Provincial summit on SMMEs

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
8 May 2000
RECOMMENDATIONS FOR SMME DEVELOPMENT

Documents handed out:
Deputy Minister's Speech

SUMMARY
Afternoon Session
The morning session was devoted to provincial reports on SMME strategies and problems. In the afternoon, the Chairperson of the Trade and Industry Portfolio Committee, the Executive Director of Fabcos, and a representative from The Banking Council led the discussion to identify recommendations to address the problems facing SMME development.

There was clear dissatisfaction with the refusal of banks to play a meaningful role in the financing of SMMEs. It was claimed that banks had engaged in a deceptive exercise of "shifting the goal posts" when approached for funding for SMMEs. Banks claimed that the adverse effects of globalisation on their businesses was the reason for this. Community reinvestment legislation and disclosure aimed at banks was seen as a potential solution. Parliamentary hearings would be held to unpack the issues. The packaging of banking services had to be looked at.

It was widely agreed that another major problem was the lack of coordination between national, provincial and local government, government agencies and NGOs. SALGA had to audit what was actually being done by local structures for SMME development from deep rural to large metro areas and to begin thinking what would be the essential achievable actions that could be undertaken by various local governments in this regard.

Other recommendations were around the regulatory review, the creation of a national entrepreneurial culture and for the strengthening of NGOs particularly in the outlying rural areas where they were essential vehicles for SMME development.

MINUTES
Afternoon Session
There was a discussion around the various inputs made during the morning session. Dr Rob Davies, the chairperson of the Trade and Industry Portfolio Committee, Mr David Moshopalo, Executive Director of Fabcos, and Mr Cas Coovadia from the Banking Council led the discussion identifying fundamental challenges and recommendations.

Observations by Chairperson: Trade and Industry Portfolio Committee
Dr Davies found that there were essentially three categories of issues:
- issues of implementation
- areas that required policy and possibly legislative adjustments
- the impact of the regulatory environment.

The Minister's fundamental conception of the SMME strategy as developed in 1995 was correct. There were major constraints on black-owned small businesses arising from the trajectory which the economy took under Apartheid. This required Government to provide concrete support for the emergence of SMMEs. There was however also a need for Government to leverage in other players.

· On implementation he identified certain issues:
- In the sphere of National Government, the Minister had mentioned that there was an insufficient investment of human rather than material resources in the SMME programme. He concurred with this. If persons did well at SMME development within the department, they would be re-deployed to do something else. This had to be reversed so that people who were skilled and had performed well in other spheres of DTI activity, had to be deployed into the SMME programme. This kind of switch-around in the DTI was quite critical.

- One of things that he had not noticed in the provincial reports was the same lack of introspection around the role of provincial Government. Dr Ruiters in his presentation had said that the performance in the provinces was uneven and those provinces that had inherited Provincial Development Corporations tended to perform better than others. He failed however to hear a resonance of this point in the provincial reports. Both provincial and local spheres of government and SMME promotion agencies needed to follow the National Department's example of self-critical reflection and ask themselves what they can do to try and make SMME promotion more effective.

In the same way that it was felt that there was not sufficient distinction between the roles of micro and small business, there was also not sufficient distinction between what was possible by the different spheres of government.

- The second batch of problems identified related to coordination. Khula, a finance institution, found itself doing business plan preparation which was probably within Ntsika's brief. The National Small Business Council, before its demise, was involved in project work rather than advocacy work. Ntsika was doing research that was more the task of the Centre for Small Business Promotion. There was a need for a better identification of core roles and then for some coordination between the different agencies in this respect.

On the ground it was found that Ntsika was establishing small business centres in areas where there was no retail finance institution providing any support. He said that in his own constituency this was the case. People who had been trained were not able to find access to finance to do work in those particular areas.

Coordination on the ground needed to follow the philosophy underlying the rural development strategy: one had to look holistically at all the elements which needed to be present to promote small business in a particular area and then ensure that all the different elements were in place at the same time.

- Several people had made the point that there had been insufficient distinction of micro from small and medium and also from very small enterprises and that different measures were applicable for different business sizes. Also the element of a greater subsidy component for some of the survivalist enterprises was more called for than at other levels.

