The Department of Small Business Development briefed the Committee on progress in the implementation of remedial actions for Abalimi Primary Cooperatives and the status of development of the cooperatives.
The Department had conducted consultation meetings with all districts having the jurisdiction to secure transversal agreements. Other government departments had participated in the consultation process, including the Department of Agriculture Forestry and Fisheries, of Rural Development and Land Reform, and of Water and Sanitation. Other stakeholders included the Amakhosi or traditional leaders. All districts had agreed to enter into agreements and to integrate cooperatives in their Integrated Development Plans.
The Department reported on the implementation of the Remedial Action Plan with a particular focus on achievements in relation to 12 cooperatives. The project faced huge challenges, including limited access to land, non-cooperation of Amakhosi and municipalities, and delays in recapitalising the cooperatives by the Cooperatives Incentive Scheme. The Department stated that, by August 2018, the project should be up and running and should evolve into a replicable model on how to develop communities.
Members stated emphatically that the information provided in the presentation was untrue. They said that the information they had was that these cooperatives were no longer operational and functioning. Who should be believed between the Department and the lady from the cooperative who had had informed a Member that the cooperatives were dead? Members asked if the officials in the Department had defied the executive orders to increase the initial funding of R350 000 per cooperative. Why had there been no consequence management? Members called for the Department to present to the Committee a clear, true and correct report for the Committee to grasp what the problem was. Members wanted to know who the officials were who were defying the Executive and the Director-General.
Referring to the forensic investigation that had to be undertaken given the lack of evidence as to the expenditure of R4.2 million, Members asked when the investigation was scheduled to start and what the framework would be. Did the grant from the European Union support the project or had the money ended somewhere else? What did the Department mean when it said that cooperatives could not have access to land? Did the Department mean that traditional leaders were not cooperating? Why it was possible for someone to pilot a project and assert that the pilot project was feasible but, at later stage, the same person who had conducted the pilot, stated that the project was not feasible, but a risk. Could the Department provide a list of all those failed or non-operational cooperatives along with tabulated reasons for the failure?
The Deputy Minister stated that the blame could not be shifted to Amakhosi. There had been no assertion from the Department that traditional leaders were not supporting the project. Any assertion in the presentation was unfortunate and should not be taken into consideration. He said that the Director-General should deal with the defiant behaviour of officials, ensure that there was consequence management and report back to the Committee in that regard.
The Chairperson told the Department to bear in mind that the funding of cooperatives was in line with the pro-poor agenda of the governing party in the country and that the programme could not be hamstrung by officials.
Presentation on progress of 12 Abalimi cooperatives by the Department of Small Business Development
Mr Jeffrey Ndumo, Acting Deputy Director-General for Cooperatives Development, took the Committee through the presentation. He stated that the purpose of the presentation was to account to the Committee on the progress made in relation to the Remedial Action Plan formulated and presented by the Department to the Committee on 7 December 2016; to provide the third progress report following the last report provided to the Committee in May 2017 in relation to aligning the support services to institutionalise and strengthen the community-based model being piloted with the 12 Abalimi Agricultural Cooperatives in KwaZulu Natal (KZN); and to outline challenges confronted and how the Department intended to resolve the challenges to progress the pilot project.
Mr Ndumo stated that on 26 to 28 January 2017, the Department had started the process of rolling out the Abalimi Pilot Project. The Department conducted consultation meetings with all districts to secure transversal agreements. Those consulted were Ugu, Harry Gwala, Umgungundlovu, Ilembe and eThekwini. Other Departments participated in the consultation process. They included the Department of Agriculture, Forestry and Fisheries, of Rural Development and Land Reform, and of Water and Sanitation. Other stakeholders included the Amakhosi or traditional leaders. All districts agreed to enter into agreements and to integrate cooperatives in the Integrated Development Plans (IDP).
Mr Ndumo said that the challenges facing the project were limited access to land and a lack of cooperation of Amakhosi. Some municipalities were taking longer than expected to conclude agreements and there were delays in recapitalising the cooperatives.
