Gauteng Township Economic Development Bill; Development Microfinance Association recommendations

Small Business Development

21 October 2020
Chairperson: Ms V Siwela (ANC)
Share this page:

Meeting Summary

Video: Portfolio Committee on Small Business Development (NA) 21 Oct 2020

Development Microfinance Association (DMA) is a not-for-profit association aimed at giving a chance to poor, hardworking and entrepreneurial people presented its mandate, activities and challenges in working with small enterprises. It offers developmental microenterprise credit, savings and support to micro enterprises in poor communities.

DMA operates in all provinces except for Western Cape and Free State and mainly caters to women. During COVID-19 lockdown it was an essential service and continued to support its clients. It offered them payment holidays due to the difficult times.

Members were impressed by the work being done by DMA to support the poor in township and rural areas. Members recommended that DMA include people with disabilities and provide them with tailored products and services. Members asked about the DMA lending interest rate and profit margin. The Committee concluded that it would ask the Small Enterprise Finance Agency (SEFA)  to provide more insight on the matter.

The Gauteng Provincial Government provided a briefing on the Gauteng Township Economic Development Bill which was aimed at structurally transforming the Gauteng economy to bring the historically disadvantaged majority into productive mainstream activities as owners, wealth creators and asset builders. The Bill would revitalise and mainstream the township economy and move towards new ways of authentic empowerment for township enterprises and black-owned businesses. It would make it easier, more affordable and quicker to open and register an operated business in the township. It would loosen red tape, remove bottlenecks and improve the ease of doing business for township enterprises.

Most Members commended the Gauteng Provincial Government on the work done on the Bill and felt it would be important to have such a Bill at a national level. Some Members were concerned that the Bill would be perceived as xenophobic as it locked out many foreigners from participating in the South African economy and the Bill conflicted with national legislation and mandates of other departments causing duplication of structures.


Meeting report

The Chairperson acknowledged that the meeting followed an emotional parliamentary session held the previous day where Members of Parliament bid farewell to fallen heroes. She applauded the leadership of the political parties for the discipline, dignity and humility they displayed during the National Assembly. Regardless of political affiliation, we are all human beings and should appreciate one another. Leaders should serve the people with dignity and leave behind a good legacy. Apologies from the Minister and Deputy Minister of Small Business Development were noted for this meeting.

Development Microfinance Association (DMA) recommendations
Mr Esido Mushwana, DMA Board Chairperson, said the Development Microfinance Association was a not-for-profit association aimed at giving a chance to poor, hardworking and entrepreneurial people so that they can improve their lives. It offered developmental microenterprise credit, savings and support to micro enterprises in poor communities. DMA members were Small Enterprise Foundation (SEF), Phakamani Foundation (PKF), Women’s Development Business (WDB) - Siyakhula, Thuthukani Finance and Akanani Finance.

It currently operated in seven provinces in South Africa. It did not operate in the Western Cape and Free State. Its clientele was made up of women (99%) and youth (18%). It provided credit to 255 000 informal business clients and had an outstanding loan book of R725 million. It had created and sustained 250 000 jobs annually and it employed 1 369 staff members.

During the COVID-19 pandemic, it knew people needed liquidity and it therefore reinvented its lending methodology to support its clients. It offered payment holidays which 40% of clients took, indicating the majority of the clients were comfortable with repaying their loans despite the difficult times.

It requested support from government in two main areas:
• initiatives to reduce cost to clients such as the introduction of mobile banking and
• initiatives to enhance support from Small Enterprise Finance Agency (SEFA) and commercial banks.

Mr Mushwana spoke about the DMA experience of working with SEFA. Its members had access to revolving loan facilities from SEFA totalling R140 million at an interest rate of prime less 3%. Some challenges were experienced while working with SEFA – one being that SEFA did not articulate the positive impact developmental microfinance institutions (DMFIs) made in reaching poor rural women and providing credit and non-financial services. An huge impediment for the informal sector was insistence by the Department of Small Business Development (DSBD) that the informal sector register with the Companies and Intellectual Property Commission (CIPC), South African Revenue Service (SARS) and Unemployment Insurance Fund (UIF).

