The Committee was briefed by its support staff on the Department of Small Business Development's (DSBD's) 2023/24 budget vote, with concerns being expressed over the effect of the cuts on the entities supporting small businesses, as support for them was vital in the current economic environment.
Key issues raised included the simmering conflict between local and foreign-owned small businesses, the lack of legislation and policy to safeguard township and rural enterprises, and the DSBD’s continued failure to refer bills to Parliament. The Committee requested the Small Enterprise Development Agency (SEDA) and the Small Enterprise Finance Agency (SEFA) to re-evaluate how interconnected and interdependent their services are.
The Committee's site visit to North West had revealed some discrepancies between the money said to have been paid to beneficiaries, and the money actually received. The DSBD's level of support and monitoring of projects was raised as a concern, as some projects appeared to exist only on paper.
Committee report: 2023/24 DSBD budget vote report
Mr Sibusiso Gumede, Committee Content Advisor, briefed the Committee on the contents of the report, whereafter he presented the observations and recommendations in detail.
The Committee made observations about the budget adjustments and the approval of the structure, which would positively impact the vacancy rate within the Department of Small Business Development (DSBD). The Committee took note of the identified credit gap for small and upcoming enterprises, and appreciated the interventions planned and implemented by the Department.
The Committee took note of the DSBD’s continued failure to refer bills to Parliament despite many assurances to do so in the past. It took note of the Department’s unsuccessful attempt to establish an “Office of the Small Enterprise Ombud Service.”
It raised concern over the simmering conflict between local and foreign-owned businesses, and the lack of legislation and policy to safeguard township and rural enterprises. Despite comparable regulatory instruments in other countries, no progress has been made.
The Committee was concerned at the Department’s and entities’ budget cuts, with the Small Enterprise Development Agency's (SEDA's) budget, in particular, likely to decrease by a substantial amount, and said that while cooperation between SEDA and the Small Enterprise Finance Agency (SEFA) appeared to exist on paper, the contrary was actually true in practice.
The Committee recommended a petition to the Department of Finance ahead of the medium term budget policy statement (MTBPS) to avoid any budget cuts, as economic growth was essential for the country. Loan opportunities and credit availability must be expanded. This had to include cooperation with commercial banks to assist smaller businesses.
The Committee once again requested SEDA and SEFA to re-evaluate how interconnected and interdependent their services are.
To support the President’s aspirations to eliminate red tape, the Committee again called for establishing a parliamentary ad hoc committee or executive structure that would interface with the red tape reduction team at the Presidency.
(Details available in Committee report)
Report on North West site visit
The report outlined the projects visited, raising a concern that there was a discrepancy in the funds awarded and funds received. Some of the projects visited by the Committee were exceptionally well run, whilst others had received large loans and grants without any functional progress to show. It was concerning that some loans were not serviced.
The Committee observed that guidance and support to projects was lacking in some cases and there did not seem to be any monitoring of some of them. This was evident when the loan was approved in one province, and the equipment was said to be in a different province.
Based on observations and information received, there was a concern as to whether the necessary steps were being taken to ensure compliance with legislation and regulations around lending, credit and intermediaries.
The Committee was unable to meet with all the intended recipients during the visit, so some information was outstanding and some beneficiaries were not available or traceable. Pursuant to the Chairperson’s communication to the DSBD and SEFA, supplementary information on these projects had to be provided to the Committee.
There were questionable projects that seemed to exist only on paper. The details and information about these projects should be provided to the Committee.
Based on information collected from the recipients, the Committee recommended that SEFA should intensify its oversight over intermediaries.
Additional information and meetings with the Department and SEFA in connection with some high risk projects were also recommended by the Committee.
The DSBD and its entities had to broaden their understanding of the projects they support, and identify gaps that require intervention in the form of additional funding, infrastructure, technical assistance, skills development and training, as well as those that require support from state organs.
The Committee was deeply concerned about business registration and licensing. The Department must expedite the process of referring the National Small Business Amendment Bill to Parliament.
The Committee also noted, in the legacy report of the Fifth Parliament, that the Department and SEFA lacked appreciation of the role of stokvels, village banks and cooperative banking institutions. These matters should be addressed.
Ms Nwabisa Mbelekane, Committee Researcher, highlighted a number of issues of concern:
- The Mahikeng meat market had received a large loan amount, but was still not fully operational due to the lack of the necessary health certifications.
- Ezimali Afrika had loaned an amount to a company named Donkey Dairy and DHA. The email registered to this loan amount was a Department of Home Affairs (DHA) email address.
- Funeka Enterprize had a R2.1 million loan amount on the books, but the owner confirmed that only R1.5 million had been received. It was not clear where the rest of the money was.
- Similarly with the Spaza Shop project, where it was identified that a number of shop owners had received the initial R3 500, but not the additional R7000. The question was whether this was also occurring in the rest of the country.
(Details available in Committee report)
Mr F Jacobs (ANC) noted that the reports reflected the Committee's observations. The budget votes provided a good basis to support the recommendations of the Committee. The North West visit was a good experience -- he was impressed by the co-operatives, and could see that the project was bearing fruit. He acknowledged that there were challenges, and agreed that the Department must be given an opportunity to provide clarifying information. There had to be accountability if something went wrong, but there should be no blame game -- rather good interventions. He supported the regulation of interest rates, with an upper limit of 25%.
He supported the budget report for adoption, and the North West site visit report for noting as a first draft.
Mr H Kruger (DA) requested that the word “illegal” be added in paragraphs 6.1 and 6.5 of the oversight report. He also requested that in the budget report, under paragraph 7.10, the need for an oversight committee over the President’s red tape structure must be added.
He asked the Committee to champion the trend in Parliament that all parliamentary accommodation be booked in guesthouses to support small businesses.
He noted that the Committee picked up problems in the field but never returned to these areas or people to follow up if the problems were resolved or improved. He recommended that each Member of the Committee identify three projects in their constituencies and do site visits with officials to ensure that they were functioning well and that problems were resolved.
He also raised a concern about the Presidential emergency structure. He had taken note during an Agriculture Committee oversight visit, that some farmers had received R7. He asked for some intervention and oversight over this structure.
The Chairperson agreed with the recommendation, and suggested that "Zoom" meetings be scheduled as follow-up meetings.
Ms B Mathulelwa (EFF) asked if there was any information about what was happening in the rest of the country with the spaza shop project. She asked that cases be opened against SEFA if the money was not paid to spaza shops, and that no money be transferred to SEFA until clarity was provided about the missing money.
She said budget cuts were unacceptable, as they would impact small businesses and economic growth.
The Chairperson said that the matters must first be investigated before action was taken. One could not punish a whole entity for the wrongdoings of individuals.
Mr D Mthenjane (EFF) commented that the Department could not monitor its own entities. He asked how a budget of a Department that was not supporting the people, could be supported. He suggested that the Hawks be called in to investigate. He also asked if the spaza shop problem was only in the North West or the whole country. He insisted that there must be consequences for the people that did not want to meet with the Committee and refused to come and account.
The Chairperson requested that the Department be given some time to investigate. The Committee would also do some investigations to get to the botom of the issues.
The 2023/24 budget vote report was adopted, and the North West site visit report was agreed to as a first draft.
Study tour update
The Committee's support staff informed Members that they were in the process of finalising the meetings and interactions for the tour, and briefed them on the draft programme. The Committee was still awaiting a response from the House Chairperson on the number of delegates that would be allowed to go. The Chairperson had raised the problem of selecting only a limited number of delegates with the Speaker.
The meeting was adjourned.
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