National Local Economic Development Conference & transversal agreements progress: DSBD report

Small Business Development

28 February 2018
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The Portfolio Committee on Small Business Development met with the Department of Small Business Development (DSBD) to discuss and adopt deliberations on the National Local Economic Development (LED) Conference Resolutions and transversal agreements.

Prior to the briefing and discussion, the Chairperson gave a report on an issue discussed in an earlier meeting regarding the attendance of important Committee meetings by the Director-General of DSBD.

The Department noted that the conference was well attended by Ministers of relevant ministries, Deputy Ministers, MECs, mayors and councillors, LED practitioners, and representatives from the Word Bank and the National Planning Commission (NPC).

The presentation by the Department detailed resolutions made at the conference, the planned activities to further these resolutions and the agreements with relevant departments for the implementation of the activities. Key implementing partners included the Department of Cooperative Governance and Traditional Affairs (COGTA), the Service Sector Education and Training Authority, the Department of Rural Development, the Department of Higher Education & Training, Local Government Sector Education Training Authority (LGSETA), the National House of Traditional Leaders, the Department of Science and Technology (DST) and National Treasury.

Resolutions made at the conference covered areas on red tape reduction in small business, implementation of Back to Basics programme, managing rapid urbanisation, addressing enablers to growth of small enterprises, establishing financial arrangements for innovation and strengthening the collaboration between local government and the scientific community.

The Committee expressed their satisfaction with the efforts of the Department in organising the conference and the outcomes that came out of the process. Members noted that the resolutions arrived at had the potential of reducing unemployment and reducing the poverty gap, if implemented.

The main emphasis from the Committee was on the implementation part of the conference resolutions. Many Members pointed out that however good the resolutions looked on paper; the main focus should now be on implementation. The Department responded that implementation was already going on citing an example of ongoing activity in collaboration with the Services SETA.

Committee Members also had questions on the timeframes for the planned activities. The Department responded that an implementation plan is in the process of being made and will be available latest by 31st March.

The Committee emphasised that the Department ought to take charge of the implementation of the resolutions and should work closely with implementing partners, key among them, COGTA.

Meeting report

The Chairperson announced that the Committee had lost a Member, Ms. Nkosazana Dlamini-Zuma to the Cabinet. She said the agenda of the meeting which was to hear a report from the Department of Small Business Development (DSBD) on the Local Economic Development (LED) conference, the resolutions made and transversal agreements signed.

Mr H Kruger (DA) raised an issue on the past behaviour of Mr M Dirks (ANC), absent in the meeting, and requested the Chairperson to ask the Speaker to remove the Member from the Committee.

Ms N Mthembu (ANC) stated that the issue on Mr Dirks happened in a plenary session in the House and not in the Committee. Members may not condone the behaviour, but they cannot be dragged into something that did not take place in the Committee given the Committee’s responsibilities.

Mr X Mabasa (ANC) said the Committee must be careful of jurisdictions and not enter into matters concerning discipline in the House, which fell under the Speaker, as was the case of Mr Dirks

The Chairperson said in the previous meeting the issue of the Director-General (DG) as the accounting officer of DSBD missing important Committee meetings had been raised and discussed. She had met with the DG who had committed to be attending important meetings and if not so, send a capable member of DSBD knowledgeable enough with the agenda before the Committee for that day, after conferring with the Chairperson.

Mr H Kruger sought to get some clarification on the agenda as to whether the transversal agreements referred to all transversal agreements in the government or just Department of Cooperative Governance and Traditional Affairs (COGTA) transversal agreements.

Mr. X Mabasa commented on DG attendance in Committee and agreed with the resolution made. He moved to accept the report from the DG as prepared, especially since it progressively addressed the future.

The Chairperson responded to Mr Kruger by stating that since the Committee asked DSBD to report to it on transversal agreements, it was the prerogative of the Department then to package the information in the way thought best. Calling of a conference by DSBD of stakeholders who had a common understanding of what needed to be done, where discussions were had, concrete resolutions made and transversal agreements signed, meant that all role players were involved. She praised the initiative and the output that came out of it.

Department of Small Business Development (DSBD) presentation

Ms Edith Vries, DG, DSBD, started the presentation by stating that the Department has linked the report on transversal agreement to the outcomes of the conference. On the background of the conference, she said DSBD initiated the National LED conference as a strategic platform to engage on critical issues on stimulating local economies through proper implementation of LED.

A technical team led by DSBD and COGTA prepared the concept note for the conference; Ministers provided strategic direction and approved the conference objectives, themes and focus areas.

The conference was well received and attended by Ministers for DSBD and COGTA, Deputy Ministers of DSBD, the Economic Development Department (EDD) and COGTA; chairpersons of portfolio committees, MECs; mayors and councillors; 400 LED practitioners from various municipalities; World Bank representatives; and the National Planning Commission, among others.

The conference objectives included:

  • Adoption of a new inclusive local government agenda for LED
  • Reflection on radical socio-economic transformation and implications for stimulating local economies
  • Explore how the Back-To-Basics Programme can be a toll for creating a conducive environment for economic development
  • The launch of the Economic Development Council of South Africa (EDCSA)

Mr Lindokuhle Mkhumane, Deputy Director-General (DDG), DSBD, said the theme of the National LED conference was ‘positioning Local Economic Development for Radical Social and Economic Transformation’.

