National Small Business Amendment Bill: hearings

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Trade and Industry

26 May 2003
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
27 May 2003
NATIONAL SMALL BUSINESS AMENDMENT Bill HEARINGS



Chairperson: Dr R H Davies

Relevant Documents:
National African Federated Chamber of Commerce (NAFCOC) submission (document awaited)
 

African Council of Hawkers and Informal Business (ACHIB) submission
South African Chamber of Business (SACOB) submission
National Small Business Amendment Bill
Amendments Agreed to National Small Business Amendment Bill

SUMMARY
In its submission on the National Small Business Amendment Bill, NAFCOC made the point that the Department of Trade and Industry was not sufficiently aware of the peculiarities within the small business sector. They proposed that either the Minister or Deputy Minister focus directly on small business development, towards the upliftment of the historically disadvantaged, in the business sector.

The African Council of Hawkers and Informal Business (ACHIB) stressed the lack of delivery from organisations such as Ntsika and Khula. They said that small business in South Africa needs to have an efficient representative voice, and their recommendations revolved around how to create that voice.

SACOB's submission dealt largely with Clause 2 of the Bill.

MINUTES
National African Federated Chamber of Commerce
This submission was presented by Mr Vincent M. Phaahla (Deputy President: NAFCOC). Mr Phaahla stated that the amendments were of critical importance to NAFCOC, as the organisation was in the business of economic empowerment. The agency stands for total business development, from the smallest body to the largest.

Mr Phaahla's report addressed three main issues:
1. He informed the Committee that the amendments should be in line with the objectives of the Black Economic Empowerment (BEE) strategy.
2. NAFCOC was of the opinion that Government is not sufficiently aware of all the peculiarities within the business sector. Instead of establishing a broad-based body to service small businesses, such as the previous Small Business Development Council (SBDC), Government should look for organised business structures, and capacitate them to operate more efficiently. In establishing the SBDC, the Minister's intentions had been noble, but this idea clearly had not worked. Mr Phaahla suggested that instead, Government should interact with the informal business sector in order to understand their problems, and out of that interaction, develop a strategy. He further proposed that the Minister of Trade and Industry, or alternatively the Deputy Minister, possibly along with a Deputy Director-General and several other Chief Director's, be charged with directly focusing on small business development and the business upliftment of the historically disadvantaged.
3. The budget allocated for small business development was "miniscule". In order to inject the upliftment of the small business sector with impetus, it requires a massive input of resources.

With regard to the work of Ntsika, Mr Phaahla stated that, instead of the present system whereby the Minister applies his own discretion in appointing directors, various stakeholders should actually be involved in this decision. He appealed for a monitoring mechanism through which to measure performance levels by the organisation, adding that time frames be supplied. He further stated that Ntsika's structure had been almost a total failure. He added that the organisation was not representative of those people who were involved in small business.

Discussion
The Chairperson commented that a large part of the small business sector is unorganised. In the establishment of a body to represent the industry, he wanted to know who should be consulted, and how representation on the body would be decided. Should the body comprise businesses within the sector, and should parastatals be involved?

Mr Rasmeni commented that the Government of Nigeria has a ministry which is dedicated to the development of small business. He asked if Mr Phaala's suggestion that the Minister and other members of his Department be levied with focusing on small business development, had in mind the same idea of establishing a dedicated Ministry.

To answer the Chairperson's question, Mr Phaahla said that a whole number of structures are directly involved in small business development. He felt it was important that the body have a national, rather than a provincial structure. On the other hand, the structure may be sectoral rather than national, and all the structures should be brought together. He wanted to avoid a centralised structure, which he felt would dilute the objectives of the body, so that it would no longer be a fully representative one.

Whereas parastatals do not necessarily need to have a role on the body, they could serve in an advisory capacity.

He continued that NAFCOC's preference would be to have the Minister of Trade and Industry focusing on small business development. If that is not possible, they would be happy to have the Deputy Minister committed to the task.