- Tendering and procurement procedures had not yielded what they should have and the reasons for this had to be analysed in some detail.

· In terms of Dr Davies' second point on policy and legislative adjustment, the obvious issue was the relationship between the banks and SMMEs and the need for a new intervention there. The Minister had made quite extensive reference to this and this had also been identified by the Portfolio Committee of Trade and Industry, in its work both on small business and the role of banks and financial institutions.

There was obviously a need for some form of community reinvestment legislation. He pointed out that the Regulatory Review had also come out in favour of such legislation. Effectively this would entail a set of criteria for banking operations in priority community areas. The performance of particular institutions would be evaluated against these criteria. Favourable evaluation would be the basis for those institutions to expand and could also be the basis on which civil society and community organisations decided where to place bank accounts and so on. There were a variety of versions and forms which this could take, but this was the kind of legislation which was increasingly seen as essential.

He cited the treatment of Khula by the banks. Khula had been subjected to "a shifting of the goal posts" in its interaction with the banks. The banks started off by telling Khula that what they needed were guarantees. When Khula put up guarantees, they were told by the banks that these were insufficient. When they increased the guarantees, the banks said that they were looking for good clients and not for guarantees against failure. Khula thus went into the scheme of preparing business plans. Finally it was said that the banks were facing competition as a result of globalisation and this was not the sort of business they wanted anyway.

Dr Davies added that the 1998 Banking Council report appeared to be resigned to this and the banks were talking about the willingness to discuss legislation in which there were obligations placed on the banking sector. He said that the debate had to focus not on whether this legislation had to occur, but what form it should take.

In addition, there was a need to review policy or even legislation around other financial institutions and the micro-lending institutions. The regulations in place at the moment protected consumers only from blatant exploitation. He suggested that there had to be discussion with the Micro Finance Regulatory Council over what measures could be put in place to encourage some of the micro-lending institutions to shift more into the area of providing small business finance. There was also a savings and cooperative or credit union movement in existence which also spoke about the need for legislative changes in order to accommodate and facilitate its expansion.

· An issue which had come out of the Regulatory Review in reviewing Corporate Law was there had to be a hard focus on law which affected corporate forms that were particularly accessible and beneficial to small business. The Regulatory Review also spoke about the difficulties which existed with close corporations, for example, the dispute mechanisms and the requirements for personal guarantees.

Observations by Fabcos's Executive Director
Mr David Moshopalo started his observations by indicating that the role of organised business was completely ignored and if it had been mentioned it was done simply in passing. He felt that organised business had a role to play in helping small business develop. This role had to be defined soon and was a challenge for organised business.

He acknowledged that scarce resources did prevent organised business from playing a bigger role in the development of small business. He said that this could necessitate a stronger role for NGOs.

He reiterated the point made by Dr Davies about the lack of cooperation by banks in relation to their response to Khula.

He noted that provinces had not spoken about black economic empowerment. For him this was a real issue. He said that without black economic empowerment there would not be thriving businesses in South Africa.

He also felt that there had to be a centralised approach followed with regard to SMMEs since the provincial reports had sounded more like annual reports which all sounded similar.

He said that on the issue of procurement, the Gauteng province had been very modest in its report about what they had achieved. He said that they were the leading province in terms of what it had done with preferential procurement and the regulations around it. Gauteng had been very innovative in dealing with guarantees and warranties. Starting from a zero base, it had placed about one billion rands worth of contracts within the small business sector. It had been very vigilant around fronting as well.

He mentioned the work being done by the Business Trust. No province had mentioned how they linked into the Business Trust. There was a billion rand up for grabs and one heard all the time that tourism would be key in creating jobs. He said that this was a national project and the idea that everything would happen in Gauteng should be dispelled. Provinces had to link into this and he failed to see why they were not taking advantage of this. There was a major weakness here.

It was important to have an integrated economy. To make sure that one did not lose the focus, there had to be a champion identified for SMME development. Whether that Champion should be within DTI, or in the President's Office where it would receive glamour and prestige, was not certain. He said that it nevertheless had to be ensured that SMMEs got the same attention as organised business and that they were seen to be major role players in the economy of the country.

