Chad Construction; 3C Projects; Vedanta Mining- Black Mountain Mining (Pty) Ltd; Inyanda Chambers of Business; Screamer Telecoms-Molapo Technology, Limpopo Economic Development Agency (LEDA)

Meeting report

Chairperson’s opening remarks
The Chairperson said the purpose of the meeting was to hear from various small businesses who had contacted her about how they were being marginalised by big cooperate businesses. The Committee had a similar meeting last year where various small businesses complained to the Committee about how they were being bullied by big companies. The presenters should briefly explain how they came to be making the presentation to the Committee.  

Briefing by Screamer Telecoms-Molapo Technology
Ms Lindiwe Mukoni, Marketing Director, Screamer Telecoms; said she had tried many avenues in an attempt to resolve the problem that the company was facing. Molapo Technology was liquidated late last year and merged with Screamer electronic services; Molapo Technology owned 62% of the shares. Molapo Technology had been in operational for 15 years and during its peak employed about 1500 employees. The company is the largest specialist in telecommunications equipment repairer in the country, and second largest in the world after Engineering Repairs, based in Europe. The company had various customers, with Vodacom and MTN with Telkom being the largest. Molapo Technology was repairing about 60% of the faulty equipment of Telkom. The main challenge now is that Telkom has started sending its faulty equipment to China for repairs and this arrangement seems to be protected by a special relationship that South Africa has with China. Companies like Eriksson, Siemens and Alcatel also said  that their equipment should be sent to Holland and USA for repair.

Discussion 
The Chairperson indicated Cabinet took a decision on 8 November 2007 that there are goods and services that should be supplied by small companies. These goods and services include media and communication, interior and exterior cleaning product supply and computer equipment. National Treasury was given a responsibility to give guidelines to all provincial and national government departments on ways to ensure implementation and monitoring of this Cabinet resolution. Cabinet also took a decision that the 30-working day rule for the payment of suppliers should also be applied to small companies. The Department of Small Business Development was not in existence when Cabinet took the decision as the Department was only established in 2014. The Department was mandated to coordinate and champion development of small businesses including Small, Medium and Micro Enterprises (SMMEs) and cooperatives. The Department is also responsible to ensure that government departments adhere to that Cabinet resolution taken in 2007. The issue flagged by Molapo Technology was intrinsically linked to all issues that were discussed in the Cabinet resolution. The Committee had the responsibility to ensure that small businesses are protected and create an environment that would be conducive for the growth of SMMEs and cooperatives.

She highlighted that it was important for these issues to be addressed in the Committee since Members of Parliament are law makers and responsible for holding the executive accountable. The Committee could possibly propose legislation that would protect SMMEs to operate in a friendly space. The National Development Plan (NDP) was clear that the SMMEs and cooperatives would need to create 9.9 million jobs by 2030. It would be impossible for the country to create this number of jobs if local companies start sending its faulty equipment to China for repairs instead of affording an opportunity to local players.

Mr G Kruger (DA) asked that Members be given the 2007 Cabinet resolution on small businesses as this was an impact factor that should base any discussion that the Committee would have. The general feeling is that the Committee had nothing to discuss if Cabinet had already made a resolution but rather to make sure the resolution was being implemented.

The Chairperson responded that Members would be given a printout of the 2007 Cabinet resolution as this was an important document to be shared with everyone.

Mr Kruger pointed out that the Cabinet resolution was directed to government departments and not to entities like MTN and Vodacom, which do not belong to government.

The Chairperson explained that even if MTN and Vodacom were not government entities the Committee would still need to look at whether there are policies that could be reviewed or introduced to support and protect the SMMEs and cooperatives.

Mr X Mabasa (ANC) proposed that the Department of Trade and Industry (dti) should also come in to assist the Committee as that was the Department that was dealing with tariffs, exports and imports. The Committee should set up a quick meeting with representatives of the multinational companies so as to deal with this matter together with dti. The private sector should also play its role in the job creation in the country. The matter should have been brought to the Committee before Molapo Technology was liquidated late last year and resulted in a loss of jobs.   

Mr R Chance (DA) indicated that the Committee should get a report on the extent to which the Cabinet resolution was being implemented by government departments and State-Owned Enterprises (SOEs). The Committee should invite whoever is in charge of procurement at Telkom to explain to Members why it made the decision to change its repair and maintenance policy and focused on China. 

