Video: Portfolio Committee on Small Business Development
The Portfolio Committee met virtually with the Department of Public Service and Administration (DPSA) to hear a progress report on the Department of Small Business Development (DSBD) organogram. To date DPSA is still awaiting the formal consultation request from the Minister of Small Business Development that is aligned to the DSBD Strategic Plan and Medium-Term Expenditure Framework budget projections.
The Committee was pleased about the honest review of progress which provided a true reflection of what needs to be addressed. This included finalising and approving the organizational structure, estimating the appropriate budget with National Treasury and the merging of entities. The Committee expressed concern that it had been two years and no progress had been made. There was an impasse. Members reiterated the urgency for consultation . It was the view of the Committee that the two agencies need to merge and it was suggested that the DSBD be taken back to merge with the Department of Trade and Industry. Lack of organized engagement and departmental integration prevents delivery on the employment creation mandate.
Chairperson’s opening remarks
The Chairperson said death had robbed them of one of their Members yet again during the recess period and conveyed her condolences. We should pray that a third wave should not emerge in our country, considering the sad situation taking place in India. Apologies from the Office of the Minister were received.
Department of Small Business Development organizational structure: DPSA progress report
DPSA Director of Organisational Design, Mr Oscar Tshivhase, said that there has not been much progress made since the last meeting in 2018. DSBD is currently operating on a start-up organisational structure approved by the Minister of Public Service and Administration (MPSA) on 16 April 2015. Upon approval of the start-up organisational structure, DSBD was tasked to develop an organisational structure that incorporates all functions transferred from the Department of Trade and Industry and take into consideration input from the Portfolio Committee on Small Business Development.
A consultation request on changes to the DSBD organisational structure was submitted to the MPSA by the former Minister of Small Business Development, Minister Lindiwe Zulu, on 26 November 2018. Considering the 2019 national elections at the time and that the Fifth Administration was approaching the end of its term, the MPSA advised that the changes to DSBD organisational structure should be held in abeyance until the Sixth Administration is in place given the anticipated changes expected to the machinery of government. This will also afford the new Executive Authority to apply her mind on the configuration of the Department.
DSBD submitted a pre-consultation request on its proposed organisational structure on 19 November 2020 to DPSA and the findings of the analysis highlighted functional and establishment concerns that need to be addressed prior to submitting a formal request to the MPSA for concurrence. This outcome of the pre-consultation request was communicated to DSBD. To date DPSA is still awaiting the formal consultation request from the Minister of Small Business Development which is aligned to the DSBD Strategic Plan and Medium-Term Expenditure Framework budget projections.
The proposed DSBD organisational structure has three key programmes:
• Sector and Market Development
• Development Finance
• Enterprise Development
However, the main concern was affordability of the proposed organisational structure. National Treasury indicated that the budget exceeds what Treasury has initially projected. Departments must align themselves within the allocated budget.
DSBD intends to merge the Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency (SEFA) into one single entity. This will be more responsive to the needs of the SMME sector. To facilitate the merger, DSBD is developing a business case which will inform drafting of enabling legislation for the new entity. DSBD and DPSA met on 17 March 2021 to discuss the draft business case.
To strengthen the business case, DPSA made the following inputs for incorporation into the business case:
• Collective agreement with organised labour to determine matching and placing criteria and to deal with possible excess employees.
• Improved governance arrangements such as the board composition of the entity.
• Reconciling the DSBD service delivery model with that of the new entity’s business model.
• Reconciling the DSBD organisational structure on policy development and oversight over the entity.
• Provide more detail on costing the restructuring.
• Once the business case and draft legislation is finalised, the Minister of Small Business Development should formally submit the final business case and draft legislation to the MPSA and Minister of Finance for consultation and inputs.
On the way forward, DPSA awaits a formal consultation request from the Minister of Small Business Development to DPSA in line with the 2016 Directive on changes to department organisational structure.
The Chairperson thanked DPSA for the presentation. She invited the Members and the Deputy Minister of Small Business Development to engage and provide relevant guidance.
Mr H Kruger (DA) thanked DPSA and said we are already 24 months into the Sixth Parliament. He asked the Deputy Minister why the two ministers have not yet met to consult and discuss the new structure and provide feedback. He expressed concern that South Africa cannot wait another 24 months. It is very important that we get the structures correct to start working and to ensure that small businesses succeed.