Key declarations made during the conference included the provision of support to municipalities in the creation and promotion of an enabling environment for economic growth and job creation, guided by the mandates of COGTA and DSBD; recognizing the critical role played by Small and Medium Micro Enterprises (SMME’s)  and co-operatives in the provision of good quality and cost effective services which opens doors for emerging entrepreneurs and contribute to unemployment, income inequality and poverty reduction; and a resolution to adopt the new South African LED agenda aimed at contributing towards achieving radical economic transformation, among others.

The conference assisted in focussing the DSBD Memorandum of Agreement (MoA) with COGTA that was being prepared. The MoA covered areas like red tape reduction, co-location initiatives, LED strategies development and implementation, cooperative support and database development.

The conference came up with specific LED resolutions and activities that needed to be taken with various partners as well as the agreements that will assist in carrying out the said activities. These resolutions, activities and agreements made are:

  • Ensuring centrality of LED in the implementation of Back to Basics and Integrated Urban Development Framework. Activities to be carried out included simplifying business licensing/registration, strengthen regulation framework through LED, identify opportunities/services that can be offered to SMMEs and target these for the youth and women. The agreement to help in this is with COGTA (at draft stage) and with the Department of Public Works (DPW).
  • Managing rapid urbanisation and effecting spatial transformation to stimulate local economies. Activities included ensuring that business development services and economic infrastructure are brought to areas previously excluded by up scaling co-location. This agreement was with the Department of Rural Development and Land Reform (DRDLR) and with COGTA (draft).
  • Red tape reduction and addressing other inhibitors. Activities included simplifying licensing/registration process, create red tape awareness in municipalities and assessment of red tape reduction guidelines, review applicable legislation that impedes SMME development, etc. The draft agreements to aid in these activities are with COGTA and the South African Local Government Association (SALGA).
  • Addressing enablers to growth and development of SMMEs. Activities included creation of a virtual database for effective monitoring of SMMEs, cooperatives and informal businesses; encouraging SMMEs to register on the database and utilising the database for promotion and uplifting of the businesses. The agreements for this are with COGTA (draft) and the Services Sector Education and Training Authority (SSETA)
  • Clarification of local government on radical socio-economic transformation. Activities included assessing and determining the strength and ownership of the local economy, identifying opportunities for the participation of SMMEs and creating a framework for participation, monitoring and evaluation. The agreement for this was with COGTA (draft).
  • Implementation of the revised National Framework for LED. The planned activities included finalising the review of the framework; engaging various stakeholders on the singular interpretation of the framework; and agreeing on the roles and responsibilities for its roll-out. The agreement for this is with COGTA (draft)
  • Establishing new financial arrangements for innovation capability and capacity building in local spaces. Activities included promoting and advocating the role of innovation in LED, developing mechanisms for accessing support for innovation in LED and establishing mechanisms for accessing the LED fund for innovation. The agreement towards achieving these activities was with the Department of Science and Technology (DST).
  • Strengthening the role of local traditional leaders in economic development. Activities include advocating for the establishment of LED in the House of Traditional Leaders and encouraging traditional leaders to participate in LED forums. Draft agreements towards this are with COGTA and the National House of Traditional Leaders (NHTL).
  • Knowledge sharing on LED good practice. Activities included developing and packaging case studies on local and international best practice on LED. The agreements towards this are with the Department of Higher Education and Training (DHET), the Minister’s roundtable with universities and COGTA (draft).
  • Dedicating effective and efficient support for SMMEs, cooperatives and informal businesses, particularly on education. Activities included continuous education through the lifecycle stage of business and monitoring the implementation of the National Skills Development Strategy as it related to SMMEs and cooperatives. The agreement for this is with DHET.
  • Delineation of roles and responsibilities between spheres of government on driving the LED agenda. Activities included clearly defining roles and responsibilities between spheres of government, agreeing on the roles of DSBD, COGTA and EDD so as to replicate the same to provinces. Agreement was with COGTA (draft) and National Treasury (draft).
  • Exploring the establishment of the LED fund and ensuring that local government provided adequate resources for LED purposes. Activities included developing terms of reference for the establishment of LED fund, identify potential sources of funding and engage relevant stakeholders on resourcing the funds. The agreements for these activities are with COGTA (draft) and National Treasury (draft).
  • Increasing collaboration between researchers and policy makers in the design of programmes to address migration challenges. Activities included integrating research on migration on the research agenda of government, assigning research bodies to conduct current and relevant research as required and engaging with universities to carry out research. The agreement for these activities was with DHET
  • Facilitating sharing of national and international models of good practices in developing and promoting cooperatives. Activities included developing and packaging case studies on local and international best practice on LED, utilise LED forums to share experiences, develop a system to capture best practice for replication and adaptation, etc. The agreement was with COGTA (draft).
  • Supporting the Economic Development Council of South Africa (EDCSA) in strengthening and enhancing capacity of LED practitioners. Activities included promoting and advocating for a professional body among LED officials, aligning the body to relevant units and updating and engaging EDCSA on government programmes on LED. The agreement on this was with COGTA (draft).
  • Building and strengthening collaboration between local government, the scientific community and agents of innovation to foreground innovation in LED. Activities here included promotion and advocating for the use of science and technology to advance LED and creating mechanisms and structures to link science and technology providers with municipalities. The agreements for these activities are with DST, DHET and universities.
  • Dedicating effective and efficient support for SMMEs, cooperatives and informal businesses, particularly on education. The activities for this are providing business management training skills to cooperatives, SMMEs and informal business by end of the 2019/20 financial period. The agreements for the execution of this activity are with DHET, the Training, Local Government Sector Education Training Authority (LGSETA) and the Services SETA. The agreement with LGSETA was signed at the conference.

