The Portfolio Committee on Small Business Development met to enable Members to interrogate the draft report on the Department of Small Business Development’s Budget Vote 31 for the first time. Due to the absence of some Members the Acting Chairperson had to co-opt members of other committees for the meeting to quorate. Highlights of the draft report included an introduction and background to the draft report; an overview; an introduction of the proposed programme structure; expenditure analysis of the estimates of national expenditure sourced from National Treasury over the Medium Term Expenditure Framework period; the policy priorities for 2018/19; the planned priority initiatives and an analysis of Department of Small Business Development’s budget; overview of Small Enterprise Development Agency and Small Enterprises Finance Agency’s strategic outcome oriented goals, budget allocation and budget analysis. Also, the draft report contained the proposed observations and recommendations of the Committee.
The Committee expressed concerns that Department of Small Business Development had deferred all planned priority initiatives repeatedly and the planned review of the National Small Business Act and Co-operatives Act that had direct impact on the work, programme and budget of the Committee was not part of that Department’s programme for the current financial year. It also expressed concerns that the bulk of the Department’s budget was allocated to a new programme Enterprise Development and Entrepreneurship and a major part of the funds for the new programme would be transferred to the Small Enterprise Development Agency; that fund allocations for program one (administration) a support function were steadily increasing each financial year and the continued payment of R10 million to Industrial Development Corporation purportedly towards Crafts Customised Sector Programme instead of the Small Enterprise Finance Agency.
The Committee deliberated on the proposed observations and recommendations even though it was proposed that since Members were receiving the draft report for the first time the Committee could not adopt the draft report. The Committee expressed concerns that the Department had not prioritised its planned policy initiatives because it had not been presented for approval by the Committee.
A Member drew the Committee’s attention to a 2 May 2018 Business Day report captioned ‘Budget delayed as Department of Social Development lacks approved structure’. He quoted the statement of the Chairperson of the Committee on Social Development that stated that ‘without an approved annual performance plan, the Department of Social Development’s budget will not be approved during the upcoming budget vote debates’. The Chairperson of the Committee on Social Development warned that ‘the Committee could not accept an annual report and approve a budget for a Department that did not have a defined structure’. He noted that the Committee and the Committee on Social Development were in the same position. He proposed that Members of the Committee could follow this stance and state that it would not pass the budget of the Department in view of the state of small businesses in the Country and the damning observation in the draft report as highlighted by the Content Advisor. The Committee resolved that the concern would be part of the Committee’s discussions.
Members sought clarity and made comments on each observation on recommendations. A Member expressed concerns that the Committee’s strategic plan was not in the draft budget report. Other Members argued that because its strategic plan was a bulky document reference to the things that could assist in developing small businesses could be inputted in the draft report rather than integrating the entire document in the report to ensure that it did not lose the essence of the report.
The Committee resolved that clarity would be sought on the way forward. The Committee agreed to re- draft two observations that pertained to the Minister’s inability to fill the vacancies which led to a breach of an Act of Parliament and the other that dealt with the suspension of the contracts of KPMG,
Some Members expressed concerns that the Department had not presented its strategic plans and its organisational structure to the Committee for approval hence, it would be difficult to adopt the budget if Members had not seen the Department’s strategic plans and its organisational structure. Members’ opinion was that as long as the draft report captured what the Department ought to do and had not done it was okay. It is now up to individual Political Parties to decide if they would accept the budget speech on the day it would be debated. The Committee resolved that it would affix a date to convene meetings with the department to present its strategic plans and its organisational structure to the Committee before the budget debate.
Also, the Committee proposed that the observations and recommendations would be re-drafted based on Members comments before Friday 4 May 2018. The Committee also resolved that it would further deliberate on the draft report during the next meeting and hopefully adopt the draft report.
Election of Acting Chairperson
The stand-in Committee Secretary informed Members that the Acting Chairperson had sent her apologies and asked the Committee to nominate an Acting Chairperson.
Mr X Mabasa (ANC) was elected unopposed as Acting Chairperson.
The Acting Chairperson explained that the Acting Chairperson and Mr S Bekwa (ANC) had sent apologies and would be in the meeting shortly. He informed Members that he had invited Members from another Committee to quorate the meeting they were Mr J Maake (ANC) and Mr M Celle (ANC). He invited Members for comments.