African Council of Hawkers and Informal Business (ACHIB) Presentation
Mr Lawrence Mavundla (National President: ACHIB) presented this submission to the Committee. He started out by saying that he was sorry to have seen the demise of the SBDC, without having those responsible for "looting" the funds of the body having been duly punished.

Mr Mavundla shared ACHIB's gratefulness that, according to the Bill, some of the responsibilities previously given to Ntsika were being removed, in order to have them focusing on that work which they are better able to cope with.

He suggested that Clause 2 might be changed to read that "A minister should form a body", rather than saying, "A minister may consult".

Like Mr Phaahla, he did not support the idea of a national body, where the powers and information would be fed downwards. Rather, he felt that local authorities should be leaders in economic development. He suggested a programme which starts at the level of the local authorities, where the issue of small business is attended to by mayors and premiers first. By way of offering an explanation for his proposal, he said that if ACHIB officials found it difficult to access those officials in the offices of the Ministry, then it was worse for those people "in the street". In the past, small business development had been housed with the MEC of Finance, with unsatisfactory results. In the future, the consultative structure should be placed at the bottom, at the local authority level, and go up from there.

Mr Mavundla further informed the Committee of a series of rallies being planned by ACHIB, and asked them to attend. He added that generally, conferences are held in hotels at great cost. For those involved in the small business sector, simply getting to these conferences were problematic, in terms of finances and other constraints.

In conclusion, Mr Mavundla stated that ACHIB would welcome a future development where they were given offices at Parliament, to represent the small business sector there.

Discussion
Mr B Turok (ANC) commented that ACHIB was proposing a fundamental rewrite of the Bill, and of Governmental machinery. He added that in the past, their experience with people in small business had been that they were not resourced to come to Parliamentary meetings. When they had been invited to Parliament, it was usually only the activists in the sector who would respond. He wanted to know, for that reason, if it would be realistic to set up a structure in Parliament, such as the one being proposed by ACHIB.

The Chairperson stated that ACHIB's suggestions were "do-able", because they had spelt out principles, which could be fleshed out in terms of amending the Bill. Commenting on ACHIB's suggestions surrounding criteria for membership on an advisory body, the Chairperson cautioned that there would have to be greater consultation with other stakeholders on these criteria.

With regard to the suggestion to granting ACHIB a parliamentary office, he stated that Parliament was open to input. He conceded that they do experience difficulties with regard to sourcing authentic "voices" from public bodies.

Ms C September (ANC) suggested that there would be very little point in granting ACHIB office space, because when Parliament goes into recess, the parliamentary buildings basically stand empty. She however suggested that they could make use of constituency offices. She added that the Department of Labour normally talks about how to devolve many of the issues which Mr Mavundla had raised. She further suggested that the organisation look into the coming BEE strategy, and that it enter the debate surrounding the growth and development summit.

In response, Mr Mavundla stated that initially many people from the small business sector had indeed participated in meetings. However, when they found that decisions reached at these meetings were not being implemented, they stopped attending. All their proposals to NTSIKA "landed in the dustbin". Venues chosen for these meetings were usually not in places easily accessible to participants in the sector. However, Mr Mavundla made the point that when election times come around, members of Parliament go "house-to-house", canvassing for votes. Later on, when they want to talk to the people, they do this through newspapers. He suggested that the same means of reaching the people be used as for election campaigns. He also urged the Committee to address notices of meetings and discussions to organisations individually. It was ACHIB's aim to inform Parliament of plans and events on their agenda, such as the country-wide rallies which they were planning. He appealed for the same approach from Parliament.

On the criteria for membership to the advisory body, he agreed that all parties be consulted with. He was grateful for the members' comments on the suggestion for a parliamentary office, and stated that, that matter could always be discussed at a later stage.

In response to Ms September's comments, Mr Mavundla stated that ACHIB was determined not to be excluded from any structures which relate to them. At local government level, they are consulting with mayors all the time. The organisation is mobilising itself throughout the country, and is determined not to undermine any structure which can help the organisation to be of the utmost service to its members.