Mr Ndumo stated that the way forward would be based on the following measures:
- Re-capitalisation of the needs of cooperatives using the revised CIS guidelines by end of July 2018;
- Technical support provided through ARC and SEDA as from 1 July 2018;
- Updated agreements with retail stores for all Abalimi co-operatives as from the 1 June 2018;
- Signing of transversal agreements with all districts by 30 November 2018;
- Ensuring closer participation of District Municipalities in the rollout of support to the cooperatives;
- The provision of training, especially on marketing, through the LGSETA;
Mr Ndumo stated that, by August 2018, the project should be up and running and should evolve into a replicable model on how to develop communities.
Mr H Kruger (DA) said he had a lot of questions to ask but he would cut them in half. He stated that he did not understand why municipalities did not want to support or finance the project. He suggested that a strategic plan was needed to address that problem. Referring to the forensic investigation that had to be undertaken given the lack of evidence as to the expenditure of R4.2 million, he asked when the investigation was scheduled to start and what the framework would be. He further asked why there was a problem in concluding transversal agreements with other departments. 12 months had elapsed without another departments signing. When would those agreements be concluded and signed? Why they were taking so long?
Mr Kruger noted that the Department of Agriculture, Forestry and Fisheries was the main stakeholder and asked whether that Department had signed the agreement. He further remarked that it had come to the Committee’s attention that the 12 cooperatives were non-operational and non-functional. The Department was asked to rejuvenate them. According to the Department of Trade and Industry, 80% of Cooperatives failed. Most of money ended up in the pockets of advisors. He asked what the other non-functional cooperatives were. Could the Department provide a list of all those failed or non-operational cooperatives along with tabulated reasons for the failure?
Mr X Mabasa (ANC) welcomed the Department’s presentation. He commented that both the Department and SEDA were facing challenges and asked about the role of the SEDA in the project and how the Department would speak on behalf of the SEDA. Did the SEDA feel it was playing an appropriate role in the project?
Mr R Chance (DA) commented that it was three or four years since the Committee had visited the Abalimi cooperatives. The Committee had seen a possibility for the community to be empowered and energised. Departmental interventions were needed. However, the situation was going from bad to worse. The main question was how the situation could be controlled and managed by the Department. He shared the same concern as Mr Kruger on the question of why local municipalities were reluctant to support the project. What reasons were provided? Could the Department state that it was progressing in its implementation of the Remedial Action Plan? How did R4.2 million go missing?
Mr Chance remarked that the community-based model being piloted with the 12 Abalimi was not well conceptualised and the model should be elaborated. He asked who would conduct the forensic investigation. He remarked that the project had, in his view, been mismanaged since day one.
Rev K Moshoe (ACDP) said that the success of the project at municipal level was minimal. What were the reasons for the reluctance of municipalities to support the project? He further asked when the forensic investigation would be undertaken and what the expected time frame was.
Mr N Capa (ANC) said that he was not convinced that that project was a pilot. He said that he wanted assistance in unpacking slide 21, and in particular, the very first paragraph. That might help him to understand many things in the process, including the shortage of staff, the lack of support, and the assistance provided by SEDA. He would like also to know the reasons why cooperatives were not incorporated in the Integrated Development Plan (IDP). He asked why it was possible for someone to pilot a project and assert that the pilot project was feasible but, at later stage, the same person who had conducted the pilot project stated that the project was not feasible, but a risk. He asked the Department to elaborate on why the project was a risk, or at risk.
Mr Capa asked whether the grant from the European Union supported the project or whether the money ended somewhere else. What were the reasons for failing to implement the project guidelines? Was the failure of the project linked to the service provider that was piloting the project? What was the nature of transversal agreement? In the presentation, nothing had been said about the beneficiaries and what their views were.
