with the demands of the businesses. In line with this, it would then be very helpful to identify which of these businesses they had expressed interest in working with and after having identified them, the Committee would work closely with them to increase the standard and quality of their products, as well as help them cope with the demands of the companies they supplied to.

Mr Chance picked up on a point made by Mr Kruger on the R15 billion figure quoted by the DG at the colloquium, and thought that the Committee needed to ask the Department to come and explain how they came up with the figure, where the money had been spent, by which Departments and on which programmes, and how successful these programmes had been. This would be done as a means of comparing those programmes to the ones the Department had been running. He found it ironic that the Department had received only 0.1% of the annual government budget, yet small businesses were expected to contribute 90% of jobs. He felt this was one of the reasons the Department had not been taken seriously -- it was treated like a nothing and if the government was serious about the Department, they would look at the spending across all Departments, the effectiveness of the spending, and if the Department was actually able to show an improved model, then the Committee would be able to recommend that their budget be increased by R10 bn. The problem, however, was that they could not, and he feared that the debate being proposed by Mr Kruger would further expose the problem. He asked that the Chairperson include in the agenda for early next year a Committee meeting where the Department would come and explain the R15 billion, to interrogate it and understand where it was being spent.

Mr Mabasa asked if the Chairperson could contextualise the R15 billion for him, because he was confused about where the amount had come from. He wanted to add that the Committee should also hold themselves accountable for the lack of work that had been done, because they had been in office for almost two and half years with almost no change. It was important to interrogate what the Committee had actually done on behalf of the poor people of the country as their representatives. Had the Committee only woken up today to realise the anomaly? He also believed that the Committee should also fight for the budget, because they had a duty to perform and they needed to be given the appropriate tools that would help them do their job. He agreed entirely with Mr Kruger, but the slight difference was on how and when they should do it.

The Chairperson responded that the DG had quoted the figure at the colloquium and had stated that the government spent R15 billion a year on the development of small businesses and cooperatives, but that the money had been allocated across different departments.

Mr Kruger said that they had been speaking about this for a long time and the problem was that the Department, the Minister and the Deputy Minister all did not take their concerns higher and as a result of this, the Committee needed to escalate their frustration. If the Committee waited for the Department to come up with a solution, they would wait for another two and half years. He found that the issue needed to be taken to the 400 politicians in the House so that they could also come up with a solution.

Mr Chance added that total government expenditure was R 1.2 trillion and of that, only 0.1% had been allocated towards the Department of Small Business Development.

Ms November said that she was not against going before the plenary, but it was the same stage on which the ANC got insulted, so she did not think it was of any use to take the matter up with the House.

The Chairperson responded that to all the issues that had been raised, Members were correct to be frustrated because these had been issues raised from day one, and the Committee had initiated the programme review process, not the Department. It was the Committee that had recognised that the Department had been given a bigger mandate, inheriting other issues from other departments, in particular from the Department of Trade and Industry (DTI) and from that, the Committee had asked for a review based on the new mandate. The point of the review was to look at the programmes in relation to the mandate, as well as to upscale those that were working, improve on those that were relevant to the mandate and discard those that were not. The Department had not moved until the Portfolio Committee had set deadlines by which it had to return to the Committee and present a report on their programme review. When the set date arrived, the Department had not been ready and as a result, the consultants that had been assisting the Department had come. The Committee had then told the Department to go back, review what had been presented by the consultants, and incorporate that into their review, because these were some of the issues that they had not looked at yet. The Department had come back with a report with no agreement on some of the issues, to such an extent that the Minister had disowned the report.

She added that the Committee had not just woken up on the issues -- they had been pushing the Department to look at itself from a broader perspective and had been assisting them to go through their own report. The approach that had been taken by the Committee in assisting the Department was a participatory developmental one. Perhaps the Committee and the Department were not at the same level of understanding and it could not be overlooked that the Minister had also inherited a programme that had been running for years in the DTI. In inheriting the programmes from the DTI, the Minister had also inherited the same staff that had been running the programmes, which the Chairperson found to be the biggest mistake, as no one had been able to look at anything objectively because these were programmes that they had created, and thus would not be able to critique themselves.

The Department had done this before. The DTI had produced a report in 2009, at which time the Chairperson had not been part of the Committee, which was called ‘Promoting an Integrated Cooperative Sector in South Africa: 2012 – 2022,’ and this was supposed to have been implemented. The new Department of Small Business Development (DSBD) had been established in 2014, and one of the most important reports that the Department should have inherited was this one, but in the programme review, this particular report was not even mentioned.

There was a model that spoke to a broader understanding of cooperatives in South Africa that the Chairperson was proposing to present, because she had found that there was a narrow understanding of what cooperatives were and what they did. It would then be up to the Committee to take this broader understanding, hopefully along with Department, in order to do what needed to be done now that they had had a chance to adjust themselves as a separate department from the previous mandate of the DTI.

