The Standing Committee on Appropriations met on a virtual platform for a briefing by the Department of Trade, Industry and Competition and two of its entities, the Industrial Development Corporation and the National Empowerment Fund, on the Second Special Appropriation Bill [B17-2021]. The Bill is intended to facilitate government interventions to address the consequences of the July unrest in Gauteng and KwaZulu-Natal and the impact of Covid-19 on the most vulnerable sector of society. The Bill proposes that R1.3 billion should go to the DTIC.
The Committee had to be assured that the Department had proper plans to use the money. It also had to have a good understanding of what the Department had done with monies previously appropriated to the Department.
In response to the unrest in July 2021, the dtic group had drawn on multiple sources to quantify the extent of damage and had developed an integrated response that included the Department of Small Business Development and other parts of the state at national level and the KwaZulu-Natal and Gauteng provinces and a number of metros and district municipalities. The package to be financed included a dtic reprioritisation of R700 million and a reprioritisation of R1.5 billion by the Industrial Development Corporation and R250 million by the National Development Fund, in addition to the R1,3bn which was proposed in the Second Special Appropriation Bill. Details were provided of businesses that had already been supported, both financially and in other ways, such as reducing import taxes and facilitating the passage of goods through the ports, particularly for businesses producing medical supplies.
The Industrial Development Corporation had initially assisted its clients where its investments were at risk but had since expanded its support to other businesses and was even supporting small-scale farmers and informal traders. Blended funding allowed the Corporation to offer a combination of grants and loans, as appropriate to each individual business. A total of 39 business clients of the National Empowerment Funds had been affected, suffering R413 million in damages. In addition to financial losses, business owners were, in many cases, severely traumatised. The Empowerment Fund also informed Members that the senior management of the Department and the entities were meeting regularly with the Minister of Trade, Industry and Competition to report on their progress in supporting industries and businesses.
Members had many questions for the presenters as they interrogated who was being supported, processes being followed and methods of support. What was the Department doing to monitor any nefarious activities, such as double dipping for support by claiming from Sasria and other sources? What anti-corruption measures had been put in place by to prevent corruption? How would micro-survivalist sole proprietorships be supported? Was the total amount of funding proposed in the Bill in line with the needs survey as well as the client impact assessment? What other measures could be put in place to ensure that everything was being done to support companies other than the clients of the presenters? Were processes and rates at the Industrial Development Corporation more favourable than those offered by commercial banks? How were the entities communicating with businesses in need of support, especially those in townships? Would any measures be put in place to support small-scale farmers? Were informal traders recognised and, if so, how were they assisted?
Members asked how the Department would stick to cashflow projections and not overspend. What had the Department and the Competition Commission done to ensure that prices stayed low? What had the impact been of the July 2021 looting in Gauteng and KZN on jobs? Had the call for localisation produced results? Had there been a resurgence of over-reliance on imported goods, especially in the food industry? How much support was being given to emerging businesses, in particular women, youth and disability-owned businesses in the emerging economy? Could the Department indicate which businesses, even those outside of Gauteng and KwaZulu-Natal, had been impacted by the interruption of supplies, etc.? Had the local manufacture of personal protection equipment been supported and, if so, how much support had been given? Had there been reports on the re-selling of coffins? What was the role of the Department in encouraging businesses to insure themselves with insurance companies and SASRIA?
The Chairperson welcomed the Committee. He explained that in terms of the Money Bills Amendment Procedure and Related Matters Act 9 of 2009, the Standing Committee on Appropriations dealt with all matters relating to appropriation of government funding so whenever anyone received money, they became the clients of the Portfolio Committee.
The Bill proposed that R1.3 billion be allocated to the dtic and its institutions. That was quite a chunk of the money to be appropriated, so before approving the recommendations of National Treasury, the Committee had to interact with the proposed recipients. The Committee had to be assured that the Department had proper plans to use the money. It also had to have a good understanding of what the Department had done with monies previously appropriated to the Department. Based on the recommendations of the Committee, the National Assembly would decide whether to appropriate the money.
