Co-operatives Development Support Programme; Deputy Minister intro

Small Business Development

08 March 2023
Chairperson: Ms V Siwela (ANC)
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Meeting Summary


The Department of Small Business Development (DSBD) outlined its strategy to support co-operatives by developing a Co-operatives Development Support Programme (CDSP) in line with the Co-operatives Amendment Act from 1 April 2023. The grant funding portion is capped at 70% while the loan portion is capped at 30% of the total approved funding and total funding is limited to R2.5 million. Registration is on the SMMESA website and online application is available.

Committee members shared their concerns about the infighting amongst cooperatives in the formation of a national apex co-operative. They asked about progress in the merger between Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency (SEFA); if the 88% mortality rate of co-operatives had decreased; and about the establishment of the Co-operatives Development Agency and the Co-operative Tribunal. Some were concerned that many existing co-operatives would remain unfunded due to the stringent requirements.

The Department emphasised its focus on having strong primary co-operatives which would eventually lead to the formation of the strong apex body. It is merging SEDA, SEFA and the Co-Operative Development Agency into one facility to address all co-operative and SMME matters.

Meeting report

The Chairperson introduced the new Deputy Minister as a person with experience in this field who will be of great assistance. She congratulated her on the new responsibility and said that she will be supported.

Deputy Minister remarks
Deputy Minister of Small Business Development, Ms Dipuo Peters, stated that it was time for them to change the strategies of what they had been doing in the past. They must learn from what has not worked whilst they take what has worked and bring in new energy and innovation to address the challenges that have prohibited maximum participation in co-operatives in our country.

Co-operatives Development Support Programme: DSBD briefing
Mr Lindokuhle Mkhumane, DSBD Director General, outlined the strategy and plan to support co-operatives by developing a Co-operatives Development Support Programme (CDSP).

The CDSP is an intervention that combines Co-operatives Act of 2005, Co-operatives Amendment Act of 2013 and Integrated Co-operative Strategy. The programme offers blended financing in partnership with Small Enterprise Finance Agency (SEFA). The grant funding portion is capped at 70% while the loan portion is capped at 30% of the total approved funding and total funding is limited to R2 500 000. The grant support is available for machinery, equipment, infrastructure, commercial vehicles and business development support.

Eligible enterprises are primary co-operatives and cluster co-operatives provided they meet all the requirements as stipulated in the presentation. Registration is on the SMMESA website with an online application form available.

There has been rethinking on co-operatives support.  The CDSP will be transferred to SEDA to be modeled on 90% grant and 10% own contribution. SEDA would ensure business development support. DSBD has  undertaken a collaboration with the EU-funded EDSE Programme.

DSBD has discussed the recognition of a National Apex Co-operative many times with the co-operatives movement. Based on the Act, DSBD will not be involved in the establishment of the apex body as it needs to be an organic process – the co-operatives movement is responsible for this.  The establishment of the apex body is critical as it will bring about unity in the sector

The way forward is to finalise the transfer of the CDSP to SEDA; develop alternative and specialised funding instruments and business development services for co-operatives (see document).

Deputy Minister Peters was excused from the meeting.

Mr H Kruger (DA) said that co-operatives have been struggling to get off the ground for many years. Co-operatives used to be the feeding ground for criminals to get their hands on taxpayers’ money but he is hopeful the blended finance model will help with this.

He was concerned that the finance is available only for black owned business and he felt that there was lots of potential in white entrepreneurs, especially the farmers. In current times people can get together and plan to generate their own electricity and co-operatives are ideal for that.

He suggested that farmers in small towns could get together and, with the help of government, they could erect energy generating plants that would help with food security and provide much needed energy.

He was also concerned about the apex body as there was a lot of infighting and everyone was scrambling to become the apex of co-operatives. From the presentation, it seemed as if government wanted to stand on the sidelines and not prescribe the formation of an apex body. He described this situation as a crisis in the co-operative sector. Government needed to have an intervention to achieve unity under an apex body because if the apex body failed the whole endeavour would be unsuccessful.

He requested name of the expert mentioned in the presentation to ensure that a knowledgeable person was employed as there are a lot of people pretending to be experts.