The Development Microfinance Association recommended that:
• SEFA provide funding for three years on a quasi-equity basis to DMFIs,
• Create a partnership model that fosters strong, independent and sustainable DMFIs
• DMFIs send special performance reports to SEFA.

The Chairperson was impressed by the presentation.

Mr H Kruger (DA) found the presentation very informative and heart-warming that the poor were getting financial help. He wanted clarity on what the term 'member' meant in the DMA context.

Mr F Jacobs (ANC) noted the good will and great work being done by microfinance institutions. The Development Microfinance Association recommendations needed to be supported. He recommended DMA beneficiaries be invited to speak to the Committee on the impact microfinance has had on their lives. SEFA should be asked to help the microfinance sector.

Mr Jacobs noted that Banking Association South Africa (BASA) had previously indicated it was struggling in giving loans to small business. The microfinance institutions were helping the poor, unbankable and marginalised. What is it that they are doing that formal banks, the top five, are not doing? In the economic recovery programme, the President hinted that banks were not able to get the money out and decrease their risk profile. It may be of interest to explore giving some of the COVID relief money intended for small businesses to microfinance institutions who could distribute the money to communities in the townships and rural areas. He recommended the Committee follow up on how money targeting the needy reached them through the DMFIs. He noted that SEFA was not present in the meeting to respond to the concerns raised by DMA. It would be of value for the DSBD, government and SEFA to work alongside DMA.

Mr D Mthenjane (EFF) said the presentation sounded convincing. However, the role of the Committee was to hold DMA accountable for its actions and not praise it. He asked if there was a database of beneficiaries that could be made available to the Committee. Is there a research unit within DMA structures that monitors and checks if the money rolled out to beneficiaries serves its purpose? Corruption is known to exist in the country. He asked if there were systems in place to counter ghost beneficiaries. He asked for a breakdown, per province, of the number of beneficiaries that were women, youth and people with disabilities. He was disappointed that there was no mention of support being offered to people with disabilities. It was a reality that they were part of the community and they needed to be included. He asked for the exact number of jobs DMA had created. The Committee should be supplied with the criteria used to select qualifying beneficiaries. How does DMA reach out to potential consumers?

Ms K Tlhomelang (ANC) was pleased that DMA was giving a chance to the poor and the hard working. She shared a saying in her language that loosely translated to, “If you are doing something that’s where the government can pick you unlike sitting at home and complaining that the Government isn’t supportive”. Citizens needed to be encouraged to be creative and initiate a business so that the Government can support them. What is the process of becoming a DMA member? She asked if DMA was pleased with the influence it had made in the seven provinces. Is the response positive? Are people aware of this initiative? She asked if there was any assistance the Committee could offer to inform citizens of its initiative.

Ms Tlhomelang noted that if funding was being allocated to vulnerable groups then those with disabilities needed to be included. She asked if there was a budget specifically allocated to people with disabilities. If the funding was not utilized, how would it ensure that people with disabilities were reached? In general, it was a good initiative. The role of the Committee would be to monitor and offer support on the DMA recommendations. Other financial institutions have a lot of red tape. This financial institution had made the Portfolio Committee's day.

Prof C Msimang (IFP) was impressed by presentation because it focused on problem areas. It was good for the Portfolio Committee to discuss these problem areas with people who have had first-hand experience. If it did not focus on problem areas, assumptions would be made that everything on the ground was running well. Meanwhile, there would be bitter complaints within the communities. He was happy to see the training of community members in Polokwane. He asked how communities in rural areas contacted the trainers. In many instances, the Committee were given very disappointing and disconcerting statistics about the success of small businesses. Of 100 businesses started, only about 30% were sustainable. The Committee would be interested in visiting businesses that have succeeded. For the Committee to have oversight of what it has not seen was unrealistic. The Committee needed to see the situation on the ground to praise or criticise the efforts of DMA. He asked for the success stories and for contact details of the relevant individuals to allow the Committee to visit. These success stories could be used as examples in other communities. Over 2 million people have lost their jobs in the pandemic. This number had added to the many who were already jobless. The Department was receiving a lot of applications from people wishing to go into business. When reports are received that over a billion social grants had been distributed, this was not a sign of success because millions more needed help.