Observations by The Banking Council
Mr Cas Coovadia stated that banks had to play a constructive role in the development and promotion of the SMME sector. The Banking Council was however convinced that other elements of the financial industry also had to come to the table in strategising how SMME development was tackled.

The old paradigm - that banks had to deliver finance to micro, small and very small entrepreneurs and informal traders and that they had to open branches in every village in the country - would simply not happen and there were very good reasons for this not happening.

The debate had to be shifted and it had to be asked how one appropriately released resources and expertise which were in the banks and other elements of the financial industry.

The Minister had said that one of the basic tenets of the policy for small business development was to use limited public sector resources through private sector funds. This had not been successful. When assessing why this was not successful, two areas had to be looked at. Firstly those public sector resources which had been appropriately used and targeted had to be geared to private sector funds. Secondly the private sector, in particular the financial industry, had to be looked at to see whether there were structural issues as to why the targeting of those public sector resources had not released the private sector funds. There were problems on both sides of the fence.

The Minister had also spoken about the effects of globalisation on the financial industry and in addition the opening up of the South African economy after 1994. This had placed all sorts of pressure on banks. The result was an exiting from the markets in which it actually needed to expand. There were real reasons this was happening from an international competitive point of view. This problem had to be factored into the strategy of financing SMMEs.

On a medium to long term basis, the structure of the financial industry had to be looked at. banks as they were currently structured would not be able to directly deliver financial services to a broad range of people. One needed to look at a separate tier of locally-based financial institutions, between the totally unregulated and the banks, that could take deposits and deliver a focused mix of services appropriate to this targeted market. These had to be low cost institutions, supported and matured by banks and others. He said that banks were not passing the buck but they needed to see how best they could utilise their resources and expertise to mature such institutions so that services began to be delivered appropriately. Such institutions would also be sensitive to the sociological environment in which the targeted market actually lived and worked.

The Banking Council gave a commitment to Government and other stakeholders to engage in debate on the restructuring of the financial industry.

In the short to medium term, with regard to disclosure, he said that the Banking Council did not have a problem with the new Disclosure Bill from the Department of Housing. However he said that there had to be some kind of coordination between the Departments and Ministers on this kind of disclosure legislation since it was ridiculous for banks and other institutions to have to respond to various Departments over varying periods on similar issues. He said that if one was talking about disclosure then it had to be looked at across the board. He had no problems with disclosure, processes and legislation which aimed at identifying real discrimination.

The principle of community reinvestment legislation was no longer a debate. He said that Dr Davies was correct that the 1998 Banking Council report agreed in principle to such legislation. There had to be a financial institution to uplift and invest in communities in a sustainable way. It agreed that there had to be a debate on what was meant by such legislation and how it was done.

He said that there had been problems with the banking sector and it was true that they had not come to the table. There were good and bad reasons for this. However they had been doing their homework. He felt that the Government, the banks and others were wiser than five years ago and were better armed to engage productively and constructively. The Banking Council's approach to interaction with Government was one of partnership. They believed that they were not talking a different language and could solve the problem together.

He said that the Banking Council had been engaging Khula very comprehensively in the last few months and in fact had a joint committee with Khula at the moment looking at the problems and progress was being made. He did not feel that there had just been a "shifting of goal posts" from the banks. There had been some serious problems on both sides.

He felt that the reports from provinces were largely disputed by entrepreneurs who he had spoken to. He was part of the Regulatory Review process and had attended five of the nine provincial workshops where small entrepreneurs were present. He said that the feedback which was received at the workshops was totally divergent from the reports received from the provinces. He said that unless things had improved drastically in the last few months, provinces needed to go and talk to their small entrepreneurs.

Finally he felt that SMMEs had to be a central focus of local government since, of all the spheres, it was best positioned to promote the SMME sector.

Discussion
A Northern Province delegate pointed out that the banks had up to now not been accommodating in terms of the SMME project. In general he said that The Banking Council had problems in dealing with the rural poor and projects linked to the rural poor. There was a clear distinction made between these projects and normal business activity of the banks. banks should look at the question of collateral from a different perspective altogether for government-driven poverty alleviation projects. There had to be policies laying down what incentives could be given to banks. Perhaps if there were some kind of incentives or guarantees from government, the banks may be flexible.