Presentation by Department of Trade, Industry and Competition, the Industrial development Corporation and the National Empowerment Fund
Presentation by dtic
Mr Shabeer Khan, CFO, DTIC, said that in response to the unrest in July 2021, the dtic group had developed an integrated response that included the Department of Small Business Development and other parts of the state at national level, the KwaZulu-Natal and Gauteng provinces and a number of metros and district municipalities. The dtic group drew on multiple sources to quantify the extent of damage, including a self-reporting survey of businesses by the dtic; estimates by the SA Property Owners Association based on their member feedback and projections by the SA Council of Shopping Centres.
The package to be financed included a dtic reprioritisation of R700m, IDC reprioritisation/allocation of R1.5bn and an NEF allocation and partner support of R250m. National Treasury had proposed an additional amount of R1,3bn, which was included in the Second Special Appropriation Bill. Jobs saved/supported by applications approved to date was 6 799. The IDC was considering rescheduling nine existing clients affected by the unrest, for a facility worth R42m. The IDC was engaging the sugar industry and had entered a partnership with the Gautrain Enterprise entailing a R50m allocation with the Propeller Fund. The dtic was finalising a R600m proposal for rebuilding of critical infrastructure damaged during the unrest.
Ms Susan Mangole: Acting Deputy Director General: Industrial Financing, DTIC, provided details of the support offered by dtic, which included facilitating the release of cargo at the port for BMW, J & J, Isigidi and Biocore’s critical medical supplies for the vaccine rollout. The dtic assisted Cipla Medpro in Durban to re-open as it produces anti-retroviral and therapeutic drugs, B Braun to outfit a new unit and re-start its renal care centre, and United Pharmaceuticals Distributors in Pinetown was given assistance to become operational again. It assisted Sumitomo to move into a temporary warehouse in Durban. Sumitomo was operational and also in full production in the Ladysmith plant. The company was collaborating with industry and the SA Police Services on the “SAY NO TO LOOTED GOODS” campaign.
Presentation by Mr IDC
Mr Tshokolo Nchocho, CEO, IDC, stated that initially the IDC concerned itself only with the IDC’s clients. 38% or 106 clients were indirectly affected by the unrest, and five were directly affected. Of the 106 impacted clients, 5% or 15 clients indicated that they would consider applying for IDC funding. A further 4% of the clients, 11 clients, indicated that a deferment would be requested. The Business Partners impacted the most were in Chemicals; Medical and Industrial Minerals, Mining & Metals, Textile & Wood and Machinery business units. Deferments were being considered on a case-by-case basis in line with the deferment criteria and IDC liquidity requirements.
The IDC had tailored a recovery package of R1.5 billion plus R400 from the Manufacturing Competitiveness Enhancement Programme (MCEP) equalling R1.9. billion. The package included:
-R1.4 billion Post-unrest Business Recovery Fund to assist all businesses operating in sectors that the IDC funded at concessionary rates;
-R100 million grant allocations to provide technical and financial assistance to small businesses in townships, rural areas and small towns and associated supply chain disruptions;
-R10 million CSI allocation to support food security and recovery efforts in affected communities, including school infrastructure rebuilding with a focus on rural, outlying and less-developed areas that now faced increased vulnerability;
-R400-million administered on behalf of the dtic for the MCEP Economic Stabilisation Fund that supported manufacturing companies affected, including those impacted by supply chain disruptions by offering concessionary funding through interest-free loans.
The IDC had already begun allocating funds and was forming partnerships with sugar mills to support small scale sugar cane farmers whose crops had been burnt.