Mr Kruger said that there would be an opportunity for constituency work or oversight visits at the end of the year or the beginning of 2021. It would be possible to organise visits to some of the DMA-financed businesses.

Mr Jacobs asked about the loan delinquency ratio, bad debt book and amount of write offs. If DMA received wholesale funding from SEFA at prime less 3%, what was the rate they gave to beneficiaries? He wanted to know s margin of profit.

Ms B Mathulelwa (EFF) was impressed with the presentation. She asked for the systematic approach being used to ensure women and people with disabilities were 100% reached in the rural areas and townships.

Mr Mushwana indicated that he would be available for discussion even after the virtual meeting. DMA was an association which had members. It did not offer the services discussed in the presentation. Services were offered by its members. An example of a member was the Small Enterprise Foundation. DMA brought the members together and facilitated them to move with a common goal. He noted the recommendation from Mr Jacobs that DMA beneficiaries be invited to speak to the Committee on the impact microfinance has had on their lives.

Mr Mushwana replied that each member institution had its own database that could be accessed. Compiling the databases would take some work but it was possible to provide the Committee with the necessary information. Yes, the money served its purpose to make a difference in the beneficiaries’ lives. Many continued to succeed. Some fell on the way but there were strategies in place to support them. He highlighted that DMA was an non-profit organisation and therefore a zero-corruption entity. It has ways to guard against corruption in all its member institutions.

He replied that it was possible to obtain a client breakdown per province. He assured the Committee that DMA did not discriminate against people with disabilities. It had not been specifying disability status. It considered all who had a business as potential clients. It had, however, taken the recommendation to include disability status in its analyses. It does not have products that are specifically tailored to people with disabilities.

Mr Mushwana explained that DMA went to the people in the villages or townships. It introduced itself to the leadership structures such as councillors and traditional leaders and stated its purpose. The leadership had to first agree and approve before it could begin operating. Staff members were located close to clients to offer support.

He replied that for an institution to be eligible to become member of the Association its needed to be development focused. It could then receive an invitation and be assessed to see if it qualified as member. There were associate memberships for people who were interested in the work being done by DMA. There were criteria to be followed to become an associate member. For clients, DMA went to potential clients and based on the criteria of each of its institutions, the clients could be assessed for eligibility for loans. When DMA goes to a village, since it does not know the people, it asked the community to nominate members they felt would benefit. It then vetted the beneficiaries and provided the necessary funds or services.

The goal of DMA was to reach as many poor households as possible. It had not reached this goal yet, but it was happy with the work it had done so far. It wanted to reach more people and reduce the number of poor people in the country.

He stated that contact with trainers was one of the benefits its clients enjoy. There were different kinds of training offered to clients. Its most powerful training method, which had been proven globally, was peer-to-peer learning. It involved the creation of a platform where people could learn from each other using various tools. Clients could access training from the institutions in which they were members.

Mr Mushwana replied that there were success stories, and he welcomed the Portfolio Committee to visit these clients. The Committee should contact DMA offices and arrangements to visit various clients, under the support of the different institutions, would be made. He encouraged the Committee to visit the clients and see the work done by DMA. The Committee would be able to engage with clients and see the impact and changes to their lives.

He reiterated that there was no system focused on people with disabilities but that there was no discrimination against people with disabilities. Within the institutions, there were clients with disabilities that run businesses.

Mr Mushwana replied that the repayment and collection rates range from around 98%, which was very high. The bad debt was as low as 3%. He noted that the question about interest rate was a sensitive topic, but DMA members charged about 10% per R1 000 loan.

Further discussion
Mr Kruger asked for more clarity on the interest rate. He noted that the prime interest rate was currently 5% and DMA institutions received prime less 3% from SEFA. What was the profit margin of DMA institutions?

