National Small Business Amendment Bill; Small Enterprise Development Agency: briefing

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ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE
15 November 2004
NATIONAL SMALL BUSINESS AMENDMENT BILL; SMALL ENTERPRISE DEVELOPMENT AGENCY: BRIEFING

Acting Chairperson
: Ms M P Themba

Documents handed out:
Presentation on Bill and establishment of Small Enterprise Development Agency
National Small Business Amendment Bill [B23-2004]
Portfolio Committee Amendments to Bill [B23A – 2004]
Bill with Portfolio Committee Amendments incorporated [B23B - 2004]

SUMMARY
The Department gave a presentation on the proposed establishment and functioning of the Small Enterprise Development Agency, and the Bill that provides for its formation. Members agreed with the objectives of the Bill, but were concerned about its classification. They felt it should have been a Section 76 bill as it had implications for the provinces.

MINUTES
Mr J Erasmus, Department Agency Management, in his introduction, said that there would be general presentation on the rationale and operation of the Small Enterprise Development Agency (SEDA) followed by a presentation on the Bill itself.

Small Enterprise Development Agency (SEDA) presentation
Mr M Shai, Interim CEO of SEDA, explained why SEDA had been formed and how it would operate. The presentation can be seen in the PowerPoint presentation attached. He added that before the Agency was formed, strategic reviews had been done. More than three reviews had been done over the last ten years. One of the issues that was raised was the fact that services should be driven by the SMMEs (Small, Medium and Micro Enterprises] themselves. At present there were different services and products at national and provincial level. The aim was now to have a common footprint nationally. Monitoring and evaluation of the Agency would be a high priority.

The structure would involve a national office and provincial offices. Administration such as IT, human resources and legal services would be centralised so that duplication did not take place. The aim would be to spend less on administration. The provincial SEDA office would co-ordinate the local offices. The implementation of the SEDA policy would be the initiative of the local offices. It was important that there be a separation between policy and implementation. A discussion regarding this would be held on 25 November 2004.

The establishment of the SEDA would take place in three phases. The first phase would be the preparation. This phase involved an analysis of the situation. The second phase would be the migration of the assets and staff to SEDA. Phase three would be the dissolution of Ntsika and the National Manufacturing Advisory Centre (NAMAC). Interviews were being conducted that day for the appointment of a CEO for the SEDA. Staff from the two agencies would be moved on 1 December 2004.

Discussion
The Chairperson felt the Bill should have been a Section 76 bill as it affected people on the ground. Information would have to reach people in the provinces. She asked why it was classified as a Section 75 bill.

Mr J Strydom, Department Legal Drafter, explained that the classification of the Bill was not the Department’s prerogative but that of Legal Services in Parliament. The reason it was classified as a Section 75 Bill was because it did not contain any matters referred to in Section 74 or 76 of the Constitution. Although reference was made to provincial structures, there were no provisions for establishment of these structures in the Bill.

Mr Shai added that they were in consultation with the provincial structures.

Mr D Gamede (ANC - KZN) said that he was glad that the timeframes referred had also been specified in the President’s State of the Nation speech in May 2004.

Mr D Mkono (ANC - Eastern Cape) asked for clarity about the merger and expressed concern that that this might lead to job losses.

Mr Shai said that staffing was an issue in any merger and that they were trying not to lose staff. They would be working with the provinces. SEDA would try to expand and people would be retrained so that they would not be lost.

Ms E Mabe (ANC - Free State) asked when the SEDA would also apply to the Free State.

Mr Shai explained that he had been to the province in question and would be returning to work on a strategy. The strategy would try to integrate the provincial economic development strategy. The head of department and MEC would take the process further. There was a big gap for an agency in the province.

Mr Gamede (ANC - KZN) asked how the local structure was identified as some were stronger than other and were able to be self-supporting.

Mr Shai said that negotiations had been started with the Department of Local Government. The SEDA would then be part of the local economic development process. The entry for the SEDA would thus be through districts.

Mr K Sinclaire (NNP - Northern Cape) said that he was not comfortable with the classification of the Bill as it had a strong provincial emphasis. He suggested that the Committee be informed by the Joint Tagging Mechanism team why it had been classified in this way.

Mr Mkono (ANC - Eastern Cape) said that since they were not part of the National Assembly public hearings, he wanted to know what the response of the affected staff members had been and whether other stakeholders such as COSATU had been consulted.

Mr Shai said that the staff of NAMAC and Ntsika had been consulted.

The Chairperson asked that the SEDA programme for the provinces be given to Members so that they could also be part of the process in their respective provinces. Mr Shai said that he would forward this to the Committee.

National Small Business Amendment Bill presentation
Mr J Erasmus presented the Bill to the Committee as in the Powerpoint presentation attached. He explained that Chapter 3 of the National Small Business Act was being repealed and a new chapter was being inserted.

In reply to Mr Gamede (ANC - KZN) asking the length of the term of a Board member, Mr Erasmus said that Board members would have a three-year term, while the CEO would have a term of five years.

Ms E Mabe (ANC - Free State) said that this difference in terms for members and the CEO might disturb the smooth running of the Board.

Mr Erasmus said that National Treasury had suggested these terms. The Board members could be re-appointed. The tendency in the Department and in Cabinet was to rotate members. He explained that originally the CEO had been given a three-year term. It was then pointed out that the Bill provided for a business plan covering five years. Hence the CEO‘s term was adjusted.

Mr Sinclaire (NNP - Northern Cape) asked if the funds that the SEDA received from Parliament were the funds that it actually obtained from the Department. He also asked from what other sources could SEDA could get money. He asked if the liquidation of Ntsika would lead to any losses for government.

Mr Shai said that the SEDA would charge for some commitments. This would be the other sources from which SEDA would get funds. There would be no losses from Ntsika as it was operating on a break-even basis. Mr Erasmus added that the funds from Parliament were indeed the funds SEDA would get from the Department.

Mr Gamede (ANC - KZN) asked if NAMAC was a juristic person.

Mr Shai said that NAMC was a trust and it had had memoranda of understandings with the nine provinces.

The Chairperson informed the Committee that they were awaiting a representative from Parliament’s legal services to address them on the classification of the Bill.

Mr Strydom continued to explain to the Committee why the Bill was classified as a Section 75 Bill. He pointed out that if a Bill contained provisions that were set out in Section 74 or 76 of the Constitution, it would be classified as a Section 76 bill. Section 76(3) of the Constitution stated that if a bill fell into one of the functional areas listed in Schedule 4 of the Constitution, it would be classified as a Section 76 bill. The bill before the Committee did not fall into this category.

The Chairperson then asked a representative from Parliament’s legal services to address the Committee on the classification of the Bill.

Adv Frankie Jenkins explained that the classification process was not a strict technical process. Every clause was not considered. The important thing to consider was to look at the pith and substance of the Bill and consider whether it was covered in Schedule 4 or 5 of the Constitution. The substance of the Bill in question was to create the SEDA. This was not one of the competencies in Schedule 4 or 5. Although trade was mentioned in Schedule 4 the Bill did not fall into this category. The SEDA’s function was to facilitate trade. Without it trade would still continue. For this reason it was classified as a Section 75 bill. He emphasised that the classification process was not a simple exercise.

The meeting was adjourned.

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