The Chairperson suggested that perhaps the Committee would need to explore the existing relationship between South Africa and China with the aim of having the Chinese companies exploiting this relationship at the expense of SMMEs in the country. The view of the Committee is that the relationship between the two countries is not supposed to hinder the development of small businesses in the country but to build capacity and further development.    

Briefing by Inyanda Chamber of Business
Mr Edgar Dhlomo, Chairman of Inyanda Chamber of Business; stated that most of the members in the Inyanda Chamber of Business are semi and fully retired. The battles that were fought in the 1970s and 1980s were liberation and political emancipation by political movements like PAC, ANC and so forth. There was also liberation for religious emancipation and this is where we saw churches like Lekganyane and Shembe. Inyanda had always been fighting for economic emancipation in rural areas and township areas. The Chamber is focused on nurturing young African entrepreneurs and the nurturing of their spirit. Government should remove all the barriers that prevent small businesses from entering the market. It was crucially important that government help and assist young people as they are becoming angry and restless because they feel they are being disempowered.
           
Mr Dhlomo highlighted that the Chamber strongly believes that government should focus on pairing SMMEs with big businesses with a particular focus on training, mentoring, development, national growth and job creation. Small businesses often mentioned lack of funding as a daunting task in starting a business and there is a need to provide enough information, tools and support to keep their businesses running and profitable. The authorities continue to strangle the spirit of entrepreneurship and innovation in a web of bureaucracy, over regulation and taxation. To get new products or services into use, or to put up a trading station, the development rights process is often as much a task for lawyers and accountants as for the innovator. The Chamber of Business advised that the small industrialists should partake in both the inter-firm and inter-industry linkages. This relationship would offer the best opportunity for full regional development.

Mr Dhlomo believed that all of the suggestions that had been made need government intervention and involvement. The reality is that small business is the future of this country, and small business is usually made up of young entrepreneurs who are the future of this country. The exclusion of young entrepreneurs in the creation of wealth has resulted in the retardation of industry competitiveness and has weakened the productive capacity of the economy.   

Discussion
Mr Mabasa appreciated the presentation as this was an input not pertaining to one enterprise but all-encompassing and covered the whole country. The presentation should at least brief Members on what the Committee was expected to do and the measures to be implemented through various government departments. It was observed that small businesses in the townships often become victims when there is a service delivery protest and theis should have been included as one of the challenges facing small businesses.     

Mr Kruger also struggled to determine exactly what the Chamber of Business was asking the Committee to do in order to further assist small businesses. The Committee should certainly support this initiative where old retired people are assisting young people in growing their businesses. The Chamber of Business should spread its wings and not solely focus on KwaZulu-Natal (KZN) but to all the other provinces. The issue of red tape seemed to be coming up very often from the Chamber and this was more than finances and skills development. It would be important to hear from the Chamber on the proposed solution to combat the problem of red tape in the country.

Mr Chance asked Mr Dhlomo to differentiate between the challenges that were experienced by small businesses now and in the past, to determine whether the challenges being experienced now are in any way different to those that were experienced in the past. What was being done in the past to address the challenges faced by small businesses? What was not being done now to address the challenges faced by small businesses? What is the general attitude of young entrepreneurs these days? It would be interesting to hear if young people are adequately equipped to become successful entrepreneurs. It is vitally important for young people to build robust and strong structures that could represent businesses in rural areas and townships. The Committee should be briefed on whether the Chamber had a receptive audience in the interaction with big businesses or they were interested in retaining the existing supply chain relationship. It would be interesting to hear if the Chamber had any interaction with organisations like Small Enterprise Development Agency (SEDA) or South Africa Financial Agency (SEFA).      

Mr N Capa (ANC) welcomed the presentation that had been made as it was interesting and eye opening. The Committee should be briefed as to whether the Chamber had ever communicated with the Department of Small Business Development (DSBD) together with their entities. The Committee should hear the perception of the Chamber on the xenophobic elements in the township, especially those that are targeting foreign Spaza shops.

Mr Dhlomo responded that most of the questions asked by Members were contained in the brochure that would be distributed. The Chamber had come a long way in trying to find its ground especially since this was taking place during the apartheid struggle. The tools are there to help nurturing young people but the problem is people on the ground at the level of municipalities. The Chamber is appealing to government to ensure that people are accountable to what they are supposed to be doing and this is especially the case of people at municipal level who are earning a lot. Government should also remove the unnecessary red tape that is a hindrance to the success of small businesses. Laborious requirements are being asked from anyone who is interested in starting a business and some people end up not starting their businesses. The Chamber is hardly involved in the protests as this is not a union, and a factor to be taken into consideration. The Chamber wanted to add its voice on a number of issues to be addressed, especially those that are affecting entrepreneurs. The Chamber was appealing to government to look closely at small businesses and focus on ways to help them.

