SMMEs benefitting from Covid-19 Debt Relief Fund: oversight

Small Business Development

17 March 2021
Chairperson: Ms V Siwela (ANC)
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Meeting Summary

Video: Portfolio Committee on Small Business Development, 17 March 2021

The Portfolio Committee received commentary from small, medium and micro enterprises (SMMEs) who received loans from the Covid-19 Debt Relief Fund aimed at providing relief to SMMEs during COVID-19. 

The Department of Small Business Development (DSBD) gave the Small Enterprise Finance Agency (SEFA) the mandate to administer the SMME Debt Relief Fund as a direct lending facility. DSBD allocated R513 million towards the Relief Fund. Of the 35 865 applications SEFA received, approximately 14 800 were fully complete applications of which 1497 were approved. DSBD gave the profiles of the 1497 beneficiaries to the Committee and 12 of the successful applicants were randomly selected to share the impact the lockdown had on their business and how the Relief Fund had assisted them. These beneficiaries included KPL Die Casting, Lapologa BnB, White Hills Trading, Waterfront Guesthouse, Rigana Manufacturing, Birdie Media, Libra Joiners and Interiors, Dirang Mmogo Business Enterprise, VSM Construction and Tattoo Republic.

The beneficiaries expressed their gratitude for the Relief Fund. Some had flourished during Covid-19 lockdown while others were still in the process of recovery. Some beneficiaries requested a payment holiday while others asked the Department to consider a complete write-off of the Relief Fund loans. One beneficiary raised corruption amongst councillors in the region which hindered the growth of young businesses.

Members were pleased by the success of the lockdown SMME loans. They asked if the businesses were transferring skills to their employees; how difficult the application process had been; and why so many SMME complete applications were not approved. They agreed that the loans had to be repaid at some stage so that entrepreneurs could benefit. The Committee Report on this oversight meeting will include all the observations and findings and it would formulate recommendations which would be referred to the Department.

Meeting report

Introductory remarks
The Chairperson said the Committee will perform oversight of the Covid-19 Debt Relief Fund on this virtual platform in compliance with Covid-19 safety regulations. Parliament has the power to conduct oversight over both provincial and local organs of state as granted to the National Assembly by the Constitution in section 55. It allows Parliament to monitor the conduct of the Executive branch of government. When exercising oversight, Parliament focuses on the implementation of laws, the application of budgets and the effective management of government departments. The vision of parliament is to be an “activist and responsive peoples’ parliament”. The vision includes a Parliament that improves the quality of life for South Africans and ensures equality. Parliamentary committees are the “engine rooms” of parliament's oversight. This oversight is exercised in various ways which include public participation. The Committee is fulfilling its constitutional mandate by engaging with the beneficiaries of the Relief Fund. The Relief Fund was aimed at sheltering small, medium and micro enterprises (SMME’s) against the impact of the nationwide Covid-19 lockdown. It was created to prevent the complete such down of SMME’s during lockdown. The lockdown meant that many SMME’s would be left without an income or have cashflow problems preventing them from fulfilling their contractual obligations. The lockdown tainted governments efforts to reduce poverty and the unemployment rate.

The Department of Small Business Development disclosed that the beneficiaries were composed of the following groups: youth represented 20.8% with 311 beneficiaries, women represented 32.8% with 491 beneficiaries and people with disabilities represented 0.3% with 4 beneficiaries. The intention of the Committee is to invite beneficiaries from each province to share the impact the lockdown had on their business and how the Relief Fund had assisted them.

The Chairperson told the beneficiaries that they must feel at home. The Committee is their lawyer. It is a defender in society and will ensure government complies with the obligations it owes society.

The Chairperson asked everyone present to observe a moment of silence in remembrance of Zulu King Goodwill Zwelithini. Apologies were received from the Deputy Minister.

KPL Die Casting
This business  was started 23 years ago. They were breaking even before lockdown and had about 80 workers. They had not lost many workers due to the lockdown. The first month of the lockdown was terrible. The company was unsure if it would last for the next three months. The Relief Fund was a great help. Most of the companies they service form part of the essential service sector. Without the Relief Fund they would not have survived. The company is involved in essential services, mainly street lighting. They are in the high pressure high casting aluminium zinc industry and make all the housing and street lights. They recently managed to secure a contract with Volkswagen (VW) and have entered the auto-motor business. They signed a five-year contract with a 15 year aftermarket contract with VW. Their experience with SEFA has been positive, they are able to communicate their problems to SEFA and receive support. KPL Die Casting is grateful for what government has done. Their business is running “smoothly”.

