Committee Report on Free State oversight

Small Business Development

22 November 2017
Chairperson: Mr X Mabasa (ANC) (Acting)
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Meeting Summary

The Committee convened to consider and adopt its Report on the August 2017 Free State Oversight Visit.

As the Committee Chairperson had tendered apologies for the meeting, Mr X Mabasa (ANC) was elected to chair the meeting.

The Content Advisor took the Committee though the report by explaining and highlighting some of the municipalities, co-operatives and business enterprises that were visited by the Committee.

On day one the Committee visited the Xhariep Leather Design Primary Co-operative; the Ke Nako Water and Waste Processing Primary Co-operative Limited; E-kasi Kitchen Co-operative Limited project in Itumeleng Township in Jagersfontein; the Hareketsetseng Co-operative Limited, located in Edenburg under Xhariep District Municipality; and the Mampotla Trading Enterprise, domiciled in Bloemfontein with its operation in Edenburg, under Xhariep District Municipality.

On day 2 the Committee visited the Mangaung Metropolitan Municipality where the day was dedicated to the following enterprises: Mangaung Fresh Produce Market; Kopanang Women's Enterprise Transport Logistics and Multi-Purpose; Botshabelo Taxi Rank; Tswellang Construction; Lebone Construction; Mamello Construction; ATTI Computer College; ET A Trust; Bloem Organic and Retmil Financial Services.

On day 3 the Committee visited Thabo Mafutsanyana District Municipality where where the purpose of the visit focused on the following enterprises: Maqheleng Waste Management; Setsoto Local Municipality; Happy Hills Enterprise; Boshweshwe Leboshweshwe; and Zolu Trading and Menza Steel.

On day 4 the Committee visited the Lejweleputswa District Municipality and two small enterprises funded by Small Enterprises Finance Agency, Max Munchies and Lesole Agencies.

The last day of the visit was assigned for the inspection of the five small enterprises domiciled in Fezile Dabi District Municipality, namely, Kroonstad Vehicle Testing Station; Moqhaka Pharmacy; Koppies Greenhouse Primary Co-operative; and Karatech CC, including a courtesy visit to Moqhaka Local Municipality.

Members of the Committee unanimously applauded and appreciated the professional work done on the report by the Content Adviser.

The Committee considered and adopted its Report on the August 2017 Free State Oversight Visit.

Meeting report

Opening Remarks
Mr King Kunene, Committee Secretary, informed Members of the Committee that he had received an apology from the Committee Chairperson; she had to attend some urgent matters to attend to. Therefore, according to the National Assembly rule book, section 159 in the absence of the Chairperson, the Committee had to elect an acting Chairperson. Members were therefore requested to nominate the Acting Chairperson.

Mr N Capa (ANC) nominated Mr X Mabasa to be the acting Chairperson of the meeting.

Mr Kalako (ANC) seconded the nomination.

Mr H Kruger (DA) nominated Mr R Chance (DA) to be the acting Chairperson of the meeting.

In the absence of a seconder for the nomination of Mr Chance, Mr Mabasa was therefore elected to chair the meeting.

Report on the Free State Oversight Visit
Mr Sibusiso Gumede, Content Advisor, took the Committee through the report page by page.
He said the report actually began at page six on day one visit to Xhariep District Municipality. The previous pages of the report covered the introduction, background, the objectives of the visit, and the composition of the delegation. He would concentrate and focus on the observations and recommendations of the Committee which was where Members would like to make their inputs in terms of the report.

On day one the Committee visited Xhariep District Municipality and Kopanong Local Municipality. The two municipalities are located adjacent each other, as a result, the Committee was addressed by the District Municipality. Councillor Teboho Mochechepa for Xhariep District and District Municipal Manager, Ms Lebohang Moletsane, pleasantly received the Committee on its arrival. Following the introductions, the Leader of the delegation of the Committee, Mr X Mabasa made a brief presentation outlining the objective of the oversight visit, brief summary concerning the nature of the financial support extended by the Department and its entities to the co-operatives in the Local Municipalities, expected roles of provincial, district and local spheres of government towards supporting these projects. The Portfolio Committee learnt quite a few things including that the mandate of the Department was not known nor clearly understood in the area, it being denoted or referred interchangeably with the Department of Trade and Industry was rather alarming. Ms Moletsane outlined the state of enterprises in the district and the participation of the municipality through Local Economic Development (LED) office.

