The Minister of Small Business and Development briefed the Committee on four recommendations contained in the 2018 budget vote report. She had been requested to appear before the Committee to explain in detail the procedure followed, and the appropriate corrective measures she would pursue against the Director General (DG) for failing to comply with public service regulations, in particular Section 25(2)(a)(i).
Recommendation 18.1 referred to Section 25(2)(a)(i), which dealt with the determination of the Department of Small Business Development’s (DSBD’s) structure, after consultation with the Department of Public Service and Administration (DPSA) and the National Treasury. The Minister stressed that the provision should be considered as whole, because in establishing an organisational structure, one had to comply with Section 25(2)(b), which required the Department to remain within budget restrictions, apply the standards and norms as set out by the DPSA, and to carry out human resource (HR) planning to identify needs. In all presentations made to the Committee, the Department had indicated that it had complied with all regulations of the DPSA and the National Treasury. If it were not for financial challenges, the Department could have had a big structure and adequate human resources. The very first structure had been deviated from, and had resulted in the existing structure, following consultation and advice from the DPSA. The Department had been limited to 210 staff, which meant that sometimes there had been a need for re-allocation and coordination, and staff being shifted from one section to another. Most of the staff had come from the Department of Trade and Industry.
With reference to recommendation 18.2, the portfolio architecture approach had been presented to the Committee and approved by 13 February 2018. The Department had clearly outlined the building of architecture on the basis of an ecosystem supporting both cooperatives and small, medium and micro enterprises (SMMEs) at different stages of their life cycle.
Recommendation 18.3 had involved inputs from the National Treasury and the Department of Planning, Monitoring and Evaluation (DPME), where the responsibilities of the DSBD had been outlined against those of the Small Enterprise Finance Agency (SEFA) and the Small Enterprise Development Agency (SBDA). The Department monitored and oversaw the functioning and operations of these agencies, as well as their collaboration with other agencies. The duplication of functions was something that worried the executive, and had to be avoided because of inadequate funding and insufficient human resources. No staff had been transferred to the agencies, as indicated in the recommendation.
The vacancy issue highlighted in recommendation 18.4 had been addressed. When the DG had been appointed in September 2015, the vacancy rate had been at 26.3%. This had dropped to 11.9% in January this year, and was expected to fall to 6% by August. This depended on the availability of qualified candidates who would understand the challenges faced by the SMMEs and cooperatives.
Members commented that they understood things could go wrong when starting up any organisation. However, they expressed concern about the delay in delivering on the Department’s mandate because of organisational challenges. They were disappointed that poor people in rural areas were suffering because the Department was not well structured, organised and managed. It had no structure approved by the DPSA. There had been miscommunication between the DSBD and the DPSA. The Minister had failed to take the necessary action.
The Committee also considered and adopted its amended second term programme. After the Committee Secretary had indicated that there had been a letter from a ‘whistle-blower’ regarding the situation at the DSBD, the Committee resolved that there should be an unannounced site visit to the Department, followed by an official oversight visit.
Minister’s response to Committee recommendations
Ms Lindiwe Zulu, Minister of Small Business Development, said that she and Mr Cassel Mathale, Deputy Minister, were responding to the Committee’s request to appear before the Committee to explain in detail the procedure followed, and the appropriate corrective measures she would pursue, against the Director General (DG) for failing to comply with public service regulations, in particular Section 25(2)(a)(i). All recommendations that were presented to her Department were, as a matter of principle, taken seriously, and the Department made every effort to respond to them.
Recommendation 18.1 referred to Section 25(2)(a)(i), which dealt with the determination of structure after consultation with the Department of Public Service and Administration (DPSA) and the National Treasury (NT). Section 25 should be considered as whole, because in establishing organisational structure, one had to comply with Section 25(2)(b), which required the Department to remain within the budget restrictions, to apply standards and norms as set out by the DPSA, and to do the human resource (HR) planning to identify needs.
In all presentations made to the Committee, the Department had indicated that it had complied with all regulations of the DPSA and the National Treasury. From the outset, it had been indicated that if it were not due to financial challenges, the Department could have had a big structure with adequate human resources. Its very first structure had been deviated from, and the existing structure had been a result of consultation and advice from the DPSA. In terms of the HR, the Department was now limited to 210 staff. They were required to use resources in a manner which involved working with methods such as re-allocation and coordination. Sometimes staff would have to be shifted from one section to another. Most of the staff Members had come from the Department of Trade and Industry (DTI), and one had to look at individuals’ capacity and capabilities in order to be able to move them around.