Lapologa BnB
They indicated that before lockdown they were doing very well. When lockdown commenced it was havoc and it was uncertain if they would be able to keep their workers employed. Lapologa BnB applauds the Relief Fund as it helped prevent the retrenchment of its employees. They did not have to retrench any employees. The “vision and mission” the founder had when starting the business was to have a branch in every town to create employment for women and youth. The business managed to open a self-catering branch in Polokwane. The Relief Fund and their compliance with Covid-19 regulations helped them achieve part of their “vision and mission” to expand and ensure the safety of guests.

White Hills Trading

Their spokesperson said that the business falls within the hospitality sector. They do baking, events management and catering. Prior to the lockdown, the business was operated from home. The business worked towards securing a property to lease in White River. After signing the leash agreement, the lockdown was implemented. They needed to make deposits and also commence renovations. The business employed three people when it was operated from home and when it moved into the leased property it was able to employ six more people. These employees needed to be paid. They had booked events which were subsequently cancelled due to Covid-19 and had to refund customers who had paid in advance. It was a stressful time for the business. The Relief Fund enabled White Hill Trading to secure the lease agreement and to pay its employees. The business is currently active because of the Relief Fund. The Relief Fund helped remedy financial stressors. White Hills Trading observed that businesses who had not applied for the Relief Fund did not survive. Although it remains difficult to recover fully, they are trying their best.

Waterfront Guesthouse
The company started 14 years ago and is situated at a prime spot in Upington with a 500m stretch of river view. Due to it being on a river bank and a prime spot the property was expensive and now the business deals with various liabilities monthly. The lockdown made it all the more difficult. The business expanded from one guestroom to a few more. They had expanded and begun hosting conferences, weddings and functions to fully utilise the property. They had started negotiations to develop the premises however when lockdown was implemented they had to abandon those plans. They have permanent employees but since expanding they were able to employ temporary workers. Waterfront Guesthouse is thankful for SEFA’s assistance. The Relief Fund was a “big help”. The Relief Fund is also a liability because beneficiaries need to repay the loan. The hospitality sector is recovering slowly. Waterfront Guesthouse hopes that the hospitality sector will not suffer any further setbacks. It was worth dealing with SEFA.

Rigana Manufacturing
Their head office is based in Durban and they have a branch in Johannesburg. Prior to lockdown things looked good. They set strong targets for the year. March to April lockdown commenced which was a scary time. April 2020 was a dismal month for the business. The business is a supplier of goods to the petroleum industry and to other essential service providers so they managed to pull through. They procured the services of a business coach which helped them with strategies. At the end of the 2020/21 financial year in February 2021, they ended up having the best year in the history of the company and exceeded their profit target by 45%. They managed to keep all staff; everyone got paid throughout the lockdown. The year ended up being a really fantastic year for Rigana Manufacturing. The Relief Fund was of great assistance. Rigana Manufacturing has increased their target and intend on having an even better year in 2021/22.

Birdie Media
They are an events, marketing and branding company. They unfortunately had to retrench employees. The Managing Director had to leave his office and convert his house into an office. He says that “it has been tough” but he is starting to see the light. The Relief Fund helped ensure that the business survive. Birdie Media is grateful and hopes to hear more stories of businesses who survived the lockdown.

The Chairperson observed that these are successful stories during difficult times. She challenged everyone to go back to the basics. We must “go back to the creator and humble ourselves before him” regardless of colour and gender.

Libra Joiners and Interiors
They are located in Cape Town. They are extremely appreciative of the Relief Fund. The spokesperson said that prayers truly brought them through this difficult lockdown process. When the lockdown commenced the company CEO announced to staff that his biggest concern was always going to be the families. Libra Joiners and Interiors is associated with the building industry, specifically the retail sector. This sector was hit quite hard. When the lockdown happened they had suppliers, staff and contractors to pay. The Relief Fund helped the businesses resolve cash flow issues. They were able to resume business in July as restriction levels were lifted. The financial constraints on the business had been tough. Fortunately, due to smart saving and spending they did not have to retrench any employees. During the lockdown they were still put under pressure by contractors to ensure that projects were completed on time. The company appreciates the assistance SEFA had granted them. Libra Joiners and Interiors propose that government look into considering abolishing the loan repayments from Relief Fund beneficiaries. They trust that moving forward with all our prayers, they will not have to endure a hard lockdown in the future. 

The Chairperson remarked that the presenters are assisting the Committee. These are issues that they would like to hear from beneficiaries. The Committee does not want beneficiaries to remain small businesses but wants them to evolve into global commercial businesses.