Mr H Kruger (DA) observed that the Vodacom investigation was not part of the day’s agenda even though the acting Chairperson of Chairs had agreed that the Committee could investigate Vodacom and a budget for the investigation had been made available.
The Acting Chairperson remarked that it was good that the Committee had been sensitised about the developments on the Vodacom investigation. He promised to liaise with management during the management meeting to ensure that it was part of the Committee’s agenda during the next week.
Mr Kruger said it had also come to his attention that Vodacom was playing for time as it knows that the Committee might not exist in the next financial year. He pleaded for an urgent meeting on the Vodacom investigation.
The acting Chairperson noted Mr Kruger’s concern and the urgency. He invited the Committee’s Content Adviser to take the Committee through the report.
The Content Adviser asked for guidance on how the report should be presented. He proposed that he should give Members the key points and dwell on the observation and recommendations.
Mr S Mncwabe (ANC) asked him to present the entire report.
Mr Capa seconded Mr Mncwabe’s suggestion.
Mr R Chance (DA) said he would prefer that the Content Adviser go through the report page by page and focus on the observations and recommendations.
The Acting Chairperson supported the Content Advisers approach and Mr Chance’s suggestion.
Brief by Content Adviser
The Content Adviser said the report comprised of an introduction and a background on page one, an overview on page two and an introduction of the proposed programme structure on page five.
Pages six and seven contained the expenditure analysis based on estimates of national expenditure sourced from National Treasury over the Medium-Term Expenditure Framework (MTEF) period.
Pages eight and nine contain the policy priorities for 2018/19 while the planned priority initiatives were captured on page 10 and 11.
The Department of Small Business Development (DSBD) had deferred all planned priority initiatives for 2015/16 to 2016/17and 2017/18 which had been further deferred to 2018/19. The planned review of the National Small Business Act and Co-operatives Act had direct impact on the work, programme and budget of the Committee but is not part of DSBD programme for current financial year. It remains unclear if any of the planned priority initiatives would be accomplished within the term of the fifth Parliament that ends in 2019.
An analysis of the budget of the DSBD is done on pages 12 to 18.
An overview of Small Enterprise Development Agency (SEDA), its strategic outcome-oriented goals and its budget allocation and analysis is captured in pages 19 to 25.
Similarly, an overview of Small Enterprises Finance Agency (SEFA), its strategic outcome-oriented goals and its budget allocation and analysis is captured in pages 26 to 34.
Finally, the observations and proposed recommendations of the Committee on the budget is captured in pages 24-37 and pages 38 to 39 respectively.
He said Members should note that in terms of the consolidated budget summary DSBD had four programmes proposed in the revised strategy plan but the Committee had not approved the revised strategy. The Committee would note that programme three has been divided into Integrated Cooperatives development and Enterprise Development and Entrepreneurship.
Compared with the previous year, DSBD budget registered negligible increase from R1.47 billion to 1.48 billion. The bulk of the budget about R1.2 billion was allocated to the new programme four (Enterprise Development and Entrepreneurship) due to transfers payable to SEDA about R769 million.
He expressed concerns that programme one (administration) a support function was apportioned R124 million in 2018/19 as against R121 million in 2018/19 and would have increased allocation of R143 million during 2020/21 financial year. Also, the creation of programme four from programme three during 2018/19 is alarming instead of waiting till 2019/20 when the Enterprise Development Fund is launched. He expressed concerns on the completion of the programme because it was allocated R450 000 while the rest of the funds would be transferred to SEDA.
Another concern is the continued payment of R10 million to Industrial Development Corporation (IDC) purportedly towards Crafts Customised Sector Programme. The Committee does not understand why this fund is paid to IDC instead of SEFA. He also highlighted the purpose of programme one, programme two (Sector Policy and Research), programmes three and four.
Mr Chance asked for clarity on the amount of R450 000 which the Content Adviser had mentioned because it was actually R450 million and asked him to explain if it was the rationale for splitting programme three.
The Acting Chairperson asked Mr Chance to state if he was asking the Content Adviser to note the clarification on the amount question and engage after he completed the brief.
Mr Chance said the Content Adviser had made an observation which brings into question the rationale for dividing programme three into two to ensure the Committee puts it into its recommendation.
