Standards Bill & National Regulator for Compulsory Specifications Bill: Adoption; Integrated Small Enterprise Development Strate

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Trade and Industry

19 February 2008
Chairperson: Mr B Martins (ANC)
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Meeting Summary

The Legal Advisors from the Department of Trade and Industry and the State Law Advisors tabled the changes to the Standards Bill. The size of the Board was now between seven and nine members. A schedule of repealed and altered legislation was now included. Members asked that the order of the wording of Clause 23 be altered to make it quite clear that consultation processes would be followed in the norm setting process. It was clarified that incorporation of national standards could be included “in laws” in matters affecting public safety, health or environmental protection. Members asked specifically that any regulations to be proposed by the Department should come to the Committee before being published, and this was agreed to. Members went through the Bill clause by clause and unanimously agreed to adopt the Bill.

The Committee then proceeded to a clause by clause deliberation of the National Regulator for Compulsory Specifications Bill. It was clarified that compulsory specifications flowed from standards. The powers of the Minister to declare standards were dependent on three prior circumstances. The Board would, as with the previous Bill, consisted of between seven and nine members. Members went through the Bill clause by clause and agreed unanimously to adopt the Bill.

The Deputy Minister and the Enterprise Development section of the Department then briefed the Committee on the Integrated Small Enterprise Development Strategy, highlighting the key role players, the focus areas of the strategy, the need to capacitate and train, and the funding that each institution could offer. There was still a gap in funding between R10 000 and R250 000.
There was a need to improve sector strategies, increase government investment and strengthen coordination and co-funding across government. The cost of necessary support to small enterprises was high. Most of the lending was using government funding at present and where banks were partnering they were still setting the terms. The Small Enterprise Development Agency (SEDA) would need to train and increase its reach. Seven basic services had been highlighted. The types of assistance and the performance of both SAMAF and Khula were outlined. Access to markets was a key priority. A final list of ten products to be targeted for supply by small enterprises to government was tabled. 70% of government procurement over the next eighteen months should be from small enterprises, thereafter rising to the optimal 85%. Challenges included the need to ensure that there was payment to suppliers within 30 days, and better monitoring systems, including a hotline for complaints, had been set up. A conference in May would highlight and launch the programme, which was to be facilitated by an integrated delivery plan.

Members raised a number of questions, many of which could not be answered at this meeting. Particular focus areas in those questions included the relationships between the institutions, the need to strengthen the position of Khula, the gaps in the funding, the information centres and their work, the need to provide greater assistance to cooperatives, stokvels and women
s initiatives, and to have better information across all the sectors dealing with the same target markets. A number of questions were asked around capacity, budgets, the need for the Department to focus in detail on the small enterprises and cooperatives, rural areas, and delays in payment by government departments. Other issues included the need to include property finance, private partnerships, including the agreement with Old Mutual, and some issues would be put formally to the Minister for further discussion.

Meeting report

 

Standards Bill: Deliberations
Mr Johan Strydom, Legal Advisor, Department of Trade and Industry, noted that the proposed amendments had been dealt with the previous week. He would focus on changes made as a result of last week's meeting.

Mr Strydom tabled a new document containing the proposed amendments. He would refer only to the clauses that had changed since the previous week. He said that the changes had not been effected in the Bill as yet. The Rules of Parliament required the Department to prepare a document in this form. Only when approved would a new Bill be printed, with a note that it was "as amended by the Portfolio Committee".

Clause 6 dealt with the composition of the board. There had been discussion on the numbers, and the numbers had now been re-stated as a minimum of 7 and a maximum of 9 members.

The second change related to the new Clause 36, dealing with amendments to laws specified in the Schedule. These included changes to the Trade Metrology Act and the National Building Regulations and Building Standards Act. There were no substantive amendments,

Clause by clause deliberations
Mr Strydom then took the Committee through the various clauses. Where not otherwise indicated, he merely gave a brief summary of what each of the clauses dealt with.

Clauses 1 to 4
Mr Strydom indicated the main content of these clauses. He pointed out that clauses 3 and 4 provided for the continuation of South African Bureau of Standards (SABS) as a juristic person, and set out the objects.

Clause 5
This dealt with the functions. In line 50 there was amendment of a reference, by substituting (f) with (e)

Clause 6
This provided for the establishment and composition of the Board, to be broadly representative of the population of South Africa, and there were requirements of sufficient knowledge or experience. The amendment relating to the numbers must be inserted. The Board would consist of no less than seven and no more than nine members.

Clauses 7 to 13
Mr Strydom summarised the content of these clauses.

Clauses 14 and 15
Mr Strydom pointed out that this clause dealt with the forum, which had been discussed during the public hearings. The forum could be constituted to provide advice to the Board. Clause 15 was similar, although it dealt with a government consultative forum.