Dirang Mmogo Business Enterprise
They are based in Klerksdorp in the North West. They offer industrial vegetation control. They say they are the largest producers of instant lawns. Prior the Covid-19 lockdown they had 49 permanent employees. They retrenched 39 employees and are now left with 10. Their sales turnover was very good. During lockdown the business had no invoices going out. With the Debt Relief Fund they were able to cover most of their expenses. They are thankful for SEFA and the Relief Fund. They have started making repayments towards the Relief Fund loan but their financial position has not improved. They request that SEFA consider presenting different repayment strategies to beneficiaries.

Cab for Ventures Pty (Ltd) did not join the meeting.

VSM Construction
The owner of VSM Construction, as a member of the youth, thanked SEFA for the Relief Fund. This funding helped VSM Construction pay staff salaries and buy more office equipment. VSM Construction specialises in construction services such as building, renovating and manufacturing of steel gates. One of the challenges they experienced was outsourcing logistics such as trucks, when they have to supply building materials. Their company has not yet been fully developed. They have potential clients. They would like to thank SEFA and the government.

The Chairperson advised VSM Construction to be strong. It is encouraging to see young lions getting into the industry. The Committee is fighting to enable young entrepreneurs to create employment opportunities for others.

Mvesande Trading
The business had a network connectivity challenge and so communicated via Zoom chat. They are from Port St Johns in the OR Tambo district of the Eastern Capeand they have four employees. They are involved in SMME consulting and small business administrators. They had not received money from the Relief Fund because SEFA administrators told them that payments from July 2020 would be fully subscribed. The business is in dire financial strain and cannot pay its suppliers and their debt is escalating.

The Chairperson said that the Committee will discuss Mvesande Trading’s message and come up with recommendations. The aim of this session is to come up with recommendations while performing oversight of the Department and its agencies.

Tattoo Republic
The business is a tattoo parlour in Bloemfontein, Free State. The business had six employees at the time of lockdown. The lockdown hit them “really hard”. They were only permitted to open during Lockdown Level Three. During their four months of lockdown they did not earn any income. SEFA’s Relief Fund helped the business a lot. The Relief Fund allowed them to pay their employees a basic salary. They were able to pay their accounts. The road to recovery has been difficult for Tattoo Republic but they are grateful for the help from government. To abide by the strict Covid-19 regulations set for the tattoo and beauty industry they had to set up a completely new tattoo parlour. The business now works strictly on an appointment basis. They are only able to accommodate a certain number of people per day. They had to retrench some of their employees. Without the Relief Fund the business would not have survived past the lockdown.

Waterfront Guesthouse added that it had been in contact with SEFA. Business picked up they during October and November 2020 with good occupancy. However, it was not very active in December and January as the strict lockdown during those two months affected events, conferences and workshops it would have hosted. It had written to SEFA requesting a three month payment holiday but had not received communication from them. It would greatly help if SEFA gave beneficiaries a three to four month payment holiday and maintains communication with beneficiaries to find out when they are able to repay the loan.

The Chairperson said that we should observe that God is still with us. “We must return to the basics because we don’t know where this monster comes from”. The lockdown affected many lives. The Committee is hard at work to ensure that small businesses survive. If small businesses die then job creation is jeopardised. She opened the floor to Members to interact.

The Chairperson said she was concerned about the burden beneficiaries are having about the repayment of the loan. SEFA and DSBD must look at this matter because it not the beneficiaries duty to develop repayment strategies. Committee members are free to make recommendations. Since this was a Debt Relief Fund it must relieve the beneficiaries. They must be liberated from this monster. The Committee can make it happen. Together we can build more. The Chairperson commended the guests for being honest.

The owner of VSM Construction highlighted the challenges young companies encounter when seeking opportunity to work on giant projects. Construction sites are influenced by politicians. Councillors are involved in government tenders and influence principal contractors to hire according to their ward. Some hire their friends because they want to benefit – only to discover that those friends do not comply with the Preferential Procurement Policy Framework Act.

The owner of Tattoo Republic said that they would like to put forward the same request as Waterfront Guesthouse, for SEFA to give beneficiaries a two to three month payment holiday.

The Chairperson replied that these comments will be forwarded as recommendations.