Mr S Bekwa (ANC) said that he was very worried. He had expected the presentation to be on the implementing side. It looked as if nothing had been done. He felt that it was a case of two steps forward and three steps back. The Department had done nothing yet to empower cooperatives. He said that, whilst Mr Ndumo was taking the Committee through presentation, he had called and spoken to one of two cooperatives that the Committee had visited and the lady who had responded his call had indicated that nothing had been done since the Committee had paid them a visit. She emphasised that the cooperatives were dead as they were not functioning anymore. However, in the presentation, it had been stated that they were functioning. That was contradictory information.
It appeared to Mr Bekwa that what the Department did was to give babies but without further financial support. The support needed was not only financial. It was not the duty of municipality to provide finances, but rather to provide guidance and support. Municipalities could have provided cooperatives with water, for example. Some cooperatives needed assistance in the form of water or road. That meant that the Department should have partnered with other departments responsible for delivering water and roads. Municipalities were not helping because the Department had dumped a babe in their hands and left. He then asked whether the Department was feeding the Committee with the right information. Who should be believed between the Department and the lady who had responded to his call? When had the Department visited Abalimi, who had visited them, and what was the situation on the ground?
Mr S Mncwabe (NFP) said that he was very disappointed by the Department’s response. It seemed that there was nothing happening in terms of empowering those cooperatives. He said that he had spoken to the brother of Chief Xolo who said that, in reality, nothing had happened. Information given at the meeting was confusing. When the Department briefed the Committee, it should bear in mind that the Committee conducted oversight visits, from time to time. The Department should explain why some of these cooperatives were dead.
What did the Department mean when it said that cooperatives could not have access to land? Did the Department mean that traditional leaders were not cooperating? Mr Mncwabe commented that traditional leaders had been on the land for millennia, but this did not mean that traditional leaders were not cooperating. He appreciated that there would be a forensic investigation, but the question was who would be investigated: the Department or its entities? Why was the investigation proposed now? Referring to municipalities that were not cooperating, he doubted whether the Department would have been facing the same problem if the Department had signed an agreement with the Department of Cooperative Governance and Traditional Affairs. He stressed that municipalities were not cooperating because they were being asked to do the duties which ought to be performed by the Department.
Mr G Skosana (EFF) asked whether there was a report around the finance from the Chief Finance Officer (CFO) requiring interventions of the Director-General (DG). Was there any CFO report under which the DG had to take certain remedial actions? He stressed that there should be a report saying what actions had been taken. He said that he supported all inputs and comments made by other Members. If the President would like to pay a visit to those cooperatives, which one would the Department recommend? Could the Department mention three shining, living examples that illustrated that the Department’s commitment to implement the Remedial Action Plan was on the right path?
Mr N Xaba (ANC) commented that he felt that corruption had been committed and that there were people who had benefited unduly.
The Chairperson commented that the history of the project should be made clear. She said that those were cooperatives that started working, some three years and others one year before the approval of the Department. Three of those cooperatives were the result of work of her constituency. Ulimo 12 was a result of her deployment during her Easter holiday. Ulimo 12 had not had a church building and the government had agreed to build their church, provided that they could form a cooperative that would also generate income. The cooperative was established to serve its own members. The same applied to the House of Glory. It needed to build a Bible school. Intombikabhayi was established in the same way. It was established to assist single mothers. The 12 cooperatives were not selected. Rather, they were created as initiatives to assist and empower their members. The Abalimi project was an initiative which would guide the future model of cooperatives in South Africa to develop communities with the aim of uplifting them from poverty.
Mr Ndumo responded that politicians in the municipalities understood and supported the project. The problem was officials at municipalities who could have ensured the implementation of the project and who could have contributed to the realisation of the project. They had different views and applied a different approached. The sentiment of municipalities had been alluded to in the presentation. Applying different approaches from that of the Department, had acted as a barrier to implementation of the project at local level.
The Chairperson asked what the difference was between the government and officials in the Department or municipalities. She said that she was an official of the government. When the Committee had visited the municipalities, officials had indicated that they were not aware of these projects. If they had been aware of them, they could have incorporated them in the IDP. For instance, if Intombikabhayi needed a road, the municipality could not provide it, but the road would be provided by the Department of Transport though incorporation of the need in the IDP. The Department should provide the Committee with a list of municipalities and officials who were not supporting the project.
