Small Enterprise Ombud Service Bill: bill rejected

Small Business Development

24 October 2018
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The Portfolio Committee on Small Business Development deliberated the proposed Private Member’s Bill: Small Enterprise Ombud Service Bill. The Bill had been proposed by Mr Chance (DA) in accordance with section 73(2) of the Constitution of the Republic of South Africa, 1996.

The Committee discussed the Bill which proposed the establishment of an Ombud to assist enterprises, small businesses and cooperatives that were bullied by big business and, especially, where payment to enterprises was outstanding, creating difficulties and threatening the survival of small businesses and cooperatives. Nine out of ten cooperatives in South Africa went under.

The Department of Small Business Development pointed out that it was planning to pass Amendment Bills to the National Small Business Act and the Cooperatives Act. Those legislations would deal with challenges faced by small enterprises and cooperatives. The proposal to create an Ombud Service Bill would duplicate the process. It would also duplicate costs.

Committee Members discussed at length the fact that the Cooperative Amendment Act of 2013 had not been implemented and that the Cooperative Amendment Act was still awaiting the signature of the President. The Department was informed that the Tribunals envisaged by the Department had to be contained in primary legislation passed by Parliament. Members informed the Department that it was highly unlikely that the Department could have other legislation to protect small businesses and cooperatives before the end of the term of the Fifth Parliament.

The decision as to whether the Committee should approve the Small Enterprise Ombud Service Bill was put to the vote and was rejected by the ANC majority in the Committee, defeating the DA and ACDP Members.

Meeting report

Opening remarks

The Committee Secretary indicated that the Chairperson Ms N Bhengu (ANC) was absent as she was still in hospital. At the previous meeting, the Committee had indicated that the elected Acting Chairperson would chair the Committee meetings until the Chairperson returned.

Mr N Xaba (ANC) proposed that the ruling on chairing the meeting be reaffirmed, and that the previously elected chair should continue until Ms Bhengu was back.

Mr H Kruger (DA) said that the Committee should elect a new acting chairperson because if it does not do so, it would be overriding the rules of Parliament.

Nominations for an Acting Chairperson were opened. Mr X Mabasa was nominated and duly elected as the Acting Chairperson of the meeting. He proposed that the Committee adopted the agenda of the day as it stood.

Mr Kruger raised concerns about adopting the agenda, given the absence of some Committee Members who were well informed about the nature of the deliberations on the Private Member’s Bill. Although the Committee formed a quorum, it was unfortunate that there were no subject matter experts in the meeting. The absence of Members who could give advice on the Private Member’s Bill presented a challenge. The Committee should postpone the agenda item until the full Committee sat again.

The acting Chairperson asked Mr Kruger what he meant by experts. Did he mean Committee Members?

Mr Kruger confirmed that he meant Committee Members, given the fact that those Members had engaged with the Bill for more than four years.

The acting Chairperson proposed that the Committee allowed the secretary to read apologies and come back to the point raised by Mr Kruger. There were five apologies, including the Minister of Small Business Development, Ms Lindiwe Zulu, and Deputy Minister, Mr Cassel Mathale.

The Acting Chairperson asked Mr Kruger to reconsider his proposal given that six Members were present and could quorate.

Mr Kruger agreed with the Acting Chairperson.

Mr R Chance (DA) referred to Mr Kruger’s argument that when it came to legislation, it was assumed that all Members of the Committee were informed about the legislation. While the Committee had a quorum, it would be inappropriate for visiting Members of the ANC to be part of the deliberation. He meant no disrespect to the Members of the ANC, but it would be completely wrong for them to deliberate on a Bill that they had never seen. He said that they could stay in the meeting, but they should not be part of the deliberations because it would be inappropriate if the it came to a vote.

The Acting Chairperson told Mr Chance that he would be guiding the deliberations. At times, even the Members of the Committee who had engaged with an issue did not contribute to every aspect of a Bill. It should be left to the discretion of the visiting Members to contribute or not to contribute. From a common-sense point of view, Members could decide on their own level of knowledge on the matter under discussion and determine whether they could contribute to the deliberations or not.

