The Portfolio Committee on Small Business Development met on a virtual platform to discuss the 2020/21 first quarter performance of the Department of Small Business Development (DSBD), Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency (SEFA). The presentations highlighted the general performance of the Department and its entities, including their financial performance reports, governance and compliance, human resource reports, Covid-19 responses and the pandemic’s impact on deliverables, among others.
The Department revealed that most of the financial resources were redirected to COVID-19 interventions. For instance, totals of R771 million, R270 million and R13.5 million at different times were reprioritised to the Covid-19 emergency relief fund.
The Small Enterprise Finance Agency indicated that the impact of COVID-19 resulted in the performance of entity just being fair enough, with some development impacts experiencing a high performance while others a very low performance against the target versus the actual performance.
The Small Enterprise Development Agency achieved a 50% performance rate as the organisation performed well on 12 out of the 24 indicators within the period under review. Covid-19 did not spare SEDA as the restrictions and national lockdown (level four and five) contributed to this low performance.
Members also asked if there was any accountability of all the monies that were redirected. How much was it and to where? They also noted that some targets had been moved to the 2021/22 financial year. Which ones are these so that we can hold them accountable and have a timeframe for every arrangement?
Members recounted that the World Health Organisation had announced the possibility of Covid-19 being prolonged. In order for South Africa to not crack for a long time or seek for sympathy for a very long time, what is the Department’s plan in navigating through the crisis?
Members noted that the budget was R70 million and was redirected to the Covid-19 relief fund. They asked the Department to provide more information on the informal businesses that were supported – name, district, province and the kind of support provided – as this information would enable the Committee to provide proper oversight.
Members also asked when the appointment of a Director-General in this Department would be finalised.
Opening remarks by the Chairperson
The Chairperson opened the virtual meeting, welcoming Members, the Committee support staff as well as the delegations from the Department of Small Business Development and its entities. She made special mention of Mr D Mthenjane (EFF) as a new Committee Member and said he should feel free to engage in the discussion. She mentioned that the Committee was happy that the party was always present. She gave him an opportunity to greet the whole Committee.
In his speech, Mr Mthenjane said that he was already feeling at home and believed that they would work together to help people.
The Chairperson requested the Members to consider and adopt the agenda for the meeting, which was for the Committee to receive updates on the quarter one performance reports of the Department of Small Business Development and its entities.
Mr H Kruger (DA) moved for the adoption of the agenda and Mr F Jacobs (ANC) seconded the motion.
The Chairperson declared the agenda adopted and then invited the Minister to lead the team.
The political leader acknowledged her team and appreciated the opportunity given to them by the Committee to come and account.
Briefing by the Department of Small Business Development (DSBD)
The DSBD, during the period under review, experienced underperformance and Covid-19 was cited as the measure reason. Presenting on the performance, the Department revealed that most of the financial resources were redirected to COVID-19 interventions. For instance, totals of R771 million, R270 million and R13.5 million at different times were reprioritized to the Covid-19 emergency relief fund. Additionally, some targets were not met due to COVID-19 restrictions, such as the failure of exposure of small, media and micro enterprises (SMMEs) and cooperatives to international market opportunities, due to International market closure as well as delays.
See presentation slides for more detailed information
Briefing by Small Enterprise Finance Agency (SEFA)
Similarly, SEFA also faced a great impact due to Covid-19. The lockdown had impacted negatively on the achievement of some disbursements targets as businesses were closed and there was not much economic activity. This resulted in the performance of SEFA just being fair enough, with some development impacts experiencing a high performance while others a very low performance against the target versus the actual performance. For instance, on the target groups, the actual achieved was less than the target in all the five targeted groups categories while on the SMMEs financed (microfinance) a 132% target was achieved with the other categories seeing an underperformance within the SMME development impact. The entity drastically underachieved on its quarterly target of facilities to people with disabilities, achieving only six percent of the target.
See presentation slides for more detailed information
Briefing by Small Enterprise Development Agency (SEDA)
SEDA achieved a 50% performance rate as the organisation performed well on 12 out of the 24 indicators within the period under review. Similar to SEFA and DSBD, Covid-19 did not spare SEDA as the restrictions and national lockdown (level four and five) contributed to this low performance. Due to the Covid-19 pandemic, government was pushed to reprioritise its funding allocation, which resulted in SEDA reducing funding for Incubators by 50% to have resources for the informal sector programmes. Additionally, the impact of the level three lockdown regulations required that SEDA limit the number of employees in respective offices due to social distancing; this had a negative impact on the client support offered.
See presentation slides for more detailed information
The Chairperson was the first to contribute, especially on the last presentation. She reckoned that SEDA was the nerve of the Portfolio Committee on Small Business Development and without it, SEFA could not operate. She wanted an elaboration on the conclusion made by SEDA specifically on how the planned interventions it presented were going to unfold.
