In a virtual meeting, the Committee was briefed by the Small Enterprises and Development Agency (SEDA) on its District Development Ecosystem Model. This model is a framework within which programmes will be rolled out to improve the development of small business. The Committee heard that the model will operate at all spheres of government with a primary focus on the local municipalities in a ‘bottom up’ approach. Their main targets include opportunity matching which seeks to improve access to finance, programme implementation and development, building practitioner capacity and lastly developing a shared information infrastructure. A geographical spread of the SEDA shows that there are 53 branches, 96 incubators and 81 colocations which will be the launching pad for implementing the model in the various districts. Members were pleased to hear that the District Model Framework was a bottom up approach driven from a local level with the policy and strategy element at the top of the framework being run by the National SMME Support Coordination Committee.
The presentation was welcomed by Members as they felt it was well detailed and comprehensive. However, they were concerned about the public perceptions of the SEDA, the inability of rural and township populations to access the SEDA services and the lack of time frames within which the model was to be operated in. Some Members were concerned about accessibility in general and people in the rural areas not being able to access the district offices and that this situation would worsen in the future. However other Members felt that allowing parliamentary constituency offices to be a possible first point of call made provision for constituency breaks and these would provide an opportunity for Members of Parliament and parliamentary constituencies to take Parliament to the people.
Concern was also expressed about the negative view of SEDA and SEFA who in the eyes of 90% of the public have a negative view already. Members asked for a detailed breakdown of all the targets in the districts across the country in order to keep the Department accountable. The Committee asked the SEDA and the Department to ensure that the economic recovery plan that the President will talk about at his Address to the Nation the following day will be factor in.
Members also expressed concern about the consultant driven nature of the exercise. They felt that the model must be very simplistic. The avoidance of wastage and duplication was welcomed including the integrated approach. Members asked for socio-economic profiles of all of the districts for a better understanding and to keep up with the progress in the various districts; who would keep all the parts of the model accountable; and the wish that the Committee will do more oversight in some of the districts. The continued absence of the Minister at these meetings was noted.
Members expressed frustration at the struggle for black business to acquire financial assistance especially with regard to SMMEs. Hence they asked whether the SEDA would do a background check on recipients of financial assistance and if so, what kind of background check would it be. Disappointment was expressed about the lack of road shows as it begged the question how the people in the rural areas would know about the SEDA if they did not do any road shows. ‘How would SEDA appear to the people who are in the rural areas’?
Members asserted that the biggest problem for small businesses were the by-laws of municipalities as it inhibited how a District SMME Support Coordinating Committee is going to solve problems and proposed that they take the ‘red tape’ out of bullet point on page 22 and replace it with ‘Ease to do Business’ as a concept. They urged that they go back to the drawing board and look specifically at ‘red tape’, ‘the ease of doing business’ and the issue of ‘bylaws’.
Members were informed that that this framework was not a silver bullet to solve all the problems, it was a way of expanding the footprint and improving and increasing the services that were provided. Members concluded by saying that moving forward their common goal was to enhance service delivery and that collaboration and information dissemination by all stakeholders will improve service delivery.
Opening remarks by the Chairperson
The Chairperson opened the meeting and began by welcoming all who were present, bearing in mind that the meeting was to be hosted on the virtual platform as a result of the Covid 19 regulations. She sent condolences to all families who had lost their loved ones and wished a speedy recovery to those who were sick. The Chairperson said that she believed this period would pass and it was critical for them to continue doing their jobs in light of the second pandemic of job losses ahead. She moved on to set the agenda for the meeting.
The roll call was conducted. Apologies were made on behalf of the Minster, the Deputy Minister and Acting DG who requested to be excused because they had to make presentations to Cabinet in light of the Presidential address the following day.
The minutes from the last meeting on 7 October 2020 were read out. No corrections were made, and the Members adopted the minutes.
The Chairperson then moved on to the second item on the agenda which was the consideration of the fourth term programme. The programme was adopted by Members.
Briefing on the Small Enterprise Development Agency (Seda’s) District Development Ecosystem Model
Dr Joy Ndlovu, Acting Board Chairperson, said she was honoured to share the District Development Model (DDM), to brief and highlight to the Committee the critical issues and the concerns that have been previously highlighted by the Committee.