Mr N Capa (ANC) had thought Mr Chance was referring to a scenario where Members had to vote. It was a critical part of participation. It was clear that Members who were not part of the Portfolio Committee should not ne allowed to vote, but during deliberations they should be allowed to participate. If Mr Chance’s objection was that they should not vote, the Committee agreed fully that they could not vote as visiting Members.

Mr Xaba (ANC) agreed with Mr Capa that since the quorum required for a meeting to proceed had been met. The Committee should continue deliberating of the Private Members Bill. Discussions could not be anticipated before presented. The Department had not even presented. The Committee could decide after deliberations what steps it wanted to take. He asked the Committee Member not to preempt the matter before participating in the process.

Mr Chance said that since there were sufficient Committee Members in the Committee to have a quorum, it was not necessary to have Members from other Committees for the purpose of the discussion.

Mr Sibande (ANC) corrected Committee Members who assumed that they had not been informed about the Private Member’s Bill. He said they had a background in engaging with legislation from other Portfolio Committees that they served on. He made an example of himself. He had served as a Chairperson for the Select Committee on Public Services in the National Council of provinces (NCOP). As visiting Members, they knew well what was happening in the deliberations. He said that he failed to understand why the Members should entertain being questioned. The issue of the quorum had been raised and dealt with.  The issue of understanding, or not understanding, discussions about the Bill was problematic. It sought to undermine Members of Parliament who were not part of this Committee. He said he could not see any reason why the Committee did not continue with the topic.

Mr D Gumede (ANC) stated that when Mr Mabasa had invited him to attend the meeting, he had asked what the Committee would be discussing. He was told the discussion was on the establishment of an Ombud in small businesses. Mr Gumede had asked about the facts informing the Bill and he was given the details. Therefore, he understood what was being deliberated in this session. Members who had been invited to the Committee understood the matter under discussion. Party manifestos were central to Members in their Committee discussions. That was a fundamental premise of Committee discussions. He questioned whether Committee Members were undermining their expert opinions or academic understanding of the Small Enterprises Ombud Service Bill (Private Member's Bill).

Mr Kruger replied that he had never mentioned academic qualifications or understanding of the Bill. He said he had used the words ‘subject matter experts’ because the Bill had come a long way. It was not only informed by what was in the paper as it had started about four years previously. If some Members felt that they had been made less important or less knowledgeable in the procedures of parliament, he apologised. It was not the intention to offend Members in calling for subject matter experts in the Ombud Service Bill deliberation.

Rev K Meshoe (ACDP) said that the rules of Parliament did not deny Members the right to speak and participate both in the House and in Committee. He did not see a problem in visiting Members participating in the Committee as there was no rule that said they should not participate.

Ms N Abraham (ANC) asked which rules prevented the visiting MPs from participating in the Committee discussions.

The Acting Chairperson acknowledged that the discussion on the matter of visiting ANC Members indicated a view that participation in the discussion by those Members was accepted by the Committee.

The Committee Secretary read the rule that allowed Members from other Committees to participate in deliberations. Parliamentary Rule 163: “If a Member of a Committee and that Member’s alternate are not available for a meeting of the Committee, the Chairperson may co-opt any other Assembly Member, to act as a Member of the Committee until that Committee Member or the alternative Member was no longer absent”.

Deliberations on the Small Enterprises Ombud Service Bill

The Acting Chairperson thanked the Secretary for providing clarity on the rules and concluded the discussion on visiting Members. He opened the meeting for deliberation on the Private Member’s Bill: Small Enterprise Ombud Service Bill. He appreciated the presence of Advocate Charmaine van der Merwe to provide legal expertise on the legislation. He stated that the Committee had deliberated on the Small Enterprises Ombud Service Bill (Private Member's Bill) and proposed that the Committee should make inputs in order to arrive at a conclusion on the Bill. Mr Chance had wished that the Committee proceed with the Bill and adopt it. The ANC on the other hand had felt that the Bill was not necessary because matters raised in the Bill were covered by what the Department was working on at the time. He invited Members to make inputs that would lead to decision making.