There is a general feeling from local small business owners that foreign businesses are hindering the development of local small businesses. The reality is that small black businesses should be supported in order to make a meaningful impact on the economy of the country.  In essence, most of the questions that had been asked by Members would be found on the brochure to be distributed at the end of the meeting.

Mr Chance asked for clarification on ways in which to get new legislation into harmony with existing laws like the well-defined relationship between Ingonyama Trust and tribal authorities with the local municipalities.

Mr Dhlomo responded that this spoke specifically about the simplification of law so that new legislation could be in harmony with existing law and this once again is to make it easier for small businesses to operate.  

Afternoon session
The Chairperson indicated that Vedanta is a mining company, originally from India but operating in the Northern Cape. There are two companies here namely 3C Projects and Chad Construction. These two companies had an unpleasant relationship with Vedanta and the Committee also invited Vedanta but they sent a letter of apology.

Briefing by 3C Projects
Ms Rachelle Dupbay, Chief Executive Officer (CEO) of 3C Projects, said her company was approached by Vedanta in 2015 to design and build 300 houses. Three other companies were in line for the project. The initial price that was charged by the company during the negotiations was R5 750 per square metre. 3C Projects was approached by two staff members from Vedanta requesting that they reduce the price that was being charged. Numerous problems were encountered when the company was about to begin building houses as the staff was not provided with ablution facilities in the area where they were supposed to be working. A lot of contractual agreements were not discussed with 3C Projects. 3C Projects was subsequently forced to close down its business and over 200 employees had to be laid-off. There were about 11 companies in the area that were in the same problem of having to close down and lay-off workers.

Ms Dupbay made it clear that the biggest mistake she ever made was getting into business with Vedanta. The main challenge facing the company is the responsibility of having to pay outstanding amount to the suppliers as there is no money at the moment; he company has closed down and it would be impossible to pay the suppliers.      

Briefing by Chad Construction
Mr Kurt Alexander, Managing Director of Chad Construction, said he heard about the meeting from a friend of his who was also in the same predicament and owned a company. Chad Construction builds houses throughout the country.  A number of companies were in the same position as Chad Construction and 3C Projects; many of them have been liquidated or forced to close down and lay-off many workers. In essence, Chad Construction was in the same predicament as 3C Projects as workers were not provided with facilities for workers to be able to cook, use healthy ablution facilities and so forth. The manipulation was in the contractual agreement including the price that was being charged per square metre.

Discussion  
Mr Chance commented that the client, Vedanta mining, is an Indian company operating in a number of countries around the world and also listed on the Johannesburg Stock Exchange (JSE).
 It would be important to know if the projects that 3C Projects and Chad Construction were asked to do were part of the socio-economic requirement based on mining companies in terms of the Mining Charter. There seemed to be a pattern of contract management that is prejudicial towards construction companies and this is evident in ways in which the two contracts were handled. What could be the motivation of Vedanta in doing this?

Mr Alexander responded that this was indeed the case and the Zambian government actually sued Vedanta mining for R1.5 billion because of this problem of mismanagement of contracts.  
 
Ms Dupbay added that the practice was unethical and likely to be financially beneficial to Vedanta as a company.

Mr Chance said the situation for both companies was undesirable and it looked like the matter arrived in the Committee very late. What kind of intervention or relief should these two companies have in order to resolve this matter? It was unclear if the companies had any meeting with the board of Vedanta in order to resolve this matter.

Mr Alexander replied that arbitration process could possibly resolve this problem as it was mainly based on contractual agreement. 

Ms Dupbay replied that she had a meeting with board members on January 2016 to discuss as to how and when 3C Projects was to begin with the second phase of housing. The company was established in 2012 and was forced to close down in 2017 and lay-off 200 employees who had been with the company since its establishment. The workers are now unemployed with no income to feed their families.  The way Vedanta is treating South African companies is unethical and corrupt.