Mr Mushwana replied that even though SEFA supported DMFIs, it was not the only funder. SEFA gave only a portion. SEFA could not fully fund the loan books of the DMFIs. Funds had to be sourced from other grants. He could not answer the question on profit margin at that moment but would be able to offer clarity after looking at all the operational expenses.

Mr Mthenjane wanted clarity on people with disabilities. The Committee's question about people with disabilities was not about discriminating against them but about including them. The statement that DMA did not differentiate between people with and without disabilities brought doubt. How many clients are people with disabilities? They need to be accommodated as they were previously disadvantaged. They were the most vulnerable in communities.

Mr Mushwana clarified that he did not mean to label Mr Mthenjane’s question as one about discrimination in his previous response. No register was being kept of people with disabilities. There was no policy that hindered people with disabilities from becoming clients. He noted the recommendation to recognise people with disabilities and have products suitable for them.

The Chairperson advised DMA to check its structures about people with disabilities as it was a policy matter. All were bound to follow this policy and ensure inclusivity. It would be important to provide these statistics to the Committee once received.

Mr Jacobs said that the responses on finance, interest rates and profit margins were not satisfactory. This was a matter that the Committee would have to follow up. The Committee should not support loan sharks. It needed to ensure that DMA complied with the National Credit Act to ensure that the poor were not being exploited. SEFA should offer a response on the lending rates.

Ms Barbara Calvin, DMA Board Member, explained that of the five DMA members, four were not-for-profit organisations. Two of these were registered as public benefit organisations. The for-profit entity, which worked in the developmental housing space, was not making much profit. It was not involved in the micro enterprise credit space which was under discussion. Of the four that were lending to micro enterprises, only one had reached break-even point, which meant attaining sustainability. The other organisations needed ongoing grants to meet operational costs. The one that reached break-even point was the Small Enterprise Foundation, the largest of the four. It used its surplus to fund outreach and growth.

The Chairperson informed Committee members that clarity could be sought through the Committee Secretary who would contact the relevant entity. She noted that the role of the Committee was to defend society and deal with issues of exploitation.

Gauteng Township Economic Development Bill: overview by Gauteng MEC
Ms Morakane Mosupyoe, Gauteng MEC of Economic Development, Agriculture and Environment, said the Gauteng Provincial Government (GPG) had developed a number of policies and strategies aimed at fast tracking economic empowerment and transformation in response to the intractable and skewed structure of the Gauteng economy where the majority of the population was still left on the periphery. The aim of the Bill was to transform structurally the Gauteng economy to bring the historically disadvantaged majority into productive mainstream activities as owners, wealth creators and asset builders. The Bill was a critical tool in the GPG’s quest to radically transform the Gauteng economy through its Township Economy Revitalisation (TER) programme. It strongly believed that it was a game changer in its quest to revitalise and mainstream the township economy and move towards new ways of authentic empowerment for township enterprises and black-owned businesses. The Bill aimed to provide a conducive environment for the attainment of this purpose. The Bill would make it easier, more affordable and quicker to open and register a business in the township. It would loosen red tape, remove bottlenecks and improve the ease of doing business for township enterprises.

Gauteng Township Economic Draft Bill: briefing
Mr Mathopane Masha, Director: Inclusive Economy at Gauteng Department of Economic Development (GDED) and Mr Mpumelelo Madikane, GPG Deputy Director of Legal Advisory Services, briefed the Committee on the Bill. The journey to the Bill began in 2014 with programmes on the township economy.

The Bill was about taking deliberate steps to allow townships to become fully fledged commercial zones by streamlining the rules on where and how to run a business and by providing different kinds of programmatic support to Small, Medium and Micro Enterprises (SMMEs) operating in townships. It would also support the township real estate and taxi economy.