The spokesperson of Libra Joiners & Interiors requested that government and SEFA completely write-off the Covid-19 Relief Fund loans. SMMEs fall in the same category as the unemployed who received R350 but do not need to pay that R350 back. SMMEs who are beneficiaries of the Relief Fund should not pay it back. Instead of a three-month payment holiday, they ask the Committee to review the R513 million and consider it a complete write-off. They urged the Committee, no matter what their political affiliation, to strongly consider the man on the street whose priority is to put food on the table. Businesses have to put that food on the table. Libra Joiners & Interiors requests a complete write off, not a month-to-month payment holiday.

The Lapologa BnB spokesperson said that they were not taking chances with  the Relief Fund. The tourism industry is among the most harshly hit due to the COVID-19 lockdown. They propose a three to six month break from the loan repayment.

Mr F Jacobs (ANC) said that it was a great privilege to listen to South African stories. The one thing that was common during the presentation was how resilient South Africans are. He applauded all the beneficiaries for their resilience. They are the ones who as entrepreneurs go out there and make it happen. In South Africa we focus only on the bad but today he is proud to be a South African. The beneficiaries from various backgrounds and provinces indicate how great the South African nation is when they come together. He extended a thank you to the President, ministers and departments. He acknowledged that not all SMMEs could receive the relief funding and that there is room for improvement. At this moment we should be grateful. Gratitude was the one thing that came out strongly from the presentations today. The Committee has been doing its oversight work on a virtual platform for the last 12 months and has been unable to come together. The Committee always checks government officials to ensure that they are doing enough. Today the Committee wants to thank the Department officials.

The participants are 12 entrepreneurs out of 1500 who were successful and who have the opportunity to tell their stories on this platform. Mr Jacobs hopes one day to visit their businesses to support them because “local is lekker”. Supporting one another is how we help grow businesses. The businesses have been given a lending hand from government. It is important for us to acknowledge as South Africans that we must  “pay it forward”. The beneficiaries have received a helping hand from government and in turn helped working families put bread on their tables. Beneficiaries have been able to retain employees and save jobs. They are part of the economic recovery and reconstruction journey.

Mr Jacobs said what we hear from all the beneficiaries is that they want to have communications with the government to restructure repayment of the Relief Fund once they are profitable and sustainable. He is not at liberty to make a decision but strongly feels that we must “pay it forward”. It is important that the Department has money for the next year when there is another round of applicants. This will allow the new round of entrepreneurs the same opportunity that the current beneficiaries have received. The money that beneficiaries repay is used to recapitalise agencies like SEFA. Just like the beneficiaries are prudent with the money in their business, government must be also be prudent and financially transparent with the money that they have. We must make the money stretch as wide and possible. It must have a big developmental impact.

Mr Jacobs stated that the Committee condemns the corruption alleged by VSM Construction. Corruption takes away efficiency and money meant for the poor. We must collectively condemn and expose corruption. Corruption does not pay in the long run. It makes the cost of doing business very expensive. It is unethical and immoral. His recommendation is to have these good news stories told more frequently. As Members of Parliament, the Committee is proud of the beneficiaries. You make South Africa work. 

Mr D Mthenjane (EFF) wanted clarity from the beneficiaries. He wanted to know how many guest houses and employees Lapologa BnB had. He asked Waterfront Guesthouse how many employees it had and to clarify what is meant by the business being “family-run”. Does “family-run” mean  that Waterfront Guesthouse only hires family members? He noted that Mvesande Trading indicated that they had not received money from the Relief Fund. Clarity is needed on that. The Committee had been presented with Mvesande Trading on the list of businesses and the amount that it had been given from the Relief Fund. The Committee needs to find out if Mvesande Trading received funding or not. If it had not received funding what is the origin of the figures that were on the list. He agreed about negotiating a payment holiday but did not agree with a  complete write-off of the repayment. After being given money one needs to show responsibility. This Relief Fund is supposed to rotate. If a beneficiary pays back the money to the Relief Fund, it can then be used for other businesses that experience financial strain as the beneficiaries did prior to assistance.

Ms B Mathulelwa (EFF) said that presenters were free to speak any language they were comfortable with. They should express to the Committee all the challenges they are facing. From the presentations, some businesses were thriving even under the Covid-19 lockdown. She asked if the companies are transferring skills to their employees.

The Chairperson said that on checking the profiles of the businesses one can see that jobs have been created. The Chairperson referenced Lapologa BnB to illustrate that skills transfer has taken place because one must be skilled when working at a bed-and-breakfast such as being the chef.

Mr H Kruger (DA) asked the businesses about their experience of the application process. Is there too much red tape involved? Do they think that SEFA and the Department can make the application process easier for everybody to access funding?