The Chairperson informed Mr Mavundla that the Department of Trade and Industry keeps a database of contacts. However, he appealed to Mr Mavundla to urge other stakeholders to be aware of initiatives by the Department, which relates to the small business sector. He added that the Department of necessity makes judgements on whom to contact for various discussions, and so could ACHIB.

South African Chamber of Business (SACOB) Presentation
On behalf of SACOB, Ms Peggy Drodskie (Policy Director) presented their submission to the Committee. In the presentation, SACOB questioned whether the reasons for the SBDC's inability to deliver efficiently on its mandate had been properly examined, and for that reason felt that any new body could run the risk of suffering a similar fate as the SBDC.

SACOB had grave concerns that should the Department of Trade and Industry establish a forum for small business which would act as its "voice", this would inhibit the Department's objectivity in matters involving the business sector. It was SACOB's contention that existing organisations are already able to provide that service. They suggested, rather than the implementation of a new structure, that closer co-operation with existing structures within the private sector be sought.

With that in mind, Ms Drodskie stated that although there is a general perception that SACOB represents only big business, which is an untrue assumption. She reported that the Chamber represents 35 000 companies, of which between 90% and 95% can be classified as small or medium enterprises. The percentage of large organisations that are members of SACOB is very small. Once discussion with the Services Seta have been concluded, an additional 43 associations will be taken on into SACOB's membership, which means that the Chamber will represent 73 uni-sectoral associations, with membership being fully representative of the entire country.

Ms Drodskie informed the Committee of various functions which SACOB performs in service to small business, in: regularly providing comments on the running costs of small business, expressing the views of small business at forums, and the dissemination of information in calling for nominations for the entrepreneur of the year award.

The submission concluded with the statement that SACOB was not in support of the main thrust of the amendments to the Bill. It nevertheless acknowledged the need for improved representation by small businesses on all issues that affect them.

Discussion
Mr Rasmeni asked if SACOB provided services to small business, through providing support, or if they were interested in having small business affiliated to SACOB.

The Chairperson said that the submission had firstly suggested that the problems which caused the previous SBDC to fold, be fixed, so that the body could continue. Then the submission went on to say that SACOB did not want a representative body, but rather an unstructured consultation amongst existing bodies. He suggested that the report seemed to be contradicting itself. He also wanted to know which board was being referred to, when SACOB said that it would "not support an amendment that provides for the nomination of directors to the board", under Clause 5. He informed Ms Drodskie that the Board which the Bill was referring to, was Ntsika's.

Mr Turok informed Ms Drodskie that the functions of various organisations was not being discussed at this forum. The Committee was aware of SACOB and what it stood for. What it wanted to know, was how to achieve the changes that needed to be made.

In response to Mr Rasmeni's question, Ms Drodskie said that it was SACOB's desire to bring small businesses into full membership, as subscription-paying members. They would then be served by the body as all other members are served.

She added that SACOB was not opposed to the idea of having a small business council as a representative body, but rather to a forum where the Department of Trade and Industry becomes the voice of small business. They preferred the idea of a council which was more broad-based.

With regard to nominations to the Board of Ntsika, she apologised for having misinterpreted that particular provision.

She mentioned that SACOB would discuss the way forward at a NAFCOC Convention later in the year, and these discussions would be informed by discussions which had already been held in 2002, at which a merger between the two bodies had been considered. The idea, however, was abandoned at the time, but there was room for more deliberations on the matter.

Department of Trade and Industry Response
Mr L October (Deputy Director-General: Enterprise Industry Development) summarised the proceedings thus far as revolving around issues of representivity and a voice for small business.

He was in absolute agreement with Mr Phaahla, that Government was unaware of the peculiarities akin to the various sectors of small business, adding that the number of informal small businesses in the country ranged between 1.6 million to 3 million. Where it was possible for SETA's to provide small business with services, they should, since it was not necessary to implement any new legislation for them to do that.

NAFCOC's submission was enlightening. With regard to their suggestion that either the Minister or Deputy Minister focus solely on small business development, he said that black empowerment already falls under the priority list of the Minister. He made the point, however, that it was not within the domain of the Department of Trade and Industry to determine the priorities of ministries.