He was also worried about the issue of coordination. In the provinces, the department or government agency which dealt with SMMEs in one province was often not the same as in another province or at national level. Streamlining implementation was thus very important.

Because of attitudes of certain local councils, there were places where SMMEs were still struggling to get offices in the Central Business Districts. These SMMEs were frowned upon and regarded as coming to upset established business practices and thus had to be kept away. The processing of licences for an SMME could take eight months due to current bureaucracy. You would be told by the relevant department that the business you were trying to establish in terms of SMME policy was not part of the province's policy. Thus there was a need to clearly define SMME policy, particularly in respect of the processing of licences.

All spheres of government banked with the major banks who were very hostile to the SMME process. The wisdom of their continuing to bank with these banks had to be questioned.

A Small Business Project representative pinpointed the issue of localisation and the role of government. It was very important for incentives to encourage corporate sector and organised business to work in partnership with local and provincial government. Where you had provincial government acting as a leader and not as a partner, problems developed. He cited examples. The Small Business Project working together with provincial and local government in a small town in the Northern Province had created 270 new net sustainable jobs and given over R15 million in contracts to local black owned businesses. Yet an uncoordinated project had built tennis and netball courts in another Northern Province rural community where women still have to dig for water.

He said that the Director General had mentioned that the present definition of small business was unhelpful. It was important to recognise that the market was segmented, and even though Government would like to have one voice to talk to, some minority views in the segments and in the subsectors had to be recognised.

Mr Willie Nell of the Eastern Cape said that his province was largely rural, very poor and underdeveloped with insufficient jobs. He referred to the energy that the banking sector put into sport development and sponsorships probably due to tax incentives. Such energy put into the SMMEs, with the same kinds of tax incentives, may result in a formula which could work.

Mr Ronny Maloi from SALGA said that the key issue for Local Government was to create a conducive environment for SMME development within the broader context of local economic development. Such programmes had to be aligned at national and provincial level to ensure that there was the necessary support base. He urged the Minister to give some consideration to a clear framework for government support.

Kate Moloto from Ntsika felt that coordination was one of the major gaps in terms of implementation. She said that joint planning had to be a critical component. Lots of the "finger pointing" would disappear if there was joint planning and role clarification. Although she acknowledged that there were problems at Ntsika, she said that most of the time they were criticised unfairly. People thought that they were responsible for matters outside of their mandate. She hoped that this was not a once-off meeting but that platforms would be created to facilitate frequent meetings to thrash out the issues.

Most provinces had recommended that Ntsika and Khula establish provincial offices. She could not understand the motivation for this as a provincial presence would in fact not deal with the problems. The visibility had to be at local level where the services were delivered. She had thought of putting up posters pointing out where Ntsika service providers were. However since only ten percent of SMME funding was being given, this type of publicity could not be done.

She noted that many Ntsika initiatives had been reported as provincial initiatives and not as Ntsika initiatives. Nevertheless the approach was one of partnership with the provincial authorities and she did not mind sharing the glory.

She pointed out that the development of an entrepreneur culture had to be focused on as well as the shortage of human resources and programme funding in provinces. Besides the banks, she felt that there were other private sector organisations that had not supported small business development to the extent that they could have. For example there was no cooperation from the Small Business Trust in this regard.

A DP member from the Gauteng Legislature recommended that instead of driving the development of SMMEs from a mainly national level, this should be decentralised to local and provincial levels. Provinces differed from one to another as well as rural and urban needs.

She also recommended removing red tape legislation of which the latest was the Skill Development Act. Research was necessary to identify which legislation needed amendment to smooth the way for small business entrepreneurs.
Educational programmes and suitable school subjects were core issues for future entrepreneurs.

Julius Namabanda working for the Social Development Initiatives said that research and development needed to be developed and shaped for the benefit of small business. International experience showed that research and development which was properly directed at small business could breed innovation.

Given the limited state resources and the specific strengths of certain provinces, provinces had to target those sectors where their strengths were. Further, the creation of small businesses had to be separated from poverty alleviation issues.

A member was concerned that the banks in their own assessment were unable to provide the financial services required by this particular sector. She wanted to know whether the banks had done a social impact study on the implications of moving away from targeting that sector. Secondly she said that if banks would not provide the services then it had to be decided who would actually finance the SMMEs, since it was clear that banks were driven by a commercial rather than a developmental agenda.