The Chairperson asked SEDA if it would be driving the interventions in line with the District Development Model (DDM). She said that according to her, there were three districts and Mpumalanga was the most rural. She was happy about the presentation and opened up the floor to the other Members.
Mr H Kruger (DA) said that SMMEs in South Africa were bullied by big businesses and government. Before Covid-19, there were two cases investigated of bullying. He asked the Department if it was going to pick up these two cases or follow up because it had been silent on these two cases.
Before covid-19, the Department looked at opportunities for productivity such as farmer cooperatives. He was still waiting for feedback from SEFA and SEDA. Based on this, he asked what was way forward was now and how can they be assisted so they become successful and start creating jobs. He also recounted that a few meetings ago he had asked the Department, SEFA and SEDA to come and give the Committee a presentation about the district model. The Committee would like to hear of the strategies by SEFA and SEDA in aligning with the model.
Mr H April (ANC) directed his last two questions to the Deputy Minister (DM). When will the appointment of a Director-General in this Department be finalised? He then pointed out that newspapers were full of Covid-19 corruption scandals; he wanted the DM to guarantee to the Committee if corruption took place in SEFA, SEDA or the Department during the pandemic, appropriate and effective consequence management would be implemented.
Ms M Lubengo (ANC) welcomed all the presentations. He noted that the Department had targeted 25 000 township and rural enterprises and out of that figure only 3 273 were supported because resources had to be diverted to Covid-19 interventions. He asked the Department to provide the Committee with more information on the 3 272 that were supported and for that information to include provinces, districts municipality, gender and race.
Ms Lubengo noted that out of the targeted 25 SMMEs and cooperatives to be supported through blended finance programme, the Department only achieved 10. What exactly caused this? He asked the Department to furnish the Committee with information on the 10 SMMEs in terms of the economic sectors they operated in, the nature of business they did as well as their financial value of the support.
Mr D Mthenjane (EFF) asked his first question to the Department. She echoed the sentiments made by the Department that finances were redirected to Covid-19 and therefore asked if there was any accountability of all the monies that were redirected. How much was it and to where? She also noted that some targets had been moved to the 2021/22 financial year. Which ones are these so that we can hold them accountable and have a timeframe for every arrangement?
He mentioned that the World Health Organisation had announced the possibility of Covid-19 being prolonged. In order for South Africa to not crack for a long time or seek for sympathy for a very long time, what is the Department’s plan in navigating through the crisis?
What measures will the Department put in place to support the SMMEs in diversifying their goods to the market? He acknowledged that there was a challenge in terms of problem solving skills on the part of SMMEs and therefore wanted to know what the government was going to do to assist these SMMEs.
He then posed a question to SEDA concerning the lack of its footprint in some municipalities. Is there any programme that SEDA is doing to go around in the rural areas to educate our people and make them aware that they are there to help them, especially the small businesses?
Lastly, he said that the Committee’s role was not to sympathise with this Department but to ensure that it took accountability and for the Committee to assist it moving forward. He expressed his desire for the Department to come up with a plan even amidst Covid-19, which was likely to be around for a long time.
The next to speak was Ms K Tlhomelang (ANC) but she experienced a network problem and was not audible; she was therefore unable to contribute at this time.
A Member said that there was need to have a list of beneficiaries for the Covid-19, which could be seen, and the figures diverted to Covid-19, including their percentages. She mentioned that this request was made previously where the Department was asked to circulate the list and figures. When will the Department circulate the list of beneficiaries in order to ensure that it is not the relatives of the ones who deliver?
Mr F Jacobs (ANC) said that there was not enough money for small businesses. He suggested that the Committee should lobby for the R200 million announced by the President. He further commended the Department for having a relief fund but he insisted that the Department, with the help of the Committee, must do more to source money for Covid-19. He mentioned that the Department had to improve on its audit outcomes.
He asked a question on the target for paying creditors: is it 20 or 30 days and what is the shortest time for processing and why? Where does the Department stand on the total number of invoices received? Does it go according to the profile of DBE procurement?
He commended the Department for doing the district municipal initiative but in line with the DDM, he would want to see how that was rolled out and to get more information on the location of the district and how it would be rolled out in more districts because both SEDA and SEFA were known as having footprints across the country; he did not think it would take time for the Department to roll out the district model across the country.
He also noted the SMME database, the need to push around registration for the database and the deadlines. What active campaign will the Department do to have informal businesses which do not have computers and are not online? He asked if the Department was going to outsource support to get the registration done. He cited the fact that the amendment board was getting a consultant. However, the process was long overdue and therefore it needed to be quickened. He asked the Department and Minister to keep an eye on getting the registration through.
After Ms K Tlhomelang (ANC) had her internet connection stable, she asked for the Department to elaborate on the appointment of the ARC (audit risk committee) members and why it was unsuccessful. She further sought explanation on how this situation could have been avoided and how it affected the audit of the finances of the Department. She also drew attention to slide 16 and 26 of the district municipality and asked the Department to provide more information on the number of the cooperatives, their location and demographics.
