Small Business Development Portfolio Committee Legacy Report, with Deputy Minister

Small Business Development

20 March 2019
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The Portfolio Committee met to consider and adopt the 2014-2019 Legacy Report. The Legacy Report comprised the Committee’s work and activities for the development of small businesses and co-operatives. A few pertinent tasks remained unfinished by the Committee and were highlighted in the report for the future leadership of small businesses.

Members were very concerned about the future of the Department of Small Business Development. The majority party made strong arguments for the continuation of the Department. The DA stated that the party was against a mixed economy, in principle, and also did not believe that the Department would succeed in reducing the unemployment rate.

Members stated that the ANC had a policy to support small businesses and had adopted the National Development Plan in 2014 which determined that small businesses had an important role to play in addressing the challenges of high rates of unemployment, poverty and inequalities in the way that the economy was monopolised by the private sector. The National Development Plan relied on small businesses to reach the 90% target of new job creation by small businesses. The impression that the Department was not performing was due to various challenges. The duties and role of the Department had been moved from the Department of Trade and Industry but the majority of funds which were allocated to small businesses had remained with the Department of Trade and Industry, as had the more experienced senior staff. That had left the Department without  adequate funds or resources to  carry out its duties successfully. Furthermore, the Director-General appointed to initiate the Department had not produced a strategic plan nor created a succession plan. The Department had lacked leadership.

In supporting the retention of the Department, ANC Members noted that the Department had been given the task of not only developing small, medium and micro businesses, but also to develop co-operatives, which were key to the social and solidarity economy and aligned with the mixed-economy resolution taken by the ANC at Morogoro. The Department played its role in terms of the Inter-Governmental Relations Framework Act and the Integrated Development Approach, which were the instruments for achieving a developmental state.

The Committee agreed that opposition parties would try by all means not to accept those policies which they did not believe in and that should be mentioned in the report. The Legacy Report was amended to indicate the position of the DA and was adopted with no objections.

Meeting report

Opening remarks
The Chairperson welcomed all present and stated that the Committee would deal with the consideration and adoption of minutes and the Draft Legacy Report of 2014-2019. She said a  farewell deliberation was also on the agenda.

The Chairperson asked the Content Advisor to take the Committee through the amendments to the Legacy Report as the report had been discussed in the previous meeting.

Mr R Chance (DA) informed the Chairperson that he had not had an opportunity to go through the report and needed a few minutes to go through the report.

The Chairperson said that Members had been asked to give their input by submitting it to the Content Advisor. She said the Content Advisor would take the Committee through with the input submitted by Members. She said that was a decision taken at a previous meeting. She ruled that the meeting continued after the announcement of apologies.

The Chairperson said the meeting would start with the consideration and adoption of the Legacy Report.

Consideration and adoption of the 2014 – 2019 Legacy Report
The Content Advisor said the issue, raised at the first discussion on the Legacy Report, on the Chairperson’s meetings with the South African National Apex Cooperative (SANACO), National Apex Co-operative of South Africa (NCASA) and the National Association of Co-operative Financial Institutions of South Africa (NACFISA) had been included on page 12 of the report.

He said the Chairperson had spoken at the Ad Hoc Committee meeting which discussed issues regarding foreigners. A report was written but not discussed by the Committee. However, the Chairperson and Mr Chance had both attended the meeting. A report from Mpumalanga had they claimed that government was not looking into the matter of the spaza shops and the licensing of the informal traders. KwaZulu-Natal and Gauteng were giving attention to such matters. The PC had previously made a recommendation as the matter of foreigners who took over spaza shops and informal trading needed to be regulated. The Content Advisor pointed to Recommendation 16. 3.

Mr Chance said the Bill had been formulated by the Department of Trade and Industry (DTI) but it had been held back as it required the relevant regulations such as giving permission to the local authority and the police to keep law and order. He said that the Bill should be considered for other areas as well. Mr Chance reiterated it was not for the Department of Small Business Development (DSBD) to finalise it and present the Bill to Parliament as it was a DTI Bill.

The Content Advisor agreed that the small enterprise matter was not the DSBD’s Bill but that of the DTI. Should the clause be removed?

Mr Chance said the Bill had been tabled by the DTI and it applied to all businesses and not only to small businesses.