Presentation by NEF
Ms Philisiwe Mthethwa, CEO, NEF, stated that the NEF had undertaken an assessment of the impact of the unrest on its existing portfolio within the affected areas (mainly in Gauteng and KZN). The destruction had resulted in job losses, business closures, destruction of property and loss of stock and reversal of gains like loss of customers and revenue. A total of 39 businesses were affected accounting for R413m. The 13 severely affected transactions had a combined value of R137 m and 1500 jobs were at risk. The business loss of revenue was R50m to date.
Ms Mthethwa informed Committee Members that, in addition to financial losses, business owners were, in many cases, severely traumatised. She also informed Members that the senior management of the dtic and the entities were meeting with the Minister of Trade, Industry and Competition to report on progress in supporting industries and businesses.
Mr Khan concluded with a reference to the attachments to the slide show that contained specific details for the information of Committee Members.
Mr A Sarupen (DA) asked dtic about double dipping for support, for example claiming from Sasria and other sources. He had heard about it happening. What was dtic doing to monitor such activities? He was particularly concerned about micro-survivalist enterprises where the owner was registered as the tax entity and not the business. How would they be assisted as many had suffered badly during the unrest? What barriers were in place, how would they be addressed and how would sole proprietors access the available funding? That was where the greatest need would be.
Mr O Mathafa (ANC) commended the team for the speed at which applications were being fast-tracked. What was happening to applications that the entities would normally be attending to, i.e. in the normal course of business? He was particularly concerned about processes. Was the total amount of funding proposed in the Bill in line with the needs survey as well as the client impact assessment? What other measures could be put in place to ensure that everything was being done to support companies other than the clients of the dtic group?
He was pleased at the commitment to ensure compliance. He assumed that would be linked to education of business owners as to how to access the support available from the dtic and its various entities. His constituents often lamented that the compliance requirements were extremely cumbersome, making it difficult for the man on the street to access the packages that government made available. Regarding the coordinating of the Department and entities to ensure that there was no double-dipping, would that continue even beyond the crisis in KwaZulu-Natal and Gauteng?
He was aware that when a company applied to multiple entities for support, the company had to present the same documents each time. Was it possible to share online documents? He asked about the NEF criteria to access funding. What would be used to determine the quantum of the grant versus the quantum of the loan in a blended support mechanism? Loans from banks were linked to compliance but also linked to qualification criteria. He was of the view that the rates and application criteria at IDC should not be as rigid as at commercial institutions/banks. Were processes and rates more favourable than those offered by commercial banks?
Mr Mathafa asked what was meant by new ways of communication with clients. Had any avenues been identified by the team? Area and site visits were mentioned. He assumed that an area visit referred to an office visit but were there any other mechanisms for meeting with clients? He personally had never come across anyone who had been assisted by dtic but he heard a lot of complaints from people who had been declined. Was there alignment between the number of applications received and the number of sites affected? Was there an incongruency between the two? If there was not an uptake in line with the number of sites affected, why was that so and what measures could be put in place to assist those businesses?
Mr X Qayiso (ANC) stated that measures had come at a fortunate time as the economy was facing multiple challenges. He had heard that 14 000 jobs had been lost. When the Department supported businesses, were those businesses required to retain all jobs or were they allowed to lay off or retrench people? It would not be right for businesses to lay off people when government had intervened to assist businesses. In the city, there was a focus on formal businesses but there were people who were not formal traders. The informal traders made a significant contribution to the city. The contribution of informal traders to the economy was often overlooked. A formula should be worked out according to which informal traders could be reimbursed. They had to be looked after.
He referred to the concentration of the market and the lack of investment for small farmers to thrive. Would any measures to be put in place to support small-scale farmers? He noted that access to funding was for businesses in Gauteng and KwaZulu-Natal only, but companies in the Free State had not received supplies from KwaZulu-Natal, especially manufacturing companies. They had been severely affected by the lack of supplies and had had to put off workers. It should not be forgotten that the companies in KwaZulu-Natal and Gauteng did not operate in isolation. How were companies that were indirectly affected by the violence going to be supported?