Mr Kruger said that the Committee understood the problems with cooperatives.  In one of the Committee meetings, Ms Bhengu had raised the issues of cooperatives that die. Nine out of ten cooperatives die in South Africa. The tour taken by the Committee had made it clear that in order to achieve job creation, it was necessary to accommodate small businesses in cooperatives. The problem was that the Cooperative Amendment Act was with the President and had not been signed as yet. The Cooperative Amendment Act talked about how disputes would be handled, especially for small business. The Act also pointed to how big business was bullying small business. There was no other platform for small business except the Committee.

Mr Kruger drew the Committee’s attention to the experience of small cellphone businesses that were bullied by the likes of Vodacom, MTN and Siemens. These big corporates had come to the Committee and promised to engage with small businesses, but they had not done that. A body that focused on complaints and issues faced by small business against big business was needed. That was most important regarding late payments. Nothing had happened for the past four years in respect of the National Small Business Act and the Amendment Act for Cooperatives. Those Acts would not be addressed by the Fifth Parliament, would have to wait for the Sixth parliament.

Mr Kruger pleaded with the Committee to push the Bill through and show the seriousness of the Committee about those problems. Should the Committee fail to push the Bill through, it would mean that the Committee did not care about the survival of small businesses in South Africa.

The Acting Chairperson invited the Department to contribute since it was busy with the National Small Enterprise Act. The amendments that the Department was making in that Act had informed the ANC’s stance that the Small Enterprises Ombud Service Bill (Private Member's Bill) was not necessary.

Mr Capa stated that the ANC had the same concerns about the interests of small business. All deliberations had shown that, and there was a lot that needed to be done to address issues faced by small business against corporates. The Department had not done enough to speed up the Amendments it had proposed on the National Small Business Act. Now that the Committee had taken a stand, the Department was trying to attend to the concerns raised in the Ombud Services Bill. The Amendment proposed by the Department should be fast-tracked and it had to address all the matters raised in the Ombud Service Bill. What the Committee was concerned about was addressed in the Amendment Bill proposed by the Department. Legal advisors and experts would inform the Committee on the time frame. When the Committee had provided its input on the Amendment, it had highlighted the challenges faced by small business and that should be enough to deal with the bullying problem. Objectives of the Ombud Service Bill would be covered in the Amendments of the National Small Business Act.

Rev Meshoe had been absent when the Ombud Service Bill was first discussed. Since the Department said there would be an impact on the Small Business Act Amendment, it should speak on the Amendment Act and explain how it would impact on the Ombud Service Bill.

Input on the Ombud Service Bill by the Department of Small Business Development

Mr Mojalefa Mohoto, Deputy Director General (DDG), DSBD, indicated that the Department was seeking a mechanism to respond to the challenges faced by small businesses. In order to accelerate its response, it had focused on three areas.

While amending the National Small Business Act, the focus had been given to moving forward with some initiatives and alternative dispute resolution mechanisms to deal with challenges faced by small business. The Department was seeking to establish a Tribunal, in terms of Section 18 of the Small Business Act and wanted the Minister to issue regulations. The regulations were being drafted and the aim was to finish them before the end of 2018. The regulations dealt with specific issues on dispute resolutions.

In the Small Enterprises Ombud Service Bill (Private Member's Bill), the objective in terms of Section 2 showed that the Department and the Committee agreed. The proposed Section 2C provided a dispute resolution mechanism for smaller enterprises. That tribunal was an alternation dispute mechanism proposed by the Department and covered the scope of the Ombud Service Bill. The Ombud Service Bill, talked about objectives and establishment, but the rest of it focused on administration. Hence it followed the same objectives as the amendments of the Small Business Act.

The Department had already started the process of amending the Bill, to address the matters raised by the Committee on small businesses. Another area of focus for the Amendment was Schedule 1, which dealt with definitions. Small Development Enterprises cut across all public institutions, from all departments down to the municipal level. There had to be a coherent approach on the definition of the Act. The proposal on the definition was gazetted on 12 October 2018. The Department had been trying to find quicker mechanism to address issues raised in the Ombud Service Bill.