Ms B Mathulelwa (EFF) asked what informed DSBD not to fund co-operatives? It was government who forced the people to form co-operatives as individual businesses were discouraged, especially in townships and rural areas, but now co-operatives are not funded and instead individuals are being funded. She was unhappy that there were clashes with the Minister’s schedule as she wanted clarification on this.

She could not speak long due to four-hour load shedding and requested that the Committee meet physically.

Earlier in the meeting the Minister was unnecessarily praised as they were still stuck with many challenges such as the lack of leadership provided when the Committee is sitting, red tape reduction, the inability to do oversight and they had still not received the list of names of people being funded.

Mr H April (ANC) stated that it is imperative they do not just come to Parliament to lament and be dissatisfied but look at what they can do to better the lives of the people. It is only when they have better information that they can ask better questions. Unfortunately one can only get better information through education. Some in the Committee should really have taken the time to use the resources Parliament has provided in order to follow through and help DSBD deliver better services to the people.

Mr Kruger interjected on a point of order. To whom is Mr April referring as it was out of order and improper to suggest that Committee members were not knowledgeable. He wanted Mr April to withdraw his statement.

The Chairperson thought Mr April had meant the Committee as a collective but if he had been referring to a specific member then that is wrong. She asked Mr April to continue but stick to the presentation.

Mr April said that he was concerned that the requirements for co-operatives were too stringent and would cause many of the existing co-operatives to remain unfunded as they fall short of meeting the requirements.

What progress has DSBD made in the implementation of the Co-operatives Amendment Act and the establishment of the Co-operatives Development Agency, co-operative training and the Co-operative Tribunal? What are the implications of the SEDA-SEFA merger on how DSBD plans to implement the Co-operatives Amendment Act?

At the time of the 2018 ILO Guidelines concerning statistics of Co-operatives, the mortality rate of co-operatives was about 88%. What is the current mortality rate? Has it improved or is it worse? 

Given the potential benefits of co-operatives to the economy, what is DSBD's strategy for turning this around? In 2018 the Committee recommended that DSBD assist co-operatives in South Africa to establish this apex body. How far has DSBD come? He asked it for details of its progress. He had more questions but was trying to be conscious of time.

The Chairperson assured him that it is important to raise questions. This document needs to be fine-tuned and by asking questions, oversight is being done. She would like the Committee to provide input.

She asked DSBD when the draft policy dialogue would be done.

Mr April asked if the skills audit recommended by the Committee to assess the expertise of officials in understanding co-operatives had been done yet. The skills audit would allow the Committee to provide better service to the people through oversight. What progress has DSBD made and what were the outcomes?

The World Bank 2021 Annual Report noted about South Africa's co-operative banking sector development strategy noted that unlike other countries during the start-up phase for financial co-operatives, South Africa has imposed more restrictive operative norms that have hindered growth. The Co-operative Banks Development Agency (CBDA) reports that financial co-operatives find it difficult to register and become operational. What has been done about that observation?

In light of the pending merger, what is DSBD's plan of action for addressing these hindrances for the registration and licensing of our co-operatives?

The Chairperson thanked Members for their constructive questions. It is important for the Portfolio Committee to see things happening. The problem of the bureaucratic processes and the issue of red tape were handicapping DSBD progress and the merging of SEDA and SEFA is also still an issue.  She was happy that it seemed as if DSBD is taking giant steps to ensure that co-operatives are recognised but would like clarification on the matter of the apex body. Who’s who? And when will this happen? Although she is aware that it is not in the power of the DG or the Minister to revisit the issue of red tape, she felt as if it needed to be done as the Committee is eager to know the progress so far. She heard the DG give a time frame of within six months and would like to know if it can be reduced to three months.

DSBD response
Mr Mkhumane agreed with Mr Kruger that the money that was made available to support co-operatives used to be misused. The support to co-operatives has been provided through SEFA and there are challenges with this. This is why it is being moved to SEDA as it is more accessible. Given that SEDA is all over the country, it can be more flexible in its support. Even though they are not in each and every municipality they have more reach in terms of offices around the country. SEDA is also trying to expand reach and get more access points where they will work closely with the municipalities to ensure there are those who can assist people approaching these municipalities for support.