The Minister shared the view that one of the biggest challenges was to change the whole ethos and approach of Local Government. Traditionally in South Africa (discounting all the racial issues of the past) Local Government had largely seen itself as responsible for providing services and dealing with lots of red tape for business. If one looked abroad, it was those Local Governments that had best understood the changing structure of economic processes that were making the greatest contribution to economic development.

It had to be seen that Local Government not only had the responsibility to provide services to citizens but to create an economy. In effect they had exactly the same responsibility that a National Government had for their area. The real interface with small and medium enterprises was at Local Government level. Larger enterprises tended to deal with National Government. This had to be accomplished in an innovative way - it was not enough to provide for better licensing procedures but also to think about what was changing in the economic process. It was wrong to say that small and medium enterprises do not need skills development. Internationally, it was in the skilled areas of IT that there was the most rapid proliferation of SMMEs. Local Governments needed to generate scope for citizens to work from anywhere and to needed to provide training.

He said that it would be useful for SALGA to begin an audit of what was actually done by local structures in respect of SMMEs from the deepest rural areas to the largest metro areas. Further SALGA as well as National Government had to begin thinking what would be the essential achievable actions that could be undertaken by various Local Governments in this regard.

Whilst partnerships were essential, they could not be short range profit making exercises for big businesses. They had to be fair and sustainable. This was where the chambers and other groupings of business had to play a role. With the weakness of Local Governments there was much profiteering taking place. Presently the Government did not have the capacity to monitor the fairness of these partnerships. As a result, some of the partnership deals coming across the Minister's desk were appalling. Business could play an important role here in self-regulating its own ethics to ensure that these were fair and sustainable partnerships.

A representative of Khula said that the main thrust of its approach was to build up NGOs as a retailer to make funding accessible to citizens. Khula now believed that this approach needed to be revisited as the NGOs of today were not the NGOs which had existed ten years ago. The simple fact was that the people with the expertise to run such institutions were gone. Human resource development was critical because the people running such institutions were finding it difficult to operate purely because most of them do not have very good management skills.
He agreed that one of Khula's failures was to establish these retailers without checking with Ntsika.

A representative from Nafcoc noted the newspaper report that major banks were moving out of Yeoville. He questioned the criteria used in making such decisions.

Ms Khan, a private equity investor, said it was very unfortunate that banks had to use globalisation and cost cutting as excuses not to deliver to small businesses. Whilst she did not know the Banking Council representative very well, she felt that he was the wrong person to be representing them. In terms of promoting an entrepreneurial culture, banks could actually play a role. She enquired about promoting an entrepreneurial mindset in the bank. banks had not been involved in such training particularly where bank managers were concerned. Further, people at regional and grass root levels who understood the issues of job creation and small business were needed on the Business Trust rather than corporate individuals.

A member commented that the issue of community reinvestment legislation needed to be embarked upon. Also consumer protection in relation to moneylenders needed to be addressed.

A representative from SABS believed that there was a wealth of expertise within SABS. It was important for the provincial departments to make use of SABS. She said that this would also improve risk analysis insofar as financial applications were concerned.

Ms N Shope, member of the Trade and Industry Portfolio Committee and National Organiser of the ANC Women's League, said that rural communities were not really being addressed and this was where most of her constituency was. There were women who did not even have water to start the small businesses being spoken about. Collaboration between the different spheres of government was needed to supply water in these very forgotten areas. People living in these areas wanted to participate in the economy of South Africa. She wanted to be reassured that she could report to her National Conference that banks had changed their attitudes and were supportive or that legislation would be passed to pressurise them to do what the community and Government wanted them to do. She also wanted time frames for implementation of the recommendations discussed. She hoped that the Director General would do something about this.

The Director General, Mr Alistair Ruiters, said that after listening to what The Banking Council had to say, he felt that the future seemed quite bleak for the financing of small business.

