Minister of Small Business Development on Department Written Responses required by Committee

Small Business Development

07 June 2017
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The Minister of the Department of Small Business Development appeared before the Committee to respond to criticisms of poor performance by her Department.

The Minister expressed her apologies for her non-attendance at meetings of the Committee in the past, and said that she never intended to disrespect the Members as they helped her and the Department to fulfill their mandate. She outlined some of the Department’s problems, which included inheriting unproductive programmes from the Department of Trade and Industry, not having all the right structures in place, employees not having the right mindset and not all the relevant positions being filled.

During the discussion, Members pointed out that the Department had a very important role to play in fighting poverty, unemployment and inequality. The Department should focus on promoting enterprise development, entrepreneurship and enterprise survivability, rather than on service delivery. Issues pertaining to the Department’s impact in rural areas, and alleged corruption in KwaZulu-Natal and Mpumalanga involving service providers and the cooperatives’ incentive programme, were mentioned. The Minister was also asked how she would ensure accountability, address corruption and instill a change of mindset among her employees.

The Minister said she would continue to seek advice from the Members and would engage with other departments to make them aware that her Department’s performance was reliant on their fulfilling their mission objectives for service delivery as well. She would cooperate more with the Members in the future and also hold direct conversations with the Department’s staff in order to foster positive results. 

Meeting report

Minister’s overview

The Chairperson welcomed Minister Lindiwe Zulu and the Director General of the Department of Small Business Development (DSBD), Ms Edith Vries. It was the first time the Minister had been requested to appear before the Committee to account for the performance of her Department. She read a letter to Minister Zulu dated 23 May 2017, which stated that the Portfolio Committee was concerned that when the Department had been invited to a Committee meeting on September 26 2016, a progress report on projects had not been presented. In addition, no programme review, annual performance plan or strategic plan had been made available. The non-filling of strategic positions and the non-review of the national small business agenda were all issues raised by the Committee in the letter. The Portfolio Committee was of the opinion that the Director General and Department were treating it with contempt, and this had led them to call on Minister Zulu to account on the progress of the DSBD since 2015. Members had been given tracking tools by the Department to enable them to see what the DSBD had been up to.

Minister Zulu acknowledged reception of the letter, as well as communications about the concern of the Chairperson and the Portfolio Committee. She took responsibility on behalf of her Deputy, the Director General and the Department as a whole, but indicated that she had always had respect for the Committee and their objective of providing oversight. She had therefore always listened to them, irrespective of what party affiliation they had, because they were speaking on behalf of their constituents.

When the Department was created, it had had to do a review of programmes inherited from the Department of Trade and Industry (DTI) in a holistic manner, and in three years it had been hard to establish a fully functional department. In that regard, she could not allow her Department to undermine the Committee. She had been personally involved with the Committee and their field work in order to get a full understanding of their working, and had traveled with them on the few occasions she had been available. This had allowed her to reconcile theoretical and practical work and had enabled the Department to translate strategies into plans felt on the ground.

Minister Zulu said that management and administration, as well as practical implementation, had been hard, but creating a structure and people who were accountable to government practice was important in order to understand challenges. The Department of Performance Monitoring and Evaluation (DPME) had assessed them and indicated their weaknesses, while the National Treasury (NT) had done the same, and so the Department was building the capacity to respond to what the Committee expected from them. There had been a lot of progress, but not to the extent that she would have liked to see as a Minister, and would want to move out of a situation in which the Chairperson was disgruntled with the Department. It was important that she took full responsibility and continued to seek ways to improve.