The District Development Model aims to improve the coherence and impact of government service delivery with a focus on 44 district and eight metro municipalities around the country as development spaces that can be used as centres of service delivery and economic delivery including job creation.
Through the DDM, the Department of Small Business Development (DSBE) will ensure that development needs and opportunities for Small Medium and Micro Enterprises (SMMES) within each district are taken into account. This will result in more sustainable businesses that grow the local economies and play a critical role in the main stream economy. The model aims to solve some of the issues that have been brought up by the Committee of the lack of access to the SEDA services to rural areas and outer lying towns. The model is entrenched in the Seda’s mandate which is found in the National Small Business Amendment Act of 2004. They have aimed to design and implement a standard national delivery network that will be accessible across the country to enable access to government Business Development Services (BDS).
The District Ecosystem development model is based on research which includes: The study of the South African Small Enterprise eco-system by the DSBD which was prepared by greater impact; the GEM reports from the following years 2015/2016/2017/2018; the Ease of doing business reports; the Aspen foundation report; the Kauffman foundation on ecosystem development; start-up Genome reports on ecosystem development; start-up Commons reports and systems development for ecosystem development and Technical assistance by the EDSE – sponsored by the EU.
The results of the research showed that: entrepreneurship promotion and development and start-up development and Business support is largely fragmented and to a large extent un-coordinated. It lacks collaboration and is missing a team approach. Coordination between Government departments and other agencies, Provincial government departments, district & local municipalities involved in Enterprise development has been less than satisfactory resulting in a free for all by some so called “Entrepreneurs” who have made a business out of grant hunting. A lack of transparency and information sharing between Business Development providers across the board resulted in double dipping and other ailments permeating this sector. This was an enormous waste of time in money and other resources resulting in smaller impact limitations of the current SEDA delivery model.
The model has been fully endorsed and falls under the model of the Department of Cooperative Governance and Traditional Affairs (COGTA). The model operates through workstreams that will feed into the DDM. At the bottom there will be the District SSME Support Coordination Committee which will interact at the district level with the District Hub, the Steering Committee and the districts and local municipalities. .At a provincial level there will be the Provincial Support Coordination Committee and at the national level the National SMME Support Coordination Committee.
A geographical spread of the Seda shows that there are 53 branches, 96 incubators and 81 colocations which will be the launching pad for implementing the model in the various districts.
The District Model Framework is a bottom up approach driven from a local level. At the top of the framework is the policy and strategy element run by the National SMME Support Coordination Committee. They develop the overall strategy development resourcing and policy outputs. Operationally there is the Shared Model Development which includes shared infrastructure development. At a local and district level is the Shared Services element which is driven by the local and district governments whose role it is to align the programmes and resources at a district level. Another element is the Business Development Services (BDS) implementation which will focus on the SMMEs with delivery of quality business development including access to finance access to market training and programmes, interventions, training and information.
At the bottom of the pyramid are the SMMEs where the plan is to improve the sustainability, growth and employment of these enterprises and increase the number of start-ups.
Operationally the framework shall work through the Seda branches to the SMMEs. The framework will focus on four actions plans: 1.opportunity matching through access to market and access to finance; 2 Programme implementation which is programme and project coordination based in the districts; 3. Practitioner capacity building to ensure the best practices; and lastly 4. The shared information infrastructures were through district management systems, co-locations and branch networks.
Mr G Hendricks (Al Jama-ah) said that he was concerned that people in the rural areas would not be able to access the district offices and that this situation would worsen in the future. He did not know if there were other outfits doing similar work in the Western Cape in the rural areas. His concern is that there are perceptions that the SEDA and the Small Enterprise Finance Agency (SEFA) are not at present accessible to the majority of the people who need their assistance. The SEFA wants to increase their footprint by allowing parliamentary constituency offices to be a possible first point of call. Parliament makes provisions for constituency breaks and these would provide an opportunity for members of Parliament and parliamentary constituencies to take Parliament to the people. He said that this is a priority for those who have a passion like the Chief Whip of this portfolio committee about promoting small business development. For example, his parliamentary constituency office would take this District Development Model to the people and the first point of call will be his office and then it will go to SEDA and then SEFA.