With reference to recommendation 18.2, the programme review and the portfolio architecture approach had been presented to, and supported by, the Committee in February. The delineation of roles and responsibilities had been indicated. It had clearly outlined the building of architecture on the basis of an ecosystem supporting both cooperatives and small, medium and micro enterprises (SMMEs) at different stages of their life cycle.
With reference to recommendation 18.3, inputs had been provided by NT and the Department of Planning, Monitoring and Evaluation (DPME). In November 2016, the responsibilities of the Department had been outlined against those of agencies. The Department monitored and oversaw the functioning and operations of agencies, as well as their collaborations with other agencies. It considered the approach of the Small Enterprise Finance Agency (SEFA) and the Small Enterprise Development Agency (SEDA), not only on the basis of comments and inputs, but on the basis of avoiding duplication of functions, which was something that worried the executive. Duplication had to be avoided because of inadequate funding and insufficient human resources. If the Department had to monitor the activities of the agencies, it also had to approve their plans and strategies. She stressed that no staff had been transferred to agencies, as had been indicated in the recommendation.
Recommendation 18.4 addressed the issue of vacancies. The Department had been working towards a reduction of the vacancy rate. When the DG had been appointed in September 2015, the vacancy rate had been 26.3%. In March 2017 it had been 9.8%, but by January 2018 it had risen to 11.9% due to resignations. Projected vacancy rate at 1 June was 10%, falling to 7% by 1 July, and to 6% by August. This estimation depended on the availability of qualified candidates who would understand the challenges faced by the SMMEs and cooperatives.
The Minister apologised that she would have to leave early to attend another meeting.
Rev K Meshoe (ACDP) asked for a copy of the Minister’s presentation document.
The Acting Chairperson responded that the copy should be copied and distributed.
Mr H Kruger (DA) commented that all Members understood that things could go wrong in an organisation, and there were many challenges when it came to starting a new department with a very difficult mandate. However, what worried him was that the people, especially the poor, were suffering as a result of these organisational challenges. The challenges ought to be put right, once and for all, so that the Department could deliver. For the last four years, no services had been delivered. There was a need to learn from mistakes, otherwise they would remain mistakes. Poor people in rural areas were suffering a lot because the Department was not visiting them. His request was that they should put legislation together in order to start delivering with a view to the alleviation of poverty.
Mr N Xaba (ANC) proposed a meeting, as reflected in the Committee’s programme, to deal with the recommendations18.1 to 18.4, at which all the issues could be addressed.
Mr R Chance (DA) said he was disappointed. He had looked at recommendation 18.1 and had felt that the Department should be held to account. He agreed that the Minister had a huge task to complete in order to turn the Department around and get it moving. An email had been received by the Chairperson, who was off sick, from the Department which contained allegations of maladministration within the Department. Of serious concern was that it was dysfunctional and its staff members were unhappy. It could not deliver on its mandate when it was in such state. As a result, poor people were suffering. The outgoing DG had to account for that.
The leadership in the Department was the main problem which needed to be addressed urgently. Yesterday, he had received a letter from the Minister indicating the process she was following to replace the DG when her term came to an end in September. It was crucial that the appointment be made so that there could be a proper handing-over. He had written a letter to the Minister requesting an investigation into the alleged maladministration. Investigations were necessary for the Department to deliver and to refrain from destroying people’s lives. Referring to 18.1, he said it would be disappointing if the Committee was misled into thinking that there was a structure. What the Committee needed was the truth.
Mr N Capa (ANC) welcomed the responses from the Minister. He had heard her explanations and understood that there had been miscommunication and misunderstanding between the Department of Small Business Development (DSBD) and the Department of Public Service and Administration (DPSA). He wanted to hear how the misunderstanding would be resolved. There should be a way of handling this situation.
Mr Xaba said that the information given by the Department had not elaborated on the issue raised by Mr Capa. The Minister’s presentation had talked about the structure of the organogram and clarified where the challenges in the leadership were. However, the maladministration issue raised in the email had not been spoken about. The Committee should be informed if there was unhappiness with the structure.
Mr Chance asked whether the Minister was taking any action in respect of the issues raised in 18.1, in particular the misinformation given to the Committee that there was an approved structure.