Referring to whether it was for the DTI or DSBD to finalise the Bill, Mr N Capa (ANC) suggested that the Committee refer to “the relevant Department” to finalise the Bill.

Mr Chance agreed.

The Content Advisor said there had been a recommendation from Mr H Kruger (DA) to include the PC’s strategic plan. He said the objectives of the PCs strategic plan had been incorporated in the annexure, as recommended by Members. Number 2 of the report on Tracking of Tools was also included in the annexure.

He noted that the Department had presented three different strategic plans, which could explain why the Department had failed to appoint the Deputy Directors-General and the Director –General  on a permanent basis. No 16.2 dealt with the review of the National Small Enterprise Act, the finalisation of the Integrated Strategy and Promotion of Entrepreneurship and Small Enterprises; the review of the Integrated Strategy on the Development and Promotion of Co-operatives. Those outstanding matters had appeared on the Annual Strategic Plan of the Department in 2014/15 to 2017/18 but were never finalised.

No 16.3 referred to foreigners and spaza shops and remained relevant.

Mr Chance asked that the word the “onslaught”, which he said meant a deliberate attack, be changed to “domination” of informal traders.

The Committee agreed.

The Content Advisor said that 16. 4 dealt with the Institutional Structure, such as the Co-operatives Development Agency, the Advisory Council, the Co-operatives Development Fund, Co-operatives Tribunal and Co-operatives Training Academy. Those recommendations had been noted in the budget reports of the PC.

The Chairperson said the issue of the absence of the Master Plan for the Development of Co-operatives created confusion. The Master Plan focussed on knowledge, training, technical skills development in understanding, and training in the understanding of what kind of “animal” a co-operative is .She said in Mondragon, Spain, a Co-operative Bank was a natural response from the community, as is the case of the Stokvel in South Africa. She said the Mondragon community had collected its own money to establish a community vocational college and that the Co-operative Bank had provided finance to establish the institution and had also financed the establishment of a manufacturing plant. The training given related to technical skills as gathered through a scientific research and an innovation programme which did not exist in South Africa. She said after co-operatives in Mondragon had learnt a skill, they would start to manufacture.

The Chairperson said they also identified opportunities to establish manufacturing plants which were owned by co-operatives. All those plans were made taking into consideration the market. The structuring of such a support system for government gave a clear understanding of those important pillars to assist co-operatives to take off.

The Chairperson said co-operatives would still face problems without adequate funding for them. She explained that the National Apex Co-operative of South Africa (NACSA) had mentioned the need to   establish a co-operative development fund. The Small Enterprise Finance Agency was not appropriate. NACSA had referred to a fund which would offer co-operatives technical support and the capacity to get off the ground.

The Chairperson stated that it was not possible with the Co-operative Incentive Scheme (CIS) to establish a co-operative development college, retail business, nor a manufacturing plant equivalent to what Members saw in Mondragon. She added that the existing support system addressed the needs of a ”Cinderella” type of co-operative and did not provide a broader perspective with a clear Master Plan which was understood by everyone in the country.

Mr N Xaba (ANC) referred to 10.1.3 on Method of Work of the Committee. Noting the concluding statement that “the Committee functioned throughout the Fifth Parliament without the services of a researcher”, he asked if the researcher issue should be made as a recommendation for the Sixth Parliament. He said the Committee’s insistence for the need of a researcher should reflect in the report, or there had to be an acknowledgement, if there had been a researcher.

He suggested that in the Preamble, the Committee should stress that it was very unapologetic and very firm on the matter that despite the rumours that there might be recommendations to downsize or to make ministries smaller, the Committee maintained its firmness in stating that the Department and its Ministry should remain part of Parliament. Views previously expressed by other political parties that there was no need for the Department were rejected outright by the Committee. The Committee had to make clear the importance of small businesses in the Legacy Report and that no economy would develop without small businesses.

Mr Xaba referred to page 11 on the chart of activities. He expressed concern over the number of times the word “none” occurred, which could give the impression that the Committee was not working.