He said that he agreed that this was a comprehensive explanation of the district model. But in his mind, this will increase the negative view of SEDA and SEFA who in the eyes of 90% of the public have a negative view already. And that will have a bad reflection on the Portfolio Committee, which will result in embarrassment. He said that the structural functional mechanism that was well outlined indicates that we will not see any progress, create any small businesses and help small businesses at the bottom end and that this is purely an academic exercise largely because we are waiting for the government to come up with a policy directive where SEDA and SEFA are one, and instead of coming up with presentations that they are one, they are saying that there will be a third agency in the District model.
He also said that the Committee seldom has time to engage the Minister and, in this year, the Committee has not received enough support from the Minister and government. At the end of the day, the Committee would get blamed for lack of service delivery, lack of opportunities for small businesses at the lower end, and at the end of their term they will be severely embarrassed. Lastly, he said that he hoped the Chairperson will have the Wisdom of Solomon.
The Chairperson thanked the team for a brilliant presentation and said there is still a lot to be done and moving forward they need to focus on the gaps that are a stumbling block to the SMMEs. She asked for clarity on the role of the EU in support of the programme. She welcomed and supported the programme.
Mr F Jacobs (ANC) commended the team for a very good presentation. He said that it was a good theoretical framework of what one should expect, but that it did not match the lived experiences and reality of how the government is perceived in the local, district, provincial and national space. What must be factored in is a proper assessment of our lived experience of economic spaces in local and provincial economic development. ‘Where we want to be and where we are must match’. ‘There is a big gap from where we are and where we want to be’. He said that he welcomed the presentation and that their role as the Portfolio Committee is to give regular oversight so that this does not become a paper exercise without tangible results. For example they would want a detailed breakdown of all the targets in the districts across the country in order to keep the Department accountable.
He said that due to the President’s address to the nation the following day, the model must factor in the economic recovery plan that the President will talk about. There is no use doing business as usual whilst lots of people have lost their jobs. He said that there are only 14 million South Africans working and the social welfare grant is not sustainable even though they are important and needed. There was a need for targets towards job creation for each district
He said he was concerned with the consultant driven nature of the exercise. The model must be very simplistic and welcomed the idea that the model will avoid wastage, duplication and it will be integrated, but it must be community and locally driven. It must be taken to the people in the townships and the rural areas in local spaces and must not be what consultants dream up in airconditioned buildings. He said that we must have community economic forums like the reconstruction and development forums in the past; where there were community voices in the district spaces where there was understanding between people and government and their economic needs. The shared model of the district service is meant to get everybody on board to use the resources in a more effective way, it is model that he supports, but added that the modalities around it would be critical.
He asked for socio-economic profiles of all of the districts for a better understanding and to keep up with the progress in the various districts. He said that there was little talk on the integration of other departments in this economic model.
He asked who would keep all the parts of the model accountable. There was a need for cooperation between all spheres of government. They must also look at the district planning process because each district is unique and has its own comparative advantage which would require its own process. There was no information on the integration with other departments like the Department of Economic Development and the Department of Trade, and Industry. There must be a process where it can factor the whole economic ecosystem into the process. He asked who would keep all the parts accountable. For the model to work there must be cooperation between all the spheres of government and would require all the bureaucracies out of the offices and into the districts.
He said that they must also factor in all the urban and rural dynamics. There have been many programmes that have looked at the urban and rural integration and renewal and how has this been factored into this model. Overall, he commended the work being done by the Department and said that there is need for more political engagements with the minsters and he expressed the wish that the Committee will do more oversight in some of the districts.
Mr D Mthenjane (EFF) thanked the Agency for the presentation. He started off by saying that he felt that the Committee was not being taken seriously. He said that the Minster is always absent without a proper reason and that that matter must be checked out. He said that for the Department to work, the Minister must take the Committee seriously.
He said that the presentation sounded good but did not provide a timeframe for all the work that was to be done. He said that the presentation did not provide time-specific targets. He said that one cannot have a plan without targets and that absence of targets makes the job of oversight and accountability impossible. The presentation was more of glorification than the lived reality on the ground, for which the Members would have to answer in their respective constituencies.
