Sefa & Seda: provincial performance & challenges rolling out of finance & business support schemes

Small Business Development

31 August 2022
Chairperson: Mr F Jacobs (ANC) (Acting)
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Meeting Summary

Video

The Portfolio Committee met on a virtual platform to receive presentations from the Small Enterprise Development Agency (SEDA), and the Small Enterprise Finance Agency (SEFA) on key issues for consideration by the Portfolio Committee.

The Finance Agency briefed the Committee on progress and challenges faced in rolling out all finance and business support schemes for small businesses and cooperatives growth, and their role in job creation. The entity was faced with huge challenges, especially with incomplete applications. Another challenge is that the entity does not fund applications that do not meet or fall outside its funding criteria. Also, applicants always expect that if a business plan is prepared by the Development Agency (or its service providers), the application will be approved by the Finance Agency. The entity has had to channel its internal capacity to respond to unplanned emergency programmes that were not part of its corporate plan. Despite all the challenges, SEFA was still able to deliver on its core mandate over and above these above-mentioned programmes.


The Development Agency briefed the Committee on its provincial performance and challenges with the Township and Rural Entrepreneurship Programme (TREP). The entity also shared various success stories from its interventions in helping various businesses, across the different provinces. The Development Agency also expressed concerns about its budget allocation, looking at the work remaining countrywide. The R90m budget is way too little to complete the work. The entity is also working with the Eastern Cape on the cannabis project to assist the farmers that were identified.

Overall, the entity has at least two District Development Model initiatives per province in its current annual performance plan. These are high-impact small business initiatives that involve all stakeholders in a district. The organisation is also investing a lot of time in building an ecosystem roadmap and developing its value proposition for the different categories of ecosystem partners.


Members were not impressed with Finance Agency presenting its statistics again, after they requested the database from them. The Members needed proof of a database, with names of beneficiaries who received funding. Members expected the entity to assist the new graduates and school leavers with funding, without the applicants having to show proof of cash flow in their companies. Business owners from black communities were previously disadvantaged, and they were not able to write business plans as required by the entity.

Members requested the Development Agency provide the Committee with the names of people who applied for funding, on 06 May 2022. Committee Members were worried about the entities’ inability to collaborate and work together. They expected the two entities to merge and work together to assist small businesses.
 

Meeting report

The Committee was informed that the Chairperson would not be available to attend the meeting. The Members of the Committee elected Mr F Jacobs (ANC) Acting Chairperson.

Mr Jacobs reported that the Chairperson excused herself due to ill health. He opened the virtual meeting, welcoming everyone in attendance. He then handed over to the Chief Executive Officer (CEO) of the Small Enterprise Finance Agency (SEFA) for the first presentation.

Briefing by the Small Enterprise Finance Agency: Key Issues for consideration by the Portfolio Committee
Mr Mxolisi Matshamba, CEO of SEFA, presented delivered the presentation. The purpose of the presentation was to report on progress and challenges faced in rolling out all finance and business support schemes towards SMMEs and cooperatives growth, and their role in job creation. The entity was faced with huge challenges, especially with incomplete applications.


One of the biggest challenges is the quality of applications, especially by YCF (Youth Challenge Fund) applicants. It has proven to be a big challenge in ensuring speedy implementation of the YCF programme. This was experienced in prior intervention programmes such as the COVID-19 SMME Relief Fund from April to July 2020, and the Business Recovery Programme (July 2021 riots). The nature of incompleteness is as follows:
-Incomplete/inadequate business plan
-No Financial Statements /Management Accounts (where applicable)
-No cashflow projections
-No lease agreements
-No bank statements - business/personal
-No quotations to justify the funding requirements
-No SARS compliance (tax clearance certificates)
-No affidavit/police statement/case number 
-Inability to provide evidence of looting

In some instances, applications could be approved without these and made a condition precedent to the funding. Despite that, the applicants delay submitting these CPs, resulting in delayed disbursements of the approved funding.