The Content Adviser said he was questioning the budget allocation and creation of a new unit. He clarified that the amount was actually R450 million.
The Acting Chairperson asked the Content Adviser to proceed and ensure that the Committee did not leave out the recommendation.
The Content Adviser said the four sub-programmes in programme four were Enterprise Development and Supplier Development, SMME’s programme Design and Support, SMME competitiveness and Entrepreneurship. He then proceeded to list out all the 18 observations.
Observation 1, 2, 3 and 4
The Committee expressed concerns on the completion of the review of the strategic plan which was not approved by the Committee, the contradictory information on DSBD organisational structure, not discussing the wholesale proposals in the revised strategic plan with the Committee and the initiation of discussions to migrate certain programmes to its agencies SEDA and SEFA.
Observation 5, 6 and 7
The Committee observed that the Government Technical Advisory Committee (GTAC) aimed to amend the National Small Business Act, the incomplete strategic plan, inability of DSBD to create a fully functional department within 18 months and the Committee remarked that none establishment of a fully functional department after four years was failure on the part of DSBD.
Observation 8, 9 and 10
The DSBD has not filled vacancies in the senior management level and had not outlined any plan to do so, DSBD and its entities have no clear strategy on how to leverage 30% public sector procurement to ensure that it nurtures small enterprises from inception to market aces stage and DSBD does not have plans to use legislation, regulations, licensing, budget, procurement and BBBEE charters to influence private sector behaviour and drive transformation agenda as announced during the State President 2017 SONA.
Observation 11, 12, 13 and 14
DSBD’s miniscule budget allocation to programme two (a core area of its operation), the rationale for creating programme four and separating programme three in 2018/19 rather than 2019/20 when the Enterprise Development Fund is launched would be launched, the repeated transfer of R10 million to IDC instead of SEFA for the Crafts Customised Sector Programme and deferring of all its planed policy initiatives for 2015/16 to 2016/17 and 2017/18 which had been further deferred to 2018/19.
Observation 15 and 16
DSBD’s disregard of the Committee’s call to create institutional support structure such as Co-operatives Development Agency, Co-operatives Advisory Council etc., the failure of DSBD to deliver National Small Business Advisory Body to represent and promote the interests of small businesses as directed by the National Small Business Amendment Act No 26 of 2003. Also, the Minister was in breach of section 2 of the National Small Business Amendment Act No 26 of 2003.
Observation 17 and 18
The DSBD has admitted that although Economic Development Department (EDD) was the legal authority of SEFA the reporting relationship between SEFA and EDD remained clumsy and DSBD did not have a plan to remedy the situation. He also asked Members to note that the Office of the Auditor-General of South Africa (AGSA) had suspended the contracts of KPMG he reminded Members that the Committee had been questioning KPMG on its transactions repeatedly. He asked Members to guide him on whether the Committee would want the observation on KPMG transactions captured.
Mr Mncwabe said the observation on KPMG transactions should be captured as it was all over the media even though SEDA had been presenting clean audits to the Committee.
Mr Kruger said he was covered and seconded the proposal made by Mr Mncwabe.
Mr Chance also supported the proposal of Mr Mncwabe and said the Committee needed to capture DSBD’s poor governance mechanisms in the budget. The Committee needs to make recommendations on DSBD’s poor governance mechanisms as it affects the budget.
Mr Capa asked for clarity on which part of the brief was the report.
Mr Kruger reminded Members that the Committee had spent two weeks developing its own strategic plan to assist DSBD on how to sustain small businesses. He observed that the report did not contain the Committee’s strategic plan hence he proposed that it be added into the recommendations of the Committee.
Mr J Maake (ANC) asked the Content Adviser to clarify what would happen if a Minister breached an Act of Parliament as alluded in the observation.
Mr M Celle (ANC) asked the Content Adviser to change the wording in the observation on the Minister’s breach from ‘this Minister’ to ‘the Minister’.
The Acting Chairperson reminded Members that the report was that of the Committee hence members needed to claim ownership of the draft report. The meeting was therefore slated to enable Members to engage the draft report on DSBD’s budget vote 31 for the first time.