There is a lack of coordination in this space. They are not the only department that offers support to co-operatives, there are other government departments, provinces and municipalities that all offer support but the impact on the ground is not there. DSBD is re-establishing a provincial-national coordinating forum where they sit together with provinces to look at integrating the support provided and come up with a singular intervention that is appropriate. For example, ensure all co-operatives go through business development support first before they access funding so they are able to utilise the money made available to them.

Mr Mkhumane referred to the 2018 meeting where the Portfolio Committee called for an apex body. The question that was raised then was about having a database with all the primary, secondary and even tertiary co-operatives government is supporting. Few were able to do that and this is the main problem. In terms of co-operative principles, the co-operatives need to be independent and autonomous from government. They cannot be government-run entities. They have to be able to stand on their own as co-operatives.

This is why in our presentation we emphasised having strong primary co-operatives. If we have strong primary co-operatives – people who are doing the day-to-day work – it assists you to build stronger secondary coops, which lead to stronger tertiary co-operatives, which ultimately leads to a strong apex body. That is why our focus is on primary co-operatives.

DSBD has attempted to bring back this unity but we end up being caught in the politics in the co-operative space. That’s why we try to stick to the Act.

In previous years, they had invited the German Co-operative and Raiffeisen Confederation (DGRV) to try and bring some unity in the co-operatives movement space. He thinks those attempts were not successful but Mr Ndumo will provide recent updates on that.

On the support DSBD is providing to co-operatives, they do provide funding to co-operatives, and in the presentation last week on the Committee's Budget Review and Recommendation Report (BRRR) they had indicated the financial support provided to co-operatives through SEFA. The CEO of SEFA also articulated that they are looking at the advocate model where they are looking at various co-operatives coming together to be able to supply a particular amount in terms of the orders that may come from the retailers. So we are working closely with, for example, Tiger Brands, to ensure we are able to get as many co-operatives supplying Tiger Brands as possible, working also with the Department of Agriculture.

On the funding requirements, DSBD is aware of the challenges. The strategy is addressing some of the reasons by moving this financial support to SEDA. It will be difficult to water down the requirements too much because it becomes a challenge to account at the end of the day. Some applicants do not have the proper documentation for a particular co-operative and if one does not have ID numbers, one ends up funding the wrong people. Other times, funded people are not there when you look for them. It is important to have this list of information so that when government has to account for or monitor the expenditure we are able to go to this registered address and see if the money invested by government is achieving any results.

Mr Jeffrey Ndumo, DSBD Acting Deputy Director-General: Cooperatives,  replied that a skills audit has been conducted, not just for the Co-operatives Unit alone but for the entire department which is aiding the process of the new structure adopted for DSBD. The people who are going to be placed in the new structure will be placed according to their skill sets and the skill requirements. Therefore the Co-operatives Unit will also be benefitting from that particular process.

Mr Ndumo replied about the implementation of the Co-operatives Amendment Act. The Co-Operative Development Agency as it was initially conceptualised became really difficult to secure funding for – in fact for all three institutions.  What they have done on the Co-Operatives Development Agency is they are creating a one-stop-shop for both SMMEs and co-operatives in a form of a merger of all their agencies and these include SEDA, SEFA, CBDA, as well as the Co-Operatives Development Agency. This is going to be a one-stop-shop that is going to really deal with all the support that needs to be provided to co-operatives, provided to the SMMEs in general, and to the informal economy in general.

On the training academy, DSBD has progressed extensively in this area and they are working with Department of Higher Education and Training (DHET) and its Minister supported that process. They had already agreed on the concept document with two options: Option 1: They place this academy in one of the mainstream or technical universities or Option 2: They ensure that the academy is established as a stand-alone. But they need DHET to come up with a plan and to give the budget to implement the academy.

On the co-operative tribunal, they are creating an institution to deal with conflict resolution and trying to synergise and merge the tribunal with this institution.

