Department of Small Business Development Annual Performance Plan: DPSA & DPME analysis

Meeting report

Mr R Chance (DA) asked if space could be found on the agenda for Vodacom and Ericsson to be appear before the Committee, as Vodacom had still not resolved the problems which had been presented to the Committee. 

The Chairperson said that in the initial draft, Vodacom had been slotted in for the previous day, but due to the non-availability of the senior manager of Ericsson, he had requested that the Committee reschedule the appointment for 4 or 16 May. The reason the item was not on the agenda was because a date was still to be found when both Vodacom and Ericsson could both be present.

Department of Public Service and Administration: Annual Performance Plan analysis

Mr Etienne Gelderbloem, Director: Department of Public Service and Administration (DPSA), presented the analysis of its annual performance plan (APP) by the DPSA and the Department of Performance Monitoring and Evaluation (DPME), and reported on progress regarding the organisational structure of the Department of Small Business Development (DSBD).

On 2 May and 3 October 2017, the DPSA had presented on the DSBD’s organisational structure to the Portfolio Committee, and the Committee had deliberated and made recommendations which the DPSA had to share with the DSBD. A meeting had been held between officials from the DPSA and the DSBD on 29 November, at which the state of the organisational structure was discussed.

As at 17 April 2018, the following progress had been made:

• The Department had finalised the service delivery model.
• All posts transferred from the Department of Trade and Industry (DTI) had been catered for in the approved start-up structure.
• Placements in the start-up structure had been completed and submitted to the DPSA for record purposes.
• The Department had finalised the proposed organisational structure.
• The job evaluation process for all posts had been concluded.

In respect of core functions, 198 posts had been identified for transfer. This number had been reduced in respect of export development (21 posts) and skills for the economy (three posts). In effect, 166 employees had been transferred to the DSBD, and this was confirmed by the name list supplied by the DTI.

In respect of export development, five employees had been transferred with effect from 1 September 2014, and were then transferred back to the DTI on 1 April 2015. From the discussions, it appeared that the transfer of such a small unit may be insufficient to attend to the whole export development service delivery value chain. The implication was that the export development functions had not been transferred to the DSBD, so it was recommended that the political principals needed to decide on the location of the export development functions.

In respect of support services, the DTI had identified 36 employees for transfer, based on functionality, shared services and segregation of duties. Of the 36 employees, 15 had been transferred and the DSBD had declined the transfer of 21. It was recommended that the proposed organisational structure of the DSBD for support services be aligned to the approved generic functional structure for Programme 1.

Mr Gelderbloem described the proposed macro organisational structure of the DSBD.

Branch 2: Sector Policy and Research

This branch would oversee the creation of a knowledge and policy environment that contributed towards the creation of employment and economic growth by small, medium and micro enterprises (SMMEs) and cooperatives.

Functions included overseeing the provision of research and knowledge management services to direct evidence based policy making; overseeing the promotion of small businesses and cooperatives interests in the global space at regional and international forums; and overseeing the provision of a sector monitoring and evaluation service to improve service delivery outcomes.

Branch 3: Integrated Cooperative Development

The purpose lay in creating and maintaining a sound ecosystem that enhanced the establishment, growth and sustainability of cooperatives that created jobs and contributed to economic growth.

Functions included transforming the cooperatives’ development support through policy instruments and advocacy to enhance the value chain in targeted sectors; designing models, approaches and programmes to assist in the establishment, growth and sustainability of cooperatives; and driving strategic partnerships with the public and private sector and civil society to improve the performance of the cooperative sector.

Branch 4: Enterprise Development & Entrepreneurship

Overseeing the promotion of an ecosystem that enhanced entrepreneurship was the key purpose in the establishment, growth and sustainability of small businesses. Functions included driving the transformation of the economy through SMME development by means of policy instruments and advocacy; overseeing the provisions of models and programmes aimed at the establishment, growth and sustainability of small businesses ; coordinating and facilitating the review of models and programmes aimed at the establishment, growth and sustainability of small businesses; and driving the conceptualisation and implementation of a national framework to promote the culture of entrepreneurship and innovation.

The DPSA said that the Government Technical Advisory Centre (GTAC) was in the process of developing a business case for the amalgamation of the Small Enterprise Finance Agency (SEFA) under the Economic Development Department (EDD) and the Small Enterprise Development Agency (SEDA) under the DSBD, with the intention to amend the national Small Business Development Act. The organisational structure should therefore also provide for governance, performance and financial oversight of entities in the portfolio.

A pre-consultation meeting with the DPSA had been requested as soon as possible to assess the proposed organisational structure for core and support functions, prior to formal submission to the Ministry of Public Service and Administration (MPSA). The DPSA would support the DSBD with the finalisation of the organisational structure, which needed to be implemented in a phased manner within the appropriate funding.

