Small Business Amendment Bill: deliberations

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
5 November 2004
SMALL BUSINESS AMENDMENT BILL: DELIBERATIONS

Chairperson

Department PowerPoint presentation on National Small Business Amendment Bill
National Small Business Amendment Bill [B23-2004]
Department amendments to the Bill

SUMMARY
The Department presented the proposed amendments to the Committee. There was agreement on most of the changes. Concern and discussion was mainly around the limited liability clause and the fact that a uniform system would be implemented nationally.

MINUTES
Mr L October, Department Deputy Director-General (DDG), explained that the Department had met with the State Law Advisors and their own lawyers and seen how they can accommodate the amendments suggested by the Committee in the previous meeting. They had been able to accommodate most of the concerns. There were three areas however where they had made no change, but had some proposals for the Committee to consider. He then outlined the changes as in the PowerPoint presentation attached. The three areas not changed were Clauses 15(3), 16(b) and 3. A discussion paper would be prepared around the issue of regulations and the role of the Committee and the Minister in the drawing up of regulations. This would be submitted to the Committee.

Discussion
Mr L Labuschagne (DA) referred to Clause 13C and said that he would prefer that the clause stated that members of the Board attend at least 50 to 60% of meetings. The way it was structured at present still provided some loopholes. Most Board members had other responsibilities and would most likely skip meetings. He inquired whether the Committee was also a stakeholder as referred to in Clause 13E. If this was the case, the Committee would only see the Board once a year when they presented their Annual Report. He asked if Clause 16(2)(c) referred to the staff of the agency as well. The clause dealing with limited liability was still a problem. If a member of the public suffered because of the actions of a staff member, no one would be held responsible. He wanted to know when this clause came into legislation. He explained that his concern about the regulations was that the Committee not going to have a say in these. His concern was not to curtail the powers of the Minister.

Professor B Turok (ANC) explained to the previous speaker that it was not the Board that reported to the Committee but the organisation. Since small business development was high priority it might be a good idea though to meet with the Board as boards could be problematic.

The Chair said that the main function of the Committee was oversight of the Department. They therefore had the power to call anyone they wanted to. This was their responsibility. It was therefore not necessary to legislate this.

Mr October agreed with the Chair's comments. He said that the attendance and low performance of the Board Member would be dealt with in Clause 13C(1)(d). The Department would also report to the Committee on the performance of the agency. He confirmed that Clause 16(2)(c) referred only to staff. He added that he did not know when the clause on limited liability had been introduced. All businesses were protected from civil claims. The courts determined what reasonable care was. If this clause was revisited, broader discussion was needed.

Dr E Nkem-Abonta (DA) expressed concern about Clause 10. He said that he understood that there needed to be a unitary national and provincial policy. He felt though that at local level it should be different as it would be more entrepreneurial. The uniformity might be constraining.

Mr S Njikelana (ANC) commended the Department for taking note of the concerns raised. He said that some of the things in the Bill was quite broad. He asked what kind of thrust would be given in the regulations. Referring to the limitation of liability, he asked if there was any reason for a paradigm shift in this regard. He was glad to see the local government level included as it enhanced the Bill

Mr October said that the issue of limited liability was before the Constitutional Court. Whether the government was liable for the safety of passengers on its trains was the one that was being tested. This was still not settled. He requested that for this Bill it be unchanged. It could perhaps be revisited later.

The uniform standard across the country was the major change in the Bill. At present, Ntsika and Khula worked according to a wholesale model. Ntsika had variations at local level since it did not fund any small businesses directly. It worked through other agencies such as NGOs, financial institutions, etc. The Small Enterprise Development Agency (SEDA) however would be a different model. It would give a national service to small businesses according to common standards. The Agency could then be held responsible. The cost however was that there was no room for local flexibility. He asked that this model be given a chance to work. It was difficult to give details about the regulations at present.

Ms Chang (IFP) referred to Clause 10.(1) and asked if the government will force the agency to do things as the word "must:" was used. She asked if the CEO would be required to sign a performance contract. Referring to Clause 15, she asked if the agency would have to abide by the Public Finance Management Act (PFMA). She also wanted to know why a provisional CEO would be appointed as spelt out in Clause 17A.

Dr Nkem-Abonta (DA) said that the local governments currently had more space so that they could borrow money. For small business development, there was uncertainty as to what would work. There were different models that could work. If there was uniform standards, local economic development would be restricted which would be contrary to the Constitution. The local governments must be able to develop the model.

Professor Turok (ANC) said that from previous experience, the Board of the agency would be very important as there would be lobbying around this Bill. The Committee therefore had to watch this very carefully.

Mr Labuschagne (DA) asked if the amendment to Clause 10(b) replaced all of (b).

Mr J Strydom, the Department drafter, said that the present (b) would become (c) while the new paragraph would become (b).

Mr Njikelana (ANC) said that it was important to look at Clause 10(1) again and ask to what extent it was restrictive or not. He felt that the Bill would stimulate local economic development.

The Chair said that the it was obvious that the Committee always looked at all aspects of the legislation and tried to arrive at a better solution. Regarding limited liability, he said that most views had been canvassed and the Department would take the concerns on board. He reminded the Committee that in the following year, they would be looking at corporate law reform. This could be raised then. It was important at present that the Bill go through. The issue could always be debated further.

Mr October responded by saying that the PFMA does apply. He referred Members to Clause 9. A performance contract would be drawn up. The issue raised in Clause 10.(1) had been debated in the Committee and the feeling was since the agency was funded by government, it had to implement government policy. In its operations it would have options.

Referring to the functioning of the agency, Mr October said that there were over 300 government agencies. There was a review of this at present because there was a lack of co-ordination and integration between these agencies. The Department was not too concerned about the different products being offered. It was more concerned about the different agencies operating. Integration of these agencies was therefore important. Research had shown that in countries where a uniform policy was implemented, it was more effective. It was easier to monitor and was more cost effective. The wording in the Bill did not limit the products offered in a local area. The SEDA will see that integration takes place across all spheres of government. A common access point was wanted where all products would be available. There have been consultations with the Department of Provincial and Local government and they were comfortable with the model.

The Chair said that the challenge would be to keep the finger on the pulse and see what was happening. At constituency level it was also important to monitor and give feedback to the Department.

Mr Labuschagne (DA) said that he still felt that a figure such as 50% attendance of Board meetings should be included. This would make it easier for the Minster to monitor. He asked the State Law Advisors to explain why the clause on limited liability was included in this Bill.

Dr Nkem-Abonta (DA) said that forcing a unitary arrangement on the country was not in line with the Constitution. He said that the provincial system was not serving any purpose and perhaps at some time it should be abolished.

The Chair said that it was not the forum to discuss the issue and that it could be taken up in the Justice or Constitutional Review Committee.

Mr Strydom said that if legal liability was excluded, it would be problematic. He would give the Committee a written paper on this issue as soon as possible.

The Chair said that it would be helpful since they would be looking at corporate law reform soon.

Ms Chang (IFP) said that her question on the provisional CEO had not been answered.

Mr October replied that this would be an interim CEO when the agency was established. Usually the Board would appoint the CEO. In the event of the Board not being in place, since this was a new agency, an interim CEO would then be appointed by the Minister.

The Chair reminded the Committee that public hearings would take place the following week. It was hoped that the Bill would be debated in the House by the 12 Novemberday of the following week.

The meeting was adjourned.