Small Business Development Budget Review and Recommendations Report

Small Business Development

16 October 2019
Chairperson: Ms V Siwela (ANC)
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Meeting Summary

Available here once adopted: BRRR 2019 

The Portfolio Committee reviewed and adopted the minutes of its meetings on 11 September 2019 and 08 October 2019 respectively, without amendments. They also considered the Budget Review and Recommendations Report (BRRR), and made some additional recommendations. 

Members maintained that due to the challenges faced by the Department, the time was now ripe for the Committee to introduce a Committee Ombudsman Bill. At the same time, they supported the recommendation that the audit functions of the Small Enterprise Finance Agency (SEFA) should be undertaken by the Auditor General (AG) instead of an independent auditing firm.

Members also commented that because of the Department was seriously under-spending its budget, the logical conclusion was that they were not adequately accessing their market, as they had only one office in the provinces. It was therefore recommended that they should combine with the Small Enterprise Development Agency (SEDA) which had a more widespread provincial reach. Others recommended an interest free regime and interest-free holidays for the whole term of loans for small businesses.

Meeting report

The Chairperson said the purpose of the meeting was the consideration of the Budget Review and Recommendation Report (BRRR) for 2019.  The Committee had a session last week where departments and entities had presented their findings and annual reports, so it was the role of the Committee which was tasked with oversight functions to adopt the reports with some recommendations. The agenda of the meeting was adopted.

The minutes of the meetings held on 11 September 2019 and 8 October 2019 were adopted without amendments.

Department of Small Business Development: BRRR

Mr Sibusiso Gumede, Content Advisor, presented the BRRR document and asked the Members to add, subtract, amend or make any contributions to it. The document was made up of seven sections, and he went on to read through the entire document.   Members were then asked to make inputs.

Observations on the recommendations

The Chairperson reminded the Members that what had been read was their recommendations, and it was now their duty to advise and make their inputs.  The Committee was mandated to guide the Department on this process. The report had boxed the Committee into a corner, because it was the annual report of the 5th Parliament, but it had given the present Committee some guidance on how best to proceed. Members were therefore free to express themselves and make inputs on the presentations. The main focus was to see that the Department achieved its goals and reached its targets. She was a bit disturbed by the issue of the Department’s organogram, because they could not move forward properly without it.  

Mr H Kruger (DA) spoke on recommendation 8.1.7, which addressed the 30-day payment which was a huge problem for small, medium and micro enterprises (SMMEs). The only legislation that would solve this problem was the Ombudsman Bill, which was very much needed. He recalled the Department promising to build it into the Small Business Act, but no one knew how far that was going. He proposed that under 8.1.7, the Committee should table the Ombudsman Bill as a Committee bill in this term, and when it came back to the Committee, any changes could be made then. This Bill would give small businesses a signal that the government was serious about looking after their welfare.

He agreed with recommendation 8.5, and the Committee had to drive that because of the problem of “double dipping” in SA. He proposed that the Committee should take charge of all the small business programmes of government in order to harmonise them under a single oversight body. As a committee overseeing Small Business Department, this Committee had to take charge of all small businesses, no matter in which department it was located.

Thirdly, at the next Committee meeting the Department should come and give full details on the fraud going on there. They had to present on what was going on, as well as the consequences imposed on those found to be corrupt, and what they were doing to stop further rot. The AG’s report had highlighted a lot of problems in the Department and the Committee was yet to get a full report. A lifestyle audit must also be carried out on all employees in the financial department of the ministry.

Ms K Tlhomelang (ANC) recommended that the Committee should agree to have a check list comprising of all the Auditor General’s (AG’s) findings, to ensure that they were implemented.  In view of the challenges faced by Department, she supported the introduction of a Committee Ombudsman Bill. She also supported the recommendations that the auditing of the Small Enterprise Finance Agency (SEFA) should be undertaken by the AG instead of by an independent auditing firm, as well as the carrying out of a skills audit to ascertain the skills and capacity needed by the Department.

Prof C Msimang (IFP) was somewhat concerned that the Department was under-spending its budget. When this happened gradually, departments usually progressed by making up for the lost ground, but in this case the Department seemed to under-spend throughout the year. The logical conclusion was that they were not adequately accessing their market, so he supported the view expressed in the report that SEFA should combine with Small Enterprise Development Agency (SEDA), because it appeared they had only one office in each of the provinces, which was not enough. The hope of many, with the rate of unemployment, was to start their own businesses and SEFA was not marketing itself sufficiently and since SEDA had more offices, teaming up with SEDA could benefit them. There was also a suggestion that they could work with the local economic development (LED) programmes in the municipalities, since they were the only government offices in the rural areas, and people were more likely to get help from their municipalities. All in all, it ought to market itself sufficiently well. The full AG’s report suggested earlier should also be tabled before the Committee by the AG’s office so that it could be interrogated by the Members.