Discussion

Rev K Meshoe (ACDP) stated that he wanted clarity on why the DSBD had declined the support service employees. When was the request made by the DPSA for the pre-consultation on the organisational structure, what was it hoping to achieve, and what length of time would the process take to be concluded?

Mr X Mabasa (ANC) wanted to know if the Department felt that if all those amendments to the structure were affected, it would have appropriately fulfilled its obligation. He assumed that all the parties would recognise that the DSBD was a department that served the poor and therefore needed more human interaction, and the constituency needed to be serviced by personal contact.

Mr Chance referred to programme 2 in branch 2, and wanted to know how the Committee felt about the decision not to transfer the export market from the DTI. The DA believed that export promotion had to be a very important part of the DSBD, and that it was vital to the growth of the economy. He emphasised that there was a seeming absence of programmes in the Department. He wanted guidance on the SEFA structure, as it was a subsidiary of the Industrial Development Corporation (IDC). He wanted to know if the DPSA had been involved in the broader discussion of the readdressing of number of departments, as referred to in the State of the Nation Address, and if the DSBD would even exist in the future.

Mr Mabasa said he wanted to comment on the last point made by Mr Chance. In his opinion, as far as the Portfolio Committees were concerned, it was a point of debate. Mr Chance was giving his personal opinion about the amalgamation of smaller departments, but his view was that a department should be kept focused and not amalgamated, as it would lose its focus eventually and competition would increase within departments. Mr Chance was not necessarily speaking about common interests, and it was unfortunate that he was saying that in Parliament.

Mr Chance pointed out that he had not spoken in favour of the amalgamation of departments occurring, but had just wanted to know if discussions within the Department had taken place, due to the statement in the State of the Nation Address.

The Chairperson said that she also had comments about the issue. Discussions at the portfolio committee levels were always about the mandate and improvement of the departments’ efficiency, and to question the department was not necessarily questioning its capacity or suggesting it should go away. There was a massive difference between SMMEs and cooperatives in regulating the achievement of socio-economic development, and therefore amalgamating the Department was neither here nor there -- the separation of them would always result in greater efficiency. The issue of capacity was related to the adequacy and suitability of the structure to support that capacity. 

DPSA’s response.

Mr Gelderbloem responded that such decisions were not meant to be taken unilaterally and should be taken in consultation with the executive authority. It was disturbing that programme one was highly regulated in terms of the Public Finance Management Act (PFMA) and the Public Service Act (PSA), and therefore a Head of Department (HOD) was expected to take on people. A meeting had been requested with the Director General (DG) to address the organisational structure, and sitting down with the human resources (HR) department would need to be done to finalise everything and the minor issues. The meeting would entail discussions with the DG – the structure, the budget and supporting documents -- and the Department would also request information from Treasury. That meeting would take place on Monday, 23 April.

The Chairperson wanted to know how that meeting would help the Portfolio Committee if it was to happen after current meeting had taken place.

Mr Gelderbloem responded that there were specific processes that were regulated in terms of the Public Service Act and the Public Service Regulations. The Department needed to consult the appropriate Ministers, who would then elevate the matter to the Executive Authority.

The Chairperson stated that the document handed out had been presented as a completed and finalised document, yet there would still be a meeting to finalise it. She wanted to know why that was the case and why it had not been done before the meeting with the Portfolio Committee.

Ms Edith Vries, Director General: Department of Small Business Development, responded that there had been several very difficult meetings that had led to the conclusion that Mr Gelderbloem had reported, that they had not been given all of the posts which they should have been given in terms of the National Macro Organisation of the State (NMOS) process. They understood their mandate and had always laid their cards down to the Committee, saying that if the Department was to function then that was what they had told the Committee they would need. Last year, an extra budget allocation had been denied by Treasury, which had led to some posts not being able to be replaced. They had given their documents to the Minister for approval, but the Minister could only give approval after consent was received from Treasury.

The Chairperson interrupted that with regard to page 5, the statement that the Department had finalised the organisational structure gave the impression that everything had been finalised.

Mr Gelderbloem said that the structure had been finalised, and it now needed to be approved through the proper process. Treasury would approve funding if the structure had been approved.

Mr Chance said that to his knowledge, if the structure had been finalised only now, then it would be implemented only in the following year. The Department was therefore still in a predicament, as everything would be considered interim.

The Chairperson wanted to know when the Gantt Chart was meant to be finalised, and what had caused the delay.

Mr Gelderbloem said that it should have been achieved much earlier, but their experience showed that when a new Department was created, there were many policies and strategies which needed to be created and that would take a minimum of three to five years. They were currently in their fifth year. When a new administration was established in 2019, everything would be sorted out and the major issues would have been put in place.