Mr Chance expressed concerns on observation 14. He noted that DSBD had not prioritised its planned policy initiatives such as the Intergraded Strategy on the Promotion of Entrepreneurship because it had not been presented or approved by the Committee. He proposed that Department of Planning Monitoring & Evaluation (DPME) and DSBD must present this planned policy initiatives to the Committee because DPME had made some observations on the Strategic plan. He said it would not be fair for Members to adopt a plan it had not seen. He drew the Committee’s attention to a 2 may 2018 Business Day report captioned ‘Budget delayed as Department of Social Development lacks approved structure’. He quoted the statement of the Chairperson of the Committee on Social Development that stated that ‘without an approved annual performance plan, the Department of Social Development’s (DSD’s) budget will not be approved during the upcoming budget vote debate’. The Chairperson of the Committee on Social Development warned that ‘the Committee could not accept an annual report and approve a budget for a Department that did not have a defined structure’. He said the Committee and the Committee on Social Development were in the same position. He proposed that Members of the Committee could follow this stance and state that it would not pass the budget of DSBD in view of the state of small businesses in the Country and the damning observation in the draft report as highlighted by the Content Adviser.
The Acting Chairperson said Mr Chance’s observation should be part of the discussions that would arise based on the observations. He advised Members to ask for clarification and interrogate the draft because the Content Adviser had prepared the draft on behalf of the Members.
The Content Adviser said the acting Chairperson had mentioned earlier that the entire document was the report but he just highlighted the most important part of the report. Members also need to study the budget analysis because it is the Committee’s document. He said the Committee’s strategies were being challenged because it had expected DSBD to consider its strategies but it had been deferred by DSBD for a long time. For instance, the Small Business Review had been continually deferred from 2016/17 to 2017/18 and further deferred to 2018/19 financial year hence, it might not be reviewed in the present financial year and the Cooperative Act was even not allocated a budget. The Committee could not continue with its work without the DSBD following the Committee’s suggestions. He proposed that the Committee recommends that it wants to introduce the Cooperative Act because it was not good that the Committee would not be able to introduce any Act in the firth Parliament. The rules of Parliament allow a Committee to introduce an Act hence the Committee could introduce the Cooperative Act.
Mr Kruger said if he understood from what the Content Adviser said that the Committee’s strategy was important hence he proposed that it added its strategy to the background in the draft report.
The Acting Chairperson asked Members to note that Mr Kruger’s proposal was crucial but reminded Mr Kruger that Members were just receiving the draft for the first time and needed to time to look at it.
Mr Capa said the only way of working through the draft was to interrogate it. He expressed concerns on how long the Committee had to pass the budget. He remarked that if the Committee wanted to approve the revised strategy before approving the budget it should do so urgently because the budget would be passed soon and the Committee might end up not adopting the report.
Mr Chance reminded Members of Mr Kruger’s reference to the Committee strategic plan which the Content Adviser mentioned was relevant. Also, the Committee’s strategic plan which has been held in abeyance because DSBD has not implemented its strategy, he proposed that the Committee should make a reference to the Committee’s strategic plan instead of putting its whole strategic plan in the report. The observation should then read that the Committee observes that due to the non-performance of DSBD in implementing its strategic plans it has not being possible for the Committee’s strategic plan to align with DSBD’s strategic plan because the two strategic plans were far apart.
The Acting Chairperson said he needed clarity on the proposal of Mr Chance because it might suggest that the two strategic plans were irreconcilable. He said the Committee might not want to go to the extreme although the Committee wanted to highlight that it had a workshop that led to a strategic plan. He asked for follow-up from Mr Chance.
Mr Chance said he understood that the Acting Chairperson might not want to merge an observation with a recommendation. The Committee could make an observation and see how it could lead to a recommendation. However, Members needed to make a note of the fact that the strategic plan of the Committee had a lot of content that was not reflected in DSBD’s report.
Mr Kruger said he would not have said the Committee should add its strategic plan to its draft report if it affected only IDP but since the report was related to DSBD the Committee needed to show that it was working to develop small businesses. He reminded Members that the document was not well known and he asked Members how many pages it was.
Mr Chance said it was a 70-page document.
Mr Kruger proposed that the document be summarised.