Mr Ndumo replied that they are working with the research unit in the Department to conduct another assessment of co-operatives performance in terms of growth and determine if the large 88% mortality rate is still the same or if it had improved and by what percentage. Looking at all the sectors where co-operatives are located, it is an enormous amount of work that needs a good budget and also great planning because they want it to be done by an independent, objective research organisation. They are overhauling the policy on co-operatives and survival rate is one of the areas that they are going to be looking at improving and moving forward. To turn co-operatives around to benefit the economy, they are looking at revamping policy and sharpening interventions in this area. Work was already underway on the funding.

One  challenge that affects the survival rate is the lack of skills and implementing this training academy with DHET will improve that.

Mr Ndumo replied that what they have done so far on the apex body is already set up a series of meetings where all the organisations with aspirations to start an apex body will meet and ask DGRV to assist those co-operatives in achieving compliance together with CIPC which is the registrar.

There has been contestation that has taken place among various co-operative organisations in their drive towards unification. SANACO had been claiming that they are the apex body of South Africa and others have been contesting that SANACO cannot be an apex body as it needs first to be subject to the democratic process of membership to establish itself as a body.

DSBD did not want to be involved in the politics and determining this process as it would be accused of being biased or taking sides. It is a highly contested issue. It will take time to realise a single apex body that we need in South Africa. DSBD is working with DGRV, the German apex body, to assist in that but it has not made much progress.

CIPC is helping to provide full compliance with the Co-Operatives Act. It is only when there is full compliance with the legislation that they will be able to recognise the apex body.

This is the current status. Co-operatives are finding it difficult to have a common mind and establish one single apex body. The requirements for establishing an apex body is that there are to be a certain number of tertiary co-operatives; they must be sector wide and they need to geographically cover the nine provinces.

Further discussion
Mr D Mthenjane (EFF) said he had been unable to ask a question earlier due to load shedding. The presentation was clear and he appreciated what they have done and are still going to do.

He raised concern about the Committee member who told other members that they are not educated. In the Committee he interprets and translates what has been raised in his constituencies. Unfortunately this makes some Members uncomfortable. You cannot say other members are uneducated just because English is not their first language. If he asked the member to speak his language, he would not be able to do so. People who are educated are engineers and those who are lecturing in universities. Just because the member was privileged to be born speaking English, it is wrong for him to tell other members that they are uneducated.

As Committee members, they are merely here to talk on behalf of the people. They are the link between the people and government as public representatives. Whatever is raised in their constituencies,  they bring it here and if they are not satisfied with what the Department is saying, they need to raise it because this is their platform.

Earlier he felt as if they were in an ANC meeting and not the Portfolio Committee. He doesn’t know who was being accused but that Member needs to apologise because he is out of order. He needs to apologise so they can move forward.  They are supposed to be working together for the people so they cannot be accusing each other of this and that. They are there to hold the Department accountable for the people.

The Chairperson said that she will respond when she wraps up the meeting. There are issues she would like to address as Mr Mthenjane said that it felt as if they were in an ANC meeting which was not the case. Coming from different political parties does not mean they are enemies. They are Honourable Members elected by their constituencies and they need to respect each other. She is surprised but she will have to come back to what she wishes to address.

Mr Kruger said he had a feeling of progress throughout the presentation up until Mr Ndumo started talking. Mr Ndumo had been working with co-operatives since the early 2000s even when it was still in the Department of Trade and Industry (DTI) and there has been no progress so far.

Mr Kruger said there are a lot of entrepreneurs out there looking for advice and resources from government but there are certain officials who stand in the way. They need to ask the DG to look at this issue so they can get experts with a track record to fix this problem. They do not need a Mr Fix-it-all because Mr Fix-it-all has been busy with co-operatives since the 2000s and it is still a  total failure to date. He is sure it will be a failure in the future as well if they do not wake up because we are busy playing with the lives of entrepreneurs and they will get the same results if they let the same people continue to run the show.

The Chairperson said she would appreciate it if we criticise that we also come up with some solutions and initiatives. She wanted the Committee to assist and give valuable input on the strategy. If there are any further questions, they can be sent in writing to the Department.