In response to SACOB's presentation, Mr October said that while he recognised that Government cannot create a voice for small business, the idea was to facilitate the establishment of such a voice, and not to be that voice.

He continued that the Minister has an inherent power to consult with business. The Bill can make the proviso that the Minister will consult, but the comments need to be as broad as they appear in the Bill. There is a proviso in the Bill that the Minister may facilitate the establishment of a council to promote the interests of small business, and to facilitate the implementation of a constitution for such a council, which should have powers in relation to advisory functions, and to make comments on the delivery of small business. The Department of Trade and Industry did not want to dictate what the structure of this body should be, as it was an incredibly difficult task to determine that.

He addressed the problem of Ntsika's non-delivery, which had been raised in some of the submissions. Meetings between Ntsika and other similar bodies had been convened, where these bodies were reprimanded for their non-performance, and instructed to evaluate their purposes, and to determine how improvement would be made. A steering committee had been established, in order to give direction to these three bodies. Mr October told the Committee that the heart of the problem was not legislative or policy, but delivery.

The overlapping functions between Ntsika and Khula would be removed.

Mr October observed that, except for Clause 2, broad support for the amendments had been voiced. He therefore recommended that the Committee proceed to pass the Bill.

Mr D Lockey (ANC) observed that the previous council (SBDC) had wanted to prescribe to entrepreneurs how to run themselves. Small business employs 50% of all people employed in South Africa. They contribute 30% to the GDP, although other businesses who contribute less to the GDP receive more attention. This Bill is not structured to help small business. An advisory council is needed. Ntsika's mandate is too wide and open-ended to function effectively. An advisory body would need to receive some clear guidelines. He listed business regulation and a lack of skills development as some hindrances to small business growth.

Joint ventures with big business could nurture emerging entrepreneurs, while encouraging a pooling of resources. The Department of Trade and Industry could play a far greater role in assisting small business achieve access to the market. Small business could also benefit from participation in the restructuring of state-owned enterprises.

In Clause 2, the Chairperson recommended that it read that "the Minister must consult ... to facilitate the setting up of an advisory body", and not "the Minister may consult ... to set up ...".

There should be some formulation to say that this advisory council would be able to interact with the Department, Khula, and any parastatals, and the Department should in turn be able to interact with the council.

Ms C. September (ANC) suggested that in amending Chapter 2, other clauses, specifically Clause 8, might be affected.

Adv Ken Warren (SACOB) informed the Committee that SACOB had certain apprehensions with regard to the establishment of an advisory council.

Mr Phaala stated the need to assess the kind of powers which the advisory council would have. It should be stipulated that the Minister must consider any advice given by the body.

With regard to Ms September's statement on consequential amendments, Mr J. Strydom (Department of Trade and Industry) said that Clauses 1, 4, and 6 would be affected. Additionally, the long title of the Bill in Clause 8 would be re-looked at.

Mr Turok felt that 4(a) presented a clumsy formulation, which could be potentially ambiguous.

The Chairperson stated that there would be a consultation process which would include small business, surrounding the Bill. These consultations would focus on funding of the advisory body, membership on the body, removal of members from the body, and various other issues.

Mr October felt sufficient consensus had been reached by those present to provide a complete rewording by afternoon. He stressed that a distinction must be made between advisory councils and structures of interaction between government institutions. Advisory councils should not be a superstructure or replacement that would not be required in the long run.

He assured those present that the recommendations given on the institution and management structure of an advisory council had been noted. The Bill would specify representation, powers, and also that it should liase with other institutions, including Parliament. The Department would consult with its legal advisers on these matters, and produce a revision of the relevant portions of the Bill on the following day.

Whereas Ntsika previously had a number of functions, it should simply be an organisation providing support for small business. That was the thrust of Clause 4.

With regard to NAFCOC's comments on the powers of the advisory council, that presented a constant dilemma. The council could not be allowed to make decisions. The quality of the advice they give would determine the degree of power which they were really accorded. It would therefore be incumbent on the advisory body to determine its own degree of prestige.

At this stage, the meeting was adjourned.

 

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