The second challenge is that SEFA does not fund applications that do not meet or fall outside its funding criteria. The forecasted cashflow must show the ability to repay the facility (affordability). The owner must display sufficient entrepreneurship skills and experience directly related to the nature of the business. The business must fit within the SEFA funding range of up to R15 million. The entity does not fund persons under debt review or un-rehabilitated insolvents. It does not fund speculative property developments. 

Another challenge is that applicants always expect that if a business plan is prepared by SEDA (or its service providers), the application will be approved at SEFA. This is not always the case because applications are often prepared by one person and applications are considered by credit committees that focus on the viability of the application. Therefore, an application may be approved or not approved.

Also, many applicants tend to submit an application that is not viable. There may be issues regarding loan repayment, market viability, the business concept not being viable, over-concentrated sectors, outside SEFA’s funding criteria. Rejection of a funding application tends to escalate complaints outside SEFA’s complaints management process.

SEFA has had to channel its internal capacity to respond to unplanned emergency programmes that were not part of its corporate plan. These programmes were implemented without additional capacity having been provided for the implementation. Despite all that, SEFA was still able to deliver on its core mandate over and above these above-mentioned programmes.

Solutions to challenges
-Increased Investment in pre-investment (application funding readiness): more focused collaboration with SEDA on pre-investment to ensure greater efficiencies on applications approvals and applicant satisfaction;
-Collaboration with ecosystem partners: more focused collaboration with even the private sector, incubators, LED offices, etc.
-Focused customer outreach: establishing structured front-offices with senior FTC staffing that office for quality and timeous handling of applications; SEFA plans to host more webinar sessions to explain/workshop funding processes & requirements. The entity will also hire more FTC to assist with application processing at various stages or programmes.
-Increased capacity of back office: Due diligence capacity and increased investment in automation.

See presentation documents for more details

Presentation By Small Enterprise Development Agency (SEDA): Provincial Performance
Mr Nkosikhona Mbatha, Acting Chief Executive Officer (Acting CEO) of SEDA, went through the presentation on their Provincial performance and TREP (Township and Rural Entrepreneurship Programme (TREP) challenges.

Improving SEDA’s Accessibility Model:
-The entity mapped additional touch points, with the assistance of the SA National Space Agency.
- This will enable SEDA to play its role as an Ecosystem Facilitator of BDS through private sector stakeholders & BDS Providers.
-A total of 180 additional touch points throughout the country; 80 will be rolled out in the current financial year for R24 million. The remaining 60 and 40 will be rolled out in 2023/24 and 2024/25 financial years, respectively.
-Provinces are busy with calls for proposals.
-The challenge is insufficient budget.

Progress with Ecosystem Facilitation Model
In line with the broader rollout of SEDA’s District Ecosystem Facilitation Model (DEF), SEDA continued with engagements with various stakeholders. SEDA Western Cape has signed a tri-partite agreement with the Department of Economic Development and Tourism (DEDAT) and the Garden Route District Municipality (GRDM). As part of the agreement, a project deliverable plan will be developed for practical implementation and monitoring of the project. The three partners worked on two major projects, which were initiated by SEDA (Pop Up Markets and an International Women’s Day Event), and the implementation of the DSBD roadshows scheduled to take place in the Western Cape Province in April 2022.   

SEDA is working with the Cities Support Programme to implement the Township Economic Development Programme (TED), which is based at National Treasury. This programme is implemented in five metros, which are Nelson Mandela Bay (New Brighton), City of Cape Town (Delft), Durban (Pinetown), Tshwane (Hammanskraal) and Ekurhuleni (Tembisa). Eight projects each focus on a specific sector, with a total of 40. Each of these projects involves different stakeholders. 

The entity’s District Ecosystem Facilitation Model is utilised as a stakeholder engagement and collaboration framework. This resulted in the signing of project charters. The pilot will be shared as one of the case studies at the township Development Symposium that DSBD plans to host later this year. 