Mr M Hendricks (Al Jamah-h) said that the rescue strategy spoke about blended finance in 8.11 of the recommendations. Blended finance was synonymous with loans only, and not grants, but Members had heard that the Departments of Social Development and Agriculture gave grants, and if that was all taken away, it would mean they were taking food out of the mouths of beneficiaries. He supported blended finance, but his party’s position was that loans must be interest free, or not exceed 3.5%. There was a need to insist that loans given to small businesses should and must be interest free.  Sometimes lenders gave interest-free “holidays” for few months, but why could they not be extended for the whole term of the loan? If this was done, it could go a long way to aiding small businesses. 

Structure followed strategy, so why was the government stuck here? How could a department be properly staffed in the absence of a structure? Structure needed to be put on the President’s agenda to establish a micro organisation. One had to be cognisant of the fact that the 5th Parliament had faced a lot of hurdles in doing their work because of the absence of a functional structure in the Department and its entities, and the Committee should not allow this to happen in the present Parliament. He had heard of the suggestions that SEDA and SEFA should combine, but his party’s position was that there should be one board chairperson representing the Department, and one director general (DG). 

The recommendation referring to decent work should be taken very seriously -- and decent work should not be “Stone Age” work, where work referred to cleaners and contracted cleaners. The Committee needed to support jobs that would arise from the 4th Industrial Revolution (4IR). It should think of next generation jobs that would create new revenue streams for the economy.

Mr H April (ANC) suggested that he wanted the officials to note that this report had been compiled by the Committee, not by the Department. That distinction should always be made, because it was the Committee doing oversight over them and not the other way around, and this should be reflected in the record as such. He thanked the officials for putting everything discussed into context. Note should be taken of section 8.14 in the reports that the suspected misrepresentation by beneficiaries, suppliers and network facilitators must be investigated and necessary action taken. This point had to be emphasised further because they had heard about cases of double dipping, with some even claiming that they did non-existent jobs when presentations were made to the Committee.  All of this costs the taxpayers a lot of money, and it was the responsibility of the Committee to ask the Department to put measures in place to prevent a recurrence.  This had to be properly phrased and form part of the recommendations.

Mr F Jacobs (ANC) also shared the sentiments of Members to reinforce the assertion that this was the Committee’s report, and the recommendations that were put together by the previous Parliament should be supported. The big challenge was to help the Department to see their new role, and to articulate a proper vision that would guide them and increase their capacity to function effectively.  One had to see if they had the requisite capacity and the right people in the right positions, and it had to be restated that the Committee had confidence in the Minister and her team. The organogram had to be sorted out as a matter of urgency.

The role of the Department was district approach, to which all subscribed, in order to find a catalytic role within inter government relations in the city state, the rural municipality and the province and all government departments, as well as big businesses that were also stake holders. He shared the financial concerns relating to interest rates, and supported the recommendations that promoted in-sourcing and advocated a close working relationship between SEDA and SEFA. The Committee had to be clear with regard to cooperatives and social enterprises in identifying whether there was a strategic shift in the Department, because they were not for profit and in most cases added social value to society. Some of them must continue to be supported with grants so they would continue to play crucial roles in their communities. The suggestion was that the cooperative framework had to be revised and put in a proper place.

The Chairperson said that the Committee recommended that SEFA should be audited by the AG and a private audit firm, even though the AG had clarified that they had no qualms if they were audited by a firm that had similar policies and were in line with the AG’s regulations. The Committee also encouraged the Department to rectify the under-spending and spend its budget. The Department of Public Service and Administration (DPSA) should also be compelled to appear before the Committee, as they were the ones that had to assist the Department to produce its organogram.

On the issue of the Department compiling the report on the study group tour; the Committee had to check on the progress thus far and also had to come up with its own observations and project the report along those lines. This responsibility should not be shifted to the Department and the Committee had to do its work and stick with its duties of guiding and monitoring the Department and seeing that they account to the Committee.

Mr Kruger clarified that he did not suggest that the AG’s report be tabled, but wanted the Department to account for what they had done to give effect to the recommendations that were contained in the AG’s report. The Department had to come to the Committee to answer to what happened as a consequence of the AG’s report.

The Chairperson agreed to his assertion.

The meeting was adjourned.

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