Minister Zulu said that she had inherited staff from the DTI who were not immersed in being accountable, and therefore the Director General had had to ensure discipline and accountability. The first and second year had left a lot to be desired, but the past two years had not resulted in unfulfilled obligations, as the annual performance plan and strategic plan had been reported with success, and the shortcomings indicated. Her intention had been to respond with a full package and not in a piecemeal manner, especially with regard to the past two years. She had expressed her frustrations to her Deputy and the Portfolio Committee, and had instructed the Director General to fill all positions. The process of reviewing the DSBD’s structures had to be done as soon as possible, as it would enable the Department to address its strengths and weaknesses. Concerning the cooperatives’ programme, the intention was to go into the field to assess the more than 400 cooperatives receiving support.

Ms Zulu decried the unacceptable level of unpreparedness she experienced from her Department, and would endeavour to hold direct conversations with Department employees, rather than delegate the tasks. She expected to meet all units, and hoped this would provide direction concerning the kind of progress reports to be provided. Developing a culture of hard work was essential, as civil servants had to identify which cooperatives were succeeding for the sake of promoting accountability. She acknowledged there had been a slip up from the Department in submitting reports, but the Director General and the management team had an idea of what they were doing now.

She asked the Director General to provide a review of what she had done over the last two years, and promised that this year’s report would be better than the previous year.

Ms Edith Vries, Director General (DG): DSBD said she had been appointed in 2015, and no governance system had been in place when she took up the position. However, in the 2015/16 financial year the Department had obtained an unqualified audit and hoped to obtain another one in 2016/17. She stressed the importance of accountability, because if they did not, Treasury would not give them money and the private sector, as well as other departments, would not want to work with them.

The Department had had a 25.6% vacancy rate, but had reduced it to 9% by the beginning of the financial year. The appointment of a Deputy Director General (DDG) had had to wait until all the governance structures required were in place. She had also stipulated the Department must stop all unproductive projects, and the programme review was looking at projects inherited from the DTI.

Ms Vries explained that Minister Zulu held quarterly one-on-one meetings with the various units, with the aim of creating proximity and advocating a paradigm shift. The Department never intended to disrespect the Portfolio Committee and sometimes got poor reports, and the work they have could be overwhelming. However, she was optimistic about where the Department was heading, and apologised if the Committee felt disrespected.

Minister Zulu acknowledged that there were suspicions of corruption in relation to the cooperatives’ schemes, as evidenced in their trip to KwaZulu-Natal, but the Department was ensuring there were proper accountability mechanisms to track people who were not doing the right thing and making sure there was a return on investment with government projects.   


Mr R Chance (DA) started by recognising the sober review of the progress, and lack thereof, made by the Department over the past three years. South Africa had nine million people out of work, with a low labour absorption rate of 40%, and these high numbers of unproductive people increased poverty and inequality, and also threatened social cohesion. In relation to these figures, the DSBD should be one of the most important ministries, but was regarded as step-child. The Department had a mindset problem -- that it was in the business of service delivery. This was wrong, as the Department must be driven by entrepreneurship, enterprise development and growth. The DSBD had inherited DTI programmes which did not have a great effect, and were using resources without much accountability. He suggested a complete programme review should be conducted, followed by a strategic review, with recommendations which would help the department.

Mr Chance was of the opinion that bringing in new blood was an option, as the “old house” was driven by “ticking the boxes” rather than by concrete action, and the example of the Cooperatives’ Incentive Scheme was provided in this context. He also questioned if the right strategy was in place, and said that acting personnel must be replaced with people working on a permanent basis. A strategic review must be done or else the Department would be faced with the same problems. He recognised that progress had been made, but the Department had to prioritise interventions which added value. Therefore, macroeconomic interventions must be done with an understanding of microeconomic conditions. South Africa needed not only to increase the number of small businesses, but also their survivability rate, as well as build trust between the government, the public and civil society, as it had been compromised by the recent Cabinet reshuffle.

Mr H Kruger (DA) said the Department had had no impact on South Africa’s rural communities over the last three years, especially in the constituency he represented (Mpumalanga), and this was a concern since the impact of the Department was meant to bring down rural poverty. He felt the Department’s strategy was based on trial and error, which led to wasteful tax money expenditure. He was surprised by the fact that most Extended Public Committee (EPC) speeches alluded to the importance of small and medium-sized enterprises (SMEs), but the Department was still so small. The Department did not have knowledge of its core business customers and did not know what their potential business needs were, and thus could not make progress to the next level.