In Mpumalanga, SEDA is part of the Economic Growth and Job Creation working group in each district. This is a DDM structure that is representative of all stakeholders in the districts, including the private sector. All initiatives involving many stakeholders get discussed and approved in this platform for inclusion in the IDP. The following are some examples of collaborative initiatives. 

KZN is concentrating on improving relations with CoGTA to ensure that the district ecosystem facilitation model is recognised. The province is currently collaborating on Market Access, including the Functionality of COGTA-funded Agricultural Infrastructure, Amakhosi Rural Local Economic Development and Township & Rural Economies Support.

-SEDA has at least two District Development Model initiatives per province in the current APP. These are high-impact small business initiatives that involve all stakeholders in a district. The organisation is also investing a lot of time in building an ecosystem roadmap and developing its value proposition for the different categories of ecosystem partners. All provinces have issued calls to express interest to ecosystem partners that want to work with SEDA to extend the entity’s access points. All provinces continued to engage their local LED Forums. Some challenges were also experienced with municipalities. The local government elections led to changes that affected relationships SEDA had developed in some municipalities. 

The entity also shared various success stories from its interventions in helping various businesses across the different provinces. One example is a company called High Point (Pty) Ltd. It’s located in the village of Hankey in the Sarah Baartman District. Its offerings include Forestry, Land Preparation, Fertilising, Waste Management, Gardening Service and Fire Protection. SEDA assisted the company with the implementation of financial management and bookkeeping. This included the development of a set of financial statements and the application of the management system. This enabled the company to submit its financial statements to enable them to apply for funding. The company was helped to apply for funding for purchasing labour carriers from the ECDC – they were funded R479 691 by the ECDC in this regard. As a result of SEDA’s intervention, the company increased its turnover from R487 641 to R2 386 820, and its employ grew from six employees to 44 employees.

See presentation documents for more details
Discussion
Mr D Mthenjane (EFF) said that, according to both presentations, it was mentioned that one of the causes of application decline was the company’s failure to prove that it has cash flow and will be able to repay the loan. He found this statement very disturbing, considering that Africans, especially black people, were previously disadvantaged during the apartheid regime. How can a person starting a new business or a school leaver have cash flow? Was SEFA trying to say that such people will never get help from the entity simply because they do not have cash flow? No wonder there are so many young people in South Africa (SA) without jobs, whereas there are entities like SEFA, which were designed to assist such people. He asked SEFA to provide a list of cooperatives that were funded during the last financial year. He said that he had requested this report, and was still waiting for it. The Committee cannot listen to the entity’s presentation without any proof to substantiate the records. The Committee needs proof that those in need are being helped.


He also said that the informal traders referred to as hawkers seem not to be informed by entities like SEFA. Those who are informed have approached SEFA for funding but were turned down. The question is whether SEFA exists to help people or not, because the entity is not doing enough at the moment. They need to explain where the money is because people on the ground did not receive funding.


He showed disregard for SEDA and said there is so much contradiction in their presentation. What is shown on records is not reflected on the ground. He once went to one of SEDA’s offices in Hazelview and found the office closed. He enquired from the people why the office was closed, but nobody could answer him. Their offices operate on their own and are not managed or supervised. People are not even informed of these entities. The roadshow they had was not enough to create awareness. They should consider doing another roadshow soon.


Mr H April (ANC) expressed his concerns in both presentations, saying that they do not correspond with what is happening on the ground. He said that if SEDA prepared a business plan and could not be funded by SEFA, they still have a long way to go. This shows that the two entities are not working well together, which is a big concern. SEFA mentioned that a person with a South African ID thinks they have the right to funding, which is not the case. They even went to the extent of reporting SEFA to the Minister and the public protector for not receiving funding. SEFA has taught people that if their administrators cannot help them, no one will. They seem not worried about being reported to all government officials or even the President. He was disappointed that the CEO even said SEFA is not operating like the South African Social Security Agency (SASSA). The programme is for the poor and should be a business SASSA for the poor. He warned SEFA to be careful not to make such remarks before the Committee. The Committee has the responsibility to do oversight to approve budgets – it cannot be that this budget was not spent on people. SEFA has displayed preferential treatment, looking at the budget allocated amongst provinces. Their spending in the Eastern Cape Province has tremendously increased. He was emphatic that it could not be correct. He claimed that provinces, where the administrators come from, have received more funds than other provinces. It happened like this the previous term and should be prevented from happening this term.


