Session on Creating an Enabling Policy and Regulatory Environment for SMMEs & Co-operatives - The Role of National Treasury

Small Business Development

15 November 2022
Chairperson: Ms V Siwela (ANC)
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Meeting Summary

Video

The Portfolio Committee met virtually to attend a briefing by National Treasury on its role in creating an enabling policy and regulatory environment for small, medium and micro enterprises (SMMEs).

National Treasury traduced the Bounce Back Scheme to support businesses that survived economic challenges such as COVID-19, civil unrest in KwaZulu-Natal (KZN), and the Gauteng and KZN floods. The scheme had two mechanisms, a loan and an equity-linked scheme. Businesses with a maximum turnover of R100 million per annum were eligible. National Treasury had amended the scheme to cater for the number of SMMEs affected by load shedding, increased input costs, and the high interest rate.

A Member expressed concern about the capacity of the state to access loans at cheaper rates and deal with the disbursement of funds and the bargaining tools, such as those used by the banks. He called on governmental departments to capacitate each other by using policy frameworks to speed up the wheels of transformation. Transformation was taking time, and frustration was felt on the ground through the civil unrest.

National Treasury said the new Preferential Procurement Regulations had been gazetted and would take effect on 16 January 2023. The revised regulations required the Minister to regulate the threshold amounts in which the 80/20 and 90/10 preference point systems must be utilised and the formula to be applied. The Public Procurement Bill had been consulted with social partners at the National Economic Development and Labour Council, and would be introduced in Parliament in March next year. The Members welcomed the Procurement Bill.

The Committee was told that the national and provincial governments were not complying with the 30-day payment rule for settling invoices, with over R4 billion not paid within the specified period in September. The Committee was not satisfied with the list of reasons given for this situation, and said ways had to be found to hold chief financial officers and accounting officers accountable. The Committee would prioritise efforts to deal with this matter.

Meeting report

Bounce Back Scheme

Mr Vukile Davidson, Chief Director: Financial Sector Policy, National Treasury (NT), said the
The Bounce Back Scheme (BBS) was to support businesses that survived economic challenges such as COVID-19 , civil unrest in KwaZulu- Natal (KZN), and the Gauteng and KZN floods.

BBS had two mechanisms. The first comprised a loan guarantee mechanism of R15 billion. The second was a smaller equity-linked scheme which would be facilitated by the NT and development finance institutions (DFIs). The NT had rolled out the first mechanism. The loan would be accessible through participating banks. Businesses with a maximum turnover of R100 million per annum were eligible. The minimum loan was R10 000 and the maximum loan was R10 million.

The number of BBS applications from small and medium enterprises (SMEs) had declined due to factors such as load-shedding and the increased cost of inputs, including the high interest rate. The BBS mandate was extended two months ago to allow the SMEs to fund solar panels

New preferential procurement regulations

Ms Mendoe Ntswahlana, Chief Procurement Officer (CPO), NT, said new preferential procurement regulations had been gazetted and would take effect on 16 January 2023. The revised regulations provide for amounts and formulae that must be prescribed by regulation in terms of Section 2(1)(b) and  (c) of the Act. The approach had its mandate in Section 2(1)(b) and (c) of the Preferential Procurement Policy Framework Act, which required that the Minister regulate the threshold amounts in which the 80/20 and 90/10 preference point systems must be utilised, as well as the formula to be applied.

The Public Procurement Bill was consulted with social partners at the National Economic Development and Labour Council (NEDLAC) from May to October. The Bill was now in the process of being submitted for legal vetting, socio-economic impact assessment systems (SEIAS) and Cabinet for consideration. The Bill would be introduced in Parliament in March 2023.

(Please consult the presentation to learn more about the new Preferential Procurement Regulations and the Public Procurement Bill.)