Mr Mncwabe proposed that the Committee could just make reference to the things that could assist in developing small businesses rather than integrating the entire document in the report to ensure that it did not lose the essence of the report.
The Acting Chairperson said he would need to clarify from the Content Adviser as he was taking the Committee through the report.
The Content Adviser asked Members to guide him on how to draft the Clause that captured the Minister’s breach of the Act of Parliament. He also said he was limited in discussing certain issues on the budget because it had a specific template.
Mr Mncwabe asked Mr Chance to guide the Committee on how to draft the Clause since he had more understanding of the English language. Members needed to clarify if the Minister had tried to fill the vacancies but was unsuccessful or if he had failed. If the Minister failed to fill the vacancies then the Minister had breached an Act of Parliament.
The Acting Chairperson said the Committee would consider both Mr Chance and Mr Mncwabe’s inputs as Mr Mncwabe was a lawyer by profession.
Mr Chance said his understanding was that the position of members of the Advisory Council was advertised but it lapsed. The choice of the word unsuccessful was true but the process of filling the vacant positions was an ongoing process that was never completed. Therefore, the Committee should say that the positions were advertised but for reasons best known to the Minister the process went on and on.
Mr Capa said that Members needed to look at the observations one by one and recommend that the observations be addressed before a particular date.
Mr Kruger asked if each observation should have a recommendation.
Mr Capa said each observation should be understood because a recommendation could capture three observations at the same time. Hence, he proposed that Members proceed to recommendations to see if an observation was not captured.
Mr Maake asked when Members received the draft report because Members might need to go over it if was received today.
The Content Adviser said the soft copies were sent to Members on 1 May 2018 but the hard copy was presented on 2 may 2018.
Mr Celle suggested that Members go over the draft report before it was discussed.
Mr Chance said he did not think that discussions should be postponed as Mr Celle did not belong to the Committee and was not a party to the history of issues in the report. Since Members of the Committee were aware of the issues in the report, the Committee could continue to discuss the report. Also, since decisions were not expected to be made the Committee did not need to quorate so Mr Celle might not need to contribute to the discussions on the report.
The Acting Chairperson said he agreed with Mr Chance that since decisions were not expected to be made the Committee should continue but he did not agree that Mr Celle could not contribute as he was a Member of Parliament. A Member is free to make contributions once he is in the meeting. He resolved that the Committee should discuss the recommendations as suggested but note that the report was just received for the first time today 2 May 2018. He invited the Content adviser to take the Committee through the draft report.
Mr Kruger suggested that Members go through the recommendations one by one and make decisions.
The Acting Chairperson said Mr Kruger’s proposal made sense but because the report was being brought before the Committee for the first time, decisions could not be made and it could not be adopted.
Mr Kruger said he understood the acting Chairperson’s resolution.
The Content Adviser said recommendation one which stressed the urgency of DSBD to present its revised strategic plan to the Committee urgently covered observation one, two and three.
The Acting Chairperson invited Members for comments.
Mr Chance agreed with the recommendation but stated that the Committee needed to attach a date because urgency could be interpreted differently by people. Members could not approve the report without getting some documents from DSBD. Hence the Committee should specify a date as one week after budget speech could be too late.
The Content Adviser said Mr Chance’s observation was correct as the recommendation in the report should be addressed before the budget vote was announced. He also sympathised with Members as mentioned by Mr Chance that approval could not be given on documents not presented to Members. He had discussed with his colleagues on what line of action Members could take because they could not approve the passing of the budget without approving the revised strategic plan and addressing observations 1, 2 and 3. In recommendation two the Committee asked DSBD to furnish it with an action plan to fill vacant positions this recommendation also needs to have a timeline affixed just as recommendation one.
Mr Kruger said that the Committee must say that the budget could not be approved if the Committee did not receive the strategic plans or approve the structure of DSBD.
Mr Chance agreed with Mr Kruger’s proposal but noted that it would be a revolutionary decision if the Committee decided it could not approve the budget if it did not receive the strategic plans or approve the structure of DSBD. He was not saying it was wrong because approving a budget was a political decision made by each Party in a Caucus meeting. It is unrealistic but he agreed with Mr Kruger’s statement. The point is that this is just a Committee report as long as the report states the fact as they are i.e. it captures what DSBD ought to do and has not done it is okay. It is now up to individual Political Parties to decide if they would accept the budget speech on the day it is debated. If the Committee does not put a date it would be difficult for Members of the Committee to adopt the report. It would also be difficult for Political Parties to support the budget if the Committee has not received a proper plan from DSBD.