Gauteng is the economic driver of this country and the biggest contributor to GDP. Looking at what SEDA has spent in Gauteng, where there is the biggest economic activity, it is not impressive. They even dared to say they have few offices in the province. In his capacity, he engaged with the Departments and the entities as a Member of Parliament (MP) because people walked into their offices asking for help or feedback. None of the people that walked into their offices was helped rather, they were given stories all the time. SEDA’s process has a pre-approval phase, which is almost impossible for a black child to bypass. Why are they making it so difficult for a poor black child to come out of poverty? In his own opinion, he thinks that there are people who have a relationship with the administrators of both entities, who benefit from these programmes. However, the genuine people who deserve to receive funding are not getting help. He said he would raise this issue with the DG and the Minister to deal with it. SEDA and SEFA thought they could just do their presentations and move on. Their presentations were late and the Committee had to wait for them. It shows the disregard the two entities have towards the Portfolio Committee. This kind of behaviour cannot be tolerated. They will have to take action. Why is there no commitment or lobbying for a percentage of all government departments’ expenditure to go to SMMEs? Why is the SEFA funding limit not aligned to QSE entities' limits, i.e., R40 million? The listing of suppliers with retailers is happening slowly, so clarity must be provided.


Ms B Tlhomelang (ANC) added on the issue of the database that was requested for a while. It remains the responsibility of the Portfolio Committee to do assessments and check if people are being assisted or not. The database should include no of SMMEs that were funded, types and vulnerable groups. They must also include the ones in the pipeline and their challenges. She also confirmed that, in their constituency offices, people walk in regularly desperate for help, especially informal businesses. The Department and two entities must improve their service and take good care of people. The people also complained that money is always going back to the government unspent, whereas their funding applications were rejected due to lack of funds. There was a programme in the North West province led by the Deputy Minister of Small Business Development, Mr S Dlamini. There were lots of issues and challenges raised by the people. However, there is a little bit of improvement in the North-West Province. The SMMEs struggled to get assistance with registrations but were now allocated an individual to work with throughout the process. She said she would monitor them closely and update the Committee on progress. According to both presentations, an application prepared by SEDA does not guarantee approval, which gives false hope to the applicants. This is why some people could not re-apply because they got frustrated by the system. SEDA and SEFA, both government entities, should be working together to resolve issues. What are the two entities doing to improve collaboration with each other?


Ms B Mathulelwa (EFF) seconded her colleagues and said they do not need the numbers of people who were funded, but they need a proof of database with addresses of all beneficiaries. There are several cases in Limpopo and other places she reported to the Committee, which SEDA neglected. None of the people they have referred to SEDA has been helped, making it difficult for them to handle such issues. There is no proof of anything from SEDA to confirm what they have presented to the Committee. They are all pretending to be working, but no results prove that. She said SEDA offices are not in certain areas where they are most needed, such as Matatiele (Eastern Cape), and Harry Gwala (KZN). They are non-existent and also not reachable online. SEDA must be on the ground assisting people physically with paperwork and registrations. They have nothing to do if they do not have meetings to attend. They must stop appearing before the Committee with statistics that cannot be proven to be true. The Committee needs proof of database to go along with the presentation.