It is frustrating for black business to acquire financial assistance especially with regard to SMMEs. He asked whether SEDA would do a background check on recipients of financial assistance and if so, what kind of background check would it be. He said that if one was to ask people in the rural areas what SEDA was, they would not know. He pointed out that the presentation did not mention any road shows and asked how the people in the rural areas would know about SEDA if they did not do any road shows? ‘How would SEDA appear to the people who are in the rural areas’?
Mr Mthenjane said that he came from the rural areas. A person from there does not know about SEDA and he again questioned how SEDA would appear to those people. He gave an example of Bush Park Greens where there was a department together with the Mpumalanga Department of Economics and Tourism. As a Member of the Committee he did not know about the meeting or what is happening in the Department. He also mentioned that there was poor attendance at that meeting which is caused by lack of road shows and not going to the people who need the help the most.
He also asked that where an SMME has been awarded a contract or purchase order, how SEDA assists them if they require emergency funding. People for example end up going to loan sharks because they do not know about the SEDA. He said that only people in rural areas and townships especially suffer from not being able to access SEDA services and those who have access and are benefitting, are people who were previously advantaged under the previous Apartheid regime.
He said that the Committee needs to bring back service delivery as MPs because they are accountable to their constituencies. He said that the Department must take serious action to make a real impact to the people in the rural and township areas. He said that he has interviewed many people who resort to getting help from loan sharks because they do not know about agencies such as Seda. He said that he was not convinced by the plan put out in the presentation, unless if they come up with something else that has timeframes. He said that he was not criticising it outright, but as the presentation stands, he was not convinced about it.
Mr Z Mbhele (DA) began by apologising for joining the meeting late. He thanked the team for their presentation and echoed the sentiments and scepticisms of his previous colleagues. He said that he was sceptical of the model that was outlined, not so much for its contents and objective merits but because of its contextual relevance. He said that it was coming about 15 years too late given the systemic challenges that this country is facing both in the aftermath of the State Capture period in the early 2010s and now in the post-Covid period after the economic devastation. He pointed out the long-standing problems in weak accountability and consequence management in administration. There was reason for scepticism as to whether the partnerships outlined in the model will have substance and bring forth results. He appreciated the work being done but it would need to operate within realistic constraints.
He asked about access to finance which is a key pillar of the model and for this Portfolio Committee. The Committee was told at a meeting on 13 November 2019 by the International Finance Corporation that they had identified that the biggest funding need in the SMME sector was ‘short term bridging capital’, and many small business owners experience difficulties in obtaining credit or loans from the private and banking sector to purchase equipment and make capital outlays for input materials. The short-term funding capital gap was one that needed to be addressed. In Micro finance there is reluctance for funders be it in the public or the private sector to wage into the micro financing space because of the cost-disbursement ratio is unappealing. It is easier for banks to give out a smaller number of larger grants or loans to maximise on the overhead costs. He agreed with the point that Mr Mthenjane made on how if the formal lending institutions are not providing access for emerging rural and informal businesses, their only option are the loan sharks. To decrease reliance on loan sharks, they would need sort out the micro finance environment.
He said that the model is supposed to be a high level plan and asked if they could get some elaboration on how the district development model would speak to addressing the short-term bridging capital for often established but small and medium enterprises and micro finance for micro enterprises and emerging entrepreneurs. He was yet to be convinced that that there was optimisation on the utility of credit guarantee or collateral loan schemes. This facility had to be scaled up as a tool and means to ensure better access to finance.
Mr H Kruger (DA) said that the presentation was good and that there was still a lot to be absorbed because it was a technical presentation with a lot of details. His concern was the red tape. Only on page 22 on the last bullet point was it pointed out. In the district and local government model, the biggest problem for small businesses are by-laws of municipalities and that he could not see how a District SMME Support Coordinating Committee is going to solve the problem of by-laws. He proposed that they take the ‘red tape’ out of the bullet point on page 22 and replace it with ‘ease to do business’ as a concept and secondly, to look at an ‘ease to do business’ in this model on a district level and even on the local municipality level to make sure all the obstacles of ‘red tape’ can be moved out of the way to strive and make money and create jobs. He urged that they go back to the drawing board and look specifically at red tape, the ease of doing business and the issue of bylaws. For example, at a municipality to get a plan approved, it will take about a year to get a plan approved. This process should be resigned to ensure ease of doing business.