Ms Zulu responded that it was a common cause that there had been wrongdoing in respect of communication between the Department and the Committee. Obviously, one had to take an action. However, action could be taken only if there was a clear indication that there had been miscommunication. The problem really revolved around having an interim and start-up structure. The Department would submit further clarification, and would explain the thinking behind the start-up and interim structure. In order for staff to be paid, there should be a structure. There could be no budget approval if there was no structure. However, there should be final structure. The misunderstanding between the Department and the DPSA was about the start-up and interim structures. Both the DPSA and the Department had to work together for the finalisation of the structure. The Minister and the DG would prepare a submission which would point out how the Department had started and what it had achieved.
The Minister apologised that the DG had misled the Committee when she had said that there was a structure. She had not been at that meeting. The information was misleading simply because the structure of the Department was still an interim one. However, the Department could not be funded if it did not have interim or start-up structure, or any other type of structure when the final structure would be confirmed. There had been a review of the proposed structure in order to see whether it was capable of responding to all the issues and challenges. Even before the DG was appointed, the Minister had indicated that it would take time to have a structure that the Department was comfortable with. It should be understood that the DSBD had a structure, but it was still working on it. Positions could be advertised only on the basis that there was an approved structure. For that reason, the Department could not advertise its positions.
On the concern that people were suffering, the Minister said that it would be difficult to respond to all the needs of the people within the five years of existence of the Department. The DSBD was reaching the people through its agencies, which had 54 offices countrywide. The agencies were spread around the country in their attempt to serve all people through innovative coordination. They were working in partnership or collaboration with other departments at all government levels. The DSBD was collaborating with local economic development offices, working with Members of Executive Councils (MECs) involved in economic development, and working with mayors. With insufficient human and financial resources, the Department had tried to cover all the country. The number of clients was very small, but people were realising the importance of creating cooperatives and small businesses. It was a pity, however, that Members were disappointed in the Department.
Minister Zulu said that she did not know where the email had come from. The DSBD was a new department which had inherited staff members from different structures and from different levels. This came with discomfort. The Department was bound to have challenges. It was always problematic when one wanted to evaluate the capabilities of the workforce. It would take a time to have a fully-fledged DG and DDGs. Only one DDG position had been approved by the Cabinet.
The DG had put the leadership structure in place. She admitted that there had been a challenge with consequence management because no action had been taken at certain points to discipline the staff.
On resolving the issue of miscommunications, she responded that the Department would learn from its mistakes and would be listening to the Committee. This was one of the areas that needed to be fixed. Finally, she said that she had asked the DG to prepare a handover report which primarily elaborated on those weakness areas.
Deputy Minister Mathale said that there had been a meeting between him, the Minister and the DG on issues that they had observed as challenges. They had resolved that people who committed wrongdoings had to face consequences, and that the Department should be sensitive to the issues that had been raised.
Mr Chance drew the attention of the Minister to the fact that on 10 May, the Minister, Deputy Minister and the DG had been present at the meeting when the structure of the Department had been presented to the Committee. The Minister ought to be truthful and account.
Mr Capa referred to a letter which stated that “according to our record, the approved structure of the DSBD was not aligned to the national strategic plan.” The letter had been signed on 22 February 2018.
The Acting Chairperson requested that copies of the letter should be made and distributed to the other Members, the Minister and Deputy Minister.
The Minister raised a point of order and said she was not aware of the letter, or where it had come from and to whom it had been addressed. If the letter had been sent to her on time, she could have responded to it. In this context, the letter would have had to be formal. The letter was therefore informal, and she could not be asked to respond to it, as a letter could not be picked randomly for her be asked to talk about it.
The Acting Chairperson said that the letter was formal. He proposed that the Content Advisor should advise the Committee to clarify the matter.
Mr Capa asked to be allowed to finish, as the point of order had been raised when he was speaking. He said that whoever who had sent the letter had thought that the information it contained would be supplementary, and would assist the Committee to deal with the issue at hand. He had read out that paragraph in the letter because it was integral to the contention as to whether there was an approved structure or not. In his view, the problem was that the structure was not aligned to the National Strategic Plan. Could the Minister clarify that the approved structure would be aligned to the National Strategic Plan so it could become final?
Mr Xaba agreed. He said that when he had raised the issue of engaging with recommendations 18.1 to 18.4, he had wanted the Committee to have a fruitful meeting. He referred to the submitted documents, in particular those responding to recommendation 18.1. He had been expecting a response from Minister Zulu which addressed the contents of the letter. Even though he had not mentioned the letter, his questions, inputs and comments had been drawn from and been based on the contents of the letter. The letter spoke to the issue of structure. The Department should realistically explain how it would commit itself to the realisation of the final structure. Members wanted to know how the Department would respond to it.