Ms L Lubengo (ANC) asked if SEDA knew the number of SMMEs in each district. It was mentioned that SEDA reached 10% and 80% of SMMEs in other districts. This information should be documented for the Committee’s oversight. How do they determine the effectiveness of their interventions?
The Acting Chairperson indicated that the Committee was not looking for a high level of presentation and performance of entities but rather what is happening on the ground. Members are deployed in different parts of the country to observe what is happening on the ground. The presentation should provide their achievements, challenges and most important areas where improvement is needed. The economic situation is dire, and the unemployment rate is too high. So, small business development will play a major role in economic growth. People need jobs and it can happen through these small businesses. There is a need to develop an entrepreneurial culture within communities. There are 18 million South Africans on the system but only five million are paying tax. Government wants to introduce a system where people do not only depend on handouts but develop their communities' projects. SEDA, SEFA and the Department need to financially and physically support people.


He supported what other Members said about the presentations. He said the feedback and positive criticism from the Members do not imply that they do not appreciate progress, but show that there is still more that needs to be done. The Committee pleads with senior officials, the board and the CEOs to ensure that more is done. They need responsible officials who will attend to the people's needs. Some of the things he picked up were staff shortage and capacity, which caused a bit of uncertainty. The two entities and the Department must work together to fix the errors while moving forward. Government is giving out R2.5 billion a year, and its responsibility is to maximise the developmental impact of that amount. The Committee gave the Department 20 months to integrate and merge SEDA/SEFA. The two entities presented themselves as two separate companies not working together. There must be collaboration as SEFA approves the applications and SEDA prepares business plans and support.


However, there is no link between the two. In total, 8 350 applications for finance, 133 rejected, and R2.3 billion was spent by SEFA. There is no link between approval and rejection. This is part of the frustration Members of the Committee have. There is also inefficiency in the ecosystem, and it needs to be fixed. The municipalities are not leading properly with the local development programme, which needs to be fixed. What happened to the cooperative in the pipeline? What is the plan with corporative? There are many informal traders across the country. They are membership-based organisations. So, why can they not work with them? They need to ensure that the informal traders’ voices are heard and their grievances attended to. Why are they not liaising with the Informal Economic Development Forum for the informal traders to benefit because they are the lowest in the ecosystem? There are no innovative government plans engaging or dealing with the communities. In his own opinion, they must waive all the by-laws and compliance, registrations and permits from the coloured people. Coloured people in Cape Town are still struggling. The people selling on the street sell goods to the value of R50 max, but the permit to sell in Cape Town ranges between R4000 to R5000, which is ridiculous. They removed them from the Parade, taxi ranks, etc., while trying to make an honest living. The President is saying that one thing and the municipality is something else. So, their people are being exploited by the system. They have appointed Mr Nkosi to head the red tape reduction plan. How far are they with that? The spaza development programme is also not getting off the ground. Most spaza shops in SA are occupied by foreign nationals but not South Africans. The foreign nationals are thriving in spaza shops but not the people of SA. Is there anything innovative being done concerning all the questions?


He said that the President’s education programme needed 50 000 assistant teachers across the country. Why can they not also find 5 000 young professionals who can help SEDA and SEFA with the application programme? They can also visit black business organisations or emerging farmers and help them with applications and supply chain processes in big companies. The President said that the cannabis industry must work for the people, but the emerging farmers are still criminalised. It cannot be commercialised yet because the legislation does not allow it. What can be done so the emerging farmers do not get left out due to the legislation, whereas big cannabis companies succeed? They expected the private sector bullying the small businesses to come and account before the Committee. Why is there no localisation? South African local stores such as Woolworths should support SA emerging businesses so that they also increase into the formal economy. Money must be given to those who are ready to do business. They must be checked and vetted to ensure that they will be able to repay the loan. However, the Department must also focus on developing youth. Young graduates or school leavers should be given opportunities to start their businesses. Not everyone is corrupt or wants to steal. Everyone wants to make an honest living. The Committee Members were also concerned about the same. Government needs to assist young people in starting their businesses. Black people come from a background where parents were domestic workers and petrol attendants, so none of them knew how to write a business plan. The young people of today want to become a new generation of change running successful businesses. He concluded by thanking the Department for the work completed so far, and encouraged them to push to do more since there is still a lot to be done.