The Committee visited the Xhariep Leather Design Primary Co-operative Limited, which was formed in 2011 with 22 members. It has been operating informally until assisted by the District Municipality through the Expanded Public Works Programme (EPWP). The intervention of the municipality assisted the co-operative to afford stipends to its employees. The main observation which came out of this visit was the lack of coordination between the Department and the Small Enterprises Development Agency (SEDA). The cooperative was struggling with the lack of power supply in the building that was given by the municipality. Power supply is one phase, yet for operations, three power supply is required. The second challenge was that funds that the project received from National Development Agency (NDA) had not been used since 2016 and the account is inactive, hence there are allegations that the account will be closed down and members do not know where will go to, according to the Chairperson of a co-operative.

The second visit was to the Ke Nako Water and Waste Processing Primary Co-operative Limited, which is currently a dormant project, owing to lack funds and property. The co-operative was formed in 2014, it is a seven member youth owned project located in Kopanong Township. In light of ongoing drought and water crisis, this is one project with massive potential. It was formed out of SEDA road-shows training conducted in Kopanong municipality, and assistance received was only limited to developing a business plan. The intention of a co-operative is to recycle and purify water for re-use.

The Committee also visited E-kasi Kitchen Co-operative Limited, which was established in 2010 and registered in 2011 with six members through assistance from SEDA. The project is located in Itumeleng Township in Jagersfontein and is operating in the food and catering industry. SEDA assisted to get it off the ground through, among others, registrations, training in financial management, CIS application and acquiring of catering equipment to the value of R208 000 from the Department of Trade and Industry (the dti). It is operating in a rented building selling fast food. The intention of the project is to provide catering services in municipalities and government events. The co-operative is grappling with numerous challenges, which include among others, that it is operating .and located in a rented building with a rental amount of R 2 800 per month excluding services from municipality, such as electricity and water. The building is shared with other enterprises with one electricity main switch-box and water supply. The project had also managed to acquire a mobile kitchen; unfortunately, it has not been delivered due to failure of the municipality to allocate a strategic operational place. An important observation made by the Committee is the allegation that, in spite of the government policy of 30 percent procurement from small enterprises, the co-operative is often side-lined by the municipality to provide catering services during government or municipality events. Lastly, they have been encountering challenges in accessing an outstanding balance from funds that they received from the Department. The intention was to acquire a delivery transport that could be utilised for delivery or when catering in the events.

The Committee visited the Hareketsetseng Co-operative Limited is located in Edenburg under Xhariep District Municipality. It is an operative primary co-operative located in Edenburg, founded by seven members in 2012, with an aim of breeding ostriches. In 2015 it received an assistance from the Department of Agriculture, Forestry and Fisheries (DAFF) with a structure to the value of R23 500, a container which serves as an office, a toilet to the tune of RI ,8 million and 60 ostriches. A second batch of 204 ostriches were also received in 2016. SEDA involvement to the project was only limited to business plan development. Although the project is functioning but its sustainability is in tatters mainly due to nonexistence of the market in the Free State province or neighbouring towns. The current market is +-400 kilometres away in Oudtshoom, Western Cape. Consequently, logistics costs absorb more than half of the co-operative earnings. Accusations of fraud and corruption by DAFF officials i.e. a toilet worth RI .8 million were alleged.