The Chairperson replied that the use of “none” in no way implied the status of the PC’s work. She said “none” referred to the Department’s work and that it could not be stated otherwise. The fact was that the Committee had completed a five-year term without an approved strategy plan or an approved structure of the Department. She said the Committee would be finishing its term without the appointment of a permanent DG or DDGs. She said if the former DG had been brought in to establish the Department, she, as Chairperson, would question what was it that the former DG had done during the three-year contract as she had left without putting a structure in place in the Department. The former DG had vacated the post without identifying the need for a DDG. As a result, there was no leadership to oversee the work that should be done.

The Chairperson stated that the Committee had assisted the Department with the development of a Tracking Tool and had suggested the importance of a Gantt Chart which would indicate the milestones of a particular task, but the former DG had failed to implement those before she left.

Mr Xaba thanked the Chairperson for clarifying the matter. He made further reference to the same chart on “Interventions considered in 2019” which showed none and asked if the Committee’s  discussions at a previous meeting on the  bullying of small businesses by big businesses, could not be considered as an intervention. He said surely the Committee was assisting in the matter between small businesses and big businesses.

The Chairperson replied that it could not be seen as assistance, but rather that the Committee was carrying out its work by raising concerns that the playing fields were not even and recognised that  intervention was required. When Members had felt that the services of an Ombudsman should be deployed, the matter was debated at a Committee meeting, but it was decided that it was too early for such steps as the matter was still under discussion.

Mr Xaba referred to page 14 of the report and said there were instances when Members might have attended national key summits which he felt should be noted as it would indicate that the Committee was carrying out work in support of the Department. He said he was aware that Mr Chance had had a problem being accepted, or accredited, but that the role of Members in carrying out oversight was acknowledged.

The Content Advisor pointed out that under the “Executive Summary”, there was a sub-section which indicated the Committee’s Work during the Fifth Parliament and where key study tours, oversight visits and legislation by the PC were highlighted. He said that the recommendation that the Department should continue to exist and motivation for that would be included in the same section.

The Chairperson made the following recommendation for the Department to consider:
- That it was the Committee’s view that the Department should continue to exist as small businesses would continue to need the attention and support from the Committee to solve their problems.

The National Development Plan (NDP) had put more pressure on the small businesses to create 90% of the 11 million new jobs targeted for 2030. The solution to the challenge to reach the target of creating new jobs, would mostly come from small businesses and not from the big businesses. It had to be understood that the impression that the Department was not performing was due to various challenges. The duties of the Department regarding small businesses and the role it was to perform had been moved from the Department of Trade and Industry (DTI)  to create a new Department. However, the majority of funds allocated to deal with small businesses had remained with the DTI. That had left the DSBD without  adequate funds or resources to carry out its duties successfully.

Many of officials deployed in the Department did not have the necessary knowledge on small businesses and the junior officials who were transferred from the DTI were those who had  dealt with CIS. She said that the officials who had dealt with Small Enterprise Finance Agency (SEFA) and other funds which were required for small businesses had remained with the DTI. The Department could say that it had been given a raw deal as a Department of Small Business Development (DSBD) had been formed but its capacity was not planned for. She said building capacity of the DSBD was not the responsibility of its Minister, but that of the President who had taken the decision to establish a new Department.

If there was a power struggle between DTI and the DSBD and a power struggle between the Ministers of the DTI and Economic Development, those negotiating on behalf of small business development placed the Committee on an uneven playing field as the Minister of DSBD had no experience in small business development and was therefore at a disadvantageous position during negotiations.

Mr Capa said, based on the Members’ experience, the Committee had valid reasons to motivate for the continuation of such a Department and also to raise the fact that the Department had not received sufficient human resources and funding.

Mr Kruger said he was not 100% sure that the Department’s target to create jobs had been met and in his view, the DSBD had failed South Africa. He said he took note of the Chairperson’s explanation as to why the Department had failed, but it would be difficult for the DA to motivate why the Department should continue to exist. However, he said there was no certainty that the Department would be discontinued and that the Committee should leave the matter to  the President decide. He added that if he was asked to give his recommendation, he would say that, although the Department was a failure, it should continue. He added that, as a Committee, Members would be out of their depth if the Committee recommended anything which was a policy decision.

The Chairperson replied that she differed with Mr Kruger’s views and said Mr X Mabasa (ANC) would respond to his statement.