Mr H April (ANC) said that the presentation was a lot to take in and that his colleagues before him had covered what he wanted to say
The Chairperson agreed with Mr Kruger on the issue of ‘red tape’ and asked the Department to address the questions and comments of Members.
Dr Ndlovu started off by agreeing that the model still requires more work but what they wanted to do was highlight some of the milestones they were able to achieve and they wanted to give more details about the model to Members. She said she was confused because on the one hand she felt that there were Members who felt that the presentation was too detailed and technical but on the other hand there were Members who said that it did not tell them anything. She said they will send comprehensive documentation that will cover some aspects that were not clear for Members. To cover the concerns raised by Mr Hendricks, she said that this model was a solution to problems that were raised in the past. The presenter had talked about access to the SEDA offices, to finance and their services and other ecosystem partners’ services. The model would address these problems. They would be going where they were needed and would work with other partners to ensure that these issues are resolved. They do not see this as adding to the problem. The model will address some of the problems of poor perceptions of SEDA. They will be seen where they have not been seen because they are present in all district areas. She said that they will be the major facilitator to ensure that where they are not able to provide a service, they will give other partners within the ecosystem the opportunity address the SMMEs.
She thanked Mr Jacobs for the positive comments and agreed that the model would need to be fit for purpose, decentralised and that community members would have to be involved. She asked Ms Majola (SEDA Acting CEO) to talk about the OR Tambo district facilitation model and how they have been able to involve traditional leaders and community members to ensure ownership and relevance. They pitched the presentation on a high level and did not go into details about the start and end date but on Slide 21 they highlighted the critical steps that they would take. She agreed there were no time frames and they would send a detailed document and try to breakdown the relevant areas so that Members will see that is not just a theoretical document but a framework.
She said that they are busy with roadshows around the country at the moment. At present they are in the North West and there have been positives. She said she agrees with Mr Mbhele that the model has come late and that they are trying to fast track the process; something brought out by the Covid 19 pandemic. They have already started to build partnerships with entities who want to work with the SEFA and the SEDA. She asked the CEO to elaborate further on this matter.
Ms Ntokozo Majola, SEDA Acting CEO, said that they are not doing this in isolation as SEDA. But they are doing it within the COGTA district development model. She said that all the departments involved in different aspects of community development will be represented in the steering committee whose role was to identify bottlenecks, address problems and check where there are problems with bylaws. The District SMME coordinating council which will be focussing on small business development and will be driven jointly by the SEDA, LED and the SDB is going to be work streaming the steering committee and with the necessary support from the municipalities will address the problems that were currently being faced.
She said that she agreed that there were no timeframes in the presentation. The Department has put together District Champions, to all the districts which have been running for three weeks now. The role of the District Champions is to interface with all stakeholders at the district on why the uptake of the programmes, especially all the Covid relief programmes is so low. The numbers are not what they expected and there is a need to create awareness at the district level along with the municipalities and to identify municipalities that are willing to work at coordination with the Department. The district champions are on the ground and on Friday they will be giving feedback on the joint task team that is chaired by the DG and to explain what the challenges are in each district municipality.
Ms Majola then agreed that they pitched the model at a very high level. This is not a programme but a framework within which all the different programmes will be implemented. It is a collaboration and engaging at the district level. They had a webinar with 18 districts that they want to roll it out to in the current financial year. They had it on the 31 August 2020. The webinar had 120 attendants excluding the SEDA and the SEFA staff and from those 18 municipalities and other stakeholders. It was then followed by the engagements in the districts in the various municipalities. They have already done the Eastern Cape with OR Tambo as the pilot. They already have a District SMME Coordinating Council in OR Tambo, In Balfour and in Sarah Baartman. They were in the North West yesterday and were setting up the framework in Bojanala. She said that they had conducted workshops on the model in Mpumalanga and the Free State as well.
She said that they are not engaging SMMEs in this model, but they are engaging the stakeholders that they will be working with in rolling out the model. She said that she got Mr Mthenjane’s point and said the SBD is having the workshop in Ehlanzeni in engaging the SMME plan mentioned earlier.