The Committee then visited the Mampotla Trading Enterprise (MTE), which is a registered close corporation domiciled in Bloemfontein with its operation in Edenburg, under Xhariep District Municipality. The entity was appointed by Free State Department of Human Settlements (DOHS) on 14 November 2012 to construct 250 units of low cost houses. However, in January 2013, the DOHS split the project into two, effectively reducing the initial 250 to 129 units. MTE approached SEFA around 19 June 2014, for a bridging loan to buy building material and pay for labour. However, there was no infrastructure where the 129 units were to be build and some were to be built on the sewerage line. Out of the 129 units allocated to MTE, only 89 sites/stands were adequate to build on. In the end, the DOHS decided to reallocate the project from Springfontein to Edinburg. Further protracted disputes with DOHS caused the project to grind to a halt. For that reason, MTE struggled to service sefa loan. Despite the bridging loan facility having been restructured in April 2015, this has had little effect in terms of helping MTE honour its obligation to sefa owing to ongoing disagreements and non-payments from DOHS.

Mr Gumede said in terms of the summary discussions the visit of the Portfolio Committee was applauded as signalling the start of something tangible and beneficial to the Metro. The Head of Department for Economic and Rural Development, Mr Teboho Maine went further to state that there are Fresh Produce Market (FPM) and Botshabelo Taxi Rank buildings within the Metro that are actively functional through collaboration of the Metro with SEFA. These are some of the projects that ensures the active participation informal traders. Members of the Committee asked questions of clarity or add inputs. Members were keen to know the status of the relationship between the Metro and Department of Small Business Development, the status of the Fresh Produce Market (FPM) and the Metro's involvement in the Agri-park initiative. Further questions from Members were asked with respect to efficacy of LED Forums with other local and district municipalities, or if at all, they do exist. Members were concerned that it seems, the focus, especially of the national departments, is more on building infrastructure that ultimately tend to become white elephant because there is no coordination taking place either horizontally or vertical to ensure that these projects do come to fruition.

On day 2 the Committee visited the Mangaung Metropolitan Municipality where the day was dedicated to the following enterprises: Mangaung Fresh Produce Market; Kopanang Women's Enterprise (KWE) Transport Logistics and Multi-Purpose; Botshabelo Taxi Rank; Tswellang Construction; Lebone Construction; Mamello Construction; ATTI Computer College; ET A Trust; Bloem Organic and Retmil Financial Services.

The Mangaung Fresh Produce Market is situated approximately five kilometres outside Bloemfontein and covers an area up to the Northern Cape (Kimberley and De Aar), the Eastern Cape (Queenstown), most of the Free State and Lesotho. Conversely fresh produce is procured from most producing areas of the country including but not limited to Limpopo, Mpumalanga, the Western Cape and the Free State. The vision of Mangaung Fresh Produce Market is to be the hub of economic activity for the producers, market agents, intermediaries and consumers of fresh produce in South Africa. Evident from the current statistics, a sharp increase in non-bulk traders as market participants has occurred.
The Fresh Produce Market formed a partnership with SEFA, whereby through its Direct Lending

scheme, SEFA developed a direct lending channel for traders. An IT-based lending platform has been developed to provide quick and affordable credit to informal business buyers at the market to a tune of R 2.3 million. The project provides affordable credit to the informal traders. Weekly loans of between R500 and RI0 000 are made available to successful applicants. As long as the client repays the loan on the set date, that same amount is made available again on a revolving basis, for a six-month period. Traders, whose applications are successful, are only able to purchase fresh produce with the loan from SEFA, because the money is disbursed directly to the buyer's market card. If repayments are not being made, the buyer's card is blocked immediately, thus minimising the risk of non-payments.