Mr H April (ANC) thanked the beneficiaries for honouring the Committee by attending the virtual oversight meeting. As a previous business owner, he knows how critical time is for a small business. He commended them for taking off time to communicate with the Committee. He finds it refreshing to see a diverse group of beneficiaries. He recommended that the Committee invite businesses who applied for the Relief Fund but were not approved. He wants the Committee to find out why they were not approved. He commended the Department and the beneficiaries who have been successful but they must “pay it forward”.

The White Hills Trading spokesperson replied about the transfer of skills. The business is involved in baking and decorating, these cannot be done by one person alone. When the business employed its staff members they needed them to perform baking tasks. The business transfers skills to its employees. It has helped an employee open his own business. The employee is allowed to use the equipment and shop space of White Hill Trading to help start his business. White Hill Trading is helping other bakers and allowing them to use its equipment.

The application process for the Relief Fund was difficult. It was difficult to upload the documents as there were many. It excludes those who do not have internet access because you were not able to do physical visits to the offices to complete physical applications. The Committee should take cognisance of those in the rural areas without access to the electronic application process.

The Lapologa BnB spokesperson replied that they have three guesthouses. One is in Phalaborwa, their head office is in Tzaneen and another guesthouse is in Polokwane. Managers have been appointed at all three branches. In Tzaneen there are ten employees. Eight women are employed, including the speaker, and this number includes four youth. One young adult male is employed to do maintenance. There are only four employees in Polokwane, two are youth, one female is employed to do laundry and another employee does maintenance. When the BnBs are fully booked they seek out students from Further Education and Training colleges (FETs) to assist. This gives the youth an opportunity to gain experience and transfer skills to them. There are only four employees in Polokwane, two are youth, one female is employed to do laundry and another employee does maintenance.

The Chairperson was pleased that Lapologa BnB is empowering the youth.

The Waterfront Guesthouse spokesperson indicated that it has five permanent employees. The business makes use of temporary staff when they are very busy. Over the years they have trained youth who still assist the guesthouse in times of need. Some of these youth have been employed by the business. Skills have “definitely” been transferred. The company teaches its employees skills internally and external trainees come in to teach employees new skills. The spokesperson clarifies that Waterfront Guesthouse is not a family business. The employees are not related to the owner of the business, they are people who have been appointed and trained. The aim of the business is to see what the new year holds. They hope that it will be a good year for them. Waterfront Guesthouse did not find the application process difficult, there was no extra red-tape, the process was done very well. They are only struggling with communication with the Department regarding their request for a payment holiday. SEFA should consider granting the payment holiday to beneficiaries of the Relief Fund.

Mr Mthenjane said his question about Mvesande Trading receiving funds not been answered.

The Committee Secretary, Mr King Kunene, announced that Mvesande Trading had indicated in the Zoom chat that they had not received funding from SEFA.

The Chairperson said that Mr Mthenjane’s question is relevant as the profile given to the Committee reflects funds were given.

Mr Mthenjane noted that Mvesande Trading had indicated that they had not received any funding. He wants clarity because the report before the Committee reflects that it received R51 000.

The Chairperson says that the secretariat will communicate in writing with Mvesande Trading to get their response since they are still having a connectivity problem.

Mr Mthenjane suggested that Mvesande Trading write their response in Zoom chat.

The Chairperson ruled that the Committee will communicate in writing to Mvesande Trading and get its response. She called on the Committee Content Advisor, Mr Sibusiso Gumede, but he had a challenge with his audio.

The Committee Secretary reported that Mvesande Trading had now written and confirmed that they had not received funds. The Committee Content Advisor has suggested that a follow-up must be done on the matter. In terms of protocol, the Committee will develop an oversight report on the observations, challenges and recommendations raised in the meeting. This Committee Report will then be reviewed by it before it is adopted and sent to the National Assembly.

The Chairperson was happy that the Committee had been able to engage and interact with the beneficiaries of the Relief Fund. In her overview she stated that there were 14 800 complete applications and 1497 were approved. The Committee will have to get a sense of what happened to the applications that were unsuccessful. The Committee is not able to invite unsuccessful applicants but it will enquire about this with DSBD. She sympathises with Mr April’s concern about those businesses not approved – his concern is the Committee's concern. The Committee will be assisting society by performing its oversight function. The Committee will not leave any stone unturned. All requests made by the beneficiaries will be taken up as findings and observations for the Committee to come up with recommendations in its report to the Department. The Committee will communicate this to the beneficiaries. The Committee will in future attempt to find ways to better advise guests about network connectivity so they can fully participate in virtual meetings.

The meeting was adjourned.

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