Mr Lindokuhle finished his presentation by giving concluding remarks on the key outcomes of the conference.

Discussion

Mr Kruger sought clarification on what was meant by ‘strengthening the red tape reduction processes through legislation’. There should be an agreement with DRDLR in addition to the agreement with traditional leaders since most of the traditional leaders are sitting in rural areas. He suggested bringing into DSBD since small business development and rural development were related. LED was traditionally a small department within the municipality and did not get a big budget and there was a need to have a strategy to finance LED effectively for service delivery.

Mr S Mncwabe (NFP) congratulated DSBD on organising the conference and outcomes and emphasised that what remained was the implementation of the resolutions from the conference. The Committee might also need to invite COGTA for them to commit to the implementation of the resolutions on their part. He was pleased that the resolutions also touched on traditional leaders since these are the people in contact with the people and successful implementation of strategy depended on them. He replied to Mr Kruger about bringing DRDLR to the fore and said implementation needed to go on and the others can join later.

Mr K Meshoe (ACDP) reiterated on the importance of the implementation of the conference resolutions noting that this will lead to a decrease in unemployment. He however had three questions: what were the timeframes of the implementation since many things were planned? Does local economy include the townships since the businesses in the townships are being lost to big business or foreigners and how was the department planning on addressing this? Is health inspection carried out on spaza shops since these also serve as living quarters for the people operating them?

Mr N Capa (ANC) said that for local development to happen, specialisation needed to take place whereby everyone occupied the space; this way, there was little chance of being displaced. The Department should own the implementation agenda of the conference resolutions and drive it.

Ms Mthembu said that the conference resolutions should not be just on paper but needed to be implemented. It was also important to get a report in the near future on the municipalities’ implementation of some the activities mentioned in the report. There was a lot of confusion in municipalities in carrying out their work because they are required to be giving reports to two departments (Provincial Department of Economic Development and Cooperative Governance). Also, some by-laws are not in favour of small business; was there a way of passing by-laws that favoured small business for example restricting big businesses from selling particular products thus limit unfair competition?

Mr S Bekwa (ANC) also spoke on the importance of implementation of the conference resolutions and again asked the DSBD to take charge in the implementation process.

Ms N November (ANC) emphasised the implementation process asking the Department to work closely with partner departments for example COGTA to fully implement the resolutions.

In response to Mr Kruger’s comment that rural development should also be mentioned alongside traditional leaders, Ms Vries noted that the report mentioned an agreement with DRDLR and said all these departments were represented at the conference.

On timeframes, she indicated that this was something she had insisted on and there was a document about this which was not presented to the Committee as it was incomplete at this time. The draft agreement with COGTA included an implementation plan. Further, the process was slowed down by the retirement of the COGTA DG in December. However this process was in motion and the implementation plan with timeframes was expected to be signed by 31 March 2018.

Replying to Mr Capa’s point that DSBD ought to claim its space, Ms Vries said that whereas LED used to be huge as an agenda of the Department, it has been reduced almost to nothing in COGTA with only one official at the director level and did not have a decent budget. This issue of funding for LED was sharply raised during the conference and one of the conference resolutions was a new financial arrangement for LED.

On implementation, Ms Vries replied that this is already taking place giving the example of the agreement already signed with Services SETA that launching an academy on entrepreneurship and enterprise development in the week. The Department developed the training model with Services SETA and this also pointed to the coordination function between DSBD and other implementation partners.

Ms Vries said that the Department did not have a response on the issue of health inspection of spaza shops as this was solely a function of the municipalities.

On by-laws, Ms Vries replied that while she agreed that SMME’s are being driven out from their spaces of work, there was little the Department could do since the Townships Revitalisation Programmes are driven by the province. Thus it was an issue of mandate and the Minister was working hard with MECs for economic development on this.

Mr Kruger said there were many apartheid-era by-laws such as the insolvency act that were not friendly to small business in the townships and such by-laws needed to be changed.

On regulation, Mr Lindokuhle replied that the Department was considering asking the Minister to include red tape reductions as part of the regulations to all municipalities in the National Small Business Act review exercise. It will then be an enforceable instrument rather than just being guidelines where some may choose either to implement or not.

The Chairperson thanked all for attending and also welcomed the former Deputy Minister and former Member of the Committee, Ms November to the Committee.

The meeting was adjourned.

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