The Portfolio Committee was briefed by the Department of Small Business Development (DSBD), including the Minister and Deputy Minister of the Department, following an assessment of the impact during the recent unrest in KwaZulu-Natal and Gauteng, which impacted grossly on small enterprises and informal traders. The briefing also encompassed the Department’s plans in place to assist affected small, medium and micro enterprises affected by the civil unrest.
The Minister indicated that the Department drafted a recovery plan to assist the small enterprises and informal traders that were affected. The Department developed different packages for small, medium and micro enterprises, and introduced them through the Small Enterprise Development Agency (SEDA) and the Small Enterprise Finance Agency (SEFA). The Department slowly began to disburse funds to avoid abuse or misuse of state funds while following the Public Finance Management Act (PFMA) and all relevant legislation.
The Department reported that, according to the South African Property Owners Association (SAPOA) and Business Leadership South Africa (BLSA), the estimated cost of the recent violent protests on the economy of KZN & Gauteng included about R1.5 billion in stock that was lost; damage to the tune of R15 billion being recorded on property and equipment; over 50 000 informal traders and 40 000 businesses impacted; about 150 000 jobs being reported to be at risk.
Under the Business Recovery Programme, R300 million was allocated to assist 150 small businesses predominantly in KwaZulu-Natal and Gauteng. These businesses will receive funding for working capital, equipment, furniture and fittings. Under the Informal Traders Support Programme, the Department aims to offer financial and non-financial support for over 17 667 entrepreneurs by providing a once-off R3000 grant to recover their stock.
Members expressed concern regarding licences and permits for the enterprises, where they asked for easier processes that had less red-tape. They asked whether the Department would rather be able to issue permits, as municipalities had been failing small businesses in this respect. The Committee asked for support in areas outside KwaZulu-Natal and Gauteng, namely Mitchells Plain, Gatesville, the City of Johannesburg, and a mall in Umzumbe Municipality, which have historically failed to see municipal support.
Great concern was expressed over South Africa having the highest unemployment rate in the world, and it was unanimously agreed upon that a climate of job creation and local product sales must be created. It was recommended that unemployed graduates assist the application process in rural areas, especially women and elderly people who are computer illiterate.
The Minister responded that the moratorium on licences and permits serves as an interim relief measure and that the Department is looking into issuing permits itself rather than municipalities, who have been doing so ineffectively. The Minister explained that the programmes intend to help reduce unemployment and grow the economy, addressing the country’s scaling unemployment rates.
The Minister explained that the Small Enterprise Development Agency offers support to enterprises in terms of filling out forms. The proposal to employ unemployed graduates as application assistants was considered and will be explored further with the Department of Employment and Labour. She also indicated that areas of KwaZulu-Natal and Gauteng will also be considered for relief. The Eastern Cape and Northern Cape were also areas of concern for the Department. Concerning red-tape, the Department acknowledge the challenges and said that the Small Enterprise Finance Agency is investigating into areas that can be relaxed, without undermining the law.
The Chairperson opened the virtual meeting, welcoming the Portfolio Committee, Minister and Deputy Minister of the Department of Small Business Development (DSBD) to the meeting. The Committee was to be briefed by the DSBD, following an assessment of the impact during the recent unrest in KwaZulu-Natal and Gauteng.
Minister’s Opening Remarks
Ms Stella Ndabeni-Abrahams, Minister of the DSBD, said that, following the recent unrest, South Africa has had to recover from an unexpected tragedy. The unrest resulted in loss of income for many small businesses and informal traders. This created a significant impact in the relevant economic areas, as small businesses were unable to pay taxes.
The DSBD drafted a recovery plan to assist the small enterprises and informal traders that were affected. The Department developed different packages for small, medium and micro enterprises (SMMEs) to meet them halfway in the affected provinces. Assistance was also offered in light of small businesses suffering under the COVID-19 circumstances as well as the unrest.
The DSBD introduced the packages through the Small Enterprise Development Agency (SEDA) and the Small Enterprise Finance Agency (SEFA). The packages were advertised to those who were affected, with clear criteria that indicate who may be a beneficiary, while ensuring that the law is upheld through these processes. The Department slowly began to disburse funds to avoid abuse or misuse of state funds while following the Public Finance Management Act (PFMA) and all relevant legislation.
The Minister said that there were attempted scams, where messages and posters were designed asking potential beneficiaries to pay certain fees to submit their applications. The Department issued a stern warning to people involved in scams. The DSBD never charges beneficiaries for their services offered, other than in necessary circumstances such as loans.