Mr April added that he did not want to be misquoted, as he never said they must operate outside the legal frames. The frustrations they face when people are angry at their offices are major.


Ms Tlhomelang suggested that next time when the ministerial roadshow goes to the provinces, the Committee must join them. In the rural area where she came from, at Dr Ruth Mompati, they were visited by the Minister, and it was very sad how things had become. They communicated with the municipality alone and the municipality chose only successful SMMEs instead of going for people on the ground. Many people did not get a chance to raise issues with government. She said there is an improvement in registrations, but there are still financial constraints. Some people were helped because of her intervention as a Member of Parliament. As much as they have not received funding yet, they are registered on the system.
 

Responses
DSBD
Mr Lindokuhle Mkhumane, Director-General, DSBD, said they agree with the Members that supporting SMMEs is crucial. However, there are realities that they are facing as the Department, hence they rely on the Committee for support. The allocation of the budget is R2.6 billion. Money spent by National Treasury on Enterprise Development across the government as a whole amounted to R20 billion. Most of the money that was supposed to support small businesses went to other government departments such as agriculture, environmental affairs, and so forth. There is an initiative, led by the Minister, aimed at consolidating and aggregating the support, so that they can be able to account as the government for the money received and spent. Currently, other government institutions receiving most of the money are not accountable to their Department. They account to DMPE and National Treasury. They are willing to do more with what they have currently, irrespective of the limited resources.


They are striving for the best, hence they are working with other parties in private sectors and universities to support many businesses. The Department should be concerned about supporting Corporative. The Deputy Minister has been appointed to work with cooperatives. They had agreed in their last meeting in Mpumalanga that they would focus on the support of cooperatives. They mostly deal with big companies that claim to be supporting cooperatives –which is mainly about politics but not the support of cooperatives. If they support primary cooperatives and have a strong primary cooperative movement, it will form a secondary cooperative movement, which will assist them in growing further. In SA, tertiary cooperatives have primary cooperatives under them but are non-functional. SEFA has funded 12 cooperatives. Out of the 12, none managed to pay back the money. Based on this, there is a need to do things differently, going forward. The same was agreed with other stakeholders, including the National Economic Development and Labour Council (NEDLAC). They agreed to have a proper engagement with interventions that will assist in turning the situation around. Cooperatives are very critical, especially when you want to get as many people as possible involved economically. The Cooperative Bank Development Agency (CBDA) is joining SEDA because they can train cooperatives. For the first time, government invested over R1 billion through TREP in townships and rural areas.

They also need to learn their lesson by looking at how things unfolded. One business created one job. However, looking at the manufacturing side, SEFA funded 56 businesses. Out of 56 businesses, over 3 000 jobs were created. The by-law issues and the Amendment Act are being dealt with to ensure that there is formality across the country, so that all municipalities must charge the same rate. The President established a committee after discovering red tape, before exploring and taking advantage of the new sector. It is difficult for people operating informally or outside the legal processes, especially informal traders, to get the licenses or equipment. As part of the selected Committee, they are working on the red tape around the cannabis industry. 
Listings have slowed down but there are challenges facing private sectors, especially the big retailers – no laws are forcing them to list local products. They have to negotiate with these retailers to take some of the local products on their shelves. A retailer once wrote to them asking them to remove two products off their shelves before accepting their new product, because the shelf space was limited. They have decided to work harder to assist black retailers. There is a company called Rosly, which is a black-owned business operating as a wholesale business. The entity is already communicating with the company to consider taking their new products in their stock. The big companies are displaying arrogant behaviour because they do not need the entity, as they are already successful. The black-owned companies are still starting up, and there is a chance to work with them, develop working relationships and grow together. Some retailers have already reported that they are not looking for new products they will not sell because they are unknown. They are afraid to try new products during this period, especially with the state of the economy. Based on this fact, they have encouraged SMMEs to produce products that are not so popular in the market but are in high demand.


