DSBD budget: Committee Report

Small Business Development

09 May 2018
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The Portfolio Committee met to continue its interrogation of the draft report on the Department of Small Business Development’s (DSBD’s) Budget Vote 31, focusing on the report’s recommendations. Although it deliberated thoroughly on the recommendations, it did not adopt the draft report as the Department had not yet presented its strategic plan to the Committee. The Members felt that any decision -- approval or disapproval -- would be a premature and uninformed one.

The Chairperson introduced an anonymous letter sent from a whistle-blower in the DSBD to the meeting. The letter gave cause for concern about the role of the Director-General in the restructuring process. The Members, across party lines, complained about the performance of the Department and its leaders. They felt that the Department did not take its responsibility to South Africa and its people seriously, based on the little progress the Department had made in the past few years since its establishment by the former President.

The Committee agreed that it would call upon the Department to present its strategic plan the following day so that it could finalise its decisions on the Budget Vote.

Meeting report

Opening Remarks

The Chairperson said that today the Members would have the opportunity to draw attention to any amendments and inputs that they would like to make to the Budget Vote.  This included the mandates they had received from their political parties and study groups, as this was the second consideration of the Budget Vote

Mr H Kruger (DA) proposed that the Committee begin with the recommendations, as it had received a very comprehensive presentation of the report at the previous meeting.

Mr S Mncwabe (NFP) and Mr X Mabasa (ANC) supported his proposal.

The Chairperson agreed, and added that all the observations that had been given had focused on the negative aspects of the Department, and those with positive comments may add value to the discussion after the recommendations had been made.


Paragraph 18.1

The Content Advisor suggested that this paragraph be rephrased, and a new timeline added to the Budget Vote process as the Budget Vote should have been adopted before today.

Mr Kruger said that the date be changed to the end of December 2018.

Mr Mncwabe suggested that the deadline be the end of June, saying that December was too far away, especially as the Budget Vote should already have been adopted.

The Chairperson said that the Portfolio Committee must reflect on what had happened and why the strategic plan had not been presented to it.  When it had engaged with the Department of Public Service and Administration (DPSA) in the presence of the Department, and although the Members had engaged on the Budget Vote, they had not concluded the discussion of the strategy plan process as there still needed to be a discussion between the Department of Small Business Development (DSBD) and the DPSA. The Director-General had said that this consultation would take place on the Monday following their previous meeting on 18 April. However, the Committee could not prolong this process until December. Members needed to take two things into consideration – firstly, when this budget is implemented it should be based on a strategic plan that this Committee has approved, and secondly, the term of office of the Director General ends in September 2018, so this must completed before then.

Mr Mncwabe referred back to his suggestion of the end of June.

Rev K Meshoe (ACDP) said that the end of June was fair and reasonable.

Mr N Capa (ANC) suggested that the Members accept the proposal of the Content Advisor, which was in May, though the exact date had to be agreed on.

Mr Mabasa seconded Mr Capa, and stressed the urgency of this being finished earlier.

The Chairperson asked whether it would be a violation of any Parliamentary process to debate the report of the budget for adoption before the strategic plan was presented to them. If not, any date would be fine. If the Committee would be making a violation, then the Department had to present the strategic plan before Members continued with this debate.

Mr Kruger said that this would not be a problem.

Mr T Mulaudzi (EFF) said that the Department could not ask for funds before it had a strategic plan. He suggested that the Portfolio Committee ask the Department to have this discussion in the following week so that the Members could continue with the process to adopt the strategic plan as soon as possible.

The Content Adviser said that there were two options:

  • The Portfolio Committee would not approve the Budget Vote on the basis that the strategic plan had yet to be adopted; and
  • The Portfolio Committee could adopt the Budget Vote in anticipation of the adoption of the strategic plan, knowing that any changes would be considered and appropriately amended.

Mr Kruger asked if the Committee knew the cost of the strategic plan.

Mr Capa said that the urgency of this must not be forgotten. The best plan of action would be to have this meeting on the following Monday, making it clear to the Department that the Committee could not approve the budget until the Department had a strategic plan that the Members agreed upon.

The Content Adviser said that the strategic plan could be amended, meaning the Portfolio Committee could continue to adopt in anticipation.

The Chairperson said that the Members must not allow the Committee to be rendered ineffective by the Department. The Committee represented Parliament, and the Department reported to the Portfolio Committee.

Paragraph 18.2

The Content Advisor said that this recommendation also depended on the revised strategic plan. There was confusion about which organisational structure the Department was using -- the approved start up organogram, or the proposed organogram. This needed to be resolved in consultation with the DPSA.

Paragraph 18.3

The content advisor said that this recommendation was also based on the revised strategic plan. The Committee had not been informed about changes in the Department. Clarity was needed about the transfer of functions from the Department and state-owned entities running under it, as well as what the implications were with regard to personnel and financial resources.

The Chairperson announced that there had been a letter from a whistle-blower in the Department. This letter was shared with the Members. She said that the Department should have consulted and taken into account the opinions of small businesses, their organisations and the Committee before embarking on the restructuring process. The whistle-blower’s email alleged that the restructuring process had been the initiative of the Director General.