Mr Mncwabe said it was a tough decision to make. He agreed with Mr Chance that the report should capture what had happened. However, what should happen or not happen did not need to stop the Committee from acting hence recommendation one and two needed to have a timeline. Also, the Committee needs to carry out its oversight function and monitor the activities of DSBD. The Committee could not be hindered even if DSBD did not make efforts to act on the recommendations.
Mr Capa said he agreed with Mr Mncwabe that if anything could be done before the Committee adopted the report it should do it urgently. He also said the Committee must identify what was wrong and resolve it with DSBD.
The Acting Chairperson said he understood that the Committee must try to have written communications with DSBD and the management of the Committee would critically set up meetings with DSBD before the budget is approved even if it was outside regular meeting days.
Mr Chance remarked that he did not think the Committee could stop the adoption of the draft budget reports by asking DSBD to make urgent submissions of a strategic plan and organisational structure to the Committee when it did not have them. He observed that the Committee was told that there was an ongoing process with the Department of Public Service and Administration (DPSA) and a structure was being planned for DBSD hence it could not just pretend that the ongoing process was not happening. Hence DSBD might not be able to submit the strategic plan and organisational structure to the Committee before the budget debate was done. In the past, DSBD has not taken action on some of the Committee’s recommendations therefore the Committee must hold DSBD accountable for its actions. He said the Committee must ensure that it makes an observation and make a recommendation that DSBD submit its revised plans to the Committee before a certain date. The Committee’s job is state matters as they were and if Political Parties note that DSBD has failed it lies on the Political parties to make the decision to support the budget or not to support it.
Mr Maake said the report should state the Committee’s observation and make recommendations on what DSBD must do to correct the concerns of the Committee before a certain date and not stop the process.
Mr Kruger agreed with Mr Maake but expressed concerns that DSBD needed to resolve some issues before the Committee approve its budget. The question that the Committee needed to answer was if it was willing to approve the new DSBD organisational structure without seeing it because this would be a direct consequence of approving the budget.
The Content Adviser informed Members that the budget vote process was a regulated process that begins a year before specifically in August. The strategic plans and organisational structure were supposed to have been submitted to DPME then to NT after both Departments would look at for approval or rejection. This document would now be sent back to DSBD in November to approve and conceptualise its Annual Performance plans. The strategic plan should be a five-year plan originally but there are exceptions. In the case of DSBD, it has been working on the strategic plans since inception in 2014 but the Committee only received the plan one week ago despite follow-ups by the Committee. He did not know if the plan had been approved by Department of Public Service and Administration (DPSA) yet. He suggested that the Committee gave a timeline and take the session before the end of May 2018 or early June because Members would still go on recess.
Mr Mncwabe said the Content Adviser was just suggesting what he had said earlier.
The Acting Chairperson asked Members if they agreed.
Mr Chance seconded Mr Mncwabe’s proposal.
The Acting Chairperson asked Members if they had any more inputs on recommendation three which asked for clarification on GTAC’s process of re-configuring SEFA.
Mr Chance suggested that the Committee had a joint meeting with Portfolio Committee on Economic Development with GTAC in attendance to get clarification on GTAC’s process of re-configuring SEFA.
Mr Capa said the Committee needed to put its point across on all recommendations in a concise manner.
Mr Maake said Mr Chance’s suggestion should be captured in recommendation three.
The Content Adviser informed Members that recommendation four addressed retail and wholesale charter while recommendation five was on the market access strategy. The Committee had made recommendation four to DSBD during 2016 BRRR deliberations but it was not addressed hence he said Members needed to put a timeline to it.
Mr Chance suggested that an additional paragraph should be added which instructed companies bidding for products and services to the value of R30 million or more to sub-contract at least 30% of the value of the contract to Exempted Micro Enterprises (EMEs), Qualifying Small Business Enterprises (QSEs), or a small business as defined in the National Small Business Act, 1996. He explained that the paragraph should be added as the new Procurement Act was replacing the old Procurement Act. He also suggested that NT and DSBD needed to present the retail and wholesale charter to the Committee before the Committee could accept it.