On informal businesses, she noted that the budget was R70 million and was redirected to the Covid-19 relief fund. She asked the Department to provide more information on the informal businesses that were supported – name, district, province and the kind of support provided – as this information would enable the Committee to provide proper oversight.
Lastly, she posed a question to SEDA/SEFA in terms of representation. Having learnt that SEDA had underachieved on the number of SMMEs which included vulnerable groups such as youth, women and people with disabilities, she asked how the Department was intending to achieve the target in the presence of the high vacancy rate of the business advisors.
On the issue of splitting so they report to the constituency, SEDA referred Mr April to slide 14/15 where the entity had split the performance in terms of province. If the Member wanted further splitting, the entity could provide that.
On the issue raised by Mr April on incubation support, SEDA said that it was regrettable to do but the entity had to increase spending on projects having to do with Covid-19 priorities. With the incubators not being fully online due to lockdowns, the SEDA Board discussed with the Minister and the resolutions of the discussions identified incubators in the areas needed. The entity also revealed that it was in constant communication with its incubators.
In response to Mr Mthenjane’s question on being known in rural areas, SEDA agreed with him and acknowledged a number of times. The entity said that it had plans but due to covid-19, it was unable to fully implement those plans. It then appointed a consultant to conduct analytical study around its communication with all of its stakeholders and how its peer function could improve. SEDA revealed that this exercise at national office had been completed. However, due to travel restrictions the entity could not go to all provinces to implement better ways on digitalisation, considering that people in those areas did not use digital platforms. SEDA said that it would use publications and audio visual on traditional media spaces so people who did not have access could hear and see more of the entity. The entity was looking at the traditional media house channels it could use so people knew about it and what it does. A delegate mentioned that she did not want this to be an excuse the entity was making but Covid-19 had an impact on its plans to have visibility for people to benefit on the things offered by the entity.
Lastly, in responding to the question by Ms Tlhomelang on underachievement on vulnerable communities and the link to high vacancy rate on business advisors, the entity acknowledged that there was a link to some extent and mentioned that its Board had increased momentum on the appointment of business advisors; a total of 15 would be recruited. Covid-19 had an impact on fast-tracking the recruitment process.
The SEDA said that it had been waiting for an invitation from the Ministry and had contacted the secretariat to request a date for the presentation.
In responding to the Mr Kruger and Mr Mthenjane, the Chief Executive Officer of SEDA said that the entity was doing a lot of work in Mpumalanga but the information appearing in the presentation was reporting on work that was done in just the first quarter.
On incubators, she said that the entity finished the refurbishment of a digital hub in Nelspruit and would be ready to start operating in the next quarter, and a centre in Secunda and a new incubator in Barberton. This was a highlight of a few high-impact projects the entity was busy with, she added. She further said that the stakeholders in Mpumalanga participated in its national stakeholder engagement on the previous Monday with the district. It was a very active participation from Mpumalanga. After this engagement with stakeholders in the district ecosystem facilitation model, the entity was then going to have provincial ones. The district ecosystem facilitation model as well as the DDM generally, its subsets were dependent on intergovernmental planning and relation. This was why SEDA was working so closely with the Department of Cooperative Governance and Traditional Affairs (COGTA) to ensure that agencies as well as the DSBD handled the IGR element of the model. COGTA had what was called the ‘one plan’, which encompassed everything in a particular district, a sector department as an agency and SEDA would come to play its role within the institutional arrangement that had been set up by COGTA. The entity would elaborate on this once it presented the model to the Committee because this was the only way the agencies could really reach out to the rural areas and smaller communities through this collaboration.
On digitisation strategy, she indicated that the entity would complete it within September and would be able to report on it in the coming quarter. This would help SEDA’s capacity that it had done through its mentorship strategy, through utilising SEDA’s portal and the one to which women were registering.
On high target vs. high vacancy rate, she said that the entity had been given a go-ahead to recruit especially the business advisors.
The CFO gave a response on the issue of incubation side, saying that SEDA had to do the work that was done by some of the incubators to ensure improvement of customer value proposition. The entity did this so as to be able to crowd in during this difficult period. SEDA had seen some success in that as some of its incubators received revenue growth. The revenue increased R82 million in the first quarter and with the cut, the entity had to make sure to keep all of its 95 incubators and include the customer value proposition.
The official appreciated the words of encouragement from the Members.
In responding to the issue of comfort around corruption, the entity indicated that it was not aware of any corruption related to the covid-19 interventions. There had not been any misconduct related to this.
He further agreed with Hon Jacobs on active campaigns and that the entity was trying to find all the options to increase that penetration. Part of what SEFA did was that time and again it was pulled and it engaged them to try and form collaborations. He said that the entity could make an open call to the public that any organisation could approach to see if there would be an entry point for collaboration.
The Chairperson thanked the Members, support staff, Department and its entities for attending the virtual meeting.
The meeting was adjourned.
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