He said that in 1994 a number of institutions ranging from the Small Business Development Corporation (SBDC) to NGOs and banks were looked at. The different needs of small, medium and micro-sized businesses was recognised. The banks argued that they would be able to deal with the requirements of small and medium-sized enterprises and the SBDC argued that they did not have the resources. The labour-intensive nature of supporting micro enterprises meant that this was most appropriately done by NGOs and Khula was set up to deal with this. He felt that one had to be more revealing about the current crisis which was faced. Whilst globalisation was an issue, one also had to reflect on the fact that banks had operated in a very protected environment in the 1980s and early 1990s and had overcapitalised on information technology and infrastructure. The reality today was that banks were cutting back in black and poor areas where branch closures were taking place. Mergers were taking place to rationalise but this would not solve the problem.

He was also not sure whether banks were coming with honest solutions when putting resources such as those mentioned by Mr Nel into cricket and the Million Dollar Golf Tournament rather than into small business. He felt that a more frank discussion was needed since he was not sure what the nature of the partnership would be between banks and the public sector.

He felt that banks were social institutions and were part of the fabric of society and they were the entry point for anyone entering the business environment. He was thus concerned that there had to be clear recommendations on how to deal with the issue of financing SMMEs. This was a far more serious issue than had been indicated by the house.

The Gauteng delegate, Ms J Fubbs, was concerned about the cost of finance incurred by the small entrepreneur because of late payments by government agencies and larger companies in return for services and goods. She pointed to community reinvestment legislation in the United States, Germany, Brazil and Chile. Invoice financing could be particularly helpful with respect to government procurement. It was something which Gauteng's tender board would be looking at. She also spoke about the necessity for alternative community banking financial institutions. Of the banking system, she quoted the Bank of Boston as saying that "the South African banking system was the most protected species that it was aware of". She felt that banks had to be expanding rather than closing down in poor settlements.

Another aspect of access to finance was that a range of financial packages offered by banks had never really been explored in South Africa. Different packages had to be developed for different projects and different groups. Oversees there were huge compendiums of packages tailored for every need whereas in South Africa there were about half a dozen. The current banking system should be encouraged to start offering new sorts of packages to cater for the diverse needs in small business.

Ms A Forbes, an SMME manager from CSIR, noted she had completed a report for DTI on provincial growth and development strategy three year before. Listening to the provincial reports of that morning, she had seen little evidence of these strategies being put in place and said that she had expected by now to have seen fairly vibrant SMME communities. She felt that these strategies had to be reviewed to see what had been done and how they fitted into the national framework. DTI had to set the National Policy Strategy since there had been too much strategising and policy making and no implementation. Implementation was really what was needed and this had to be carried out by local government.

Ms Ntuli from Trade and Industry Portfolio Committee said that there had been much discussion about finance but it seemed as though there were no answers emerging. She called for a more structured way of dealing with the refusal of banks to heed the calls for their assistance.

Another committee member, looking at local level procurement, said that the structure of the local council tender boards was very flawed. Secondly, as to the revival of the National Small Business Council (NSBC), the principle of establishing such a body was correct. Essentials were that there had to be funding, it had to be private-sector driven and there had to be a coalition. He believed that there would be a role for government in such a coalition comparable to a mid-wife bringing this "baby" into life, nurturing it, allowing it to grow, but giving it independence at the same time. The problem with the NSBC was that it was seen in some quarters as a government-established institution in competition with organised business.

Mr "Cas" Coovadia from the Banking Council said that he was glad that he was not a politician and therefore did not only have to do popular things. He said that he would say some unpopular things whether or not it made him unpopular at the end of the day.

Firstly he said that banks were basically businesses. They bought and sold money. There were shareholders who needed dividends, and if they did not get dividends then they would pull their money out. Like any other business they had a social role to play but they were a business foremost.

Secondly they were covered by the Banks Act. They had certain prudential requirements and had depositors' money constituting upwards of 40% of the their funds. They thus have a prudential requirement to ensure that this money was returned. These were the realities. Within this context, the Banking Council was saying banks could get involved in broadening access to financial services across the range in South Africa in a way that enabled them to protect their deposits and also play a role in developing communities.

He recommended that this conference mandate the DTI to sit down with the Banking Council in the next few weeks so that all the issues could be placed on the table. The problem areas had to be identified, solutions had to be sought and thereafter there had to be a report-back to the conference.