Discussion

Mr Kruger said that Mr Mohoto had said the same thing during the tabling of the Red Tape Deduction Bill. The same urgency was indicated by the Department concerning red tape. Departments keep on promising that they will address issues, but they failed to do so. There were bigger problems in small business development in South Africa and red tape did not feature anymore. He was not convinced by what the Department had said to the Committee. The Red Tape Reduction Act had taught them a lesson and it was time for the Committee to act. The Ombud Service Bill was important for the survival of small business development. That was the overall agreement of the whole Committee. When it got to decision-making, the Committee left it to the officials. The officials were not able, at the moment, to handle that Bill.

Mr Chance expanded on Mr Kruger’s comments. The Committee should pay attention to the failure of the Department to enact the Cooperative Amendment Act of 2013 which provided for the changing of the Cooperatives Advisory Board, the Advisory Council, the formation of the Cooperatives Development Agency, the formation of the Cooperatives Tribunal and other issues relating to governance of Cooperatives.

Mr Chance said that the Act had been sitting on the shelf for five years and the Department had done nothing to implement it. That was an outrage. The Department that claimed responsibility for cooperatives had done nothing to implement the Amendment Act of 2013. On the definition of the word ‘enterprise’, the Ombud Service Bill deliberately used the word ‘enterprise’ as opposed to the word ‘business’ for the same reason that Schedule 1 referred to small enterprises. The word included every private corporation conducting business. The Committee had had an opportunity to make amendments to both Small Business Act and Cooperatives Amendment Act of 2013. Events had overtaken the 2013 Amendment Act on cooperatives. What should happen in order to avoid duplication and administrative burden was to cancel the idea of a Cooperatives Tribunal and merge it with the section that focused on dispute resolution within the Ombud Service Bill.

Whether a business is a cooperative or not, the key was ‘small’ business. In terms of the schedule, that referred to any business that employed less than 200 employees. Logically, that would open an opportunity to change the Cooperatives Amendment Act. That would remove the tribunals, and the administrative functions would be handled by the Registrar of the Ombud Service Bill. There would be no need for a Cooperative Development Agency. There was already a Small Enterprise Development Agency (SEDA) which had the capacity to support small enterprises across the economy.

The Small Business Advisory Council, which had not been reconstituted by the Minister should become the Small Enterprises Advisory Council and it should incorporate the proposed Cooperative Advisory Council in the 2013 Amendment. That would help the Department to find a better way of organizing its functions in support of agencies that were responsible for advancing its mandate. To avoid costs and save on government expenditure, there should be one body that supported the Department and provided oversight.  There was another body to deal with dispute resolutions for small enterprises. That was highly desirable and was what the Committee should take going forward.

He asked Advocate van der Merwe if it was permissible to establish a tribunal as the Department wished to do. He was concerned about the sudden referral of the Cooperative Amendment Act to the President. It was an underhand tactic by the Department to avoid the proposed Ombud Service Bill by the Committee. It was wrong for the Cooperatives Amendment Act to be rushed through the approval of the President without the inputs of the Committee on how best to regulate and support cooperatives. He requested the input of Advocate van der Merwe.

Mr Xaba said that the Department had referred to the Amendment of Schedule 1 of the Act. The Committee should find areas of common ground and agree on those. Areas of contestation required the Committee to discuss them and to find a resolution. From there, a decision could be made on whether the Bill should proceed. He proposed that the work of amending the Cooperatives Amendment Act should be the work of the Committee.

Advocate van der Merwe responded to the question of whether it was possible for the Department to establish tribunals. She said it was not possible. Section 166 of the Constitution provided that courts, including tribunals, had to be established in terms of an Act of Parliament. That meant a tribunal could be established through legislation that was considered by Parliament. It was not possible through secondary legislation, such as Regulations.  It was not clear whether a dispute resolution mechanism that was different from a tribunal could be established outside of legislation by Parliament. Regulations were limited to what was established in the Act. The Minister did not have the necessary power to establish a dispute resolution mechanism. There was a further limit on the Minister. The Courts had cautioned Parliament against delegating its powers to a Minister. The Courts had indicated that Parliament could not delegate its plenary powers: it could only delegate operational matters. Parliament could set up a body in legislation and then allow the Minister to prescribe the procedures to be used by that body.