Mr Ndumo agreed with the Chairperson that different departments could provide different services and stressed that his Department had extensively engaged with municipalities. There was a department responsible for water and a department responsible for developing roads. That view was shared and had been taken into consideration.
Mr Cassel Mathale, Deputy Minister, stated that when a problem was mentioned, it should not be generalised. His officials should state who they had consulted and what response had been received.
The Chairperson appreciated the intervention of the Deputy Minister. She commented that the Department’s mandate was regulated by two guiding documents, namely, the Intergovernmental Relations Framework Act 13 of 2005 and the IDP. The transversal agreements were centred on those two documents. The municipalities could not refuse to apply the IDP for local government.
Mr Ndumo responded that municipalities were scared of providing financial assistance. They felt uncomfortable about it.
The Chairperson responded that municipalities should not have been asked to assist financially but to guide cooperatives. Their core business was to establish an IDP which incorporated all aspects needed for the development of cooperatives.
Mr Ndumo said that a letter from the Minister had requested them to deviate from the previous framework and when they had done that, the project had still faced defiance from municipalities. He had a document requiring deviation. The Collective Investment Schemes (CIS) did not carry out the mandate that it had been given. That had contributed to the problem.
The Chairperson asked whether the CIS had defied the Minister with no consequences. She commented that the funding of those cooperatives was in line with the pro-poor agenda of the ruling party to which she belonged and that the project could not be hamstrung by officials. How were these officials deployed and treated?
The Deputy Minister responded that those issues would be looked into. He admitted that there was defiance and there should be a consequence management.
Mr Capa said that the reluctance and defiance illustrated that there were certain arguments between the subordinates and executives.
The Deputy Minister responded that when an executive instruction was issued, it ought to be followed. It could not be deviated from because it was simply an executive order and the executive would take the responsibility. There should be no argument. That would lead to consequences.
Mr Chance said that the DG should tell the story of what had happened since the deviation order was an executive instruction.
The CIS responded that it had no intention to contradict senior management and stated that it was not refusing to process the Abalimi applications but was raising a number of concerns regarding clarity and was seeking further guidance. Everything the CIS team worked on was done in terms the CIS guidelines and the PFMA framework. Applications were found not to comply with the requirements because the Abalimi project was a government project. However, applications would be processed and would be finalised by the end of June. Whilst they were being processed, cooperatives would be visited.
Mr Chance said that it was clear that there was defiance of the executive order because that statement was not adding anything. The people were living in poor conditions and nothing was being done to empower them.
Ms Edith Vries, Director-General of the Department, stated that when the Department had appeared before the Committee in May 2017, it had presented its plan which was very persuasive. The Department had stated that R350 000 per cooperative was not enough. The commitment was therefore to deviate from that funding and to look at the needs of the cooperatives and request the CIS to fund them differently because the Department was piloting different models to ensure greater sustainability. The Minister had not signed anything contrary to the PFMA guidelines. The guidelines of the CIS were determined by the Minister. If an amount went beyond R11 million, the approval of the National Treasury was needed. The authority therefore rested with the Minister because the CIS budget fell within the Budget Vote 31. The Minister, when signing the deviation, had applied her mind. She had sought advice from advisors. She had wanted to make sure that she was approving something that was correct. The issue of defiance had not been discussed with her.
The Abalimi project was in the Annual Performance Plan of the branches and therefore she would hold officials accountable. The Department was willing to investigate issues relating to the R4.2 million but the Department did not have capacity. The State Security Agency had been approached to investigate the life style of officials. The Department had asked the investigative unit of the Auditor-General South Africa to assist in that regard.
Mr Capa said that there was no need to talk about issues that were not related to the matter. The report should have stated that so-and-so had been fired for defying orders.
Mr Chance agreed. The question would be: who was running the Department: the DG or the officials of the Department?
Mr Capa stated that the DG should state that so-and-so had defied orders so that those officials could be called for a disciplinary hearing.