The Chairperson objected, and said that she had asked a very straight forward question, and wanted a simple answer. When was the Gantt Chart meant to be concluded?

Mr Gelderbloem responded that it was very difficult to answer that. The responsibility for the Gantt Chart lay with the Department, and therefore there was none.

The Chairperson said that without a Gantt Chart, milestones could not be completed, as it helped with not only the structure but with meeting the milestones as well. The Gantt Chart was important as it showed and help to achieve things and without it, nothing would be achieved. The Department would need to be asked about that issue that they had not given a Gantt Chart, nor had the organisational structure been achieved.

Mr Chance wanted to know how vacancies and various other components had been seen to, such as hiring and advertising vacancies and posts, when the organisational structure had not even been established. He found that very irregular.

The DG responded that an improved start up structure had been put in place, and the proposed structure that had been put forward was based on the start up structure. They were able to appoint for positions where funds were available for the posts and vacancies that needed to be filled. She clarified that they did have a Gantt Chart.  Where they were stuck was with the budget. They had not got what they had asked Treasury for, and that was why they could not proceed.

The Chairperson thanked the DG for the clarification, but she still did not understand how they could attend a meeting a week later to discuss a document which was meant to be presented in the current meeting. Every single year around the current time of the year, the departments always presented their organisational structures, their budgets and their performance plans, and were always meant to be prepared in advance, as the times during which these various documents would be presented remained constant. However, in the document which was currently presented and from the discussion being heard, the organisational structure, the budget and performance plan were all not up to standard.

The DG said she wanted to clarify that the DSBD had made it very clear to National Treasury that they needed the money -- that their ‘kitty box’ was empty and they needed a funding allocation from Treasury -- which they had been denied. The assurance she wanted to give was that the conversations had not been started because of the Portfolio Committee saying so, but because they had identified their issues, and if they could get some agreement then they would be able to get some money with the adjustment budget.

The Chairperson said she heard the argument that was being put forward. She said the Committee could not be advocating for funds for administration at the expense of the Department’s core business. The priority was building the capacity of the core business, because then the administration would also become more efficiently executed. She said that administration would not reduce poverty, but the core business would.

Mr Gelderbloem said that he heard what the Chairperson had said, and it was very clear. It was not about the management of finance and corporate management, but support services were needed and posts needed to be filled, and programme one could not be ignored.

The DG said that they agreed that the core business needed to be looked at and improved on. 

There were questions she thought needed to be answered. The first was regarding international relations – and the Department did not have any. Regarding the absence of programmes, she said that even if programmes were transferred, they still needed to be responsible for them in their entirety, and the only reason why things had been outsourced to SEFA was because they had the capacity to do it. Lastly, regarding the length of the time frame to complete the business case on SEFA, she said that if the Minister was asked to get the concurrence of her colleague in writing, then they would be able to go ahead with it. The process was not only expensive but also technical, time-consuming and painful for the people involved. A mandate from the political principals was needed in order to go ahead and once that was done, it would take approximately 12 to 18 months to have the business case approved.

Mr Chance asked if the DPSA could respond to his question which related to the broader issue of restructuring in government.

Mr Gelderbloem said that the Department had a unique role and its mandate was articulated in pronouncements by political principals and the ruling party, and was a key strategic function in government. He stated that they accounted to the Portfolio Committee but they had an accountability role and a responsibility role. The DSBD had to account to the Committee on small functions of government, but could also use various organs of state to promote its functions, such as the DTI, and even state-owned enterprises. He did not think it made sense to take the DSBD back to the DTI, as the DTI functioned at a more developmental level.

Mr Chance said that Mr Gelderbloem had made a very valuable statement on the accountability and responsibility aspects, though there was a struggle to get that accountability across to government. Many departments themselves had small businesses within them. A key question which needed to be asked was, what was the best way to create, sustain, grow and build companies. When that way was found, then it needed to be worked on and built upon.

The Chairperson compared the role of the DSBD to that of the Department of Sport and Recreation (SRSA) ahead of the 2010 soccer world cup, where it had made a bid to host it, had been unsuccessful, learnt from their mistakes and re-submitted the bid and had succeeded. That one plan had led to the creation of millions of jobs. If the DSBD positioned itself in the same way that SRSA had for the 2010 Soccer World Cup, with the aim of creating 9.9 million new jobs by 2030, then they would create those new jobs. The SRSA had not built a single airport, yet it had facilitated airport construction by the Department of Transport, and that same position was needed by the DSBD.

There was no need to close the Department, as it was needed more than most. However, the Department had to step out from the periphery and step into the core.

The meeting was adjourned