Advocate van der Merwe said that she had not seen the regulations and was not sure on which section in the Cooperatives Amendment Act the Department was basing its proposal to give the Minister powers to regulate. The Committee had to be careful not to delegate its powers. The establishment of a judicial body like a tribunal required an Act of Parliament. That was what the Constitution said.

Mr Chance thanked the advocate for providing legal clarity. The answer was clear. The Small Business Act did not provide the Minister with powers to intervene and there was no mechanism that allowed for intervention. The Department had to explain to the Committee under which section it wanted to establish a tribunal.

Mr Mohoto stated that the Department was aware of what had been alluded to by Advocate van der Merwe. Under the Cooperatives Act, a structure was already established. The Department aimed to broaden that structure to be inclusive of all aspects of cooperatives. That included areas of small businesses, specifically those that could be addressed by a tribunal.

Mr Chance indicated that his recollection of the meeting between the Committee and the Department on the National Small Business Amendment Act was that tribunals would emerge from that Act, not the Cooperatives Act. It was disingenuous for the Department to backtrack on this point.

Mr Mohoto pointed out that in the presentation the Department had indicated that tribunals would come from the proposed National Small Business Act. He referred Mr Chance to the presentation the Department had made in the previous meeting.

Mr Chance asked why the Department was seeking to change a tribunal that was not in existence. That required a more fundamental review of the legislation. The Cooperative Tribunals could be combined with the Ombud Service Bill Tribunals. The fact that the Department had tabled the Cooperatives Act in May 2018 showed that they were trying to avoid the Committee or a DA Member coming up with legislation. That was why the Department was trying to amend the Cooperatives Act. Schedule 1 talked about cooperatives and included small businesses. How was the Department going to address the problem of a tribunal that addressed issues of cooperatives of a certain size?

The Acting Chairperson stated that some questions were for Members of the Committee to answer, not the Department alone. There was an issue of expenses if there was a National Small Business Act and the Ombud Service Bill. The Committee should consider the expenditure that would be necessary to go along with those legislations. The Small Business Act was suitable, and the Committee would have an opportunity to give inputs rather than simply substituting the Small Business Act with the Ombud Service Bill. That would create a parallel process.

Mr Chance said that the Cooperatives Amendment Act of 2013 had not been enacted so its provisions did not exist. What the Department had done was to ask the President to proclaim it enacted. The exiting provisions referred to a Cooperative Tribunal for cooperatives and failed to mention small businesses. Was the Department planning to make the changes to the Act before it went to proclamation? In the case it did, the Department could not go for proclamation due to the fact that the Act had to come before the Committee before it went for proclamation.

Mr Mohoto declared that the Department was acting properly and was not informed by what political parties proposed. The conceptualisation of the Act started back in 2013. The proclamation that the Department was seeking from the President would enable the establishment of the proposed mechanism to deal with challenges faced by small businesses.

Mr Chance challenged the Department, arguing that there was a deadline. The Department would not be able to create those mechanisms by the end of 2018. The point made by Advocate van Merwe was that tribunals could only be established through legislation. It made it impossible for the Department to create the proposed tribunals. The Cooperatives Amendment Act of 2013 did not allow the creation of tribunals for small businesses. The Act referred to cooperatives only and failed to mention other forms of enterprises. It would require another amendment before it went for affirmation. All the proposed approaches that the Department had indicated would not be achieved by the end of 2018. It had to go back to the drawing board.

Ms Dominique Vincent, Director for Legal Development, DSBD, explained how the Department would deal with implementing both the tribunal for cooperatives and the tribunal for small business. The Cooperatives Act had been sent to the President and it allowed the creation of small business agency and an advisory council. During the presentation on the 29 August 2018, the Department had indicated that the tribunals would be incorporated into the National Small Business Act. 