Mr Z Mlenzana (ANC) raised his concerns about informal traders. Were informal traders recognised? If so how and how were they assisted? For example, the farmers were not always formal traders.
He asked the CFO how the dtic would stick to cashflow projections and not overspend. He needed to know if the CFO could spend the money that the dtic was asking for. How were clients monitored and how were they evaluated? Did the dtic have any under-expenditure or over-expenditure in its budget? How much had been referred to SAFRIA where the dtic felt unable to handle the claims of its clients?
Ms E Peters (ANC) stated that the presentation had clarified issues but she wanted more details. Was it not possible that businesses would claim from insurance and ask for assistance from dtic? What was the role of dtic in encouraging businesses to insure themselves with insurance companies and SASRIA? The lack of insurance was sometimes based on the cost of premiums.
She found it worrying that there had been so many incidents of looting of funeral parlours. Had dtic received intelligence reports on the re-selling of coffins? Funeral parlours were said to reallocate coffins and now it seemed like there was a market for recycling or second-hand coffins.
Was there any support for small businesses such as pharmacists and dental health practitioners that would possibly not re-open because such service providers were now reluctant to re-invest in township locations? How much support was being given to emerging businesses, in particular women, youth and disability-owned businesses in the emerging economy? Could the dtic indicate which businesses, even those outside of Gauteng and KwaZulu-Natal, had been impacted by the interruption of supplies, etc.? For example, some people could not get fabric to make clothes that they normally sold because the factories had burnt down and so they had lost their income. Another example that she had personally encountered was that Defy spares were no longer available because the component factory had been burnt down. How many people were affected by a lack of component parts?
Ms Peters asked what anti-corruption measures had been put in place by the dtic to prevent corruption? Handwashing, sanitation and wearing masks had become the new normal. What had the dtic and the Competition Commission done to ensure that prices stayed low? What had the impact been of the July 2021 looting in Gauteng and KZN on jobs?
Mr Qayiso asked about PPEs. Had the call for localisation produced results? Had the dtic supported the local manufacture of PPEs and, if so, how much support had been given?
Ms Peters asked whether there had been a resurgence of over-reliance on imported goods, especially in the food industry. The previous year, the dtic had had to protect the poultry industry role players against imported products. How could they ensure that there would not be over-reliance on imported goods?
The Chairperson noted the extensive interest in what the dtic was doing. That was because the Standing Committee on Appropriations understood that the problems in the economy could not be solved until the economy had been transformed and the dtic and its entities were key in that role. The Committee would engage with dtic at a later stage as the Department had to explain the processes it had in place to ensure the de-racialisation of the economy. NEF and IDC would each be called to present to the Committee individually. The dtic was working with a R2.1 billion budget and the Standing Committee wanted to see where the money was going. The Committee was playing a critical role in de-racialising the economy in the true sense of the concept. Was the dtic serious about empowering black people, women, youth and disabled and rural people?
The Chairperson asked the Department and the entities not to lose sight of the intentions of the government in relation to the economy after 350 years of marginalisation of black people. It could not be business as usual. When one looked at the flow-through of monies, nothing went to black people. The Committee did not want to preside over such an economy.
He said that the CFO had referred to R20 million lost to the KwaZulu-Natal GDP but that was actually lost to the SA GDP. He had seen many different numbers. How much confidence did the CFO have in that number? It was now two months since the unrest. How many companies had been returned to operation? What about the affected farmers? Business could change overnight but farming depended on the seasons and therefore did not have the same agility. Had the IDC ever considered using black farmers associations as intermediaries?
The Chairperson asked for more flesh on the money distributed: details of race and gender, etc. How far was the assistance to those people? Referring to a slide regarding poor communication, he asked why was the Department was not communicating. In slide 24, the CRIP (Critical Infrastructure) column was empty. Why?