The Acting Chairperson commented that the letter had been addressed to the Content Advisor and therefore the Minister should, taking the letter into consideration, respond. Even if it was not availed to the Minister prior to the meeting, the letter was in fact formal.
The Minister thanked the Acting Chairperson for the opportunity extended to her to read the letter. She said that the main challenge was miscommunication. It was indeed true that the Content Advisor had to communicate with the Department. However, for the Department to operate, a structure was needed, whether it was interim or in any other form. She reminded Members that the Cabinet had approved the Deputy Director General (DDG) position, and there was no way it would approve the DDG position without a structure. There was a working structure. In order to be able to work, there had to be an interim, or start-up, structure. According to the public administration regulations, the final structure would be need to be approved. The final structure could be established when the interim structure and mandate had been reviewed, so that the final structure could carry out and deliver the Departmental mandate effectively and sufficiently. The Minister was expected to sign off the structure that was put in place. She would sign it off, whether it was interim, start-up or final.
The letter had come from the Director, and had not come from the DG or DDG. She was not disputing it, but it would be difficult to discuss it as it was had not been discussed by senior management for them to be informed about it. It was therefore her responsibility to make sure that the existing structure was aligned to the National Strategic Plan. It was her responsibility to make sure that Parliament was comfortable with the work of the Department.
Rev Meshoe said he thought the structure had been approved by the DPSA. Based on that perception, he sought clarity on whether the DPSA had to liaise with departments to ensure that their structures were aligned with the National Strategic Plan. It seemed that there was no proper communication, resulting in the problem the Committee was dealing with. The Minister seemed not to be aware that such communication could have taken place. This was therefore embarrassing.
Mr Mncwabe commented that the explanation of the Minister made sense. The letter spoke to what Minister Faith Mutambi had communicated to the Minister -- that when the start-up structure was approved, there was a need to submit the final structure for approval. This made the letter make sense as well. If there were contradicting information, the Committee would be left confused. The Minister should talk to the DPSA so that they could speak the same language. The DSBD should submit a structure which both Departments had unanimously agreed to.
The Acting Chairperson asked whether the Minister would like to comment on these inputs.
The Minister agreed that her Department could not do anything without the DPSA, as everything the DSBD did should fall in or be aligned to the public service regulations. There was a need to make a submission to the Committee outlining when the DSBD had been approved and launched and what had been done, and when the Minister of Public Service and Administration had signed, along with the Minister of Finance. The report should include the nature of the structure in place, its vision and the plan the DSBD had for the future. The report would include its engagements with the DPSA and the Department of Finance. If the Members were not satisfied with the work the Department had done, then there could be engagements on that.
The Acting Chairperson said that the Minister was suggesting that there should be another briefing on steps taken by the Department to ensure a fully working Department. She had indicated that the report would touch on various aspects holistically. Could Members accept the response to recommendation 18.1?
The Deputy Minister said that there was a disjuncture, and he felt that the DPSA should sign off the structure in order to remove the misunderstanding. That was his understanding.
The Acting Chairperson welcomed his inputs.
The Deputy Minister said that his comments were to avoid having to continue discussing the matter.
The Acting Chairperson said that the Minister should respond to recommendation 18.2.
The Minister said that she had responded to all the concerns raised under recommendations 18.2 to 18.4 in a general context.
The Acting Chairperson said that Members’ questions had been confined to recommendation, 18.1 and therefore they should ask questions in relation to recommendations 18.2 to 18.4.
Mr Chance asked about the hiring of a new DG. Was it not better to assume that there was need for a reorganisation of the government departments prior to advertising the position?
The Minister responded that the reorganisation of government did not fall within her authority. The important thing was that when the term of the DG was coming to an end, the position had to be advertised and this had to be done in collaboration with other departments. In this regard, the DSBD would be advised on what to do. The reorganisation of the government was the prerogative power of the President, and the ANC had a say over it.
Mr Xaba said that he wanted to understand the role of the SEFA, and how the transfer of the staff had been done. His question related to recommendation 18.2.
Mr Capa, referring to recommendation 18.4, said that the DPSA had been devoted to assisting the Department to deal with its restructuring.
The Minister responded that there no one had been transferred to the agencies. They had not transferred any functions or personnel to the agencies.
The Acting Chairperson stated that the Minister should ensure that the process of recruiting the new DG was smooth. The Committee could not work on the basis of speculations, especially when they were negative speculations.