On funding she said she cannot answer. She will pass the message on to the SEFA. Access to finance is part of the model because it is a portfolio and holistic approach. The SEFA in engaging with stakeholders in different provinces will be part of the model. They said that they presented the model to the Minister and she has made her input and provided guidance on how they need to interface with LED and make it a workstream of the District Steering Committee to get the necessary participation of the relevant stakeholders.
The EU was supporting the SBD entities in delivering their services. They are a part of this programme because they are assisting with structuring the Information management system that will link to the SMME SAA portal that the SBD has already established.
Mr Andrew Bam, Programme Analysis Development and Learning, SEDA, said that this is a framework to facilitate the BDS ecosystem. It is not a silver bullet to solve all the problems. It is a way of expanding the footprint and improving and increasing the services that are provided. This model is also not there to provide strategy on the service offering. The issue of micro finance and bridging capital are at a programmatic level and at a finance and strategy level. This model can serve to bring those issues to light where they can then be solved.
He said they have timeframes and targets and that the qualifying criteria were things the framework will enable to be resolved. They are creating a system that can improve the way it works together. This meant that one can go to the rural communities and to people that currently do not qualify if they are blacklisted. He said it would require creating the framework and think-tanks that can solve these types of issues on the ground.
The Chairperson thanked the team for its response and the well-crafted concept. She said she was pleased they were noting the Members’ concerns. This showed that while one was moving on the ground, one could observe the interaction between themselves and the local stakeholders, the relationship between the municipalities and the local community as well. She agreed with Mr Mthenjane’s point and requested that they should utilise their PCOs for information determination purposes. This point was how one could reach our people properly and it must be checked out further to improve cooperation. The issue of ‘red tape’ cannot be identified now. She agreed with Mr Kruger and said that the critical point on why the SMMEs cannot grow was due to the ‘red tape’ issue which made the implementation of plans difficult. She said that this Portfolio Committee must follow and monitor these problems properly and she appreciated that Dr Ndlovu will forward the comprehensive documentation on the framework. She was satisfied with the answer on the EU and said that information must be disseminated to municipalities and their PCOs so that Members are not unaware of things happening in the Department in which they are doing oversight.
She said that moving forward their common goal is to enhance service delivery and that collaboration and information dissemination by all stakeholders will improve service delivery.
She thanked Dr Ndlovu and her team and all the Members.
Ms B Mathulelwa (EFF) was speaking in the vernacular (2:28:10 – 2:31:10).
Mr April called a point of order whilst Ms Mathulelwa was speaking.
Ms Mathulelwa said that when she arrived in the Committee, it was a problem not being invited into the meetings even though she is the head of the Small Business Development Committee. She said that she does not appreciate being set aside. As the EFF they noted that the Minister and the Deputy Minister did not attend meetings and sent their apologies. She asked who would account if they always sent apologies.
The Chairperson said that she understood that Ms Mathulelwa was not undermining her (as the Chairperson) and that the situation of virtual meetings has problems such as not being identified when they put their hands up. She noted the concerns of the Minster and the Deputy Minister and will issue a political challenge on the matter.
She said that she has the right because they have a secretariat in their Portfolio Committee to make follow ups on a particular matter which they have requested, and the Department is not coming forth with the data. She also said that she would like them to treat each other with respect and dignity to retain the decorum of the house. She said Members should allow Members to express themselves and then raise their concerns after that. She said that you do not raise a point of order when some else is speaking and that they are here to learn from each other.
Mr April said that the Chairperson had covered what he wanted to say.
The Chairperson asked Dr Ndlovu to address Ms Mathulelwa’s concerns.
Dr Ndlovu said she has noted the questions but will give the Acting CEO an opportunity to deal with the question.
Ms Majola said that the data and information that Ms Mathulelwa wanted was about people who received Covid-19 relief funding from SEFA and not SEDA. However she would take the information forward to the Department.
The Chairperson said that she would appreciate he information. She added that once a Member asks for something it belongs to the Committee.
The meeting was adjourned.
Download as PDF
You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.
See detailed instructions for your browser here.