Could the officials say to which areas support had been allocated? As politicians, he and the Committee Members went to the people and the people told them if they were still waiting, so he wanted to know what officials had to say about support that had been given. How much of the budget had gone to black people, women, youth, disabled, townships and rural people? The Committee wanted to know that the Department was supporting government policy.
He required details of the profile and geographical spread of the stabilisation fund and concessionary fund. How did the IDC define its clients? The Rand value was very high when it came to Gauteng support: was there an over-support of clients in Gauteng? What was the geographical spread of the IDC’s clients? Regarding the choice of millers as intermediaries for farmers, he asked if that was an optimal way of distributing funds. How did one ensure that the targeted clients received the funds?
The Chairperson noted that the dtic talked about R2.1 billion, but when would it be distributed? What was the nature of the intermediaries? What were the conditions governing the Solidarity Fund? Who benefitted from blended finance? How did it work? Regarding the retention of jobs, what were the conditions of assistance? Was there a requirement that a company had to produce jobs in order to be given support or were the companies given a blank cheque?
The Chairperson said that the Committee did not want convenient answers and because some questions were very broad, the officials might have to provide the answers later.
Mr Khan responded to questions about the support offered to micro-businesses and businesses in the township economy following the unrest. The survey indicated a greater need for support to such businesses. The IDC had earmarked R100 million, and was working with intermediaries like the Stokvel Association. The NEF had provided support to those companies.
He said that a core objective of the Department was to build an integrated economy and the Department was very willing to come back to the Committee at a later stage, with the NEF and the IDC, to present its processes and goals.
Regarding double-dipping, the CFO said that the dtic was aware of the gaps in control measures in the system that became evident during the Covid relief and it had requested the Auditor-General to oversee the payment of funds and to provide timeous insight into what needed to be done. The Minister and Deputy Minister had instructed the Department to ensure that there would not be a replica of the July unrest by building the economy better and in different communities. The dtic was actively promoting “building back better” as suggested by the Minister. Assurance practices and risk managements systems, including internal audit and risk control, had been activated and if corrective action was required, the dtic could ensure that the measures were in place. Earlier reports had been of areas that had been completely burnt but having sent people to the sites, it became clear that some intelligence had been incorrect and that information had been corrected.
Regarding the speed of applications, Minister Patel had stated that support had to be made timeously so that companies could come back as quickly as possible so that the impact on the economy and GDP was kept to a minimum. The dtic and entities had to change application and award processes to address that concern. The Minister had instructed that all applications were to be adjudicated on a daily basis, so adjudication committees were sitting daily. The quantum of support was enormous. National Treasury had suggested R1.3 billion and the amount was huge but the dtic was aware that it would not be sufficient. The Department and the entities had re-allocated own funds to add nearly R4 billion to the R1.3 billion. Also, more than financial support had been offered. An example was where component suppliers had been disrupted, they were brought on board as quickly as possible and also entry through ports was hastened. The Competition policy instruments were addressed to allow companies to implement support measures so that the companies could move forward. The International Trade Administration Commission of South Africa (ITAC) was allowing for a rebate system for companies that needed imports to deal with the disruptions to their supply chains and ITAC was allowing some imports, especially food products and components to enter the country duty-free. The dtic had a committee managing that.
Mr Khan stated that if the situation had been approached as in the past, support measures would not have reached companies timeously. For example, some companies had had documents destroyed and could not provide the information that would normally be required to access support so dtic had looked at other ways of verifying information e.g. information available at banks. Looking at finding ways of improving the ease of doing business, dtic had turned to the information available on the Bizportal of the Companies and Intellectual Property Commission (CIPC) and had allowed companies that provided essential services to use that information. Bizportal allowed companies to be registered in a timeous way and one way was by verifying information with the SA Revenue Service and similar entities and so various ways of obtaining information had been utilised by companies that had lost information during the unrest.