The Kopanang Women's Enterprise (KWE) Transport Logistics and Multi-Purpose Primary Co-operative was established in 2010 with a membership of 25 women, I00 percent black owned, 80 percent women and 20 percent youth owned. This is one the most progressive projects visited by the Committee operating and located in Thaba Nchu. The Co-operative was registered in 2010 and operated on a small scale for three years. In the ensuing years, it was manufacturing clothing and school uniforms and specialises in cut, make and trim activities for larger retailers. At the time that they were assisted by SEFA, they had been awarded purchase orders to supply schooluniforms in Upington, Warrenton, Qwaqwa and Bloemfontein. The loan from SEFA allowed KWE Co-operative to maintain 25 jobs and create 50 new jobs. The factory size at KWE Co-operative is now large enough to accommodate 73 sewing machines and it is set up to provide adequate space to all sections of production processes. Through this investment, SEFA assisted a Women and Youth owned Co-operative to address the need for school uniforms in deep rural areas. The funding assisted the co-operative to procure sawing machines, buy material for school uniform and hampers to be supplied to various schools within the Free State and for labour and transportation costs. The business is able to successfully deliver on their contracts with all the SASSA offices in various towns across Free State, and has potential to secure more orders. It has also secured another building adjacent the current one with an intention of producing sanitary towels for school going girls.

The Committee also visited the Retmil Financial Services (Pty) Ltd, which has been a SEFA client since 2004 and focuses on providing access to funding to small enterprises. Loan products are asset finance, property loans, equity finance and working capital loans. From November 2004 to January 2009, then Khula Enterprise Finance Limited approved, to Retmil, a total of R69 000 000 in business loans and RI .4 million in seed loans (grants). In April 2011, the business loans were consolidated to one facility with a value of R41 575 million repayable over 84 months. In August 2012, SEFA approved an additional business loan of R30 million. It would appear, Retmil struggled to service this debt. In July 2016, Retmil was handed over to legal for judgement with the total exposure ofR46 364 million. In terms of the SA High Court settlement reached on the 28th of July 2016, the settlement of R45 million owed by Retmil to SEFA was to be repaid at prime rate less 2 percent from 28 July 2016, six months instalments of R500 000 with effect from 1 September 2016, and the outstanding balance to be paid in monthly instalments of R250 000 plus interest from the 1st of March 2017. Retmil did not obey this agreement. For the first six months Retmil adhered to the repayment agreement of R500 000 per month, but failed to honour monthly reporting requirement hence, as of November 2017, Retmil remains in arrears with monthly payments.

During its visit to Free State, the Committee engaged extensively with the founder and Chief Executive Officer of Retmil Financial Services (Pty) Ltd. At first, she was very adamant that she did not want to meet with Members of Parliament owing to humiliation and intimidation she had suffered or received from SEFA officials, which she mentioned. Through the persuasion of the Committee Members she eventually relented and narrated her side of the story. However, owing to confidentiality of the matter, and the fact that it is currently being canvased at Court, a caution was exercised not to divulge information that might later implicate her, Retmil Financial Services and SEFA. The Portfolio Committee undertook to conduct its own investigation in order to take an informed intervention and resolution.

On day 3 the Committee visited Thaobo Mafutsanyana District Municipality where where the purpose of the visit focused on the following enterprises: Maqheleng Waste Management; Setsoto Local Municipality; Happy Hills Enterprise; Boshweshwe Leboshweshwe; and Zolu Trading and Menza Steel.

The Maqheleng Waste Management (MWM) is a black woman-owned enterprise in the waste recycling industry. MWM is a Ficksburg-based company that commenced its operations in 2012. It is owner-managed by Ms Caroline Kgomo, a black woman. Ms Kgomo was unemployed and identified a gap in the market when she noticed that waste and refuse material was scattered all over their surroundings which posed a health hazard to the community. That became a business idea for her as she decided to explore the viability of turning waste into revenue and at the same time keeping Ficksburg clean. MWM's challenge was financed by SEFA in 2014 to acquire a collection and delivery van, erection of a shelter, a pressing machine and a working capital. The Committee was quite impressed with the progress the project has registered. It is fully operational with seven (7) full-time and five casual employees. SEDA assisted with training and branding and the Setsoto Local Municipality offered land for operation. In terms of the entity's growth expansion plan, there are gaps that will necessitate additional funding. However, the view of the Committee was that, before exploring credit facility either through SEFA or any other financial intermediary, the entity must be assisted to acquire grants, incentives from the local government in order to cut or reduce operating costs and/or interest free loans.