Mr Chance disagreed with the Department. It would not make the necessary deadline. The Department would have spent five years without legislation when the current Parliament came to an end as 2019 General Elections approached. It was wrong to change certain areas of its own proposed Acts. There were no mechanisms in place that would protect small businesses. Even the initiatives that the Department was proposing would not be implemented before the end of 2018.

The Acting Chairperson pointed out that the Committee should consider the issue of duplication of functions should it carry forward the Ombud Service Bill with that proposed by the Department of Small Business Development. The Department had been able to give the Committee information on what it wanted to do about the problems faced by small business. The amendment of the Cooperatives Act had the potential to deal with those problems. The desirability of the Ombud Service Bill was overshadowed by the amendments proposed to the Small Business Act. The essence of the legislation proposed valid mechanisms and the issue of the time frame could not be a problem. He proposed that the Committee finalised the issues.

Mr Xaba agreed that all issues had been addressed in terms of the presentation by the Department. The Ombud Service Bill did not assist the process.

The Acting Chairperson indicated that the contributions suggested that the work of the Department was essential and should not be upset by the Ombud Service Bill. He said the Committee would be given an opportunity to contribute to the proposed Amendment to the Small Business Act and the Cooperatives Amendment Act. Duplication of functions could be expensive. Establishing an Ombud as proposed by Mr Chance would not help the work of the Department.

Mr Chance said there would be no duplication if the Bill was passed. The Department could rely on the establishment of an Ombud under the proposed Private Member’s Bill.

Mr Capa asked that the Department be left alone. It was time for the Committee to reflect on the issues, given the fact that the Department has provided a lot of information.

Rev Meshoe indicated that the Committee was not quorate and could not vote on the matter.

The Acting Chairperson argued that the Committee has been deliberating for a long time on the Ombud Service Bill and the National Small Business Act.  He appreciated Mr Chance’s contribution and efforts to provide the Committee with a solution for the challenges faced by small enterprises, but the Department was currently busy with the National Small Business Act that it wanted to amend. The task of the Department was to understand that the matters raised by Mr Chance were shared by the Committee. The Committee shared the same concerns as Mr Chance but proposed a different mechanism to address them. The Department had to work with speed.

The Acting Chairperson stated that the Committee rejected the Ombud Service Bill based on the matter of duplication of functions between the Committee and the Department, including the cost of conducting separate Amendment proposals aimed at addressing the same situation.

Mr Chance disagreed with the Acting Chairperson. It was incorrect to say the Committee was rejecting the Ombud Service Bill based on the issue of duplication and costs. The Ombud Service Bill would not mean a parallel process or duplication of functions. If the Private Member’s Bill was passed, there would be no need for the Department to create a tribunal.

The Acting Chairperson challenged Mr Chance’s claim, arguing that the administrative cost of setting up an Ombud Service Office would mean extra cost.

Voting on the Private Member’s Bill: Small Enterprise Ombud Service Bill

The matter was put to the vote. Three Members voted for the passing of the Private Member’s Bill: Small Enterprise Ombud Service Bill (two DA Members and one ACDP Member.) Four Members voted against the Bill (four ANC Members). The Bill was rejected by the Committee.

Mr Kruger asked for the minutes to state the names of the Members in terms of the voting outcomes. The Secretary indicated that normally names were not indicated. Verification could be made through the register in order to see if the numbers balanced.

Mr Kruger asked again for the names of Members to be reflected, especially the Members that voted for the Bill.

The Acting Chairperson urged the Committee to adhere to parliamentary procedures.

Minutes

Acting Chairperson asked for the approval of the minutes before the Committee. Mr Kruger proposed that the Committee postpone the voting on the minutes as it was not an urgent matter and the heat in the room was unbearable. Mr Chance seconded his proposal.

Closing remarks

The Chairperson thanked the Department and Adv van der Merwe for the input and assistance. He sent the best wishes of the Portfolio Committee to the Chairperson.

The meeting was adjourned

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