Mr Khan elaborated on conditions around support mechanisms. From the outset, based on the surveys, the dtic had understood that it needed to ensure that jobs were protected. Retention of jobs was a key requirement for support as the unrest would have a direct impact on GDP – it was estimated the loss would be at 0.3% to 0.7% of GDP. The dtic also wanted to ensure that companies that were uninsured were brought into fold of the insured, especially via SASRIA insurance that was not expensive but not well known. The companies needed to understand the importance of insurance and information about SASRIA had to be made more easily available to businesses.
In response to Mr Mlenzana’s questions around cashflow projections and monitoring clients, the CFO stated that the dtic ran a programme of different incentives totalling R6 billion annually and kept a tight control on that cashflow. The incentives included the Black Industrialist Programme, the Auto sector, etc. so cash flow systems in the dtic were very tightly managed but also allowed for funds to be dispersed timeously.
Mr Khan said that the work with SASRIA was around infrastructure rebuilding. The dtic was working closely with SASRIA to ensure no double-dipping but speedy re-building. Regarding businesses of women, youth, disabled and rural communities, it was clear that it was necessary to build a more inclusive economy. Larger companies had supported small companies. Small companies supplied food to the larger companies or the workers, and that type of business had suffered. The inequalities had to be addressed and the economy had to be rebuilt in a more inconclusive way.
Mr Khan stated that the Competition Commission had intervened on prices and the National Consumer Commission had also intervened. Companies that were overcharging were brought into line and consequence management was put in place. Two programmes were in place to support local PPE production. Support was given to a facility to produce personal protection equipment (PPEs) and a dtic partnership with the Council of Scientific and Industrial Research (CSIR), using the solidarity fund, had produced 20 000 ventilators for the health sector in SA.
Ms Mangole stated that the dtic was working with SASRIA on the Critical Infrastructure Programme to see how much it was availing companies from their insurance. Companies like Ithala and Isithebe had each been assisted in obtaining a bill of quantity so that the dtic would know what the shortfall from the insurance claim would be and so how much the grant would have to be to cover the shortfall between SASRIA and losses experienced. Where the grants had not yet been paid, the dtic was awaiting a bill of quantity. SASRIA had informed the dtic that it had received a lot of claims from companies in rural areas that did not have any insurance with SASRIA.
To address the potential of job losses, the dtic required companies that received a grant to bring the affected jobs back within 12 months of getting a grant. Even companies outside of the area were being encouraged to increase jobs to compensate for the companies that had would not return to business in the country.
Mr Qayiso asked which came first: the SASRIA payment or the dtic grant.
Ms Mangole explained, using the example of Isithebe Industrial Park. The Park made a claim, SASRIA informed dtic how much it would avail and dtic would provide the grant to make up the difference. Because it was a cost sharing process, both SASRIA and the dtic would pay the contractors, etc. simultaneously. Other companies were getting bridging loans through the IDC or NEF because they were not sure exactly how much SASRIA would pay them. They would repay the loan as soon as SASRIA paid out. Grants became deductible from the account of the company only after it showed that all jobs had been re-instated.
Mr Nchocho informed the Committee that the IDC would have to come back with some of the information requested as he did not have the figures at his fingertips. He stated that the IDC provided bridging finance where a claim had been lodged and acknowledged by SASRIA. There had to be an acknowledgement by the client that repayment would take place immediately on the pay-out by SASRIA.
The IDC had three channels for reaching small businesses. One working mode was a small team that processed applications made directly to the IDC. The second channel of making funds available was by providing funds to Trade and Investment KwaZulu-Natal to assist township businesses. R30 million had been made available so far. In Gauteng, the IDC was working with the Gautrain Enterprise, Propellor. The IDC had made R 100 million available and Propellor had provided R50 million and the funds were being used to support township businesses. The IDC was also working with other intermediaries.
The speed and efficiency with which the IDC worked in the normal course of business had been maintained by the establishment of a dedicated team to work on the recovery programmes while the normal teams continued their work uninterrupted. Other clients were not prejudiced.