On day 4 the Committee visited the Lejweleputswa District Municipality and two small enterprises funded by SEFA, Max Munchies and Lesole Agencies. Mr PK Pitso, Acting Municipal Manager, for the District Municipality, outlined its Enterprise Development Initiatives and challenges. On enterprise development initiatives, the Committee was informed that Lejweleputswa District Municipality has mainly been doing a number of projects with the Department of Agriculture, Forestry and Fisheries (DAFF); Free State Provincial Treasury; assisted Coffin Manufacturing Co-operatives and also provided financial support to existing and qualifying enterprises with material and equipment.

Mr Gumede said the last day of the visit was assigned for the inspection of the five small enterprises domiciled in Fezile Dabi District Municipality, namely, Kroonstad Vehicle Testing Station; Moqhaka Pharmacy; Koppies Greenhouse Primary Co-operative; and Karatech CC, including a courtesy visit to Moqhaka Local Municipality.

- The first general reflection the Portfolio Committee noted in its oversight leg to Free State province was that the Department of Small Business Development (DSBD), SEFA and SEDA are not present on the ground, they are barely recognised and their products and services are almost not known or accessible. Consequently, there are very limited projects currently being implemented by either SEFA or SEDA in the Free State. For instance, while other provinces like Limpopo and Gauteng have seen the Co-operative Incentive Scheme beneficiaries climbing to more than I00 per province, less than 10 CIS beneficiaries are domiciled in the Free State province.

- According to the respondents the Committee interacted with, it was cited, inter alia, that DSBD website is not user friendly and most of the information promoting its products and services is outdated. The Department is inaccessible via landline [no switchboard or dedicated call centre] and applications for fmancial assistance are either ignored, disregarded or not acknowledged.

- During its visit to Ke Nako Water and Waste Processing Primary Co-operative Limited in Kopanong Township the Committee noted with regret that notwithstanding the potential of the project, it remains dormant owing to lack of financial support and space or property wherein the co-operative can operate. This is one critical bottleneck, which has emerged in almost all the Committee visits. The Committee has, for instance, cautioned that DSBD incapability to cascade or convert policy aspirations into plans, programmes and key deliverables for implementation is problematic. The New Growth Path (NGP) contends that space and property availability for small businesses is often a challenge;

- A visit to E-kasi Kitchen Co-operative Limited in Jagersfontein the Committee was confronted with a similar challenge. The co-operative is renting a space for R2800 a month excluding water and electricity. In addition, the co-operative complained that there are not many opportunities available for small enterprises in the district. The previous observation by the Committee in relation to the market access was to note that the Department has a dedicated unit entrusted with this responsibility. Nevertheless, throughout the oversight visit, none of the officials entrusted with this responsibility were available. This despite all the co-operative projects that the

Committee has visited in the past have consistently raised the question of market access as a major obstacle. The Committee once again notes that the Department's focus appears to be exclusively on addressing the demand side of the market yet its Achilles heel is proving to be its lack of foresight in dealing adequately with supply side capacity.

- During the Hareketsetseng Co-operative Limited visit in Edenburg, Xhariep District Municipality, the Committee noted with concern allegations of malfeasance levelledagainst DAFF officials where one toilet came at a cost of Rl .8 million. The project is in ruins, however, there is a possibility that it can be resuscitated provided SEDA and DSBD intervene decisively. An implementing agent from DAFF, who decided the structure layout, storeroom, office container and ablution facility and costed it, only assists members of the co-operative. An agent also determines time for selling, buying and prices of ostriches. At some stage, ostriches were sold whilst there were still underweight. These ostriches are bought whilst they are young and sold to the very same market at the price determined by an agent.

- The Committee is impressed by the relationship between SEFA and Fresh produce markets of Mangaung, Springs and Durban. The Mangaung Fresh Produce Market formed a partnership with SEFA, whereby through its direct lending scheme, SEFA developed a direct lending channel for informal traders. A substantial number of informal traders are benefiting from the programme. Direct lending channel with the use of card system is operational and most of informal traders are using the system with minor challenges.