Non-compliance with 30-day payment rule

Ms Moipone Ramoipone, Director: Public Finance Management Act (PFMA) Support, NT, said the Cabinet had resolved in 2009 that departments must implement mechanisms to ensure that invoices were paid within 30 days from the date of receipt, because of the high level of non-compliance. The NT was mandated to provide the Forum of South African Directors-General (FOSAD) with regular reports on non-compliance with the requirement to pay invoices within 30 days. NT reported quarterly to the FOSAD and other relevant structures of government on the status of non-compliance through Treasury Regulation TR 8.2.3.

National Treasury recommended that:

Payment of invoices within 30 days be included in the performance agreements of Accounting Officers, CFOs and other officials working in this area.
Disciplinary action be taken against officials who failed to comply with the requirements to pay invoices within 30 days.
Accounting Officers and CFOs must address the root causes of the late and/or non-payment of invoices to improve compliance with TR 8.2.3.
Payment of suppliers within 30 days was a standing agenda item for discussion at every Executive Committee meeting of departments.
Accounting Officers must improve internal control processes to ensure compliance with the legislative requirement for invoices within 30 days.

Ms Ramoipone said that statistics as at September showed that at a national department level, 12 867 invoices worth R470 million were not paid within 30 days, and 3 454 invoices worth R92 million were older than 30 days, and not paid. At a provincial department level, 16 798 invoices worth R2,2 billion were not paid within 30 days, and 27 068 invoices worth R4.3 billion were older than 30 days, and not paid.  

(Please refer to the presentation on the reasons behind non-compliance with the 30-day payment rule.)

Discussion

The Chairperson thanked NT presenters for empowering the Portfolio Committee, and said the session was long overdue. She said the Public Procurement Bill would "unlock the red tape." She was disappointed by the non-compliance with the 30-day payment rule and the reasons for this situation, and said this had to be prioritised by this oversight committee.

Mr H April (ANC) was worried that if the state institutions worked exactly on the principles used by banks, the wheels of transformation would turn very slowly because the interests of private capital had been in the hands of the minority. He was worried about the capacity of the state to access loans at cheaper rates and deal with the disbursement of funds and the bargaining tools, such as those used by the banks. He called on governmental departments to capacitate each other by using policy frameworks to speed up the wheels of transformation. Transformation was taking time, and the frustration was felt on the ground through the civil unrest. The Portfolio Committee had to go to Durban and witness the destruction caused by the civil unrest.

Mr F Jacobs (ANC) said there was a lot of room for improvement in compliance. The President had good intentions with the BBS to provide financial access "to our people.” He was disappointed that the Minister and the Deputy Minister could not come to present a fiscal framework to the Committee. The people required access to funding to be productive and contribute to the economy. The banks were not really making money affordable. They got money from the South African Reserve Bank (SARB) at a very good rate, but did not pass the benefit on to the community and consumers. The organised banks were making profits without concessions.

He said non-compliance with the 30-day payment requirement was a big problem. Could a way not be found to keep the CFOs and Accounting Officers accountable? He said that R4.3 billion was a lot of money that small businesses at the provincial level needed. He agreed with the Chairperson that the Committee must go back to the drawing board and see how it could improve its oversight. Could the Committee get the government departments that were the culprits and their political principals to come to account? What about the provincial governments? Why were the premiers, metros, districts and municipalities not paying their small businesses?

The Chairperson appreciated the work that had been done in KZN. The Portfolio Committee needed to see where there were gaps. The high non-payment figures shown in the presentation were a worrying factor. The government wanted to create jobs to alleviate poverty. If people were not being paid on time, everyone got affected. Load-shedding could not be used as an excuse -- those involved had to ensure compliance. She said that R4.3 billion was a lot of money, and she did not accept some of the common reasons offered, such as misfiling of information and inadequate budgets. It was the responsibility of the department to ensure that its annual performance plan was in line with its budget. People who lack capacity must not be appointed. She was also worried about the lack of consequence management.

She concluded that the Portfolio Committee was happy with the Procurement Bill, saying it must be enacted into law so it gets implemented next year.

The meeting was adjourned.

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