Mr Mabasa described it as critical for the DSBD to continue to exist as the Committee should fulfil the intentions it had to assist with the development of small businesses. He said that the Committee was in a better position than the Department to motivate why it should exist due to the Committee’s oversight role and also the Committee was more familiar with the challenges which the Department had not yet overcome.

Mr Kruger said there were two positions to look at: whether the Committee believed in principle that  small businesses would create jobs, and that was a “yes”; the other point was whether the Committee  believed that the Department and the way it was structured would  reach the 90% target to create new jobs, and that he did not believe it would do.

He agreed that there was a need to develop small business in South Africa. He asked if the Ministry on its own could take the Committee to that point or whether the Department should not be part of another Ministry. He said that he believed 100% in the principle that there should be efforts to develop small businesses, but he did not think the current Department could assist in its success.

Ms N Mthembu (ANC) said that Members had carried out the Committee’s work, had been on oversight visits and had seen the plight of the small businesses. It was for that reason the Committee felt that the existence of the Department was of paramount importance. She agreed with Mr Mabasa and Mr Capa. For the Department to see results, recommendations should be made as in a mandate. She said Members knew their constituencies well enough to understand the plight of the people, how they were affected and  what type of assistance they were in need of.

Mr Chance elaborated on the point made by Mr Kruger and said that it had always been the DA’s position that that Department should not have been created because it would only be able to apply a band aid to the problems of small businesses. There were many issues which affected small businesses and which were outside the purview of the Department. He said the Licensing Bill had been produced by the DTI, the labour regulations, which placed restrictions on the Department, were produced by the Department of Labour. He reiterated that the DA would not make a recommendation for that Department to continue. The DA would not support it and therefore the DA would not adopt the Legacy Report.

He said the DA had a fundamental difference on page 2  with “the Realisation of a Developmental State”. In principle, the DA Members could not support it. He said the DA Members’ presence only served to make up a quorum on those two grounds.

Mr Mabasa said if the DA had articulated its point at the time when the matter had been discussed, the Committee would have spent less time deliberating the matter as the ANC Members had argued that the Department should continue to exist. He proposed that since it was a principled decision by the  DA not to support the continuation of the Department, that Members refrain from convincing the DA to support motivations for the Department to exist and rather to focus on why  the ANC, as a majority, would want the Department.

Mr Mabasa said that DSBD was not the only Department with challenges, and it was not correct to discontinue, as a quick solutions, a Department that experienced challenges. He said challenges were there to overcome and suggested that Members should rather devise the means to overcome the challenges.

The Chairperson said Members should not divorce the current work of the ANC from the work started by the organisation in 1912 as outlined in the Freedom Charter on what a new South Africa would look like. The Morogoro Resolution on the mixed economy was well explained in that Resolution, which contained the strategy and tactic of the ANC in preparation for the organisation taking power. She said when the ANC came to power it had taken a decision to transform South Africa from an economy dominated by the private sector into a mixed economy. She said the ANC had also adopted the National Development Plan (NDP) which determined that small businesses had an important role to play in addressing the challenges of high rates of unemployment, poverty and inequalities in the way that the economy was monopolised by the private sector. The community continued to be no more than providers of labour and consumers.

The Chairperson warned that there could be no Legacy Report without a political direction and the ANC had to state its position clearly on decisions taken as the ANC in the report, even though the position of the PC was informed by certain policy positions. She reminded Members that the NDP had been adopted in Parliament in 2014 to give a particular focus to the establishment of the SBD.

She also called on Members to identify the issues which placed the Department in an unequal position to carry out its tasks. She said that since the establishment of the Department, Members had agreed it was a correct decision, but that the name, “Department of Small Business Development” was wrong. The Department had been given a task to develop SMMEs, which were small businesses, and also to develop Co-operatives. But the Co-operatives were not SMMEs. Cooperatives were key to the social and solidarity economy based on the mixed-economy resolutions taken at Morogoro. It was based on that understanding that the ANC had called for a name change to the Department of Small Businesses and Co-operatives.

The Chairperson said the Department gave out funds, played a coordination role and assisted in reaching agreements. The Department played its role in terms of the Inter-Governmental Relations Framework Act (IGRFA) and the Integrated Development Approach, which were the instruments for achieving a developmental state.