- The Committee applauded the success of Kopanang Women's Enterprise (KWE) Transport Logistics and Multi-Purpose Primary Co-operative in Thaba Nchu. However, it lamented lack of teamwork between SEFA and DSBD. In its Mpumalanga report and observation the Committee, after four co-operatives were smashed with a debt of R20 million excluding interests and fees, remarked that upon receiving applications from small enterprises, especially co-operative formations, SEFA must engage DSBD to ascertain if the application or the nature of the project being pursued by the co-operative does not qualify for financial support under CIS or Shared Economic Infrastructure Facility (SEIF). While the Committee notes that SEFA is a lender of last resort for small enterprises, but equally, before extending loan facility to small enterprises SEFA must make it its responsibility to ascertain if such a credit cannot be leveraged by way of a grant or incentive from DSBD, DAFF, the Department of Trade and Industry (DTI) or Local Government.

- Again, the Committee notes SEFA's fallacy that financial intermediaries or wholesale lending is less risky than direct lending. Three disturbing lessons from Retmil

Financial Services episode:- from November 2004 to January 2009, then Khula Enterprise Finance Limited approved, to Retmil, a total of R69 000 000 in business loans and Rl .4 million in seed loans (grants), and in August 2012, SEFA approved an additional business loan of R30 million. How many individual small entities would have been finance with such an amount of money and also, the question of due diligence come to the fore as to the nature of checks and balances exercised before such huge sums of money are given to individual companies; Secondly, in terms of the SA High Court settlement reached on 28th July2016, the settlement of R45 million owed by Retmil to SEFA was to be repaid at prime rate less 2 percent. But SEFA is unable to extend the same courtesy or benefit of charging 'prime less' to small enterprises and lastly; The Committee noted with quite unease the deterioration of relations between SEFA and Retmil Financial Services management, the intimidations, verbal abuse and bullying to and from both parties.

- The Committee further notes that this is not the first and may not necessarily be the last financial intermediary going through the same legal hurdle with SEFA. In 2013, Marang Financial Services (Pty) Ltd, a large micro-finance intermediary was placed under liquidation. A Final Liquidation order was granted by the Master of the High Court on the 26th of March 2013, and in the process, SEFA had to write off in excess of R65 million.

Other SEFA funded projects i.e. ETA Trust, Advance Technology Training Institute, Bloem Organic Compost Close Corporation, Maqheleng Waste Management, ZoluTrading Close Corporation and Menza Steel Work Close Corporation are progressing very well and able to meet their obligations. Nevertheless, they all underscored or decried the rate of interest charged by SEFA, which usually oscillates between 14 - 20 percent, and also, opportunities for more funding and training.

The Department must develop an effective marketing and branding strategy. The Committee made this recommendation in 2016 after having observed that even those projects that are sponsored by the Department are hardly ever mentioned or showcased by way of publicising, advertising, billboards, etc. Branding and marketing of these projects should be intensified in order to increase the awareness of DSBD service and product offerings. In the absence of a strategy however, this is not likely to be attained. The strategy must be developed and concluded no later than 30 June 2018.

- There is a requirement for a dedicated system or platform for DSBD clients to track progress on application for financial assistance online.

- The DSBD and SEDA must follow up on Ke Nako Water and Waste Processing Primary Cooperative Limited and ensure that the business plan is developed and financial requirements are sketched out with a view to getting the project off the ground before 31 March 2018.

- The DSBD and SEDA must follow up on E-kasi Kitchen Co-operative Limited to make sure that the business plan is updated and the remainder of the balance on the CIS is disbursed no later than 31 January 2018. Signing of transversal agreements with respective local and provincial government cannot be overemphasised but long oveverdue.

The DSBD and SEDA must follow up on Hareketsetseng Co-operative Limited. Allegations of corruption must be reported to the Department, DAFF, and the role of the implementing agent. This is a commercial project and DSBD, together with her entities, has a responsibility to ensure that this project does not collapse.