Mr Mabasa indicated that this was a complicated case in a sense that the Committee needed to get more information and engage with these companies that are exploiting small companies. It was appreciated that the companies seemed to prefer arbitration rather than having to go to court as this was taking so much time and money and it is proven to be costly to small companies. The Committee would need to involve the Department of Human Settlements to find out about tools that they had developed thus far in anticipating similar problems. It would be important for the Committee to try and find a quick solution as each day that passes is costly to the business. Job creation and job retention is critically important, especially in our country with high unemployment. It was also good to hear that the two companies were employing local people in a project being done. The Committee would need to accurately investigate where these companies had broken the law. The fact that Vedanta seemed to be preying on small companies was something that the Committee should take very seriously as unemployment continued to increase.

The Chairperson stated that the Committee would be looking at short term intervention where it would be premised by a follow-up. The Committee would need to invite Vedanta together with companies that had been forced to close down because of its malpractice. The Committee would also have to be provided with a legal department of Parliament in order to find ways to resolve these cases. A long-term intervention would be looking at setting up a constant resolution structure that would be dedicated at resolving issues of this nature affecting small and big businesses. There is a need for interaction between the Committee and the Portfolio Committee on Mineral Resources. The Committee should find a solution as to why the mining companies are not willing to cooperate with small businesses even if the service of building houses for miners had been rendered.

The first case from Molapo Technology was where the company was negatively impacted by a company from China and the case of Chad Construction and 3C Projects was also negatively impacted by a company from India. There is tendency of foreign companies having a negative impact on local companies and this is something that needed to be taken into consideration by the Committee.  The Committee would not want a situation where the relationship between South Africa, India and China is used negatively to impact on small companies. The Committee had a national responsibility to propose laws that would protect South African companies and create job opportunities for local people. South Africa was trading with other countries and even allowed them to invest in the country, but that direct foreign investment should not happen at the expense of South African companies.

Vedanta Mining wrote a letter that they would like to come to the meeting but had prior commitments and promised to honour an invitation at a later date. The Committee is faced with the challenge that this is the last day for the sitting of the Committee and Members would be back again in August 2017. The Committee appreciated that the two companies were able to come to the Committee to express their grievances as this was the responsibility of Members of Parliament. The Committee would also like to get information about those companies that had been liquidated so that any follow up meeting would include those companies as well.

Mr Capa said the Committee should indeed invite the CEO of Vedanta so as to hear their side of the story in order for the Committee to make a meaningful intervention.            

Briefing by Limpopo Economic Development Agency (LEDA)
Mr Nebo Kekana, Executive: LEDA; appreciated the opportunity to present to the Committee as this was an important platform. The problem faced by the Agency was that one of its clients is facing a possibility of closing down and possible lay-off some of the employees. The Agency tried to intervene by including all the affected parties but soon realised that the problem was not only in Limpopo but also in Mpumalanga and other provinces. A number of companies had been affected by this possibility of having to close down and these included a company under Afri-Wise, Tegmul Petroleum Services, both contractors to Total. The purpose of coming to the Committee was to appraise the Committee on the marginalisation and exclusion of black owned contractors by Total South Africa. The Agency is also seeking advice and solution that could resolve the problem faced by these companies.

These companies were faced with a number of challenges, including intimidation, delays in the purchasing of orders, cancellation of contracts and the blacklisting of black contractors without following due processes. The Agency tried to engage with Total South Africa with no avail. There seemed to be a level of arrogance from the company and this is proven by its reluctance in dealing with the problem at hand. The Agency was worried that these challenges that had been highlighted could result in a loss of jobs 48 000 that the country had already lost in quarter 1. The Agency had identified the 6 companies that are in similar problem and there were 270 workers that were likely to be laid-off including about 46 young people, 64 women and indirect employees that are subcontract providers. The demise of these 6 companies could present a huge socio-economic challenge.

Mr Kekana continued that there is a general feeling that more companies were affected by this problem but they felt intimidated by Total South Africa. In terms of the provincial breakdown, there are 2 companies in Gauteng, 1 in Limpopo, Mpumalanga, Western Cape and Free State respectively. It is so sad to see an internationally recognised company like Total which has a global ethical code on its website exploiting small companies in this cruel manner. 

Discussion
Mr Chance said that there seemed to be a pattern of maltreatment by Total South Africa towards the subcontractors. Serious allegations were made by the Agency but the Committee would firstly need to understand exactly what had happened so as to understand the possible remedy. The Committee should perhaps give an opportunity to Rua Botlhare Projects to briefly tell the Committee what exactly happened.
           