She said those persons who would not support the Legacy Report on the basis that the DA did not believe in a developmental state would do so in support of the policies of the DA. She explained that the policies of the ANC on building a developmental state arose from policies taken over many years.

The Chairperson said the IGRFA empowered the Department to coordinate services and even to draft licensing. She stated that the NDP also allowed the Department to sign agreements. She said that policy was used when SA was bidding to host the 2006 and 2010 Soccer World Cups and when SA was preparing to host the 2010 Soccer World Cup. She said that the provisions needed had been in different departments and were coordinated by the Department of Sports and Recreation (DSR) which was the lead Department. She added that the process was led by the South African Football Association (SAFA) on behalf of the DSR. In the case of small businesses, the institutions that were developing small businesses was the Small Business Development Institute and for the co-operatives it was National Apex Cooperative of South Africa (Nacsa) and National Cooperative Association of South Africa (NCASA).

The Chairperson said although the Department was not equipped for the task, being in an unequal position, did not mean that the policy position of the ANC was a wrong policy decision. Members who had been loyal to the PC, should be honest with South Africans by speaking the truth about the fact that the Department had been disadvantaged. That did not take away the principal that such a Department was needed.

Mr Chance said that the DA had made its position clear on the Department’s future and referred to page 7 paragraph 4 of the report which stated: “The membership of the Committee remained constant” as not being correct. He said the Committee should also acknowledged the loss of one of its Members in a tragic accident and that there had been other changes to the Committee Members during the past five years. He said it was important to mention that, as the former Members included Ms Dlamini-Zuma and Mr Khoza who was tragically killed and Mr Mkonqi . It was important to have the names in the appendix of the attendance register and also to state for how long Members had served on the Committee.

The Chairperson agreed that Mr Chance raised a valid point as it would assist the Speaker with deployment and to ensure there was continuity. She described the Committees and its Chairpersons and Members as the pillars of Parliament.

Mr Capa said there was still a lot of work to be done, and would like the Committee to remain collegial as it was the last day of the Committee in Parliament. He said after the meeting Members would be outside doing the “dirty work” by calling each other names and shouting at one another, which was a requirement. Members needed to be civil with each other in order to complete the Legacy Report. He agreed with the recommendations brought by Mr Chance. He suggested that the Legacy Report should be finalised in the meeting. Where there were disagreements in the report, the Committee should come up with a decision to resolve them.

The Chairperson agreed with Mr Capa and said the business nature of Parliament was politics which could not be removed. Members had to remember that the DA was there to play a political football and the ANC would not see that football. She said the nature of a PC, if allowed, would discuss this issue from a political point of view informed by the policies of the ANC. The Committee could not be a Portfolio Committee with Members who represented a political party but had no political ideology and policy positions. She explained that policy positions were supposed to guide, and the policy positions would be those of the party that had won the elections. She added that opposition parties would try by all means not to adapt to those policies which they did not believe in. That should be mentioned in the report.

Mr Xaba said Members agreed with the Chairperson’s explanations on the Ministry and existence of the Department. He suggested that the Legacy Report should have concluding remarks by the Chairperson. He pointed out that the distribution of Members’ attendance list and the performance rate was carried out in conjunction with Parliament, or by the Committee.

The Chairperson told Mr Chance that she agreed it was important for Parliament to understand how the changing of Members of the PC had affected the Committee as such moves affected the performance of the PC .

The Chairperson suggested an amendment to page 33, 15.4: “A Master Model /Plan makes a distinction of the Pillars and the co-operatives mentioned in the report form one of the pillars; the knowledge would include training in the concept of co-operatives, technical skills training, research and innovation training.” The other amendments were the manufacturing and the retail businesses and how they have positioned themselves. She said the Committee had to be clear as to which pillars would drive the development of co-operatives in South Africa.

The Chairperson said several Co-operatives had organised themselves on a WhatsApp group, named RSA Co-operatives Alliance and internationally the group was known as the International Co-Operatives Alliance. She said they were holding serious discussions with the group and the secretariat was in contact with the Department which had made requests for a national fund for those co-operatives. She said the Department could not lose the Co-operative Alliance Group, as there were members from Kenya and other countries who participated on the group chat. They had taken a decision to pressurise government to support them.