The Acting Chairperson asked Members if recommendation four could be broken into 4a and 4b.
Mr Chance asked the Content Adviser to inform Members of the entity that presently owned retail and wholesale charter.
The Content Adviser replied that no particular entity owned the retail and wholesale charter presently.
Mr Chance said charters were developed private companies hence the Committee or the DSBD did not need to develop it on behalf of the private sector.
The Content Adviser replied that Mr Chance was correct hence he would change the wording to incorporate private sector initiatives. He promised also to rephrase recommendation five to include that companies that bid for contracts of about R30 million needed to sub-contract at least 30% of the value of the contract to Exempted Micro Enterprises (EMEs), Qualifying Small Business Enterprises (QSEs) or a small business. He informed the Committee that DSBD already had programmes to address policy initiatives on 30% procurement.
Mr Capa said he was tempted to say that recommendation four be removed but as being alluded by Mr Chance the responsibility for the charter should fall with the private sector and DSBD should give direction on how the charter should be done.
The Content Adviser said recommendation six dealt with the 88% failure rate of cooperative enterprises and the Committee had earlier proposed that DSBD review the Cooperative Incentive Scheme in the 207/18 financial year but DSBD had not adhered to it.
Mr Kruger noted that the statistic of 88% on failure rate was given before DSBD started its operations. Hence, he suggested that the 88% data be removed but the recommendation should be captured it as ‘high failure rate’ without any statistic added.
Mr Maake said recommendations two and six, filling of vacant positions and failure of cooperative enterprises respectively should be captured as observations.
Mr Capa said the Committee should not refer to the data of 88% because it was a National statistic.
The Acting Chairperson said Members should note Mr Maake’s comments.
The Content Adviser said recommendation seven was a long-standing recommendation of the Committee that requested that DSBD engage National Treasury on how to support DSBD entities.
Mr Mncwabe said he agreed with recommendation seven.
Mr Chance said he agreed but proposed that NT and DSBD make a presentation on the strategies and give a timeline for its implementation.
The Acting Chairperson asked Members if they agreed.
Mr Mncwabe said he agreed with the proposal.
The Content Adviser said recommendation nine was a follow-up on recommendation seven
Mr Chance reminded Members that the DG for DSBD had produced a document that outlined other departments programme on development of small businesses. He suggested that these other departments should come and present what they proposed to the Committee.
The Acting Chairperson invited Mr Maake to comment.
Mr Maake remarked that recommendation eight had been omitted.
The Content Adviser admitted it was an error.
The Acting Chairperson resolved that recommendation eight would be taken as recommendation nine.
Mr Kruger said cooperative enterprises had failed because of lack of business skills. Hence DSBD needed to train all cooperative enterprises to acquire business skills. He suggested that the Content Adviser incorporate this in the recommendation.
The Acting Chairperson said the Committee needed to be aware of the intended and unintended consequences that could occur if it wanted to take over all cooperative enterprises. DSBD should identify the particular SMME or Cooperative that was under it and target them for training. He remarked that some cooperative enterprises were under Departments of Agriculture Forestry and Fisheries (DAFF) while some were under Trade and Industry (DTI.
Mr S Bekwa (ANC) said some of the SMME’s that were under DAFF and DTI should be under DSBD and their budgets should be moved to DSBD.
Mr Kruger said the Committee needed to identify who was responsible for small businesses to avoid duplication and interventions there were carried out in silos. This would ensure that DSBD carried out oversights on efficient and effective use of State funds.
The Acting Chairperson said he had mentioned that the Committee needed to be aware of the intended and unintended consequences that could occur if DSBD took over all SMME’s and Cooperatives because DSBD could inherit the SMME or the cooperative without having the budget funds. Clarity should be sought to ensure that SMME’s and Cooperatives are developed.
Mr Maake said the recommendation to retrieve all SMME’s and Cooperatives should be changed because he was not sure if DSBD had the strategy to develop all SMME’s and Cooperatives.
Mr Capa said recommendation eight should be captured as DSBD must inform the Committee of what it wants to do after retrieving SMME’s and Cooperatives.