Mr Mabasa said that the Department must stop “outsourcing” its responsibilities to external entities. 

Mr Mulaudzi said that the EFF originally did not support the creation of this Department, but it now supported its mission and goals. It was disappointed with the ineffectiveness of the Department’s leaders.

Ms N Mthembu (ANC) said she agreed that there must be consequences for failure and that their job as a Committee was to represent the interests of the public.

Mr King Kunene, Committee Secretary, gave his report back. He said that the Members could not proceed with the report of the annual performance plan (APP) without having the strategic plan, and the Committee could not approve or disapprove the report until the Department presented its strategic plan.

The Chairperson asked the Members when the Committee should call upon the Department to attend a Committee meeting. The Members all agreed that the meeting should take place tomorrow. Mr Kunene was asked to organise the meeting.

The Members referred back to the anonymous letter received from a whistle-blower.

Mr Mncwabe said that the outcomes and goals of the Committee and the heads of the Department were not aligned. Members had to act upon the information the Committee had received. He proposed that the Committee should have an unannounced oversight visit to the headquarters of the Department to establish the validity of the letter. If the letter was found to be true, it was reason for serious concern and the future of this Department would be compromised.

Rev Meshoe supported the suggestion of an unannounced oversight. He added that the Committee should consider making a statement to prevent the renewal of contracts of senior Department officials that the Committee did not support.

Mr Capa agreed with the Members. He believed that the formal Parliamentary processes should be followed, including a formal investigation of the Department’s management.

The Content Advisor read through paragraphs 18.4, 18.5, and 18.6 of the Budget Vote report.

Paragraph 18.5

The Content Advisor said that the vacancies in the leadership of the Department had been present since 2015, and there was no clear rationale for this to be the case.

The Chairperson said that the legislation establishing the Small Enterprise Finance Agency (SEFA) should be amended to relocate it under the DSBD. The Members should reconsider SEFA’s funding model, and the Agency should consider moving away from grants towards more accessible loans with lower interest rates. The Committee should also consider establishing a co-operative bank. This would make funding more accessible for small businesses, as well as help generate funds for other businesses in the future.

Paragraphs 18.7 and 18.8

The Content Advisor said that the Committee had recommended that the DSBD must develop a well-articulated framework for leveraging co-operatives’ financial institutions and co-operative banks to unlock access to capital for small business enterprises. The revised strategic plan did not address this and other critical issues that dealt with creating access to finance.

The Chairperson said that the Members could make this recommendation, but they should look at the approach South Africa followed as opposed to international trends. South Africa followed a ‘top-down’ process in the development of co-operatives. Countries that were successful with co-operatives used a ‘bottom-up’ approach. She said that co-operatives and small business entities were people that aimed towards resolving their own problems. This focused on building self-reliance and community sustainability. However, the manner in which the South African government was driving the cooperative development agenda made it the responsibility of the government to dictate and determine what structures should be in place for cooperatives without strengthening them to be independent and in control.

Paragraph 18.9

Mr Kruger said that this paragraph was too long. He added that the Members must ensure that the Department and SEFA aligned their strategy to the government’s own policies and strategy.

Mr Capa also suggested the paragraph needed to be shortened, by removing the example that was given in it.

Paragraphs 18.10 and 18.11.

Mr Kruger again suggested the shortening of paragraph 18.11. The Department needed to scale up all of its projects, not only those that had been previously visited and mentioned in this paragraph.

Paragraphs 18.12, 18.13, 18.14, and 18.15

Mr Kruger said that a ‘small business’ needed to be defined to avoid chaos, as well as misuse of the leniency by recipients seeking additional benefits that they were not entitled to.

The Chairperson reflected that all the observations that had been made were negative, and this was not fair on the Department. The establishment of the DSBD was a positive development which needed to be acknowledged by the Committee, as it was intended to help address the country’s main issues of poverty, unemployment and inequality. If the Department was successful in executing its goals, people who received grants -- child welfare grants, for example -- would be empowered, able to be self-employed and provide for themselves and their children. In turn, grants could then be done away with in the long-term, as people would be self-sufficient.

Mr Kruger added that rural development as a mandate should become the responsibility of this Department.

Mr Capa stated that this Department had a vital role to play in the country’s governing.

The Chairperson said that the Committee would not be adopting the report today. After the Department presents the strategic plan, the Members would be able to adopt the report.

Ms Mthembu said that the Members’ concerns with the DSBD should be captured in the report.

Mr Kruger suggested that the Committee should meet with the Minister to discuss their concerns about the Department, and mandate her to address the issues they had raised.

The Chairperson responded with a reminder of the previous failed attempts with this approach.

Mr Capa added that the Department must be forced to take accountability for its problems and shortcomings.

The Chairperson informed the Committee that tomorrow’s meeting had been confirmed. She added that the Department must report back to the Committee on how it planned to remedy its problems. Insufficient progress had been made with regard to the appointment of the National Small Business Development Advisory Council, and the remedial action promised for the abalone pilot project. She felt that the DSBD came to the Committee meetings merely to present plans, but did not follow this up with the implementation of those plans.

The Committee Secretary confirmed that tomorrow’s requested meeting with the Department would take place.

The meeting was adjourned.


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