The Bill was designed to create enabling conditions for existing township businesses and for new township businesses to start. The TER strategy was aptly positioned as one of the key game changers in the drive to Transform, Modernise and Re-Industrialise (TMR) the Economy in the Gauteng City Region (GCR). The overall purpose of the TER strategy was articulated in the three key intended outcomes:
• Creating enabling environment based of strategic focus areas to revitalise the township economy.
• Establishing the economic and social value of the township economy.
• Ensuring that the township economy becomes the key player in the provincial economy.

The Township Economy Action Plan focused on:
•  Changing how townships are regulated and governed to transform them into zones of widespread job-creating commercial activity
• Setting up better procurement rules and programmatic support which allow government and its main contractors to buy from large groups of township-based firms, with systems linking them so they can supply as if they were one large firm
• Dedicated financing mechanism for firms engaged in TER activities
• Deploying Installation, Repairs & Maintenance (IRM) initiative as consolidated buying platform for facilities management, maintenance and technical trades
• Promoting consolidated buying via platforms with private sector partners
• Manufacturing cluster pilots
• Commercial rapid land release initiative
• Taxi Economy Initiative
• Township backyard real estate initiative.

The provisions of the Bill and contents of each clause were presented (see document):
Chapter 1 : Preliminary Provisions
Chapter 2 : Designation of Township Areas
Chapter 3 : Business Activities Reserved for Citizens or Permanent Residents
Chapter 4: Regulation of Township Enterprises
Chapter 5: Promotion and Development of Township Enterprises
Chapter 6: Gauteng Township Economic Development Fund
Chapter 7: Miscellaneous Provisions
Chapter 8: General Provisions.

On all the questions regarding foreign nationals: The bill focuses on affirming South Africans, rather than banning foreign nationals. The bill expands the net of formality - making businesses easier to register and easier to fund , as well as making them eligible for government funded assistance. The bill will reserve this assistance for citizens and permanent residents. The bill gives the state and citizens an opportunity to formalize the vast majority of township based businesses in a streamlined way . This will allow the state to tackle a number of issues that have been kindling for xenophobia, such as the accusation that foreign businesses operate outside the tax net or use illegal or expired inventory.

The Draft Bill had been gazetted and the deadline for public comments was 30 November 2020.

The Chairperson said GPG had been invited to brief them on the Bill and show the work being done by other provinces especially on job creation and youth and women empowerment. It was in line with the DSBD priorities in its COVID-19 response where the focus was on townships and rural programmes, dedicated informal business support, localisation and business viability. It was up to government to make the Bill a reality as a response to poverty, unemployment and inequality.

Mr Kruger stated that centralisation was not a workable solution. The Bill would increase red tape for poor small businesses on the ground. The Bill overrides the District Development Model. He did not understand why the District Model with its by-laws and municipality by-laws could not fix the problems. The other part of the Bill was legislating the mandate of DSBD. SEFA and SEDA (Small Enterprise Development Agency) had this mandate as well. The Bill’s mandate would result in friction with DSBD. Provinces just needed to monitor municipalities and get the databases and by-laws in place so that they could benefit small businesses. He was frightened listening to the Bill.

Mr V Zugula (ATM) said the Bill process had begun in 2014 and a lot of work had been done. He commended the GPG on its work which would go towards affirming the confidence of South Africans citizens in the economy. The Bill may be described as xenophobic or Afrophobic. However, all countries in the world reserved certain sectors of their economies for their own citizens. It was unfortunate that when South Africa is catching up on this trend, it was then labelled xenophobic. He recommended that the Bill should speak to a structured way of encouraging procurement from local township producers. It would be of advantage to the country if the majority of goods in the shops of informal or township traders were produced locally. There is no reason for the majority of goods sold in the townships to be from international countries.

Mr Zugula noted that the current visa requirements require a foreigner to invest R5 million if they wanted to trade in the country. This was currently not happening. How does the Bill consider the current reality where the legislation is not being enforced? The Bill would increase the number immigrants getting fraudulent documents. What was the take on fronting as a result of the Bill? The Bill was called the Gauteng Township Economic Development Bill. When using the term 'township' and placing restricting on the participation of non-citizens, specific foreign nationals come to mind. Would it not be better to change the word 'township' to avoid appearing xenophobic? He asked if advice could be given to the Committee on how to make the Bill national, particularly the reservation of specific sectors for the benefit of the citizens.