Most SMMEs, due to their scale, are not able to charge lower prices. They produce less and charge higher prices, unlike the big companies that produce in volumes and charge lower prices, which makes it difficult for them to compete with big companies. Concerning the roadshow, they have tried involving many stakeholders, including MPs. He acknowledged that they need to improve, and involve other stakeholders and everyone who needs to be involved. Their interventions through the roadshow were done because people were complaining about the lack of support from municipalities. Most of the challenges were also arising from service delivery. They are not getting basic services from their municipalities. He promised to return to these provinces and respond to their grievances on issues raised. They will also investigate if the roadshows were not just going around these provinces, making promises that were later not fulfilled.


SEFA
Mr Matshamba explained that SEFA did not expect new applicants to have cash flow as individuals. However, the applicants must prove in their business plan that, when their business is well implemented, it will be able to generate enough cash flow to pay back the loan. SEFA is not a collateral funder but it funds knowing that most of its members do not have collateral security, especially the new companies in the market. For this reason, the entity has to stress the ability of the business to raise money to sustain the business and meet its financial obligations. If the entity does not observe the cash flow potential of the business, it will be engaging in reckless lending. He said that they (entity) must ensure that the taxpayers' money they lent to the SMMEs must be paid back. The cash flow they are referring to is not for individuals but for the business to meet its financial obligation, which is also a basic funding requirement.


On the issue of informal traders, he said that the requested proof was already presented to the Committee. They have disbursed R14.4 million for 4 844 informal traders. The balance left is R484 000. They are now looking at additional funding to support the informal traders. There is a pipeline of 7 000 informal traders, and the total value of applications is already sitting at R21 million. He will check and verify the numbers, but this information was shared with the Select Committee. They were lending money during the violence in KZN and the floods. However, it is difficult to support informal traders without formal lending. They are working with the associations to verify if the members are informal traders. The municipality verified those with permits that are informal traders. They have also reverted to assisting them with procurement in the future when they are purchasing stock to sell.


Concerning the youth funding, he shared a slide with the Committee but was asked to take it down. He asked for permission to share the slide again and discuss the facts around it. The youth funding disbursed during the fourth quarter of March 2022 was R494m, and they continue to provide funding to youth-owned entities. If the Committee believes these are just numbers, they may have to look within the confines of the law and invite the beneficiaries as part of the oversight of the Committee. He also added that the AG audited these numbers. The Committee may feel free to ask the beneficiaries if they received funding or not. Escalation of funding to the Eastern Cape province is a worrisome perception. As the head of the entity, he reported to the Committee that this perception is not from an informed point of view nor backed by facts. He clarified that R27 million was disbursed to 43 SMMEs in the Easter Cape during the first quarter 2022 statistics.


Mr Mthenjane interjected as Mr Matshamba was still speaking, and said that the CEO is known for his arrogance. The CEO cannot insist on giving those statistics when the Committee has requested a database. Mr Mthenjane said he was not interested in the maps and pictures. As the Committee, Members are trying to build the Department and the entities, encouraging them to work together. Constituencies are not looking for excuses; they want services delivered.


The Chairperson reprimanded Mr Mthenjane not to disregard others when they speak but rather respect everyone equally. All Members were given a chance to speak. So, they must respect the officials and give them a chance to answer the Members’ questions. The information the CEO presented was new and in the interest of the people. He ruled that the CEO must continue and conclude his presentation.


The CEO continued to explain that the numbers were extracted from the database. The province leading with funding is Gauteng with 177 million, followed by KZN and the Western Cape. Two facts inform this information, one being the structure of the economy and the concentration of the SMMEs receiving funding from SEFA. Looking at the first quarter of the current financial year, in March, Eastern Cape received 22m, Gauteng received 238m, KZN 98m, and the Western Cape 67m. He promised to provide the Committee with evidence to prove their wrong perception that Eastern Cape is a leading province in funding.