Ms Vries said that Mr Ndumo should appear before a disciplinary hearing committee because he was responsible. He had been on study leave and had come back the previous week.
The Deputy Minister said that the DG should state that there would be consequence management and that the Department would report back to the Committee in that respect.
The Chairperson stated that it should be born in mind that there were service delivery protests and yet the Minister’s effort to support cooperatives had been sabotaged by officials. That was a painful situation. Mr Chance was always very explicit in pointing to the Minister and saying that she was not performing. It appeared that the Minister performed, but the officials sabotaged her performance.
Mr Chance responded that the Minister should still be held accountable because the DG reported to the Minister and Minister had done nothing to ensure that her instructions were followed.
The Chairperson said that the Minister had not defaulted anywhere. It was the DG’s function to ensure that the instructions of the Minister were followed. The painful situation was that when officials of the Department did not perform, the blame was shifted to a political head of the Department. The Minister had shown that she cared about cooperatives. She had even increased the funding. The DG should submit a report to the Committee indicating that there was a political head of the Department and that there was a ruling political party. This truth would not have come out if Members had not interrogated the presentation. The Department was there to create jobs and to alleviate poverty. There was no need to answer questions because the Committee had identified what the problem was. The problem was the officials who were sabotaging the executive instructions. The DG should ensure that the executive orders were implemented.
Mr Kruger agreed. He commented that her concerns were not limited to Abalimi project. It should be noted that there were thousands of cooperatives out there which had failed. There should a strategic plan to assist all failed cooperatives because there were many poor people suffering only because the Department was not doing its job. He pleaded with the Committee that there should be assessment on the progress of all cooperatives so as to identify those which were not successful.
The Chairperson said that the statement put before the Committee that Amakhosi were not releasing land was not true. Ten hectares had been given to Ulimo 12 by the Inkosi Ujali. Amakhosi had attended the launch and had spoken. They had agreed to provide land. The House of Glory was the only cooperative that was leasing land. It had a lease agreement over nine years. It was the land claimed by families. All other cooperatives had been given land to plough. She, therefore, pleaded with the Department to present a report which was true and correct and which did not attack traditional leaders maliciously and unnecessarily. Amakhosi were leaders in the community and they would be aggrieved if they heard that the Department had reported that they were not supporting their subjects, when they had shown a commitment to do so. There were four cooperative that had lost members through deaths and that was not reflected in the presentation. That showed that the Department was not sensitive. Rather, it was creating animosity unnecessarily. There was no problem with the land.
Mr Capa asked whether the tendency shown by the Department applied only to Abalimi project or applied to all cooperatives countrywide. He proposed that the Department, on the basis of information provided, and the Committee’s opinion, ought to write a report that talked about the information that had been revealed so that the Committee would be able to guide the Department on how to proceed. The report should include clear actions that had been taken.
Mr Kruger said that it was clear that Amakhosi was not the source of problem and asked whether the Department had also visited those cooperatives that the Committee had visited for the purpose of a follow-up.
The Deputy Minister responded that the blame could not be shifted to Amakhosi. He apologised for that because there had been no assertion from the Department that traditional leaders were not supporting the project. Any assertion in the presentation was unfortunate and should not be taken into consideration. For the record, the Amakhosi should think that the Department was ungrateful if they considered what they had done to support and promote the project. It would be difficult to talk to them in the future. Any slide which talked about they were not cooperating should be disregarded. He thanked the Members for their cooperation and support.
In her concluding remarks, the Chairperson stated that the Committee was appalled by the untrue and incorrect information and expected a report on the consequences faced by officials who were suspected of being the culprits. The Department should bear in mind that the funding of those cooperatives was in line with the pro-poor agenda of the governing party in the country and that programme could not be hamstrung by officials. She again pleaded with the Department to submit the true report which did not attack traditional leaders. Amakhosi could not be portrayed as people who were not supporting their communities when they went out of their way to assist their respective communities.
Meeting was adjourned.
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