Mr Mabasa still maintained that the Committee should blame itself for not having shown a better fighting spirit. The point of highlighting the time that they had been in office showed that these actions should have discussed after having been in office for at least a year, but had failed to do so.

Mr Capa proposed that the Committee phrase this issue as an agenda item for the next meeting and allow time for it so that they could come up with concrete ideas and solutions and a clear direction for the Department, or devise another method of talking to other Departments until it reached the level that Mr Kruger had been speaking about. It was not possible to come to a resolution on it at this meeting, but it could be discussed in another meeting.

The Rev Meshoe supported Mr Capa’s point that next week, the Committee should workshop a document with proposals of what they thought would work and adopt something that would say to the Minister that what they wanted to do was to create jobs and help cooperatives, and that all this work was so that they could contribute towards the country’s growing economy.

Mr Chance said that after the programme review presentation next week, this would show the Committee if the Department had been listening to them or not. He proposed that at the meeting next week, they should allow the Department to present, hold a deliberation and then ask that the Department be excused so that the Committee could further deliberate on the issue and take some decisions on what to do next. This would then determine how much noise the Committee was willing to make with regard to escalating the issue higher. It would be interesting to see if the Department had considered the report the Chairperson had just mentioned in their programme review, because he himself had only discovered it recently, but it had been drafted long before that.

The Chairperson then asked if the Committee could return to the DFI report, noting that on page 12 the issue that the Committee had been discussing was the presentation which had been left out and had then triggered the discussion on following up with the Department to see if they had reacted or had any contact with Biz-Town media and see if the 10 000 job-creation mark had been reached. She then added that before the Committee looked at a way to follow up on these issues, they needed to discuss what recommendations they would be making with regard to the previous presentation that had been delivered to the Members.

Mr Gumede responded that no recommendations had been made.

Mr Kruger asked if a proper recommendation would be, not to further investigate Biz-Town’s presentation, but to assess if it would be in a position to benefit all small businesses and cooperatives in South Africa as a whole. 

Mr Chance said that it was not the business of the Committee to be recommending to private people that came to present, because they could be considered as being biased in their recommendations. They should, however, ask the Department if they could support the Biz-Town portal, and also ask them what they had done about what Biz-Town had proposed and presented on, and if they do not agree with it, then the Department would need to go in search of a tender that could execute what they needed done. The Committee needed a mechanism to monitor what had been proposed to the Department, and if anything had been pursued in trying to realise any of the proposals.

Mr Capa added that the Department needed to find out more about Biz-Town so that they could come back again to present to the Committee. Based on what the Department would have been able to find out, they could deliberate further on whether the Committee should recommend that their proposal be pursued.

The Chairperson said that the Biz-Town presentation had firstly proposed that sponsorship should be made directly to small businesses in order for them to market their goods and services. In relation to this point, she thought it important to look at how much corporate social investment (CSI) was used to assist small businesses and cooperatives. She also wanted to know where companies that needed to be awarded Black Economic Empowerment (BEE) status got their funds to assist small businesses. Biz-Town had proposed that government should assist the 10 000 unemployed people by listing them on the Biz-Town database at a reduced rate of R900 per person, per annum. The question here then was which Department within government would do that and, how much would be spent in total. She also highlighted the importance of knowing whether Biz-Town was a BEE-compliant company.

Mr Capa said that it was tempting to go into the details of the future, but the Department needed to investigate Biz-Town, find out more information and report back to the Committee so that it could make informed decisions where Biz-Town was concerned.

The Chairperson asked if Mr Gumede could take them through the recommendations section of the report.

Mr Gumede responded that nothing had changed in the recommendations, except for bullet point 5.7. He then suggested that maybe the Members would like to go through it to make sure it was captured correctly.

Mr Chance responded that looking at his notes from the last meeting, it seemed that all he had proposed had been included, and he was happy with it.

The Chairperson then said if everyone was happy with the report, the Members should move to adopt it.

The report was adopted after being proposed and seconded respectively by Mr Capa and Mr Chance.

Report on Oversight Visit to KZN on the 14 and 15 October 2016

The Chairperson said that there had been some deliberations on the report on oversight visit to KwaZulu-Natal (KZN), and the Committee was now at the stage of looking at the recommendations. She said that if there were any recommendations not initially included in the report, they should be added today.

Mr Gumede said that there was one addition. On the last page 30, bullet point was the only addition that had been recommended by the Members, unless there was something else that had been left out.

Mr Chance said that the numbering needed to be changed to and not

The Chairperson added that she was not sure if bullet point had another paragraph that dealt with the issues they had brought up, and that calling this an incentive was misleading because an incentive could not also be a grant. What was further misleading was that it was the only start-up funding made available for cooperatives, and so calling the grant an incentive was using the wrong terminology. The Committee would have to look at something in addition, to further incentivise the start-up businesses in order to get funded.