The Minister said that her office and the DG’s office were open, and they had been accommodating and had responded to all queries. However, she did not know how she should respond to anonymous communications. There were structures to raise these issues. When an anonymous email was sent to the DG, the Minister could not deal with faceless people. No one had been suppressed or jailed because he had raised a particular concern. People should come forward and engage with the Department for it to deliver good service. An investigation had been initiated to get to the bottom of allegations of fraud and corruption that might be happening in the Department.
Second Term Committee Programme
Mr King Kunene, Committee Secretary, went through the Committee’s amended programme. He indicated that there was a letter from a ‘whistle-blower,’ and the Committee had resolved that there should be an unannounced site visit to the Department. This matter was still being followed up with the Office of the Chairperson. Members should state whether the matter should be pursued.
Rev Meshoe commented on the issue of oversight, and said that from the discussion with the Department, it appeared that it had a structure which it was unhappy with. The structure was a problem. They had heard from staff that their concerns were not being heard, and that their morale was very low. The Committee should convince the authorities that the visit in question was a prerequisite.
Mr Chance agreed. The concerns raised by the whistle-blower were serious matters, as they involved the staff of the Department. Members had looked to the Department to resolve the situation, but this had not resulted in a solution. An unannounced visit was key. He asked why the Committee was not travelling overseas like other committees, to learn from other countries how they dealt with issues similar to the ones the Committee was dealing with. Other committees were going to Russia, Hungary, the Netherlands, Cuba, etc, but the Chairperson had indicated that the Committee could not go on a study tour due to the fact that no money had been allocated to it. Why had the budget been allocated to other Committees?
Mr S Mncwabe (NFP) agreed. He was concerned that the Committee was still receiving emails from the staff of the DSBD, indicating that a lot was happening there. He supported an urgent visit and suggested that Members of the Committee from Gauteng -- Mr Meshoe, Mr Kruger and Mr Chance --should pay the unannounced visit to the Department. It was clear that nothing was happening. The Department was not doing its work, and this had been reflected in today’s engagement. He had been expecting the Department to have contributed to the creation of jobs by 2030, but it was failing in this respect. On the study tour issue, he supported Mr Chance and asked why allocations had never been used even to visit neighbouring countries, such as Zimbabwe.
Mr S Bekwa (ANC) supported the idea of visiting the Department. He cautioned that they should not just go there, but should rather go with open eyes. They should be equipped with information in order to investigate the leadership. There was a need to make a follow-up. On the study tour, he said that there should be allocations for the purpose of travelling to learn from other countries. No budget had been allocated for study tours for two committees, the other committee being the committee on tourism.
Mr Capa said that an official visit could not be unannounced visit. There was no problem if the Minister, the Deputy Minister and DG were present, in knowing that there had been communication to the Committee. No unannounced meeting could be made officially, because arrangements had to be made.
The Chairperson agreed. The difficulty with an unannounced visit was that they could not meet who they wanted to meet. It had to be arranged.
Mr Chance feared that if it was an official visit, they might not get information that they wanted to hear. The purpose of the visit was that it should be unannounced, in order to get to the core of the problem.
Mr Capa said that the Committee should not do what the situation could not allow. The Committee wanted to go there unannounced. If this was the case, it should allow only two Members to go there and have a discussion with the staff of the Department. The problem was that the report of two Members could be contested and not be given the weight it deserved. As a Committee, they could not visit unannounced. It ought to be an official visit.
Mr Bekwa said that if the Committee went unannounced, they would not get the information they wanted because those with the right information would not be there. The unannounced approach should be understood as a strategy to get to the core of the question.
Mr Meshoe supported the suggestion that individual Members should go there, but a Committee visit would have weight. The Committee’s visit should follow immediately after the delegated members’ visit. Delegated Members could go and find out how staff was being demoralised.
Mr Xapa supported the amended programme, and supported the suggestion in favour of sending the individual Members to conduct oversight.
Mr Kunene said that the question of funding an overseas study tour should be pursued.
The Chairperson agreed that there should be an unannounced visit and official oversight visit.
Mr Kunene indicated that he had received a referral relating to the Ombudsman in the National Small Business Amendment Bill.
Mr Xaba suggested that the referral should be communicated to all Members by means of email, and it should be recorded that the Committee had received and accepted the Bill. The Bill should be taken to next quarter for consideration.
Mr Chance said that by the third quarter, comments would be submitted and they would be considered, together with the Bill.
The Chairperson agreed.
The Members decided that the consideration and adoption of minutes should be postponed to the next meeting.
The meeting was adjourned.
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