Mr Tebogo Ramatswi, Director: Rua Botlhare Projects; explained that the problem started a long time ago in 2015. Total South Africa said there were few contractors that were doing the work that was being done by Rua Botlhare Projects and that is where Total South Africa offered the company a contract. The company was then informed that Total South Africa was no longer going to do business with Rau Botlhare Projects and this was after many complications.

Mr Chance asked if there was any proof that Total South Africa was marginalising and excluding black contractors.

Mr Zola Pato, Managing Director: Tegmul Petroleum Services; clarified that they are not “fly by night” contractors but very experienced and qualified. He is a chemical engineering and worked for Sasol for ten years, his main responsibility to design specification for garages and the depots. He then worked for Total South Africa for the period of 3 years. In 2013, he started doing the pumping service for Tegmul Petroleum Services. All these contractors complied to all the requirements needed and all these black contractors have ISO1001 certification and ISO14001 certification and ISO18001 certification; and none of the white suppliers have those high qualifications.  The majority of the contractors believed that this is more than about performance and qualifications.

Tegmul Petroleum Services heard rumours last week about the possibility of being blacklisted, and this was indeed true when the company was blacklisted on Tuesday 27 June 2017. There was a garage that the company was building in North West but the company received a letter to vacate the site as this contract was being given to a white contractor. Eight attempts had been made by a specific individual to get the company blacklisted. Total South Africa blacklisted the company based on allegations and no due process was followed. There was cogent proof to all the allegations made by the company against Total South Africa and that white contractors are taking over site where the company had been unduly removed. The company currently had R8.5 million worth of purchasing orders that are at stake and 64 employees that are likely to be retrenched. Each day of idling was costing the company about R100 000 and the more the delay the more it becomes costly for the company. The problem was fresh enough that if the Committee was to intervene immediately the damage could be revised.

The Chairperson mentioned that one thing the Committee could take from the meeting today is that small businesses are marginalised by big companies. This started when the Committee invited two companies namely; Miller Trading and Mbonisa, and because this meeting was televised it attracted a lot of interest from other small companies to come and appear before the Committee in order to share their experiences. The reality is that small companies were not coming before the Committee in the past but this seemed to have changed. It was the best decision for these small companies to come before the Committee and to Parliament as this is a law-making institution. It is the responsibility of Parliament to make new laws in cases where there are loopholes. The Committee would have a short and long-term intervention as explained before.  The presentations made today show that it is a common practice for big companies to exploit small companies and therefore the Committee would need to introduce laws in place to deal with this pattern.

The Committee would need to separate between a practice done by a company and that which was being done by few employers so that the Committee would be able to get rid of “bad apples”. The Committee would need to get to the bottom of the problem and ask who was responsible for the problems being experienced by contractors at Total South Africa. 

The Chairperson thanked all the presenters as it would have been impossible for the Committee to know about these challenges being faced by small companies. It was also good to see that Members managed to look at these issues from a common perspective. There was a misunderstanding in the beginning of the meeting and Mr Kruger was making a very important point that the Committee should find a resolution that would deal directly with private companies as the Cabinet resolution was to deal with SOEs and government departments.

Mr Mabasa suggested that the Chairperson should consult with the Chairperson of the Portfolio Committee on Mineral Resources so as to walk together on the short and long term of the Committee in addressing the problems that came to the Committee together. The Committee was also particularly impressed to see highly qualified black individuals as there is an impression out there that black people are useless and are supposed to be doing menial jobs. The individuals that presented today were highly qualified and experienced.

Mr Kekana once again thanked the Committee for the opportunity to express their frustration on the matter.

Mr Chance recommended that the Chairperson should write to the CEOs of Total South Africa and Vedanta in expressing the grievance of the Committee on the handling of the contracts for the contractors presented in the Committee. The Committee hoped that both of the CEOs would respond as to why they decided to terminate the contracts of the contractors. The matter cannot wait until the Committee returned on 1 August as it needed to be investigated with urgency. He volunteered to visit the CEO of Total South Africa to find out exactly what happened and how to get to the bottom of the issue.

Mr Mabasa added that the priority of the Committee would be to return things to normality while seeking for a long-term solution.

Mr Pato indicated that the letters to the contractors had already been drafted and could be sent to the Committee immediately as every day is costly to the business. The company would appreciate if the Committee could intervene now on the matter as even if a solution were to be found in coming weeks it would be too costly to the company. Vacation of the sites was also costly in terms of transportation and this is something that the company currently have to deal with.     
           
Adoption of minutes
The Committee adopted the minutes of 21 June 2017 with amendments.

The meeting was adjourned.