Mr G Hendricks (Al Jama-ah) said that the President depends on DSBD for employment creation. He hopes that small business will generate the jobs the President has promised the nation in so many of the State of the Nation Addresses. We are unfortunately letting down the President by not creating the jobs arising out of small businesses. There was a problem with the structure submitted. National Treasury had a problem as the budget for it is too expensive. DSBD is “protecting its turf”. They have not listened to the Minister of Finance, which said that moving forward government would use zero-based budgeting. We must not build or strengthen structures in the way we did in the past, we need a fresh approach.
DSBD has seven schemes. These seven schemes are all that it will be doing except collecting the installments of people who took the loans from it. A “mean and lean” structure can operate at least for the next year or two. He agreed with Mr Kruger that the next step is getting the two ministers to meet. It is important to note that there is still a “go-slow” in SEDA and very little service delivery. When he spoke to the Minister of Small Business and mentioned SEDA, she shook her head. This is the problem we are stuck with.
Mr Hendricks said this means that this Portfolio Committee would not have left a legacy behind in 2024. We should leave a legacy based on zero-based budgeting and a lean and mean structure, where we can say at least 75% of the jobs target have been created during our term of office. Right now, it looks as if it is not even possible to appoint senior management to take DSBD forward. It may not even be necessary as there are only seven schemes that need to be looked at.
It is back to the drawing board for this Committee. We will have egg on our face if this Committee does not deliver. It is also up to us to see what can be done to create jobs outside this Department. He has seen that Members are already doing that. We are not getting much assistance from SEDA and SEFA and the DSBD leadership has not impressed us. He thanked the Chairperson and said she needs the “wisdom of Solomon” to take us forward.
The Chairperson thanked Mr Hendricks for his useful and valuable advice. She said the Deputy Minister is assisting with those. The Committee's main aim is to see output and see DSBD meeting it targets.
Mr F Jacobs (ANC) wondered why this presentation is given if no progress has been made. There are no time frames on when this will be taken forward. He shares the concerns of other Members. We want to ensure we have the right structure to implement government's plans. He welcomed that the Director General has been made permanent and commended the Ministry for that. At the same, the Committee urges them to finalise the organogram. The integration between the two departments is imperative to ensure delivery on the mandate. He is hopeful that they will receive a time frame.
The Chairperson invited the Deputy Minister to react to Members' reflection on consultation between the two ministers. While this is a concern belonging to Ministry, the Chairperson asked the Deputy Minister to share her thoughts and provide feedback on progress and highlight the specific items that need attention. The Chairperson agreed with Members' concerns. This is indeed a thorny issue - the zero-budgeting and concerns of National Treasury are important to address. The role of this Department is to create jobs. The Portfolio Committee needs to come up with a resolution. She wants everyone to reach a clearer understanding of these matters and to make recommendations in line with DSBD policies.
Deputy Minister of Small Business Development, Rosemary Capa, thanked the Chairperson and expressed her appreciation for this platform. It allows members to interact with each other about accountability and progress. In response, she requested that DSBD needs to meet with its counterparts in the Public Service Commission and deal with these matters. Better intervention is needed. When you cannot change a particular situation, there should be means of adapting the situation, while ensuring work is been done. In response to Mr Kruger, she said the two ministers have already met. We must understand that a discussion between any Minister and the Minister of Finance always depends on the availability of resources required by that Department. The obvious agreement reached between the Ministers was that there are no funds to finance any other budget extension.
The Deputy Minister said that government is continuously being re-structured and reviewed. There are casualties as a result, one being this Department. We are coming from being a part of the Department of Trade and Industry (DTI) and we need to adapt to the subsequent changes. Several employees were re-established to direct and respond to these matters. Cooperative support must be ensured. The institutional arrangement needs to meet legislative requirements to achieve the mandate. The budget had been part of Trade and Industry and DSBD has benefited from what was taken away from DTI. Former Minister Lindiwe Zulu did what was required by law to interrogate the mandate and work with the executive collective to carry out the organizational design.
When this institutional arrangement is achieved as an organogram, we will be able to deliver on the mandate for this country. This is the route to take together with the Public Service Commission and to finance that organizational structure. An organizational temporal arrangement should match available finances and start running the process. We will also need a legal framework to assist this process.
In the meantime, compliance is an issue. Capacity for and how to spend the budget needs to be showcased. Non-compliance will not move the Department forward. She appealed to leaders of Parliament to allow the opportunity for engagement with the Public Service Commission. Firstly, the budget should be estimated and allocated to key performance areas. The Director-General has been appointed. We cannot afford not to have a DG. Secondly, the Office of the DG must be capacitated to function in its role.