The IDC had seen a tapering down of numbers. Of the R1.5 billion approved, R600 million had been utilised and R900 million was still available but the volume of applications on hand that day was for only R460m. IDC had more capital available than credit applications had been received. Geographically, he could say that applications had come from the northern rural areas of KwaZulu-Natal but a higher proportion of money had gone into the urban industrial areas. He would provide the information by area but agreed that the IDC needed to drive more money into the rural areas. He had the details per region and per municipality as the Minister had asked to see those figures.
Mr Nchocho reminded the Committee that the country had very strict laws relating to knowing one’s clients, and ensuring that one checked identity and source of funds, doing business only with people who were compliant with tax obligations and not enabling a criminal syndicates, i.e. there were the Financial Intelligence Centre (FICA) checks so it did take time but the IDC was being as speedy as possible, without breaking the law. Documents were requested from the registration office and the IDC did not wait for the company to submit. He stated that despite everything, the IDC did not want to be found to have broken the law.
Whether the IDC provided a loan or a grant was a result of looking at the historical business record of the client and then working with the client to determine the total need and what the client could afford going forward. Having determined how much a client could afford to repay, the rest was funded by a grant. He explained that interest rates were concessionary rates. Clients paid 0% for the first 12 months and then it was 5% fixed for the rest of the loan term. Another concession was the funding holiday, i.e. a moratorium of 12 months in paying back the loan. He would provide the number of applications received and details of the geographical areas in writing.
Mr Nchocho agreed that the IDC’s communication seemed to have fallen short. Much communication had been through the internet but now the Corporation was using local radio stations. To mitigate job losses, a condition of a grant or loan was that the beneficiary had to restore all jobs and IDC had an audit team that went on site to validate the number of jobs filled throughout period of the loan. The IDC and dtic were looking at provinces not directly affected and would be able to report back in two weeks’ time about helping businesses in other provinces. The post-investment monitoring team would monitor investments and report to the IDC Board and executive on the use of the investments and progress of the businesses.
He informed Members that many SMMEs were not insured but the IDC now arranged insurance with SASRIA for all businesses receiving assistance and included the insurance payments for the first three months in the loan amount. The IDC had assisted several small pharmacies in the township or rural areas. It was not difficult as those businesses did not need more than R1m to R1.5m. Regarding the demographics of who had been supported, he had the details, just not at his fingertips and that would be provided. He would also provide in writing the validated number of businesses that had received support. Monitoring was taking place via the performing of live audits by the dtic and by the AG’s Office.
Mr Nchocho explained that all members of the IDC adjudication committees had to declare their interests. No one person could sign off on any decisions – all decisions to provide grant support were a result of meetings that were recorded. He added that the message from the Committee about transformation was loud and clear and very eloquent. Millers been selected as intermediaries for the small-scale sugar farmers as they had trading facilities but the IDC would also look at sister organisations in the provinces. He explained that disbursements was a rolling process.
Referring to slide 34, Mr Nchocho said that the IDC had started with a narrow focus on its clients as the Corporation had to look at the exposure of the IDC to loans made but support to industry had since broadened and the IDC was assisting much more broadly than just existing clients at the time of the unrest.
The CEO admitted that investing in large cities was an albatross around the neck of IDC. Provincial offices had been delegated to provide small and medium loans to businesses in rural areas to try to improve inroads into the rural areas. Intermediaries were very helpful and did assist in the distribution of funds. The IDC was able to monitor intermediaries through its own participation in the governance structure of its clients and full, detailed reports were received by the Board and the executive. Drawdowns were made according to the list of beneficiaries which was confirmed by the IDC or intermediary person in the governance structure.