Mr Mthenjane said that the matters addressed by the Bill should have happened over 26 years ago. Who would be the drivers and implementers of the Bill once it becomes law? What will be role of the National African Federated Chamber of Commerce (NAFCOC)? The Bill seemed to represent the same thing as NAFCOC as they both address township economics. Where is NAFCOC located within the small business set-up in government? The small business desk would have to investigate the role of NAFCOC to avoid duplication of structures. The Bill was focused on Gauteng, a province in South Africa. He felt this meant that the country was being divided into secondary countries. Why not have a Bill that covers the entire country as these problems are shared across provinces?

Mr Z Mbhele (DA) said that it was not surprising that much of the feedback on the Bill was about the framing of participation of citizens over foreign nationals in the economy. What is the Bill trying to achieve in clause 7 with reference to the Immigration Act? The Bill would create a mechanism which would affect refugees and asylum seekers only in their eligibility to participate in the economic sector. A foreign-born immigrant who becomes a citizen or permanent resident would not be subject to the limitations. Only a narrow segment of immigrants would be affected. Since the Bill was designated only for townships, a compliant immigrant-owned business would be able to operate without hindrance in Kempton Park but not Katlehong. What does this distinction aim to achieve? The main point was that effective enforcement of a reasonable legal requirement for immigrant-owned businesses was about the rule of law. This had not been happening properly over the past years. He recommended effective and consistent enforcement of existing legislation. He did not see what the new Bill would achieve.

Mr Jacobs commended the Gauteng leadership and MEC for the Bill. The Bill could come off as controversial, but it addressed the debate on the creation of a shared and inclusive economy. The Bill affirmed citizens and permanent residents. The fundamental point the Committee should focus on is if the Bill can bring together the informal and formal economy. The high street and informal businesses were worlds apart, they do not coexist or mutually reinforce. The capital was highly monopolised. If a company with a monopoly in its sector made it to the townships, they could out-buy a spaza shop. The Bill affirmed the rightful place of rural and township economies within the broader economy. A circular economy was one where money generated in the townships stayed in the townships. By supporting a small business, the money went towards helping a community. The Committee should see the political correctness of the Bill, which was about mainstreaming township and rural economies. The Committee should explore ways of making the Bill national. There were similar Bills being worked on in Mpumalanga and KwaZulu Natal. The COVID-19 pandemic exposed the great inequalities in the country. Foreign nationals are part of the economy and should be allowed to carry out business, however, the Constitution should be followed. Other provinces should give briefings on their Bill process. There should be a similar Bill going through Parliament.

Prof Msimang agreed that the Bill had elements of a national statute as townships were throughout South Africa and all grappled with the same problems. How can it be brought to the attention of legislatures so that the material they have can help the whole of South Africa? It was an attempt to empower the black entrepreneur in the townships who were squeezed out of big business. They were finding it hard to compete in the urban areas. The urban areas are extending into townships with malls and big business. The African entrepreneur was squeezed out of business, and this township economy requires legal support on a provincial and national basis to be empowered.

He commended GPG for the initiative it took in empowering black entrepreneurs in the townships Something which should have been taken on by central government. They were being squeezed out of business and employment. Due to COVID-19, 2.2 million people had lost their jobs. One would find that over 90% of these people were blacks from the townships and rural areas.

If the Bill was done on a provincial basis, there would be overlaps and conflicts with national legislation. There was national policy stating that foreigners would only be allowed to come and trade in South Africa if they had rare skills which are not locally available. If the proposed Bill stated that foreigners with permanent residency could compete, it would contradict the national legislation which stated they may not unless they hold rare skills.

The Chairperson asked the Content Advisor to explain the process of a Committee Bill.