Briefing by the DSBD on recent unrest in KwaZulu-Natal and Gauteng
Mr Lindokuhle Mkhumane, Director-General (DG) of DSBD, presented to the Portfolio Committee, on the recent unrest in KwaZulu-Natal and Gauteng, which grossly impacted small enterprises and informal traders. The presentation included the plans in place to assist affected SMMEs.
SMMEs in informal and formal sectors across the provinces were affected by the recent riots and looting. The support offered by the DBSD is open to all affected SMMEs. This included the retail and services sectors, as these SMMEs suffered damage to property, and looted equipment and stock.
Destruction of business infrastructure was particularly severe. The DSBD plans to mobilise resources to restore law and order in order to protect property and safeguard economic infrastructure. There were disruptions in supply chains, resulting in stock not reaching shelves and informal businesses not being able to do their trade. The amalgamation of these factors resulted in the loss of income to SMMEs, increased poverty, unemployment and decrease in the growth of the GDP.
The recent looting and unrest worsened conditions that were already strained due to COVID-19 and the implementation of hard lockdown. According to the South African Property Owners Association (SAPOA) and Business Leadership South Africa (BLSA), the estimated cost of the recent violent protests on the economy of KZN & Gauteng is as follows:
About R1.5 billion in stock has been lost.
Damage to the tune of R15 billion was recorded on property and equipment.
More than 800 retail stores were looted and 100 were completely burnt.
This has impacted negatively on about 50 000 informal traders and 40 000 businesses. To date, about 150 000 jobs are reported to be at risk.
Business Recovery Programme
The Business Recovery Programme focusses on uninsured small enterprises, predominantly in KwaZulu-Natal and Gauteng. These businesses will receive funding for working capital, equipment, furniture and fittings. This programme includes businesses with existing funding from other lenders that are unable to pay back funding owed to other lenders.
In terms of financial support, the programme offers:
Blended Finance, which is a combination of a grant (60%) and a loan (40%);
Interest rate on the loan component is limited to 5%;
Initial payment moratorium of up to maximum of 12 months for small enterprises in KwaZulu-Natal and Gauteng, and six months for other provinces;
Repayment period of a maximum of 60 months;
Maximum funding accessible per entity is R2 million.
In terms of non-financial support, SEDA will offer pre-investment support to assist in package application processes. SEDA will also offer post-investment support that will monitor economic growth and offer customised Business Development Support (BDS) according to the needs of SMMEs.
[See presentation for criteria for eligibility and funding requirements under the Business Recovery Programme for formal businesses]
The DSBD has allocated a total budget of R300 million through the reprioritisation of funds, which aims to support 150 small businesses predominantly in KwaZulu-Natal and Gauteng.
Informal Traders Support Programme
Under the Informal Traders Support Programme, the DSBD aims to offer financial and non-financial support for over 17 667 entrepreneurs by providing a once-off R3 000 grant to recover their stock. The Department also plans to offer BDS, which will be administered and monitored through SEDA as an investment.
[See presentation for criteria for eligibility under the Informal Traders Support Programme]
The Department has formed partnerships with Nedbank and various informal trade associations to ensure rapid delivery of relief measures. These partnerships are also aimed to assist package applications and to verify operations of the informal traders. Grants will be disbursed from Nedbank facilities, which will provide periodic reporting to SEFA. SEFA will provide all post-investment funding where necessary.
The DSBD introduced interim relief measures for informal businesses. These interim measures included a moratorium on permits and licence requirements for businesses until 31 December 2022, through the Business Act. The Department said that this will reduce the costs of doing business for the period covered by the moratorium and further reduce unemployment rates.
It is expected that the SMMEs, including co-operatives, will plough back the money into their respective businesses through acquiring equipment or stock. The Department believed that increasing the grant component and reducing the debt component of the Blended Finance Model will make funding more accessible to SMMEs and co-operatives, especially those in the informal sector.
The DSBD provided an update on businesses supported by SEFA, stating that all economic sectors in KwaZulu-Natal and Gauteng by businesses insurance, resulting in a total of R14 913 259.32 total SEFA exposure.
Mr G Hendricks (Al Jama-Ah) said, regarding licences and permits, that there have been many problems where municipalities have taken long to issue permits, especially to informal traders. He said that it is unacceptable for municipalities, especially in the Cape Town and Johannesburg, to continue to confiscate goods from informal traders. He asked for a response from the Minister regarding measures to ensure that the DSBD is equipped to issue permits without red tape, particularly after the impact of the pandemic and unrest.
Regarding unemployment, he said that South Africa has been rated the most unequal country in the world and the country with the highest unemployment rates. He felt that the reason for this was due to government not having a policy on unemployment. Mr Hendricks said that Al Jama-Ah will call for full employment when the Minister introduces a Green Paper on employment, in conjunction with the Department of Employment and Labour (DEL). He said that stop-gap measures would not suffice; the Department must take bold moves in order to combat these issues.