Ms Mthethwa said that the NEF’s focus on women-owned and black-owned enterprises was not discriminatory as partnerships were encouraged, and, especially large businesses, could be less than 100% black-owned, depending on how much money had to be put into a business. The NEF conducted feasibility studies to determine the bankable feasibility. Even if black entrepreneurs only had 30%, it was acceptable, depending on the quantum. Obviously, the NEF strived for a 51% black, female, youth, disability or rural ownership wherever possible. The NEF also looked at the impact of enterprises on a community and so determining the rate would depend on ownership, where the enterprise was located, i.e. urban or rural, the economic status of the community in which the enterprise was based and the impact on the community. It was therefore a complex process to determine the interest rate at which funds were loaned.
She stated that localisation was a critical factor in determining where to give assistance. The Minister had urged the NEF, and other entities, to look beyond the situation immediately before the crisis. Reconstruction and rebuilding of businesses was a starting point but the NEF was looking at where the business sourced the building materials and skills to determine whether they were sourced from townships and businesses were generally encouraged to source locally. Looking at supplies going to the re-construction programme was intended to drive localisation and even creation of new manufacturing businesses.
She explained that providing support to informal traders was the core mandate of the Department of Small Business Development but the NEF provided support to traders. Often small traders were part of the value chain of malls and so as investors were re-building the malls, they were looking at different structures and models of accommodating informal traders. There were some exciting developments that the NEF would discuss with Small Business Development. She promised to show the Committee a slide on the story of such an informal trader when she had responded to the questions.
Ms Mthethwa was aware a huge allocation of funds made to the Land Bank to assist small-scale commercial farmers. The NEF had to focus on its core mandate while small scale farmers had been accommodated via the Land Bank allocation. She added that the NEF would be very happy to support small scale farmers if funds were allocated to the NEF for that activity. The NEF had previously supported businesses in the agro-processing sectors. Jobs were lowest in the agro-processing sector even though it was one of only two sectors in the economy that was currently growing.
She explained that the amount of money lost to the GDP depended on the econometric models used by the companies to quantify loss. A student studying economics should take on the task of determining the exact amount lost to the GDP. Regarding PPEs, the NEF had received R200m in 2020/21 to provide support to black-owned companies to manufacture PPEs but it was critical that government hospitals and other medical facilities needed to purchase from local producers, regardless of whether it was a black or white business. Government had to drive localisation and the private sector would follow.
Ms Mthethwa said that normal applications were still being attended to. The NEF had only 140 employees so the majority of staff were working on the support funds but those staff members would be re-assigned to continue normal functions in a month or two.
The NEF was part of the KwaZulu-Natal Coalition initiative. When meetings were held, the NEF offered a package which included an application form and the officials assisted companies to apply there and then. Members might not have come across such firms, but she assured Members that the NEF had interacted with more than 600 companies. Regarding the looting of funeral parlours, the NEF had already approved funds for more than 20 funeral businesses. Most of the work had already been done and the NEF would be collating the information and writing an investment report including a cashflow analysis, although it would not be as comprehensive as a normal NEF Investment Report. The NEF was very excited that the Solidarity Fund would be providing grant funding that would be blended with NEF loans.
Ms Nokuthula Nkomo, Head Social Economic Development Unit, NEF, presented a slide depicting a case study of an informal trader in Umlazi who had been unemployed and had started his business using the government grant of R350 and had then taken on a small loan.
The Chairperson congratulated the Minister, the Deputy Ministers and National Treasury in their absence and team dtic because it was very clear that they had been on the ground. He thanked the officials for answering the multiple questions, which showed the interest of the Committee in the work that they were doing. He noted that there had not been any reports of malfeasance and corruption and he encouraged the CFO and CEOs to continue being vigilant and to keep a track record of all activities.
Mr Khan thanked the Committee for the questions. He noted the concerns about transformation of the economy.
The Committee would deal with minutes at a following meeting. The Chairperson thanked Members and the Department. The next meeting would be held on Friday 17 September 2021 at 15:00.
The meeting was adjourned.
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