On the SEDA/SEFA merger, it is important to relook and reflect on organizational coordination. Close cooperation and effective collaboration are key. The units and entities must work together. The Deputy Minister is thankful for the District Development Model which addresses issues of lack of coherence in planning and implementation. There is no violation of the enabling Act if some work is allocated to SEFA. The Department continues to work with the SEDA board to endorse service delivery. There are many issues at hand. Work is scattered. The weight of work should be evenly distributed. Businesses need to become self-sustainable and this problem must become a programme.
The Deputy Minister said there is constant engagement with the Minister on this matter, however the Minister is temporarily in charge of other activities unrelated to this department [as acting minister in the presidency].
Mr D Mthenjane (EFF) thanked the Chairperson for organising the meeting presentation and for inputs made by colleagues. There is indeed a problem in this Department. “The fish always starts to rot from the head”. If there is a problem in the Department, the Minister must deal with the issue in a serious manner. Our suggestion as a Committee is that the Department be taken back to and merge with Trade and Industry. He wanted a department able to come up with a solution for people who are suffering and hungry. It has now become a problem on its own. Now we are sitting with a Department that cannot help anyone or provide solutions. We are sitting with more problems. It was a good idea to merge SEDA and SETA, but when is this going to be done? We were told the Ministers have met and spoken, but we do not know the solution. The problem of the lack of departmental and operational coherence, has now doubled with Covid.
The Chairperson thanked Mr Mthenjane for his inputs. The Committee is expected to come up with proposals in response to the problems presented, especially on budget, affordability, and legalities of the merging entities in line with the organizational structure. She invited the Deputy Minister to respond.
Deputy Minister Capa said she believes this is not the platform for restructuring government. It is rather a platform to conduct oversight. When the Annual Performance Plan (APP) is presented tomorrow, the details will be reported and discussed. How are going to deal with the fact that the budget is not enough, given what we currently have? It would be unfortunate to talk about the APP today which will only be presented in tomorrow’s meeting. Tomorrow the collective can decide if DSBD is on track and better understand the work being done. We need to amend the Act, not violate the Act. A way forward has been proposed but has not been properly implemented.
Mr Kruger thanked the Deputy Minister for her response. However, she only responded to one member of the Committee. He requested her response to his follow-up question. For 24 months we had an acting DG. Now it seems we are going to have to operate with a shared Minister or have no minister for another long period. He asked if she thinks it is fair for business communities, small businesses and those looking for employment to wait another long time. Is this progressive? How much longer can this situation carry on? Is this sustainable?
Deputy Minister Ms Capa responded that there were no Director General present in this meeting today. Covid disrupted the process of shortlisting and verification. No meeting was able to take place. The Minister sets the guidelines, but she is not the actual implementer. The Minister knows business and she knows this Department. The Department will achieve its goals with the present capacity at hand and will not haphazardly be shifted. The work required by DSBD will duly be done by this Department.
The Chairperson said the purpose of the meeting was to get a better sense of what is happening with the organogram. It is a complicated matter for the Portfolio Committee. This briefing indicated the urgency for the two Ministers to convene and meet. They must propose a time frame and report back to the Committee on progress and updated developments. We cannot move forward without the blessing of Treasury in consultation with the Ministers. There are two issues that need to be addressed. Firstly, the approval of the organogram and secondly, the merging of the two entities. The Committee needs to be diligent in deciding upon which option will better assist in moving forward.
Issues of affordability are critical. Our interest is to see the Department running smoothly and the two entities collaborating soundly to fulfil the President’s job creation mandate. The presentation, comments and frustration expressed by Members show the existence of many grey areas. This indeed has a negative impact on oversight. Tomorrow’s meeting should provide more clarity and we will take it from there. There is a need to provide leadership as a collective on this matter. She is happy with what DSBD presented. It shows a true reflection of what is happening. She noted appreciation for the appointment of the DG. She believes things will begin to move forward but only with stronger administration and improved implementation strategies. The Chairperson thanked all for being honest about the current situation.
The Deputy Minister interjected and stressed that the Ministers have met and have given direction.
The Chairperson replied that she was aware of that.
The Committee programme for the second term of 2021 and the minutes of 10 and 17 March 2021 were adopted before the meeting adjourned.
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