Establishing a Committee Bill
Mr Sibusiso Gumede, Committee Content Advisor, noted that the content of the Bill was not a new matter and had been discussed at length during the Fifth Parliament. He felt that looking at the Bill with the lens of how its sidelined foreigners would result in its purpose being missed. In 2013, the Department of Trade and Industry (DTI) drafted a bill called the Licensing of Businesses Bill. The intention of this Bill was to replace the Business Act 71 of 1991. The Gauteng Bill is slightly different from this Bill but has the same objective. During the Fifth Parliament, a concern that was raised consistently was that the Bill needed to be revived and moved forward. In a Committee oversight visit to Mpumalanga an observation was made that it was working on something similar. Likewise, during a KwaZulu Natal visit, the Committee noted that KZN was working on a similar Bill. The Western Cape was also working on something similar. There was the view that rather than having different provinces coming up with different Acts, the Portfolio Committee needed to push DSBD to finish the Bill that had been started by DTI.

The Portfolio Committee needed a separate meeting where it could review Bills and Acts that it wanted DSBD to champion during the Sixth Parliament. He noted that the Business Act was under DTI review before this Department, DSBD, was created. There was the National Small Enterprise Act (No 102 of 1996) that needed to be reviewed. The view from DSBD was that it would submit only the Ombudsman Bill during the Sixth Parliament. If the Committee felt that the Department was moving slowly, it could draft its own Bill. It was allowed by the Rules of Parliament. He would not discuss the Private Member’s Bill which was another method the Committee could use to start a Bill. The Committee should hold a meeting and list the Bills it wanted the Department to introduce to Parliament so as to decide which Bills to move on.

The Chairperson recommended that Committee members contact Mr Gumede if they had follow-up questions on the process of establishing a Committee Bill.

The Chairperson said Members had raised certain concerns but were not opposed to the Gauteng Township Economic Development Bill as it sought to assist citizens. Townships are not in Johannesburg only; they cut across the country. The goal was to ensure it was still in line with the Constitution, that the country was a non-racial country and clear on xenophobia. It was the responsibility of Committee to ensure what DSBD had planned was being implemented.

Mr Gumede stated that there were the two processes for establishing a Bill. The executive process of establishing a Bill was done by the Department. If a Bill was established by Parliament, it followed the Rules of Parliament where a Portfolio Committee or a Member of Parliament (Private Member's Bill) would initiate the Bill. The drafting process was normally done internally by Parliament's legal section. Where the two processes differ is Parliament does not have its own internal capacity for a socio-economic assessment. The Socio Economic Impact Assessment System (SEIAS) unit at the Department of Planning, Monitoring and Evaluation (DPME) ensured Bills developed by the departments meet all the standards. He was willing to share some documentation with Committee members to provide them with insight.

Gauteng MEC response
MEC Mosupyoe acknowledged the comments by the Committee. Her team would respond to the technical questions. Many felt that the Bill should have a national footprint. Section 104 of the Constitution on the legislative authority of a province informs how a province can develop its own bills. There was the sense that the Committee was in support of the Bill especially because it would be supporting people who had been disadvantaged over a period of time and it would allow them to participate in the economy of Gauteng. The Gauteng province could only offer its support to the Committee in the creation of a national Bill. The GPG has a relationship with NAFCOC. It was one of its partners and a stakeholder. Two weeks prior it had an extensive meeting with NAFCOC about the Bill. NAFCOC was helping in the process of taking the Bill for public participation and it had made comments on the Bill. NAFCOC had its own proposals on how the township economy could be revitalised, changed or supported. NAFCOC was being kept in the loop.

On localisation, there was an internal policy to which the Bill was aligned. The main localisation policy would start with Gauteng's own departments. It would be the first line of obedience in the legislation of new policies being put in place.

Yes, the Bill was 26 years late, but it was never too late to start, and someone needed to start. The intention of the Bill was not to exclude foreigners but to affirm citizens. It allowed foreigners who were compliant to participate in the township economy. Its intention is not to exclude anyone.

Mr Masha, GDED Director, noted the Members' comments, specifically where rephrasing was needed. The main objectives of the Bill were quite clear. When many pieces of legislation converge there can be contradiction in the impact intended. Hence, the intention of the Bill was to streamline these intentions. It was not going to increase red tape; if anything, it was going to addressing red tape. The Bill would enable easy access to registration of businesses and access to support.