Concerning the localisation programme, Mr Hendricks said that the President is looking for the DSBD to take the lead, which is still yet to happen. Out of the thousands of products, only a few have been worked on. This progress resulted in supermarkets allocating shelf space, providing assistance to disadvantaged entrepreneurs in township areas.
Mr Hendricks said that he hopes the Minister and Deputy Minister of the DSBD will honour the commitments made: to create 20 business opportunities in Mitchells Plain, buy a fishing vessel for the Mopani area and set up a coffee shop for a 21-year-old girl assisting her mother with down syndrome.
Mr H Kruger (DA) said the presentation provided a lot of pride to see the Department acting on the planned strategies, following the incidents of unrest. He congratulated the DSBD on removing a lot of the red-tape when claiming for funding under these strategies.
Regarding the Ease of Doing Business Bill previously mentioned in a meeting, Mr Kruger said that the Department of Planning, Monitoring and Evaluation (DPME) found the Bill undesirable. He suggested that the Bill be introduced as a Committee Bill to reduce the red-tape in South Africa to allow businesses to prosper in the future.
Mr Kruger proposed that the Committee make a commitment to never stay in hotels again. The Committee should rather support small accommodation businesses when on oversight visits.
Mr J De Villiers (DA) asked, concerning the execution of the programmes, that SEDA and SEFA go to the ground with the agents, going to entrepreneurs and small businesses and informing them of the programmes. He suggested that the Committee, along with the Department, revisit some of the entrepreneurs from the first oversight visit and provide them with the information on how to gain access to these programmes.
Regarding permits and licences, Mr De Villiers said that a moratorium cannot be placed on permits, as permits allow municipalities to provide order to trading spaces. He suggested that permits should rather be discounted or given for free. He emphasised the need to regulate trading spaces.
Mr De Villiers also suggested that the DSBD provide the Committee with easy-to-use marketing material that can be distributed easily to those affected via social media such as WhatsApp or email.
He said that the DSBD and the Committee must create a climate for job creation and sale of products.
Mr F Jacobs (ANC) said that many of the women in the informal trading sectors are not as informed on the online services and application processes. This was exemplified specifically during an oversight visit to the Isipingo area. He recommended that unemployed graduates should go into informal areas to conduct the surveys to assist with the process of service delivery. He felt that it is important for informal traders apply as soon as possible.
Concerning debt relief, Mr Jacobs said that, while it is important to focus on the areas most affected by the unrest, government must not neglect other areas in poverty where the need is also dire. He welcomed that the criteria of the programmes that included relief for areas other than KwaZulu-Natal and Gauteng.
On licences and permits, he said that it must be an easy process for permit holders to do business in a municipal space. He used the example of Cape Town to say that certain municipalities make it incredibly difficult for informal businesses to trade. He had received a delegation from the Cape Parade, where the city was forcibly removing informal traders that had been historically conducting business. He made another example in Gatesville, Athlone, where permit holders’ stock and permits were confiscated by the Metro Police under the pretences of health and safety bylaws and ordinance to assault informal traders. He asked how it could be ensured that municipalities properly implement the regulations.
He suggested that the DSBD provide the Committee with quarterly reports on the progress of relief measures in affected areas in order to measure the success of the programmes and to hold the Department accountable.
Ms B Mathulelwa (EFF) asked for the hawkers and informal traders in Gauteng to be provided, by the municipalities, with a permanent solution – shelters to protect their stock.
Ms Mathulelwa further asked that the DSBD and Committee create a timeframe that segments the different stages of the programmes.
Regarding requirements for relief from SEDA and SEFA, she expressed concern that the same ineffective requirements were mentioned in the latest intervention measures.
Inkosi B Luthuli (IFP) expressed concern over people in rural areas being unaware of needing to fill out forms. He asked how these people were going to assisted during the application process.
Mr Luthuli said that he was disappointed that the Department, in its report, failed to mention the shopping centre, located in Umzumbe Local Municipality, that was burnt down during the unrest in KwaZulu-Natal. He could not understand why this was the case, considering that the Department visited the affected area during oversight.
The Minister clarified the moratoriums, stating that it was not applicable to the payment of licences. The moratorium is on the fee imposed by local authorities in order for SMMEs to receive the permits. The moratorium is doing away with the fee for the prescribed period. To combat issues of local authorities depriving SMMEs of that opportunity, the DSBD has ensured to follow-up with all non-compliant municipalities.