Mr Chance said it would be a mistake if DSBD retrieved all SMME’s and Cooperatives and it could not control its programmes. Hence, the Committee should change the recommendation to Department of Planning, Monitoring and Evaluation (DPME) should set standards and performance matrices while DSBD should ensure that the other Departments carry out the standards and performance matrices effectively.
Mr Kruger said he agreed that the problem statement on all SMME’s and Cooperatives be removed from recommendations and be taken to observations. Also, DSBD should come back and address the Committee on how it hoped to develop small businesses in South Africa. Hence DSBD should concern itself with business skill development through training while the other departments should be concerned with the technology aspect.
The Content Adviser said recommendation nine instructed DSBD and SEFA to review its current model of using intermediaries to loan money to micro and survivalist enterprises. It proposed the use of Co-operative Financial Institutions and Cooperative banks to streamline access to finance for micro and survivalist enterprises.
Mr Chance said the Committee needed to have the input of NT on micro financing because it was under NT since the essential aim of the Committee’s proposal is to introduce less charges. The Committee needs to receive NT’s input to find a way to reduce the charges and assist DSBD to ensure that the loans are paid back.
The Content Adviser asked Members for guidance on how to capture the recommendation on micro financing as mentioned by Mr Chance.
Mr Kruger said it made business sense to make use of Co-operative Financial Institutions and Cooperative banks to streamline access to finance for micro and survivalist enterprises. However, the Committee needs to consider that sound financial principles must be followed ad also note that South Africa is a developmental State.
Mr Chance agreed with Mr Kruger’s proposal hence the Committee needed to ask DSBD to review access to grants, loans and equity in financing small businesses. DSBD needs to develop a strategy that would be used in financing small businesses in conjunction with NT.
Mr Capa said the Committee needed to come up with a recommendation on Observation 11, 12 and 17.
Mr Kruger asked if Members could brainstorm with its study group and come back with a proposal.
Mr Maake observed that there was no recommendation to observation 13. He also did not like the phrase ‘purportedly towards crafts customised sector programme used in this observation. DSBD should also receive a recommendation on how it should handle the R10 million transfers to IDC.
The Acting Chairperson asked the Content Adviser to note the issues raised by Mr Maake.
The Content Adviser asked Mr Capa if he was suggesting that one recommendation be given to Observation 11, 12 and 17.
Mr Chance said he agreed that one recommendation be given to Observation 11, 12 and 17 and also another for Observation 16. He suggested that the Small Business Advisory Body should be a Council and proposed that DSBD brief the Committee on why the Small Business Advisory Council (SBAC) had not started operating. He also said DSBD should also include in its brief the timelines for starting the SBAC.
Mr Kruger asked if the DSBD would still be in existence in the next financial year.
The acting Chairperson remarked that Members should not try to answer Mr Kruger’s question.
The Content Adviser said he had captured observation 13 in that manner because the Committee did not know why IDC received the R10 million. He asked Members to give clarity as he had tried to follow-up and failed.
Mr Kruger said it was unclear.
Mr Maake suggested that the Committee recommend that DSBD explain why it transferred R10 million to IDC or ask DSBD to stop the transfer. He also asked the Members to state how the observation on the suspension of KPMG contracts by Auditor-General of South Africa (AGSA) be captured.
Mr Capa said Members would leave the capturing of the suspension of KPMG contracts by AGSA in the capable hands of the Content Adviser.
The acting Chairperson requested that the Content Adviser insert dates on recommendation’s that had deadlines and ensure that the dates given was before 17 May 2018.
The Content Adviser asked if it was in conjunction with DSBD’s presentation of its strategic plan.
The acting Chairperson said he placed the request because the report had to be adopted before 17 May 2018 because the Committee may need to meet DSBD before 17 May 2018 to ensure that the Committee did not frustrate the efforts of the Content Adviser.
The Content Adviser asked the Acting Chairperson if the Committee was adopting the report in the coming week.
The Acting Chairperson replied that the Content Adviser’s statement was correct.
The Content Adviser said based on the acting Chairperson’s remarks the programme of the Committee remained unchanged but the only thing that might change before Members went on recess was the strategic plan. He would circulate a document to Members by Friday 4 May 2018 and the Committee would hopefully adopt its report in the coming week.
The meeting was adjourned.
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