The Chairperson asked Mr Capa to chair the meeting as she excused herself for a few minutes.

Mr Chance referred to Page 2 which read: “The Committee has at all times sought to ensure and contribute to the realisation of a developmental state…..” and said that it was not the DA’s position. He said the DA did not believe in a developmental state.

The Content Advisor said that a disclaimer would be made to the reference.

The Acting Chairperson asked for further responses on the report.

Mr Xapa wanted to know about the acknowledgements at the end of the report.

The Content Advisor said he received a template and that there were issues which he wanted to raise in the report but those were not catered for.

The Acting Chairperson asked for the Legacy Report to be adopted with amendments.

The Legacy Report of May 2014 – March 2019 was moved for adoption with amendments by Mr Xapa and seconded by Mr Chance with amendments.

The Chairperson declared that the Legacy Report of the Portfolio Committee on Small Business Development had been adopted by the Committee, with no objections.

Mr Kruger apologised to the Chairperson as he forgotten to raise the matter of Vodacom and big businesses bullying small businesses. He suggested that since the matter had not been solved, along with two or three other matters, it be included in the report. He said Vodacom had promised to send the Committee a report within seven days of their meeting, but that report had not been received.
Mr Mabasa seconded Mr Kruger’s amendment to the Legacy Report. He said the amendment to be included should emphasise the challenges of small businesses so the incoming leadership of the Sixth Parliament should continue with the matter.

The Chairperson agreed with the proposal.

The Deputy Minister, Cassel Mathale, queried whether it was formally correct to go back to the Legacy Report after it had been adopted. He advised the matter should re-opened.

The Chairperson thanked Mr Mathale.

Mr Mabasa moved that the report be re-opened.

Mr Kruger seconded the re-opening of the report.

The Chairperson said the report was re-opened to include the “unfinished businesses” which included the Vodacom and small businesses matters, and a forensic report from the Office of the Auditor-General . She added that the Committee had applied to meet with the House Chairperson responsible for Committees on 9 and 10 April 2019 to process and finalise the forensic reports.

The Chairperson put the Legacy Report, with the amendments, to the Committee.

Mr Mabasa moved for adoption, with amendments, and Mr Chance seconded the move.

Mr Mabasa proposed that it should be noted in the Legacy Report that the Committee thanked Minister Lindiwe Zulu, Deputy Minister Mathale and SBD for their unselfish support to the Committee and for attending meetings whenever the Committee called on them.

The Chairperson noted that the Committee had adopted the Legacy Report with no objections.

Announcements by the Chairperson
A group photo of Members and support staff on the National Assembly steps. A  lunch would be served to the Members and support staff.
The mother of an SBD official, Mr Jeff Dlomo, had passed away. The Honourable Mthembu Jackson’s child had passed away. A minute of silence was held in sympathy with Mr Dlomo and Mr Jackson.

Consideration of Committee minutes
Minutes dated 20 February 2019: The minutes were adopted, with technical amendments, as moved by Mr Chance and seconded by Mr Xaba.

Minutes dated 27 February 2019: Mr Xaba moved that the minutes be adopted with amendments. Mr Kruger seconded the motion.

Minutes dated 06 March 2019: Mr Chance referred to page 3 3.1 which read ”...the full extent of irregularities…” stated that it was incorrect as they were not detailed. He proposed that the “full extent of regularities” should be removed.
The Chairperson referred to page 6, paragraph 2 “officials from COGTA had instead had…” It should read as: “officials from COGTA had misused….”
On Page 6 there was an omission of the observation made by Parliament that the Department facilitated the meeting between SANACO and NACSA.
Page 7 paragraph 2 read: “the secretariat team formed by RSA Alliance Group led by DSBD ….”. The Chairperson proposed that the DSBD should be replaced with a “Department responsible for Co-operatives.” 
Ms Mthembu moved that the minutes be adopted with amendments. Mr Mncwabe seconded the motion.

Minutes dated 13 March 2019: The minutes were moved for adoption, with technical amendments, by Mr Chance and seconded by Mr Xapa.

Farewell deliberations were delivered by Mr Chance and Mr Mabasa.

The Chairperson thanked everyone.

The meeting was adjourned.       


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