Clauses 16 to 19
Mr Strydom again summarised the content. He pointed out that Clause 19 allowed for appointment of consultants where there was not sufficient experience or expertise in SABS. 

Clause 20 and 21
Mr Strydom pointed out that these were delegation clauses typical of those found in other legislation.

Clause 22
Mr Strydom indicated that there was an amendment in this clause dealing with the end of the financial year of SABS. The financial year was simply to continue, no matter when the Act was passed, to avoid the situation where there might have to be two financial year ends in a calendar year.

Clauses 23 and 24
These were the essence of the Bill, and there were extensive amendments in respect of both.

Mr Strydom said that Clause 23 should have the heading "National Norm for the setting and amending of South African National Standards”. He reminded the Committee that this heading was to make clear that there should be a single national norm. All standards would be based on the premise of that single national norm. There was a clear distinction now between Clauses 23, dealing with development and maintenance of the national norm, and Clause 24, dealing with standards based on that norm.

Prof B Turok (ANC) asked how would SABS develop the norm. He understood the difference between the norm and standard. He asked if only the standard setting process would involve consultation.

Ms Elsabe Steyn, Director, Department of Trade and Industry, noted that the norm would follow the same process and it would be a consultative process.

Prof Turok thought that the opening wording of the clauses should be the same. The current wording suggested that SABS would set the norm without consultation, but that the standard would be set with consultation.

Mr Strydom pointed out that Clause 23(1) stated that it was the prerogative of SABS to develop and maintain the single national norm. However sub clause 23(2)(a) set out that the norm must detail a process. The need to take into account the interests of all parties was mentioned in (2)(a)(ii) and (2)(a)(iv) required a national consensus-building process.

Prof Turok suggested that the consultation should appear at the beginning of the clause, suggesting that the wording was the wrong way round.

Mr Strydom suggested that perhaps, at the end of sub clause 23(1), there could be wording to make it clear that the process of consultation must take place

Prof Turok suggested that perhaps the wording now contained in sub-clause (iv) should appear higher

Dr Tshenge Demana, Chief Director, Department of Trade and Industry, agreed that wording would be inserted in 23(1) and that the Department would attend to this.

Clause 25
Mr Strydom summarised that this dealt with appointment of a standards development organisation

Clause 26
This provided for copyright in standards documents to vest with SABS. The Copyright Act would apply in respect of those standards in favour of SABS. There had been a material amendment, as contained in 26(3), that a person could make a copy of the document for “his or her own personal use”. It was difficult to formulate precise wording to cover all situations, and there might still be some problems - for instance at academic institutions.

Clause 27
This set out limitations on certain claims. If a person had manufactured something, stating that it was done in terms of a standard when it had not been done, that would be a false claim.

New Clause 28
Mr Strydom indicated that a new clause would be inserted, dealing with incorporation of national standards in laws, in matters that might affect public safety, health or environmental protection.

Prof Turok asked if this was to be incorporated in regulations or in an Act, and if Parliament would be seeing the regulations.

Mr Strydom indicated that the current wording was not restricted to regulations as the wording referred to "any law". This was wide enough to include primary or subordinate legislation.

Prof Turok said that this was raising the age-old argument about whether parliament should be passing regulations. Oversight by this Committee did not extend to regulations.

The Chairperson did not agree completely with that statement. The impact of any Department’s regulations was subject to oversight, and the Committee would be able to call upon the department or state law advisors to explain them.

Mr Mongamezi Kweta, State Law Advisor, Office of the Chief State Law Advisor, agreed that this was an empowering clause. Subsection (2) referred back to subsection (1), so the same interpretation would be given to "incorporated" in subsection (2) as in subsection (1). This would mean incorporated in any law.

Mr S Rasmeni (ANC) proposed that the clause be left as it was. The oversight role of the Committee would allow this Committee to ask the Department to appear whenever it was intending to introduce regulations, and he thought this would be a sufficient safeguard.

The Chairperson agreed, and reminded Members that in relation to other legislation the Committee had made a specific request that regulations must be brought to this Committee before published. The Department had acceded to these requests. If there were areas of concern, the Committee could raise the matter.

Old Clauses 28 and 29
Mr Strydom pointed out that although he would refer to the following clauses as numbered in the Bill they would need to be renumbered in the new version

Clause 30
Ms M Ntuli (ANC) asked what this clause meant.

Mr Strydom responded that this was intended to cover the situation where an employee, in the performance of his or her work, and acting in good faith, made a mistake. Any person who was aggrieved by a mistake would normally be able to institute legal proceedings. This clause said that, provided there was good faith, and no intent to cause harm, the employee would not be liable for damages.