Ms Mathulelwa said the presentation is seeking to give them hope, and they need a time frame for implementation that will not take too much longer as they have been waiting. She wanted to emphasise that DSBD has wasted a lot of time and she thinks it should not take more than three months for implementation. Since it is now March, they can start implementing in April. However, if they do not start implementing that’s where the problem starts.

What are measures in place to ease the restrictions prohibiting co-operatives from being funded by DSBD through its entities, SEFA and SEDA?

She also requested that if people are going to undermine them in this Committee, then she wants Mr April as well as everyone in the Committee to produce their qualifications. They cannot be undermined by the illiterates present. One cannot talk about using the facilities of Parliament to further one's studies. They found their own ways to get educated and they should not be undermined.

She asked the Chairperson which part of her role is to thank the ANC for deploying a Minister. She can thank the government not the ANC.

The Chairperson thanked everyone for their concerns. Sometimes if they view things differently, they need to reach consensus and that does not mean they are creating enemies; they are building each other so she appreciates it. However, they must also be careful about their utterances. The "illiterate" comment is not parliamentary; they need to respect the decorum of the House as Honourable Members. That is her humble request and she will not tolerate Members undermining each other. That is not the objective of these Committees of Parliament. Their role is to ensure oversight of the departments to assist society on the ground, regardless of political affiliation.

Mr April said that if he had inadvertently hurt anyone or they have taken his comments personally, he would like to withdraw those comments.

He thanked Mr Ndumo for his experiences but felt as if Mr Ndumo had more excuses than answers. One would want to propose that in the next three months someone like Mr Ndumo would come to the co-operatives in their constituencies to give them a better understanding of how to access these opportunities and how the changes will affect them

The Chairperson thanked Mr April for withdrawing his statement and apologising. Members are taking it in good spirit and she hopes they can be patient with each other. She also appealed to all of them to learn from one another as that would empower them. They are there to ensure that the people who voted for them are receiving services and they are not wrong to indicate their dissatisfaction to the Department. It is their role as Members mandated by Parliament and the voters who had given them this opportunity to lead in this Parliament. Her humble request is to be patient with each other and reserve issues which might bring tension. If she had offended others by mentioning ANC, she apologises as she cannot take the platform and exercise it as an ANC meeting.

She asked the DG and Mr Ndumo to respond to the further statements that there are a lot of excuses. They do not want to see excuses; they want to see things happening since co-operatives have the power to create jobs and to change the environment so they should not ignore or delay the process.

DSBD response
Mr Ndumo apologised if he came off as if he were making excuses. They are making some steps to address the areas that he pointed out and he has already explained how they are addressing these matters. They will provide some time frames in some of the areas and they will definitely come back later to give very clear timelines on all the aspects.

Mr Mkhumane said the implementation of the new approach will start from 1 April as soon as the budget is available because they have been asked to wait until the beginning of the financial year before one can transfer the money which was intended to go SEFA, to SEDA.

On the exercise being done by an external party, it is a bit complicated because it includes the review of both legislative, policy and strategic documents, as well as undertaking interviews with key role players who will be engaging with the people in the sector which includes the co-operatives themselves but also the other government departments and institutions supporting co-operatives. Ten they will have to draft a short paper on the study on effectiveness and lastly they would need an open policy dialogue which is critical to have with the sector because there are a number of issues that both parties need to raise for the sake of the movement. They believe co-operatives are the best for economic growth especially dealing with people who are marginalised / those residing in rural areas. It is their intention to get good work done so that they are not accused of doing shady work. That is why they are requesting this period of five months for this exercise since the person started last month.

The Chairperson thanked everyone and said that the Committee would be sure to follow up as it is highly interested in the document. They believe they will see things happening by 1 April.

She asked the DG to relay a message to the Minister to fast track the North West oversight visit with the officials there so that they are clear about the oversight visit that side.

Committee minutes dated 15 and 30 November 2022; 22 February 2023 were adopted but the 1 March 2023 minutes were held over.

The Chairperson implored Members to listen to each other and if there are any further issues, they should be addressed by following the proper protocols.

Meeting adjourned.

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