- The Mampotla Trading Enterprise is obviously going through a difficult time. The Committee is of the view that legal proceedings against this entity should be put on hold until proper consultation between SEFA and the Department of Human Settlements (DOHS) is finalised. Without DOHS recapitalising this project by means of allocating more units to Mampotla Trading Enterprise, SEFA's portion of the loan is not likely to be repaid. There has not been a doubt or misgiving concerning Mampotla Trading Enterprise competence and capability to deliver. It is clear from the Committee’ point of view that the project was thrown off balance by irregularity of DOHS and, made worse by SEFA's litigation process. DSBD and SEFA must report back to the Committee before the end 2017. In addition, SEFA must henceforth, ensure that all small enterprises owed money by the state, particularly where there is evidence that either goods or services were delivered to the satisfaction of the client [state organ], are temporarily absolved until all internal mechanisms and processes are exhausted.

- The Department has a duty, in conjunction with SEFA, to rapidly finalise the development of the rescue strategy for struggling small enterprises before 31 March 2018. The concept of business rescue finds its foundation in one of the stated purposes of the Companies Act, which is to "provide for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders". In its correspondence to SEFA Board of Directors, the Committee strongly advocated for the agency to adhere to these provisions before progressing to section 129 of the National Credit Act.

- On the matter between SEFA and Retmil Financial Services, the Committee is again calling on SEFA Board of Directors, in its capacity as the Accounting Authority, to exercise its oversight responsibility by ascertaining if in the case of Retmil Financial Services, Accounting Officer, performed his duties diligently and meticulously without contravening Section 38 (a) (i) (b) (c) (ii) and (h) (i) (ii) (iii) of the PFMA, when more credit was extended to Retmil Financial Services findings of which must be reported to the Committee for record before 31 March 2018.

- The CIS guideline and/or policy must be expedited, so is the forensic investigation on the CIS grant. Provision of the CIS grant to newly formed and dormant entities i.e. Tswellang Construction Primary Co-operative Limited, Mamello Construction Primary Co-operative Limited and Lebone Construction Primary Co-operative Limited raises more questions than answers considering that the three entities were only registered in 2016 and immediately after that qualified for the CIS.

- On market access intervention, the Department needs to provide adequate support to projects, both financial and non-financial, lead an integrated process of nurturing cooperatives from inception phase to spearheading market access intervention programmes. The Portfolio Committee would like to recommend that a Market Access Unit within the Department urgently develop a detailed and realistic Market Access Strategy on or before 31 March 2018, contents of which will include plans to scale up support to all projects previously visited by the Portfolio Committee in Eastern Cape, Limpopo, KwaZulu Natal, Mpumalanga, Gauteng and Free State.

- Other SEFA funded projects, i.e. ETA Trust, Advance Technology Training Institute, Bloem Organic Compost Close Corporation, Maqheleng Waste Management, Zolu Trading Close Corporation, Menza Steel Work Close Corporation and Kopanang Women's Enterprise Corporation have demonstrated resilience in the face of economic headwinds. They need to be carefully examined to identify areas of further growth.


Mr Kruger congratulated and thank Mr Gumede for the professional work he produced for the Committee, and indicated that he is an asset to the Committee.

Mr S Mncwabe (NFP) agreed with Mr Kruger that indeed Mr Gumede captured the report very professionally. He suggested that they should rather go straight to the observations and recommendations because its where they want implementation, and everything Mr Gumede highlighted in the report was what the Committee did in its oversight to Free State Province.

Mr Capa applauded the quality of information contained in the report. They as a Committee should make use of the information contained in the observations and recommendations.

Mr Chance also congratulated Mr Gumede for the quality of report.

Rev K Meshoe (ACDP) appreciated the quality of the report and supported the view that they should focus on the observations and recommendations of the Committee.

Mr Chance raised concern that the enterprise of the lady owner was being put out of business by the conduct of SEFA. He corrected the word "whacker" for the word "hacker" on bullet point 6.3, on page 14 of the report.