Mr X Mabasa (ANC) complained that despite the various visits to the field by the oversight Committee, he was worried that corrective measures were not being taken to address shortcomings, and this meant that the oversight visits were not translating into positive action. He cited the case of the West Rand visit undertaken by the Committee, and stressed that feedback should be provided in order to guarantee improvement and provide better outcomes.

Ms T Mahambehlala (ANC) expressed her desire to see an attitude change at the Department, as this would allow a visible impact to be attained, especially in the area of poverty alleviation. She alluded to allegations of corruption against service providers in Mpumalanga and KwaZulu-Natal, and asked whether the Department had made any progress in that area, as government had a mandate to fight corruption.

Mr N Capa (ANC) said that a meeting of this nature should include three elements: why, because, and therefore, which underlined a process. He wanted to see a change in the area of disciplinary action. Performance management was an area he laid emphasis on, and said that the Committee needed to be convinced as to whether what had not been done would be fulfilled in the future.

Mr T Khoza (ANC) said it was difficult for the Department to adjust their poor mindset because they were resistant to suggestions. He alluded to the corruption allegations in KwaZulu-Natal and Mpumalanga, and suggested more needed to be done to root it out.

The Chairperson said that she and two Members would have to be excused in order to attend a meeting with the Chief Whip. She thanked the Minister for taking the issues raised very seriously, and asked her to ensure change management at the Department. This would entail addressing personnel management, problem management and time management, for without addressing these issues their programmes could not be properly executed. She echoed the sentiments of Mr Chance that the Department should not focus on service delivery, but on becoming an enabler for SMMEs to thrive. She reminded the Department to remember their mandate, understand their role and work in line with outlined national policy.

Minister Zulu thanked the MP’s for their input and once more took responsibility for actions taken on behalf of the Director General and the department. She agreed that the mid-term review should be based on performance management, and not on just ticking the boxes. The Department was supposed to enable SMMEs and cooperatives to stand on their own two feet and would drive that into the mindset of the Department’s employees. She said the right structures were not in place to allow them to recruit the right people to carry out certain functions. She also agreed that they had to make sure other departments understood that the DSBD relied on the service delivery of other departments, and they would establish intergovernmental cooperation to drive home this point.

She wanted to do away with the trust deficit, because the growth of SMMEs was strengthened through public-private partnerships. She was concerned about the issue of corruption, and would consult with her Director General and subsequently with the staff on how to remedy this scenario. She promised to take into account all the suggestions from the MPs that would enable a mindset change in the Department.

Ms Vries spoke of instilling a mindset change, and agreed about the importance of giving assurance about how corruption was being addressed. The Public Finance Management Act (PFMA) must be promoted to facilitate a mindset change, and they would hold a strategic session on 8-9 July to address this.

The Chairperson returned at this stage and praised the good spirit of the meeting, as well as the willingness and commitment from Minister Zulu to institute change. She requested that a follow-up report be provided before budget allocations were done. She concluded by stipulating that due to her NGO background, she would suggest training programmes and career pathing be incorporated so that the right people could be groomed and mentored for certain positions.

She recommended that the Ms Vries bring along the Deputy Director General to the next session, and the Minister added her view on the importance of bringing a delegation to such a briefing, as it enables them to experience and understand these kinds of structures and processes.

Committee matters

The Committee deliberated on the minutes of the previous meeting.

Mr Chance was worried the minutes did not show the Committee’s concerns about the financial viability of the DSBD, as they had requested R1 billion to function. He said the medium term financial projects should be reflected in the minutes. The Chairperson stressed the need for the DSBD to become financially self-sufficient. The minutes were adopted.

The meeting was adjourned.



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