When the Minister saw the budget allocation, she instructed them to first reallocate more budgets to the poorer provinces. They took money from the Gauteng budget and allocated it to poorer provinces to maintain balance. They also had an issue with the capacity of leadership in provinces. So, they had to hire leadership heads in Northern Cape, Free State, and Limpopo, and the numbers are turning around. The only province they are still struggling with is Mpumalanga, and the issue has been addressed because the head of the province is not performing. They intend to confront the person and, if necessary, get someone to replace him. To satisfy the Members, they will bring the numbers and the people to the Committee, within the confinements of the law and according to POPI Act.


On the previous Friday, the Minister was celebrating, in Pretoria, that SEFA funded women who are now incredible businesswomen. He will invite them to come through and verify this. He also committed with the DG that there would be a turnaround. They have learnt their lesson and have practical interventions in place to ensure that they rectify this, going forward. They are willing to implement some of the old best practices that used to work in the past. They are working with the heads of Provinces to use the aggregate model, and they are confident it will work. In certain areas, it has already started to work. He apologised for saying their entity is not SASSA; he was just emphasising their lending is within the confinement of the law, and that they must ensure that the money comes back to finance the next entrepreneurs.


SEDA
Mr Mbatha indicated that they would look into the matter concerning one of their offices that was closed. However, there could have been a reason for closure because they used to close their offices due to COVID cases. The reasons would be to deep clean the place to reduce the spread and then open again. As much as Gauteng is the economic hub, their focus is not on the suburbs, as they know how to do business plans and can also afford to pay for them. This is the reason why most applications are coming from Gauteng. They focus on locations and rural areas of the province to achieve a balance. A year ago, they started the programme of wholesalers and retailers with the Department. Many requirements are needed, such as quality, packaging, production processes, etc. Most SMMEs cannot leave their products overnight. They are in the food industry but do not meet the minimum requirements. However, they are working with them to improve their skills. For example, at Pick n Pay, if a product does not meet the set requirements, the company will not take risks with their customers getting food poisoning or anything that might be harmful.


SEDA is working on the issue of dysfunctional municipalities and the economic development offices that hinder them from functioning properly. They have a database of every member that is registered, but the tool needs a lot of work to function properly. They appreciate that they have to improve and are working on it. Another thing that could work is if SEDA had a database of each registered member who was assisted in different Provinces. The entity will continue with the registrations for the formalisation of businesses in the North West and other provinces. The entity will deal with these issues at the provincial level as well. They will get more involved to resolve these issues quicker. They are willing to work with the Committee on its oversight and provide the details that Members need for oversight.


There is still a lot of work in the country that is still outstanding, but SEDA will have to get deeper into the outskirt where help is needed the most. SEDA also need a bigger budget; with the work outstanding, they will not be able to do it with a budget of R900m. It will not be sufficient to cover the work outstanding for the whole country. SEDA’s work is big and requires a bigger budget to fulfil its mission and purpose. After the intervention, they return after six months to track their work and do an assessment of the work done. It helps them to monitor their clients and see how far they have gone with the work. Their services are not once-off but rather continuous. They need to build services within the economy of South Africa. They have resolved issues of capacity and are in the process of hiring new staff members. They had an issue with contracts of 12 months that were later increased to 24 months. They only have one permanent director and the rest are acting; this has affected the entity’s growth and performance. They are also working with different sectors to fund graduates. They are working with the Eastern Cape on the cannabis project to assist the farmers that were identified. SEDA need all stakeholders in all provinces to come through and assist them with this project.


Closing Remarks
The Chairperson commented that the discussion was robust. He said there are too many issues to be resolved, so the officials should attend to them and give feedback. He thanked everyone who participated in the discussion.


The Committee considered and adopted outstanding meeting minutes.


The meeting was adjourned.



 

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