Mr Capa said on bullet point 5.6 on page 9 of the report, it is important for the Committee to get both sides of the story and to check whether there were no irregularities in the giving of the loan by SEFA to the Mampotla Trading Enterprise, and the relocation of the project by DOHS.

Mr Kruger added that the Committee should sent a written letter to the Minister so that SEFA can answer formally in this regard.

Mr Gumede said there was correspondence between Ms Mampotla and SEFA, but the issue is that they (SEFA) are playing with numbers and payments are not made on time, and therefore, the information at their (Committee) disposal does not give a real story.

Ms N Mthembu (ANC) said SEFA knew about the predicament of Ms Mampotla but did nothing to assist the lady, and she was not paid on time by the Department so that she could service her laon from SEFA.

The Chairperson said on the balance of inputs in this issue it is better for the Committee to directly interact or engage with SEFA. They already have the background in terms of the oversight visit but they must get into an informed conclusion of the matter. Therefore, the issue of writing to the Minister will not give them answers, but they must rather invite SEFA to seek further clarity on this matter.

Mr Chance said they must go through the observations and recommendations and make a determination on how they will proceed with this matter.

Mr Capa insisted that they should know exactly what happened between Ms Mampotla and DOHS.

Mr Gumede said an extract from the minutes indicates that the SEFA CEO must engage with the DOHS and issue of court settlement must be put aside, and get a feedback from both sides , which will determine a way forward on the matter.

The Acting Chairperson said they should go through observations and marry each realistic observations with recommendation, note the observation and address it when they deal with recommendations.

Mr Chance said on bullet point 10.13 on page 30 of the report, the Committee noted SEFA's fallacy on financial intermediaries that its lending is less risky than direct lending. It should be noted that when a loss is incurred by SEFA it is a bigger loss, and the repayment rate of 2% granted to Retmil should be a lesson. This must be flagged and deal with it when they come to recommendations. Therefore, SEFA must pay attention to intermediaries.

Mr Capa was concerned that there are projects that get business because they were seen by SEFA that their projects would financially succeed and be able to make repayments to SEFA.

Mr Kruger said maybe it wass an issue of the criterisa on how projects are funded by SEFA, they could say yes to one project and no to the other project.

Mr Mncwabe said maybe SEFA looks at the nature of business in terms of production on whether it has the potential to create jobs

Ms Mthembu said this is more on the transformation side because there is no balance on the projects that are funded by SEFA. Therefore, SEFA needs to ensure that gap is closed so that projects receive equal funding from SEFA.

Mr S Bekwa (ANC) said they need to intorrogate the system of funding. SEFA must explain its creteria of funding which it comes before the Committee.

Mr Mncwabe said in as much SEFA funds projects it must reflect the radical economic transformation so as to enhance economic growth and creation of employment in the country.

Mr Chance said they need to make an observation that SEFA is there to lend money to small enterprises. Therefore, why money was not lent ot other deserving small enterprises because there should be a balance in terms of funding.

Recommendations of the Committee

Mr Capa said the date on the first recommendation should be brought forward istead of 30 June 2018, but rather be 31 March 2018 because the development of the marketing and branding strategy of the Department is very important and a good idea.

Mr Capa suggested that the content adviser must formulate ideas around the issue of the Mampotla Trading Enterprise because it is obvious that the owner of the business is going through a very difficult time.

The Acting Chairperson agreed that together with the support staff they will formulate a strong recommendation in this regard and also looking at it in conjuction with the minutes of the meeting between SEFA and DOHS.

Mr Chance said they should also get correspondence between the Chairperson, SEFA and DOHS on how the Mampotla business can be rescucitated.

Mr Mncwabe said they should get a full report on this matter before the last Committe meeting of the year.

Mr Capa said thier report must reflect on the work that has been done and also note and confirm it has been done.

The Acting Chairperson said the Committee is fine with all the recommendations and will correspond and invite SEFA to appear before the Committee before the end of the fourth term.

The report was adopted with amendments.


The meeting was adjourned.

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