If the banks were being difficult and not accepting viable solutions then the Director General had the right to report this. If DTI on the other hand put forward untenable solutions, then he would come and say to the conference that the solutions were untenable. Until these parties began to lock horns around the problems and look at viable solutions, progress would not be made.

Dr Rob Davies commented that for the financial sector, investments in IT should lead to an expansion of services to previously unserved areas and a reduction of costs - this was what it was supposed to do. However in the South African situation, for various complex reasons, it has had the opposite effect. He said that what was being confronted was "a market imperfection" to put it mildly. This meant that policy needed to try to influence the situation in another direction. He felt that there was a case for a dialogue, not about whether there would be an attempt by policy to influence the banks in a different direction, but precisely what form this would take. If one went back to "whether" this would be a waste of time. It was probably appropriate that discussion took place at the level of officials and the Banking Council. He also felt that there was a role for the parliamentary structures. The National Assembly and NCOP committees would soon be holding public hearings on the role of the financial sector in the support of SMMEs.

The set of issues summarised under the heading of coordination related to the appropriate roles for National, Provincial and Local Government. There had to be more reflection on what was the appropriate role for each institution. In respect of the different agencies there was clearly a need for coordination between them. This was closely linked to what had been raised by Kate Moloto about joint planning, teaming and role clarification.

The weakness of NGOs was another important issue that needed serious attention. They had been relied on as service providers and some comments had highlighted that there were structural changes taking place in NGOs. He noted other issues which had been mentioned such as the question of the regulatory review, corporate governance review, procurement as well as the need for more regular interaction at this level and of this nature.

Mr Hamilton from KZN referred to the issue of developing an entrepreneurship culture in schools. He felt that this should go further than schools and there should be interaction on curriculum in technical schools, colleges, technicons and universities. He felt that currently graduates from these institutions would find it difficult to obtain employment. In terms of IT there had to be focus on developing people who could run the economy in a modern global way. At the moment there was a chronic lack of IT specialists. Perhaps the tertiary institutions should identify the disciplines which the economy needed and encourage students to study those disciplines by providing subsidised fees for those disciplines.

Ms Moloto said that NGOs needed more funding as well as "breathing space" to grow before certain levels of performance could be expected from them.

The committee member suggested that the coordination between the various government departments and agencies should be led by the DTI and a time frame of three months allocated for this.

The Chairperson did not think that a time frame could be set up immediately but agreed with the principle of a timeframe. There had to be discussion around how much time this would need.

A Ntsika representative said the lack of coordination went wider than the institutions mentioned. It included such institutions as the CSIR and NPI who all had programmes but due to lack of coordination, there was plenty of duplication. Coordination was also needed amongst such government departments as Labour and Public Works.

A committee member emphasised rural upgrading projects as a strategic focus. Secondly, the Tender Board needed to be transformed nationally and provincially. In the area of procurement, monitoring had to be emphasised. Companies were given procurement packages but there was no monitoring. Some of these companies simply collapsed since they were not trained to deal with the issues.

The Chairperson ran through the main recommendations made:
1) On financing, dialogue had to take place between government and the banking sector to thrash out the issues. Secondly there should be hearings at a parliamentary level to unpack the issues. Thirdly there had to be some agreement around the question of disclosure by banks. Fourthly Ms Fubbs' point around the packaging of banking services had to be looked at.
2) On coordination, this should be the role of National, Provincial and Local Government and the agencies. This was within the context of the relationship between these agencies and government spheres, the question of resources, the issue of procurement and monitoring and the question of how the sectoral and targeted approach would be dealt with. SALGA had to audit what was actually being done by local structures for SMME development from deep rural to large metro areas and to begin thinking what would be the essential achievable actions that could be undertaken by various local governments in this regard.
3) On developing a national entrepreneurial culture, the question of human resource development, research and development, interaction with schools and curriculum development had to be dealt with.
4) There was also a recommendation around the strengthening of NGOs particularly in the outlying rural areas where they were essential vehicles for SMME development. They had to find a way together with local government to integrate services.
5) This recommendation was around the regulatory review.
6) There had to be an ongoing exercise of this nature perhaps every quarter or half year depending on resources and the availability of people.

The Deputy Minister of Trade and Industry, Ms Lindiwe Hendricks, addressed the conference in conclusion.