She exemplified this with the City of Cape Town, stating that, due to their non-compliance, the DG has written to them and is planning on escalating the matter if it does not get addressed. She appealed to the Committee to continue to bring up issues of local authorities depriving SMMEs of opportunities.
Concerning unemployment rates, the Minister said the programmes intend to help reduce unemployment. She said the only way to grow the economy is through investing in small businesses, which has been catered to in the criteria by means of including informal traders.
The Department was cognisant of digital challenges, including IT illiteracy. SEDA offers support to SMMEs in terms of filling out forms. The proposal to employ unemployed graduates as application assistants was considered and will be explored further with the DEL. The DSBD aims to spend more on the core business, not only on the support but without leaving the support. It is critical that budgets are fully utilised to fulfil the DSBD mandate. This will be done through undertaking business development and all necessary training by SEDA and potential other partners.
Regarding commitments made to the Mitchells Plain community, the Minister said that it is important to provide support to small businesses and informal traders outside of the scope of KwaZulu-Natal and Gauteng. She indicated that the Eastern Cape and Northern Cape were also areas of concern for the Department. The Minister urged the Committee to further advance the call to National Treasury to provide more funding to assist SMMEs.
On localisation, the Minister said that the criteria of businesses supported includes the manufacturing sector. The DG indicated that there are 1 000 products ready to be put on the market, and that there will be participation in the Dubai Expo to showcase these innovative products. The DSBD aims to identify a particular component that can be manufactured in South Africa in every ecosystem. SEFA is working hard on enhancing support for localisation.
The Department may be revisiting Parliament to review how far they are able to go with SEFA in terms of funding available, when looking at economic conditions and demands, and the amount of support required by SMMEs, to grow.
Concerning red-tape, the Department acknowledge the challenges, and indicated that SEFA is investigating the areas that can be relaxed without undermining the law. In areas where exemption is permissible, National Treasury will be approached for financial support.
The Minister said that a follow-up meeting will be made with the local authorities in Gauteng regarding a space required by hawkers.
SEFA receives many applications, though many businesses fall short of complying with the criteria. The criteria was established to tell SMMEs that it is important to follow certain processes under the law, which SEFA and SEDA aim to assist through professionalising the sector.
Regarding shopping centre infrastructure, the DG said that those applications are referred to TTI under the infrastructure grant. The Department will ask SEDA to assist shopping mall owners to package their applications, which will then be forwarded to the TTIC because they have the available infrastructure.
Ms Tumi Sefolo, Executive Manager: Direct Lending, SEFA, said, in terms of the requirements for the Business Recovery Support packages, that some of the COVID relief programmes have been simplified and implemented. SEFA expressed caution of abuse of funding and asked to be held up to any form of scrutiny to ensure that only businesses that deserved to benefit benefitted.
SEFA said to applicants that, where their business premises have been destroyed and they do not have access to any manner to apply, SEDA has made their offices available for those business owners to come forward and submit the necessary information to process packages accordingly.
Mr Hendricks expressed dissatisfaction with the response concerning permits and licences. He said that legislation requires the DSBD and removes the responsibility from municipalities. The permit system upholds Apartheid spatial planning systems that prevent informal businesses from operating in white areas where lots of money can be found. He said that the Department must not hesitate to issue the permits themselves.
Regarding SEDA, he noted improvement, specifically in Mitchells Plain where three applicants went to the fourth round and may be eligible for funding.
The Chairperson said, concerning permits, that the moratorium served to assist in the meantime until the required legislation is ready. She said that there is a large resistance from municipalities.
The Minister said that the Department is currently reviewing the Business Act in order to address issues of powers between the DSBD and municipalities. The moratorium serves as an immediate relief measure.
Regarding employing the assistance of unemployed graduates, the Department is still considering budgets and consulting the DEL to provide the necessary assistance.
The Chairperson said that the Committee will be conducting oversight visits and is committed monitoring these programmes to ensure development in those areas. The Committee will invite the Department of Economic Development and Tourism to ensure that the message is spreading to all municipalities on all levels.
The Chairperson said that SEDA must stop calling people to come to their offices for training, as the travel fees are burdensome. SEDA has the resources to arrange facilities, in the affected areas, to be used for training.
Mr H April (ANC) observed that it was rather unfortunate that the Committee was informed of the amalgamation processes through the media; he asked that, in the future situations like this, Members should be taken into confidence before the information reaches the media.
The Minister responded that government processes require that the Department first goes to Cabinet for approval and then gets sent to the Committee. It was sent to the media first, as Cabinet statements are immediately issued to the media – which was beyond the control of the Department.
Committee minutes of 02 June, 24 July, 12 August and 18 August 2021 were all considered and adopted.
The Chairperson thanked everyone for attending the meeting.
The meeting was adjourned.
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