Mr Mabasa said that on page 29, bullet point, ‘350K’ should be changed into the same format that had been used throughout the report.

Mr Gumede said that he would change it to 350 000, as advised.

The Chairperson mentioned that Committee documents were sometimes for public viewing, and it was important that they were presented in a user friendly format that people could understand.

Mr Capa said that on page 11, at the top paragraph, was disputing the geography of the towns listed, and some clarity was needed.

The Chairperson responded that it was important to note which major cities were the nearest to one if one was a developing cooperative in one area and needed to know how one would transport the goods. That was why the bullet point had specified those particular towns, because the two cities were important for investment purposes. She then asked if there could be a move for the adoption of the report, if there were no further amendments.

The report was adopted, with Ms November and Mr Kruger having respectively proposed and seconded it.

Limpopo Report

The Chairperson asked if any Members had any changes to make to the report. 

Ms November pointed out that there were no time-frames stipulated. For everything that the Committee did, she found it important for it to be attached to a time-frame or it ran the risk of not being considered urgent enough to be acted on.

Mr Mabasa referred to page 7, bullet point 5.1.3 on the last line, and proposed that they change it to add the word ‘thereof’ before the words ‘of a skills transfer,’ which then continued on to page 8, bullet point and he suggested that the word ‘spheres’ be left out, as there had already been mention of the Departments. On page 9, bullet point, he suggested that they replace ‘at termination’ with ‘poverty reduction’. On page 10, the second paragraph and second line, to add the word ‘brick’ or ‘brick manufacturing’ before ‘machine’. In the same paragraph and fourth line, he proposed a full stop after the word ‘infrastructure’ and to start a new sentence thereafter. In the same paragraph, he asked that there be an elaboration on what was being said to provide a little more information. On page 11, bullet point, the fourth line, he proposed to add ‘of the’ before ‘inter-governmental task team’. On page 12, bullet point 5.4., at the end of that paragraph, he proposed ‘happen’ should be changed to ‘happening’. At the end of the page, bullet point, he proposed the addition of ‘should a hawker be sick’ as opposed to ‘should a person’. On page 13, bullet point 5.5, the second paragraph and third line, he proposed ‘simple’ to be changed to ‘simply’. In the same paragraph, third line from the bottom, he asked for the inclusion of the apostrophe after the ‘s’, as they were referring to many years. On page 14, the first paragraph and fifth line, it should say ‘the Members of the cooperative’ and not the shareholders because this denoted a company. On the second paragraph on the third line, the word ‘stalls’ should be changed to the singular.

Mr Capa on said that on page 8, bullet point 5.2., it should say it was funded by the Department through SEDA, because he was worried the Department would be assumed not to have played a role. On page 9, bullet point, he asked that the Department also be included in the sentence. On page 10, bullet point 5.3, the top paragraph, he asked for clarity on whether the word ‘agree’ was correct, or if it was referring to something else. On page 15, the last paragraphs of the three bullet points, he said that the first one should be the provincial Departments, making the last one the national Department.

Mr Chance thanked the content advisor for his work on the report. He said that on page 9, the last paragraph, ‘node’ should be changed to ‘province’. On page 3, the last sentence of the paragraph was an issue of contention over employment standard being a bit of a contradiction – maybe a combination of rurality and unemployment would work best. He then returned to Ms November’s point and also mentioned that it would be helpful to give a timeline of which institution had been visited on which day, and it would be helpful to label them. He referred to the omission of two places from the narrative, as he thought they were very important and should be included in the report. On page 6, the last paragraph and line 6, he asked that the word ‘mythical’ be changed because this made it seem as though the cultural practice did not exist. On page 22, bullet point 6.2, he said that there needed to be an elaboration on the lack of coordination between the three spheres of government. He added that the lack of coordination at the local economic development (LED) level needed to be pointed out. On page 24, bullet point 7.1, he stated that it could be said in theory, but how could they openly say this was so in practice when they were aware that 88% of cooperatives were failing. He suggested that the point be changed to reflect the reality of the cooperatives, and not what they hoped it would be.

The Chairperson responded that she agreed with what had been said. The problem had was with the Department and the misconception that the work was being done, although the results showed that this was not true because there was no master plan, no module being followed and no instruments. On page 2, bullet point 5, the word ‘adequate’ should be changed to ‘critical’ to show that small businesses relied heavily on the support structures that had been created for them. She said that this would help the Committee to argue with DTI on why these structures were so critical to them.

Several Members commended the content advisor for the quality of the report he had produced.

The Chairperson also wanted to say that she was happy about the report and the style of writing. The content had been arranged in such a way that it gave context to why the report had been created and said that if all Members were satisfied with the report, it should be adopted. She added that the reports were very important, especially when looking at the programme review and considering which programme they thought could best create jobs in South Africa. She added that if the Committee did not come out forcefully, jobs could be created but the unemployment rate could still be high in underdeveloped areas.

The meeting was adjourned.  


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