Ms Ntuli asked what would happen if a mistake caused death or severe injury. She wondered whether SABS itself should not be held liable, so that people were not left without a remedy.

The Chairperson explained that if a person acted negligently, then the individual or organisation could be held liable. He explained that this was a broad principle, and that the standard of a reasonable person would apply.

Clause 31
Mr Strydom noted that there was an amendment that had inserted all the relevant references. The clause dealt with offences and penalties and hopefully everything was now covered.

Clauses 32, 33 and 34
Mr Strydom summarised the content of these clauses.

Short Title
Mr Rasmeni asked whether the new Bill, once passed, would become an Act of 2007 or 2008.

Mr Strydom indicated that a number would be assigned to the Bill, once passed, and the year 2008 would apply. This would be reflected in the Short Title clause.

National Regulator for Compulsory Specifications Bill: Department briefing and clause by clause deliberations
Mr Strydom said that this Bill also needed to be read with the proposed amendments, as set out on a separate sheet. He reminded members that Compulsory Specifications flowed from standards. Save for one exception, there would be no compulsory specifications without a standard already being in place.

Clause 1
Mr Strydom highlighted the definition of a compulsory specification.

Clause 2
Mr Strydom indicated that this set out the purpose of the Act, to provide the framework for administration and maintenance of compulsory specifications.

Prof Turok wondered if this clause was not too narrow. It was limited to health, public safety and the environment. He could see that there might be other circumstances to be covered.

Mr Strydom noted that this Bill was intended only to apply to those standards that were to be made compulsory specifications because they related to these vital aspects.

Clause 3 and 4
These set out the establishment of the National Regulator. Fairly extensive powers were awarded, but it also included the standard type of powers as set out in the Standards Clause.

Clause 5
Clause 5(1)(a) set out the most important objects: to make recommendations to the Minister on compulsory specifications.

Clause 6

Mr Strydom said that the
the same minimum (7) and maximum (9) numbers of members as reflected in the Standards Bill would apply to this Board.

Clauses 7 to 12

These clauses were the same as appeared in the Standards Bill

Clauses 13

Mr Strydom explained that this clause contained the main essence of the Bill. It set out how a compulsory specification would be reached. There were many national standards, relating to a host of different circumstances. The majority of these standards were not considered to be of such a nature that they should become compulsory specifications. However, those relating to the important areas of health, safety or the environment could be.

Compulsory specifications would be made by the Minister. There was not an unfettered discretion. The Minister could only make a compulsory specification on the recommendation of the Board. Compulsory specifications could only be made in the areas of public safety, health or the environment. They could be made by way of notice in the Gazette. However, there had to be consultation with stakeholders, and consensus building, as set out in the sub-clauses

There was a proposed change to 13(1)(c), which would now read "if a SANS or a provision of such a standard is not available in terms of paragraph (a) or (b).
Therefore this would limit the Minister's declaration to a case where no standard was available.

Clauses 14 to 19

Mr Strydom summarised the content and meaning of these clauses.

Clause 20

Mr Strydom pointed to the provision relating to self-incriminatory evidence or answers given to inspectors. Such answers would not be admissible in a court, unless they fell within the ambit of certain actions. This had been discussed the previous week. 

Clauses 21 to 29

These were similar to clauses appearing in the Standards Bill.

Clause 30

Mr Strydom indicated that nobody could be presumed to have committed an offence. This clause however stated that documentary proof around the name of a person importing a product could be presumed sufficient proof of ownership or importing, unless the person could satisfy the court otherwise; it was a rebuttable presumption.

Clauses 31 to 33

These were similar to clauses in the Standards Bill.

Clauses 34 to 36
Mr Strydom summarised the content of these clauses.

Short title and commencement

Mr Strydom noted that the Bill, once passed, would be an Act of 2008.

The Chairperson read out the Motion of Desirability for the Standards Bill. This was proposed and seconded

He then read out the Motion of Desirability for the National Regulator for Compulsory Specifications Bill. This was proposed and seconded.

The Members agreed unanimously to adopt both Bills, with amendments.

Integrated Small Enterprise Development Strategy: Implementation Update by Department of Trade and Industry (dti)
The Chairperson welcomed Deputy Minister Elizabeth Thabethe, to the meeting

Ms Hlonela Lupuwana, Chief Operations Officer, Enterprise Development, dti, noted that during 2007 the Department had made presentations to this Committee on its proposals for an Integrated Small Enterprise Development Strategy (ISEDS) and had also received Cabinet approval. Priority areas set by Cabinet included capacity building of the South African Microfinance Apex Fund (SAMAF) and financial intermediaries level. The financing gap between R10 000 and R250 000 must be addressed, and Khula needed to come up with implementation plans. Khula and SAMAF would need to upscale support and capacity building. There must be improvement of sector strategies, increase of government investment, and strengthening of coordination and co-funding across government. An annual reporting system on progress in implementation must be made.

Ms Mandisa Manjezi, Chief Director, Enterprise Development, Department of Trade and Industry, noted that the bulk of the work and resources would lie in development support. It was necessary to look at all market forces. Annual reviews were done on the state of small enterprises. Small enterprises required sophisticated and technical support, including mentorship and incubation, and the cost of delivering this support was high. Banks claimed that they were lending, but the reality was that it was mostly government money being used. Banks would require guarantee mechanisms or owner contribution. Their lending decisions were not prioritising the same areas as government.

Ms Manjezi said that non financial support services were also offered, but perhaps there was not sufficient investment in these. The Department had a strategy to ensure a comprehensive infrastructure roll out plan. By the end of the 2007 financial year, there had still not been sufficient coverage. There were fluctuations in the provinces, and Small Enterprise Development Agency (SEDA) would have to play a role in training and development, as there was still not adequate expertise on the ground to provide all necessary interventions.

Ms Manjezi noted that an investigation of the numbers showed more "walk-ins" to the branch offices, which reflected the message that the Enterprise Information Centres (EICs) were not giving the quality of information services.

The analysis of the queries to the EICs and branch offices had isolated seven basic services that were  needed. The Department would also offer sector specific interventions. The role of the line and sector-specific departments would have to be clarified and strategies developed for sectors. the Department had begun to work with partnership agreements. Technology development support programmes were driven through the SEDA Technology Centre. The bulk of funding at the national office went to network support and knowledge systems development. Procurement programmes and agreements would be handled at Head Office.

The landscape of financial support services was shown. There was a gap in the middle sectors. The Industrial Development Corporation (IDC) focused on industrial finance, and was a direct lending institution. The National Empowerment Fund (NEF) also had a direct lending mandate, but focused on broad based black economic empowerment (BBBEE) initiatives. Khula did not lend directly to enterprises. Its lending went via a myriad of partnerships. Although there were some models, the lending decision did not vest with Khula, and it had to customise to needs, objectives and priorities of partners.

SAMAF also lent through a network, rather than directly. There was follow through and support It was hoped to develop a robust micro system. Before there could be lending, there must be heavy investment into capacity building, and mentoring on development of systems and capacity to absorb credit.

The core of SAMAF and Khula interventions was shown. Business loans were delivered through the network of financial intermediaries. Small enterprises experienced serious gaps in availability of property and Research and Development (R&D) finance. For procurement, there was a contract based lending product developed with an external partner. Even the NEF had begun to work on looking at contract based lending.

SAMAF had a poverty alleviation product, stretching beyond enterprises to household finance. It would apply to joint income of less than R1 500 per month. Capacity building investment would have to ensure that the network was able to absorb and manage credit facilities. A further product was geared to micro-enterprise development, linking to cooperatives initiatives. It was quite powerful, but there had to be education on its power. The amount of SAMAF lending (R10 000) looked very small. However a cooperative with 10 members could access R100 000, and that represented 10% of R1 million. A real enterprise could be begun with this, with adequate development support instruments.

SAMAF performance at end March 2007 was tabled. The numbers showed low disbursements. This was because before it could start lending, there must first be development processes with financial intermediaries About 28 of the 31 intermediaries had not at that date been in the SAMAF agreement for more than 6 months, and had therefore been in the preliminary stages of framework development.

The Khula performance was also tabled. Ms Manjezi explained the rise in lending approvals between 2006 and 2007 as influenced by the shift in the demand for products, more credit facilities being requested. Khula therefore had to find ways to respond. The number of joint venture partners partnering with Khula was another factor. The numbers seemed consistent also with the outreach. The volume of approvals had increased, and more were accessing finance for larger amounts.

The Government Preferential Procurement for small enterprises product and services had begun with consultation with National Treasury (NT). The Department had to establish a framework for selection of the products to be used. The second phase would refine the implementation and monitoring mechanisms, and would be concluded with work by NT, and the issuing of guidelines.

Mr Mojalefa Mohoto, Unit Director: Enterprise Development, dti, noted that access to markets for small enterprises was a key priority. There was a need to look at market failures and opportunities. The focus would include strengthening the manufacturing chains to supply the demand. There was also encouragement of enterprise clusters and cooperatives, as these could perform better. The ability to absorb labour must be stimulated. Increased markets would increase the capacity to employ. This scheme was not for government alone. Once there was a pool of enterprises, they should create their own markets in the private sector. The ten products had been selected from a sample. Criteria had included the frequency levels of supply of the products to government, and this had informed the final list of ten products. These were listed (see attached presentation).

Mr Mohoto noted that merely providing markets without a linked payment system would not assist. Enterprises must be paid on time. This was legislated for in the Treasury requirements, but had not been happening. There would now be a platform for complaints, through a hotline in SEDA. There would also be government supplier database integration to track growth and movement.

Mr Mohoto said that the ultimate aim was that about 85% of government spending in the ten target areas should be directed towards small enterprises in the long term. However, for the next 18 months, a target of 70% would apply. The initial target would be enterprises supplying R500 000 and below, although there was recognition that some enterprises could supply above that figure. the Department would be running workshops with role players and the mechanisms developed would take into account the dynamics of particular provinces. It was critical for NT to issue guidelines. Annual reporting and monitoring would enable the Department to track the project. A Government Conference on Small Enterprise Procurement would be held in May 2008 to launch and publicise the programme.

Mr Mohoto said again that although the 30-day period was legislated, it was not being implemented in practice. Accounting Officers of Departments would therefore be targeted, and would have to include payment on time in their key performance agreements. A hotline call centre would be established. Complaints would be fed back to the accounting officers so that they could address the problems. The Auditor General should also be asked to comment on the payments.

Ms Manjezi added that coordination would be improved by establishment of a national / provincial / local integrated service delivery plan. The Department would look to review its enabling framework, since there had been disjuncture in the policy frameworks, to strengthen the coordination capacity, to have a joint plan for outreach to under-serviced areas, to set targets to track outreach, and to have co-funding arrangements.

Discussion
Ms D Ramodibe (ANC) welcomed initiatives to address poverty. She asked for an explanation on the relationships between Khula and the banks.

Ms Manjezi said that it was the banks who decided whether they wished to partner with Khula, and in what areas they would partner. Most banks tended only to partner on cash-claim products, in the lower segment. By doing this, Khula could absorb the risk element. Because Khula tried to ensure that credit indemnity was in proportion, the banks would still try to minimise the loan size so that they would curb their losses. There would not be investment by the banks in infrastructure. Khula was dependent on what the banks wished to do. Khula was also not included in credit committees of the banks.

Ms Ramodibe asked for an explanation of the rationale for the placement of information centres. She asked why the information centres were not perceived as helpful and what should be done.

Ms Lupuwana noted that the branches were better staffed, and there was more work. The information centres were not SEDA-owned, and could only really deal with referrals and information about where to go.

Ms Ramodibe asked about the micro enterprises, noting that there had been some discussions about bringing them together and assisting them to survive.

Ms Ntuli noted that the Cabinet resolutions had included procurement and compliance. She asked what the time frames were, and what were the challenges. The need to invest for capacity-building was mentioned. She was pleased to see the Deputy Minister, as the issue of capacity was a perennial issue across all departments. It did not seem to make sense that it should still be so prevalent. Government procurement, compliance and coordination were all very well, but without capacity she wondered how much could be done.

Ms Ntuli said the same issue of capacity building was raised for SAMAF. She would like to hear if the plans would ever come to fruition.

Ms Lupuwana said that the Apex fund was structured in a certain way. Cooperatives were community owned and needed assistance on training, corporate governance and training. That was why a policy was taken to capacitate them before they could take lending decisions.

The Deputy Minister added, on the capacity issue, that the Auditor General had highlighted huge vacancy rates, not just in the dti. The problems might lie in some agencies or some provinces, where there was not the capacity to spend correctly. There was a huge problem of competition between government and the private sector, largely influenced by the difference in salaries. The Minister of Public Service and Administration had highlighted this in her media briefing the previous week.

Ms Ntuli also questioned the up-scaling of government investment in small enterprise. The budget for 2008/09 seemed to indicate that Khula was under-funded, and she wondered how serious the Department was about small businesses. She would like to hear exactly how things would be achieved with this small budget. Those in both townships and deep rural areas were suffering enormously.

Ms Lupuwana noted that the old SEDA budget had not changed. There was a moratorium in establishing new branches. Focus was put instead on improvement of the product. The plans were there, but the budget was too limited.

She noted that the whole issue would, as part of Khula Direct, this issue would be taken to Cabinet. There were attempts to close the gap between R10 000 and R250 000 funding. Recapitalisation of Khula to the tune of R1 billion was being requested. In addition it was proposed that Khula should be able to lend direct rather than through the intermediaries. However, it was quite difficult, because there was a huge spread of network that did not belong to Khula. The budget was dictated by the process, but the figures were changing in terms of lending and capacity building. The projections in the year ahead, for SAMAF, seemed to indicate a case for requesting additional budget. A number of institutions had been capacitated already.

Ms Ntuli noted that NEF and IDC were lending direct, and she appreciated this. She asked if they had a ceiling, and wondered also what their lower level was, as they seemed to cater for a particular group. She asked how women's groups and stokvels would be assisted. Perhaps there was a need to re-think how to develop rural people and help them to stay in those areas rather than migrating to the cities on the hope of a job.

Ms Manjezi said that the Department was trying to find a link to cooperatives in areas.

Prof E Chang (IFP) said that she remembered Khula having said that they would be more aggressive in lending under R200 000. That would seem to indicate that direct assistance would have to be sought from Khula. Khula was mentioned in regard to small business, but there was no reference to direct lending for micro businesses.

Ms Manjezi accepted the comment. However, she explained that financial intermediaries did not have risk management capacity Instead of giving R120 000 they might decide only to limit the loan to R10 000, because the risk element was minimal. That was why the loans size remained in lower segment figures. As long as they were carrying the mandate on someone else's back there would be challenges. The decision to change this would lie in government as a whole, not just dti.

Prof Chang said that the micro enterprises might be able to access funding. the Department needed to pay more attention to them.

Prof Chang noted that this dealt with procurement from government. She wondered if this alone would not justify unlimited credit, based upon the premise that government would pay. More attention would need to be paid to whether the government business would be regarded as a guarantee against payment.

Mr Mohoto said that this issue was embedded in the programme around supplier development. If enterprises had secured a project, they should be able to secure bridging finance. The direct foreign investors would have to develop a product or assist contracts in government.

Dr P Rabie (DA) noted that Northern Cape was a rural province, and there was no delivery network, approvals committee, and no lending capacity.

Ms Lupuwana said that there had not been anything in Northern Cape in previous years that could on-lend. There was now progress, and district municipalities were trying to start up. There was no longer a zero presence. 

Dr Rabie said that small business procurement programmes were having problems in dealing with government departments. He said the private sector could not be expected to participate if government did not set an example. Small businesses were vulnerable and needed cash flow. Two months delay could create huge problems. He wondered if it was possible to name those provincial and national departments that were not paying.

Mr Mohoto said that it was rather a question of delay. Invoices might be sent to someone who was out of office, and sit in the in-tray for too long before being processed. This had to do with systems, and insufficient tracking. In addition, if an entrepreneur submitted an incorrect invoice, the turnaround time for rectification may be more than 30 days.

Ms Manjezi added that there were some system deadlocks. Bankserve would say that they could set up systems to clear invoices, and track the age analysis. However, because the Department systems did not allow for payment of third parties and cession of invoices, this tracking system could not be used. These points would be raised for further discussion. System decisions could not be taken by the Department alone.

The Deputy Minister said that the hotline would assist the small businesses to report on issues of non-payment or late payment. This was the only proposal that seemed to be workable at the moment. the Department was not included in those departments failing to pay in time. She could not speak for the agencies.

Mr S Njikelana (ANC) noted with concern that EICs and branches in certain areas were performing poorly. Limpopo, although it was so vast, had only three branches. He wondered whether there were sufficient branches in each province.

Ms Manjezi said that the determination of where the EICs would be was based on whether there had been local business centres of some kind through whom SEDA would work or partner. However, SEDA was now having to invest in EICs and developing a in-house learning capacity to assist the EICs. As part of the development challenge, there was combining of financial and non financial support. The banks were doing micro lending, and financial intermediaries had better money than Khula. It was the decision of the owner of the business to decide which to go with. That was a development challenge.

Mr Njikelana noted that the seven basic services were useful. He noted the joint arrangement with Department of Agriculture on agri-business, but wondered if there were others for other sector programmes.  He echoed Ms Ntuli's concerns that support tended to be urban-biased, and the rural areas were losing out.

Ms Manjezi said that the Department did not focus directly on rural areas, but would become involved in Integrated Development Plans of municipalities, and provincial development growth, and would decide on projects to drive the rural dimensions.

Mr Njikelana would like to have an update on programmes and on what was being done by parastatals in other areas.

Mr Njikelana recalled that when SAMAF presented, they had said that they would use intermediaries because of the numbers under R10 000. He would like to have comment, as intermediaries could be very helpful at that level. He asked to what extent coordination was helping. There were a number of institutions mentioned.

Mr Njikelana noted that property finance was not available as a Khula service. He asked why not. Property was helpful as collateral security in business.

Ms Manjezi said that this type of investment would require a high capital base. The same was true of research and development. As long as recapitalisation remained outstanding, this could not be done, unless Khula could find a partnership with the private sector. Perhaps enterprise development and empowerment could be linked through such an intervention. Perhaps parliament needed to send through a clear message

Mr Njikelana noted the gender spread and wondered if this showed any improvement, or if there were plans to ensure it.

Mr Njikelana hoped to hear more on the recent initiative with the private sector.

The Deputy Minister clarified that Old Mutual had a partnership with dti. It was two fold, within the Jobs for Growth of the Deputy President, assisting with rural development and poverty alleviation, and Old Mutual would be putting more than R400 million in to the different partnerships. On 18 February, the Women
s Entrepreneurial Fund, in partnership with Old Mutual was launched. R100 million had been contributed by Old Mutual and government in equal shares. This Fund would give loans to entrepreneurs, of between R30 000 and R1 million. It would be specifically geared to women entrepreneurs, as there had not previously been a targeted fund.

Mr Njikelana asked who was likely to raise challenges around constitutional compliance.

Ms Lupuwana noted that the constitutional challenge around the set aside was raised by NT
who suggested that perhaps one group should not be targeted against another. However, the Department was of the view that preferential procurement must be a priority.

Mr Njikelana referred to computer supplies as one of the 10 targeted products, and asked if this related to hardware, software or both.

Mr Mohoto confirmed that it referred to both.

Mr Rasmeni said that other questions should perhaps be directed to the other institutions mentioned.

Mr Rasmeni wished to refer to the point on lending decisions being taken by the banks, although the money came from government. He said this was a major problem, and asked if the Department was geared to do "business unusual". Most of the presentation appeared to be stressing business
as usual. There was a need to change and to attack poverty by empowering and supporting small, medium and micro enterprises (SMMEs) and cooperatives, making interventions into the second economy. Unemployment and inequality in society were still rife, and coordination must address all sectors and all departments. He asked if there was both coordination and leadership to drive the small businesses. Departments were still acting autonomously.

Ms Lupuwana noted that there was coordination between SAMAF, Khula and NEF, with an exchange of information.

Mr Rasmeni said that steps to assist emerging farmers were being taken, but there was little support, no marketing, and lack of support to cooperatives. He asked if the unit dealing with cooperatives in the Department was still in existence, and what its budget would be.

The Deputy Minister responded that this unit still did exist. 

Mr Rasmeni said that the turnaround for support to financial intermediaries seemed to be too slow; they were concentrating also on other issues, and there was not immediate disbursement and transfer of funds. In fact, he felt that the turnaround times should be improved across the board.

Prof Turok thanked the Deputy Minister for her attendance.

Prof Turok said that there was much concern about the allocation of funding in the dti. He suggested that this Committee should look carefully at the new budget and that the funding to the Department should be specially examined.

The Deputy Minister responded that the cooperatives funding had changed a little, as there would also be donor funding. In addition NT had given some funding and the Cooperatives Bank would also assist. Khula  was given responsibility to deal with a special project on cooperatives. The Enterprise Organisation (TEO) was also running with a Cooperative Incentive Scheme (CIS). The Cooperatives Unit of the Department had not had adequate capacity to deal with all applications. There would be a more integrated strategy.

 Prof Turok thought there was a need for better focus. If Cabinet had taken a decision that this was the year of government procurement, then that should take precedence over all else. It would make a huge difference if this Committee could say with certainty that all government departments were committed to what was set out. This should be raised in the Clusters and other Committees in Parliament. He understood the difficulties of accountability and quality performance. However, there was surely more that could be done within that context.

Prof Turok said that the location of the unit for enterprise development and the whole structure had to be clarified. He would like to see an organogram of all the institutions and the reporting lines.

Prof Turok said that at Polokwane an excellent resolution was taken on rural development that could be used as a basis for discussion.

The Deputy Minister said that support for small businesses was a core function of dti. She agreed that it might be useful for Prof Turok to note a formal request for an address around coordination and reporting functions, and should also raise the "business unusual" and the Polokwane issues. The position of direct foreign investment and implementation were critical proposals also raised at Polokwane. She agreed that there was a need to speed up the responses. There was a need to harmonise issues. Provision should be made for economic development and utilisation of all entities and agencies must be considered in the budget.

Prof Turok thought it was odd that NT was the custodian of government procurement.

Mr Rasmeni asked the Minister also to address the composition of the Boards, and the overlapping appointments.

The Deputy Minister said that the Boards had been discussed in many Cabinet committees. In some cases the expertise offered by a person might not be available elsewhere. The pool was small and people did tend to rotate in boards, both in government and private sector. Some who had more work were better than those who sat on only one board. It really depended on how they could prioritise their work. That was work in progress, and was linked to the broader issues of skills shortage. Hopefully it would be corrected in time.

The Deputy Minister gave a general response, stating that the integrated strategy was seeking better coordination and better alignment, moving away from the "silo approach". That would be happening gradually. The strategy presented to Cabinet emanated from previous Lekgotlas, when it was realised that the fragmented strategies were not assisting. This was work in progress. Issues such as the urban bias were ongoing. SEDA was trying to change its focus, although it could not do so in all provinces, and to work with other offices. There was progress, but it was slow.

Ms Ramodibe spoke to the need to do something specific for the poorest of the poor.

Mr Njikelana commented that it would be helpful to have a comparison of the Indian experience, as India had done a great deal to SMMEs.

Mr Njikelana said that Khula, SEDA and SAMAF must support the cooperatives. Although he understood that the Department was interacting with NT, there must be a formal response from NT and Cabinet as to what was being done to increase budget allocations for agencies. There had been numerous presentations to NT, and this should be escalated to Cabinet. He was dealing with a number of the agencies, and the demands on the ground were growing.

Mr Njikelana suggested that the Committee would have to focus on EICs and technology centres of SEDA. It would be helpful to have increased support. In addition he thought the Committee should focus on the incubation programme, as other countries who had intensified incubation programmes had prospered.

Mr Njikelana said that the quality of service of external service providers must be examined. Many people were more or less satisfied with their first interaction with SEDA, but that was lessened when they went through the various channels. There was a need to monitor this issue.

Mr Njikelana noted that there must be a conscious effort to mobilise what the clusters had suggested.

Mr Njikelana asked that the integrated service delivery plans should be examined by the Committee. The fifth core objective of Parliament was facilitating cooperative government. He would like to emphasise harmonisation. He asked if there could be a special session with NCOP and South African Local Government Association (SALGA) to evaluate what was happening. There was competition between the various groups. Public representatives must maximise resource allocation.

Mr Njikelana thought it was important to take the Department to the people. The assumption was that there would a focus on practitioners in the second economy. He thought that the focus should be broader. He would hope that the Department would explain what it did, but should also use locals to ensure continuity with what they were presenting, including councillors and parliamentary constituency offices. Leadership could be addressed there too.

Mr Njikelana said that he was anxiously awaiting the Enterprise Development Bill and looked forward to hearing when it would be presented.

The Deputy Minister said that the officials would attend to any need to amend legislation.

Ms Ntuli commented again on addressing the financial gap between R10 000 and R250 000. Under funding a person would be
funding for failure. She had thought that there must still be mentoring, and asked if this was indeed continuing. She pointed out that funding should cover both equipment and working capital.

Ms Ntuli stated that some people had good business plans to develop traditional tourism villages. However, they could not find funding, as the institutions did not seem to have the capacity to deal with this. She wondered if the departments should not come together to decide who should be doing what. The Portfolio Committee on Agriculture was dealing with Mafisa, but there did not seem to be coordination with small business under this Committee. Crafts and agri-businesses were not being seen, nor assisted through other groups. There had been very little development since 1994 on these issues.

The Deputy Minister noted that the CEOs were working together in the various departments. They understood that their target markets were the same, and the various institutions were thus attempting to ensure that the rural and poor communities could tap into whatever was available. She agreed that this issue would justify a separate briefing.

Mr J Maake (ANC) raised the disparity between the approvals and the on-lending disbursement and asked for clarity.

Ms Lupuwana said that the difference lay in the funding from SAMAF to financial intermediaries, whether these were micro finance institutions or cooperatives. The money was disbursed in tranches. Before the later tranches would be given, the borrowers must demonstrate compliance with certain conditions.

Mr Maake said that one of the objectives was to increase the demand for products produced by small enterprises. He asked what strategies there were apart from preferential procurement.

Mr Maake asked the Department to come up with a concrete suggestion as to what exactly should be done on the lending decisions. He asked what level this must be taken to, and if legislation was needed, then the Department should bring proposals. The financial institutions seemed to be playing games with Khula.

The Deputy Minister said that more explanation was needed, but she would give a general response. She suggested that the Committee write a formal letter setting out the concerns around Khula and SAMAF, and a full report would be given. In relation to SEDA, she asked Mr Njikelana to give her some specifics as to which offices were involved.

The Deputy Minister noted that under the rural development programme there was a unit to deal with crafters, training them to exhibit, and to export directly instead of using a middle man. Perhaps that could be included in a presentation by the Department on small business. Some exhibitors would be taken directly to New Mexico. Some of the issues were handled by other units, but some fell now under the enterprise development unit.

The Deputy Minister appreciated that many people still did not know whom they should approach. There were a number of agencies and institutions and there was little understanding of what each handled, leading to frustration when people were referred on, or when their applications were refused without being told the reasons. People would often employ consultants, at huge cost, to attend to registration of Close corporations or cooperatives, unaware that they could do so themselves with assistance from SEDA. That was the reason for the communication campaigns.

The Chairperson said that it was not possible to address every issue now. This was an ongoing process.

The meeting was adjourned.


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