Mr Jak Koseff, Chief Director: Gauteng Office of the Premier, replied that it was important to look at the Bill thematically. The comments on what needed to be clarified were useful. Big institutional thematic issues had been raised by Members. One of them being whether the provincial government was the right place for the Bill. Looking towards the Constitution, the Provincial Governments are the custodians of regional economic policy which involves regional calibration or refinement of regional economic policy. Gauteng is a logical place for convergence to happen because there is a level of streamlining. Extensive background research has been done. There was a consensus decision across all constituencies and all sides of the political spectrum that the current by-laws and regulations were either poorly designed, poorly enforced or both. This was because different regimes had never been properly calibrated for the reality of dense urban areas and in particular townships.

Mr Koseff replied that why Katlehong and Kempton Park were treated differently was straight forward. Kempton Park was not 90% informal and 90% of township-based enterprises did not have a business bank account. This figure was drawn from a township economic geography survey. This meant that they could not access financing, insurance and other services.

Mr Koseff referenced the Indian- or Bangladeshi-style village bank model. In South Africa, highly urbanised township areas, in need of affirmation and integration, used to be dormitories and places where workers slept to travel to and from the economic core. These areas never had the opportunity to develop their own high streets and precincts, internal economic engines and manufacturing zones. Part of the reason this did not happen was the overall structure of these areas was never properly re-legislated post-Apartheid. This was what this Bill was correcting. It is not saying that townships had to be the ultimate destiny of the majority and they would forever be areas defined by informality. Quite the opposite. It is trying to affirm that there was Apartheid spatial economic geography that was very deliberate for the period in which it was enforced.

The Bill is trying to fight the long shadow of various policy failures under democracy. It was not just about making it easier for a spaza shop to get a business licence, it was about ensuring that that spaza shop operates within a high street precinct that is zoned for commercial activity. The realities were that businesses in these dense areas were not governed by the same laws governing operations in commercial, residential and industrial sites. If nine out of ten businesses are not within the context of formal regulation, which is what research showed, then it meant the laws are neither safeguarding, nor preventing maleficence, nor enabling those businesses to grow. These were areas where the Bill was creating a new legislative framework. The Provincial Government was creating a funds of funds that could be processed via organisations that were good at working with township-based businesses and could reduce the risk of non-payment. This was a critical area where the Public Finance Management Act (PFMA) did not offer guidance. It had to extend the reach of existing instruments to be able to execute. Gauteng could be seen a regulatory sandbox, a way for the nation to test ways of doing things.

The question on integration of asylum seekers has come up at various points. There was a greater issue that was being grappled with that the Bill was addressing. The Refugees Act and the Immigration Act are based on international covenants that deal with reasons people seek asylum. It was not as widely known as it should be that the reasons could not be economic. Asylum seekers need to be fleeing war, disaster, persecution among other reasons. It cannot be due to having fewer economic opportunities in their home country. This, however, was one of the biggest drivers of immigration. The challenge in South Africa was that it had a long queue in the refugee system. As asylum seekers were waiting in that queue, they could work to sustain themselves. This has created this condition where the asylum seeker permit becomes a de facto work permit. This Bill cannot solve the problem of economic migration. The Bill is aimed at South Africans. The Head of Policy in the Gauteng Office of the Premier Policy Unit would have a lot to say on this and he would be well placed to respond to the technical questions.

The MEC was correct that the NAFCOC engagement was very fruitful and one of the institutional items that was picked up was the need to recognize a reference group or oversight structure, which the Bill made provision for. The idea of engaging with an established and legitimate umbrella organisation in townships is something NAFCOC is proposing. There is need for a genuine enabler of access as opposed to getting gatekeepers who act as fronts for organised criminality.

The Committee adopted the minutes of 14 October 2020 meeting with an addition to the resolution that the Committee recommended the use of constituency offices to increase Seda’s footprint in rural communities.

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.

Share this page: