Questions and Replies

Reply:

The National Small Business Advisory Body (The Council) is being established in terms of Section 2 of the National Small Business Amendment Act, 2003 (Act No. 26 of 2003) and the members of the Advisory Body are appointed by the Minister of Small Business Development in terms of Section 3(1) of the Act.

The Minister of Small Business Development invited nominations from the general public, small business organisations and interest groups in terms of Section 3(1) of the National Small Business Amendment Act to serve on the Advisory Body. From the nominations received, the Minister of Small Business Development is mandated to select amongst the list of nominees and appoint the members of the Small Business Advisory Body for a period of three years.

To date, the Panel approved by the Minister has finalised the process of shortlisting. All relevant documents and a shortlist of verified names by the DSBD Human Resource Directorate were submitted to the Minister for consideration of the appointment to the Council.

Reply:

The capacity-building initiative, and not the research project, for township Chambers of Commerce done in partnership with the International Labour Organization (ILO) was completed in August 2017.

(a) The recommendation is for the Department of Small Business Development (DSBD) to develop a National Chamber Support Programme focusing on the informal businesses.

(b) It is envisaged that the National Chamber Support Programme will focus on strengthening the governance and operational capacity of informal business organisations, covering amongst others a range of key capacity areas, such as Governance and Leadership, Infrastructure support, Organisational development, formation of linkages and collaboration with other strategic organisations.

The capacity-building initiative, and not the research project, for township Chambers of Commerce done in partnership with the International Labour Organization (ILO) was completed in August 2017.

(c) The recommendation is for the Department of Small Business Development (DSBD) to develop a National Chamber Support Programme focusing on the informal businesses.

(d) It is envisaged that the National Chamber Support Programme will focus on strengthening the governance and operational capacity of informal business organisations, covering amongst others a range of key capacity areas, such as Governance and Leadership, Infrastructure support, Organisational development, formation of linkages and collaboration with other strategic organisations.

Reply:

(a) The number of loans that have been referred to SEFA’s legal team is 284, with 277 from Direct Lending and 7 in Wholesale Lending book.

(b) The total amount in Rands owing to SEFA in these disputes is R534m of which R504 is for direct Lending and R29.5m for wholesale.

(c) The age analysis of the amounts owed is as follows:

Period	Direct Lending	Wholesale Lending	Total
	R	R	R
Current	4 588 941	1 147 431	5 736 372
"1-30	2 322 195	1 203 977	3 526 172
31-60	6 750 033	1 226 358	7 976 391
61-90	2 009 081	624 696	2 633 777
91-120	2 259 501	395 402	2 654 903
121-150	2 149 803	664 410	2 814 213
151-180	3 588 879	388 460	3 977 339
180+	475 126 945	24 966 678	500 093 623
Total Legal Book	504 235 869	29 469 981	533 705 850
Number of loans	277	7	284

 

(d) The total amount SEFA expects to write off as bad debt in the current year is not easy to determine because the write-offs depend on the extent of completeness of the legal process, i.e. the Legal process has to be fully exhausted to a reasonable degree that the debt written of is highly unlikely to be recovered.

(e)(i) The table below shows the number of disputes that have resulted in SEFA attaching clients' assets to settle the debt owed. The categories are outlines as follows:

Warrant of Execution	6	R 9 686 424
Attachment of Assets	9	R 12 420 884
Sale in Execution	6	R 17 505 095

(ii) SEFA clients that have been liquidated resulting from these legal proceedings:

There are 5 accounts in liquidation worth R21 million. It has to be noted that SEFA does not initiate liquidation proceedings rather all matters in liquidation are voluntary or ex parte.

Reply:

(a) The Department of Small Business Development (DSBD)

The DSBD has not funded any institution of Research and Development (i) domestically nor (ii) internationally and does not have a discretionary fund in place.

(aa)(aaa) Not applicable.

(aa)(bbb) Not applicable.

(aa)(bb) Not applicable.

(aa)(cc) Not applicable.

(b) The Small Enterprise Finance Agency (SEFA)

SEFA does not fund any institution of research and development (i) domestically nor (ii) internationally.

(aa)(aaa) SEFA, however, acknowledges the importance of research and has established research collaborations with some of the South African Universities. SEFA has established research collaboration with the University of South Africa (Unisa), North West University (NWU), University of Free State (UFS) and University of Stellenbosch.

(aa)(bbb) The scope of the research collaboration with the universities focuses on cooperative research between SEFA and the institutions on issues relating to access to finance for SMMEs and Co-operative Enterprises.

(aa)(bb) Not applicable.

(aa)(cc) Not applicable.

(b) Small Enterprise Development Agency (SEDA)

SEDA has not funded any Research and Development institutions.

(aa)(aaa) Nonetheless, SEDA has Service Agreements with Global Entrepreneurship Monitor (GEM) and Bureau Economic Research (BER).

(aa)(bbb)(i) SEDA partnered with GEM South Africa through University of Cape Town to participate in the research study that support SMMEs products and policy developments); and

(aa)(bbb)(ii) BER is the research partner housed at the University of Stellenbosch – assist with compiling Economy Sector update to tract the development in the SMME Sector).

(aa)(bb) Not applicable.

(aa)(cc) Not applicable.

Reply:

(a)(i) SEFA has been supporting SEF’s activities since the days of Khula Enterprise Finance. The basis of the support was a thoroughly conducted due diligence (investigation) to determine the appropriateness of their model to discharge the Government mandate to expand and strengthen microenterprises in South Africa. SEF has raised facilities with SEFA since 2005 when it borrowed R9,6 million until recently when it borrowed R30 million. Each time SEF has gone to SEFA for loans, a new due diligence that interrogates SEF’s business model has been conducted, with the findings contained in the submission to SEFA’s Executive Committee for consideration.

(ii) SEFA has a balanced scorecard that it strives to achieve through its activities and partnerships. The scorecard includes the following:

• Facilities disbursed in priority Provinces (Numbers and Rand Values)

• Facilities disbursed to Youth (18 – 35 years of age) (Numbers and Rand Values)

• Facilities disbursed to Women (Numbers and Rand Values)

• Facilities disbursed to Blacks (Numbers and Rand Values)

• Facilities disbursed to entrepreneurs with disability (Numbers and Rand Values)

• Number of jobs facilitated (created and maintained)

Whenever a funding proposal is submitted to SEFA, the subsequent due diligence interrogates the performance of the applicant against this scorecard. SEF has continually been assessed against these parameters and confirmed to have a huge impact on almost all of them except the facilities to people with disabilities. In addition, as part of the monthly reporting protocol for all approved funding applicants, monthly performance data is submitted to SEFA and is strictly monitored by SEFA’s Post Investment and Monitoring (PIM) Division.

SEF’s development statistics are also collected according to this process. Furthermore, SEFA conducts random monitoring visits that include interviewing SEF’s clients to determine the impact of the loans extended to them. The feedback obtained has further highlighted the impact of the government funding to women channelled through SEF. Currently, SEF operates in five (5) priority Provinces of Limpopo, North West, Northern Cape, Mpumalanga and the Eastern Cape. Over 99% of their portfolio is to women. More than 60% of all development statistics reported by SEFA on an annual basis are achieved through partnership with SEF.

(b) The SEF business model derives from the iconic Grameen Bank lending model. It utilizes solidarity groups made of up to five (5) women each. Seven of these groups get together to form a “centre”. The “centre” becomes the administrative machinery for not only assessing and recommending loans to members, but also the authority to ensure that all loans are collected. Other benefits that come from the “centres” include peer support for both business and social purposes. In many countries, the “centres” become the mechanism to empower women on a number of other social matters including HIV/AIDS education, nutrition and sanitation. SEF interacts with its clients through the group and “centre” meetings and provides the essential business education for strengthening the microenterprises.

Given the success of SEF and similarly structured programmes here in South Africa and elsewhere, it has been established that SEF’s business model is absolutely appropriate for providing large scale financial support for women-owned small-medium- and micro-sized businesses.

Reply:

1. All the entities under direct reporting of Minister of Small Business Development have boards in place and the Minister is responsible for appointment these boards.

SMALL ENTERPRISE FINANCE AGENCY (SEFA)
BOARD MEMBERS	GENDER	RACE	APPOINTMENT DATE	EXPIRY DATE
Ms Hlonela Lupuwana-Pemba, (Chairperson)	Female	Black	01 October 2016	30 September 2019
Ms Happy Ralinala	Female	Black	01 October 2016	30 September 2019
Ms Kate Moloto	Female	Black	01 October 2016	30 September 2019
Ms Charmaine Groves	Female	Coloured	01 October 2016	30 September 2019
Ms Nomcebo Dlamini	Female	Black	01 October 2016	30 September 2019
Mr Kholofelo Molewa	Male	Black	01 October 2016	30 September 2019
Mr Phakamile Mark Mainganya	Male	Black	01 October 2016	30 September 2019
Mr Nazir Ahmed Osman	Male	Indian	01 October 2016	30 September 2019
Mr Lawrence Mabundla	Male	Black	01 October 2016	30 September 2019

SMALL ENTERPRISE DEVELOPMENT AGENCY (SEDA)
BOARD MEMBERS	GENDER	RACE	APPOINTMENT DATE	EXPIRY DATE
Dr Ivor Zwane (Chairperson)	Male	Black	01 September 2010 - 31 August 2013 01 November 2013 -31 October 2016	31 August 2017 (Extension)
Dr Marius Venter	Male	White	13 December 2010 -01 September 2013 01 September 2013 - 31 August 2016	31 August 2017 (Extension)
Mr Mojalefa Mohoto	Male	Black	01 September 2010 to 31 August 2016 01 September 2013- 31 August 2016	31 August 2017 (Extension)
Mr Dennis Thabaneng	Male	Black	01 September 2008- 31 September 2011 01 November 2011- 31 October 2014	31 August 2017 (Extension)
Ms Precious Lugayeni	Female	Black	01 September 2008- 31 September 2011 01 November 2011- 31 October 2014	31 August 2017 ( Extension)
Ms Anjue Hirachund	Female	Indian	01 September 2015	31 August 2018
Ms Zanele Monnakgotla	Female	Black	01 September 2015	31 August 2018
Mr Thakhani Makhuvha	Male	Black	01 November 2013	Linked to the term of Office as the CEO of sefa

2. Not applicable.

Reply:

(1) The structure of the Department of Small Business Development (DSBD) currently shows 20 vacancies. Following the review of the first draft of the Strategic Plan and Annual Performance Plan submitted on 30 August 2016, the DSBD received feedback on 22 November 2016 from the Department of Planning, Monitoring and Evaluation (DPME) and the National Treasury which required a fundamental review of the DSBD Strategy. The DSBD could not fill the Line Function posts due toj the methodology of “structure follows strategy”. The proposed structure (prepared for consultation with the DPSA) developed during 2016 had to be discarded. A business case for the new structure (in alignment with the revised strategy) will be prepared during the 2017/2018 financial year.

(a) The current structure shows the following funded vacant key positions:

(i) Deputy Director General (DDG): Enterprise Development & Entrepreneurship.

(ii) Deputy Director General: Co-operatives Development and Enterprise Competitiveness Support.

Kindly note that the designation of the two (2) funded DDG’s is likely to change.

(b) The Minister has appointed two Senior Managers to act in the above mentioned vacant DDG posts. The vacancies have, therefore, not severely impacted the functioning of the Department in terms of the execution of its mandate.

(2)(a)&(b) The pilot phase of the Enterprise Incubation Programme (EIP) ending 31 March 2017 has not received submissions from small business incubators in Dr J S Moroka Local Municipality and the Thembisile Hani Local Municipality. The has been no incubation from the Small Enterprise Development Agency (SEDA) nor any industrial park through the Department of Trade and Industry (thedti) in Dr J S Moroka Local Municipality and the Thembisile Hani Local Municipality

(c) The Informal and Micro Enterprise Development Proramme (IMEDP) has supported 43 businesses in Dr JS Moroka and 30 in the Thembisile Hani, to a total of 73 informal businesses in these two municipalities combined.

(3) (a) The DSBD is currently conducting the Red Tape Reduction programme in partnership with the Department of Cooperative Governance and Traditional Affairs (CoGTA), the South African Local Government Association (SALGA) as well as the International Labour Organisation (ILO) focusing on red tape reduction as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The regulatory and administrative burdens which are being addressed and removed are linked to the following seven indicators and associated legislation and regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system) relevant legislation would be the Preferential Procurement Policy Framework Act (PPPFA), Municipal Finance Management Act (MFMA) and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws that are relevant to the business licensing process, e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act; and

(vii) Assessment of percentage spent in procurement from SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

Each of the above mentioned indicators has a specific number of legislation and regulations of which each municipality is responsible for assessing and ultimately removing as per specific municipal context and action plan.

(b) The DSBD is also conducting a national study on legislative and regulatory protocols impeding on SMMEs and Co-operatives, and the key focus areas of the study are: (i) registration and reporting under tax, company registration and labour laws; (ii) state procurement; (iii) construction; and (iv) broad-based black economic empowerment. The draft report will be finalised by the end March 2017.

Reply:

Description	aa. 2014/2015	bb. 2015/2016	cc. 2016/2017
a. What number of cases of
(i) Fruitless	-	-
(ii) Wasteful	-	-
(iii) Irregular	-	1
b. What was the amount of each case?
(i) Fruitless	-	None	-
(ii) Wasteful	-	None	-
(iii) Irregular	-	R1 834 000*	-
c. How much of the specified amount has been recovered in each case?
(i) Fruitless	-	None	-
(ii) Wasteful	-	None	-
(iii) Irregular	-	None	*Related to the B'avumile training. The department did not comply with paragraph 3.4 of PN 8 of 2007/2008 which requires that for transactions with a value of and above R500 000.00 a competitive bidding process should be followed. An investigation into the matter was conducted and no official was found to have personally benefited and it was confirmed that the department derived value in the form of training provided to beneficiaries.

Reply:

1.(a) & (b) Members of GAPIPA/OWIPA are part of the tenants of the Industrial Parks. All GAPIPA tenants lease agreements expired more than 5 years ago and there has been resistance to renew and enter into new lease agreements. As a result, SEFA is currently only collecting on average only 20% of rentals from GAPIPA tenanted properties.

At a meeting with SEFA management, GAPIPA agreed to enter into lease agreement subject to the agreement by SEFA management to sell and transfer the properties to tenants.

In an attempt to resolve the dispute, the board of SEFA approved a framework to sell the properties to the tenants at fair value with an option for SEFA to fund the sale transactions using an Instalment Sales Agreement. However, the tenants refused the offer to buy the properties at fair value and demanded a free transfer.

2. No budget has been set aside and budgeted and no service providers have been appointed. It is one of the considerations being made provided the budget allows and that GAPIPA/OWIPA Executives agree to this proposed intervention including the terms of the proposed sale.

3. Due to Landlord and tenant confidentiality agreements, SEFA is not in a position to provide the requested information. SEFA recommends that Honorable Mr Chance to engage directly with the tenants for such information.

Reply:

2014/15

The Department of Small Business Development (DSBD) spent R0.00 for (a) travel, (b) accommodation and (c) subsistence costs for the (i) Minister, (ii) Deputy Minister and (iii) the spokesperson in the (bb) 2014-15 financial year.

For the 2014-15 financial year, DSBD did not have a vote and all expenditure relating to the 2014-15 period was incurred under the Department of Trade and Industry (the dti) vote.

2015/16

The Department spent R2 427 204.75 for (a) travel, (b) accommodation and (c) subsistence costs for the (i) Minister, (ii) Deputy Minister and (iii) the spokesperson in the (bb) 2015-16 financial year.

No	Name	Travel (R)	Accommodation (R)	Subsistence costs (R)	Total (R)
(i)	Minister	1 007 264,93	204 850,46	45 314.30	1 257 429,69
(ii)	Deputy Minister	724 333,73	177 966,07	119 231.23	1 021 531,03
(iii)	Cornelius Monama	92 590,82	21 421,47	34 231.74	148 244,03

2016/17

The Department spent R1 439 399.73 for (a) travel, (b) accommodation and (c) subsistence costs for the (i) Minister, (ii) Deputy Minister and (iii) the spokesperson in the (cc) 2016-17 financial year.

No	Name	Travel (R)	Accommodation (R)	Subsistence costs (R)	Total (R)
(i)	Minister	553 220,06	114 732,96	44 074.64	712 027,67
(ii)	Deputy Minister	436 963,22	166 090,93	46 479.53	649 533,68
(iii)	Cornelius Monama	45 227,57	4 582,40	28 028.41	77 838,38

Reply:

a) The role of the person named was to represent South Africa from a policy perspective, including the South African Ecosystem on entrepreneurship and to draw lessons on international best practice in and from the engagements at the Start-up Nations. The Summits are held annually and are attended by various countries on invitation and the participants engaged on discussions regarding entrepreneurship and lessons from countries represented.

b) One of the pillars, the current SMME Strategy (Integrated Strategy for the Development and Promotion of Enterprises and Entrepreneurship) provides for the promotion of entrepreneurship through campaigns, leadership training and awards. The Department of Small Business Development (DSBD) implements or partners with organisations that seek to achieve the objectives of this pillar. This has been evident in the DSBD’s partnership with various organisations during March 2017 to host the Global Entrepreneurship Congress (GEC). One of the milestones of the GEC was the launch of the Global Entrepreneurship Network Africa chapter. As one of the founders of this Chapter the DSBD is involved in the activities that seek to promote entrepreneurship in the country and the continent.

The DSBD also focuses on supporting pre-start up activities that invigorate innovation and business start-up as part of increasing the levels of entrepreneurship in the country. The Small Enterprise Development Agency (SEDA) rapid incubator programme linked to the Centres for entrepreneurship programme and the Black Business Supplier Development Programme (BBSDP) sub-programme targeting and funding start-ups are some of the examples that the DSBD is implementing.

Reply:

(a) Department of Small Business Development (DSBD)

(i) The DSBD had no dealings with a service provider, Bell Portinger.

(ii) The DSBD did not acquire the services of a Public Relations Company during the 2016/17 financial year.

(b) Entities

Small Enterprise Development Agency (SEDA)

(i)&(ii) The SEDA has not procured services from Bell Portinger nor any other Public Relations Firm.

Small Enterprise Finance Agency (SEFA)

(i) The SEFA has not procured services from Bell Portinger.

(ii) Details of services procured from other Public Relations Firms are attached as Annexure A.

Reply:

(a)(i) Department of Small Business Development (DSBD)

The DSBD was established in 2014. All the investigations relate to programmes that were transferred from the Department of Trade and Industry (the dti) to the DSBD. All the investigations were conducted to completion by the Forensic Audit Unit of the dti. When these functions were transferred to the DSBD, the Department took over the responsibility for the implementation of recommendations. Only one investigation was conducted and concluded during 2016. The details are included below:

REFERENCE NUMBER (NAME)	SUBJECT MATTER	DATE OF CONCLUSION
NACH 162	Investigation into alleged corruption in the Black Business Supplier Development Programme.	May 2014
DFC 191	Alleged fraud and corruption relating to the Black Business Supplier Development Programme.	June 2014
DFC 200	Alleged fraud and corruption relating to the Black Business Supplier Development Programme.	September 2014
DFC 208	Fraud and corruption relating to the Co-operative Incentive Scheme.	May 2015
DFC 209	Alleged corruption in the Black Business Supplier Development Programme.	December 2014
DFC 216	Alleged irregularities on CIS funding.	May 2015
DFC 224	Alleged bribery at Co-operative Incentive Scheme involving the application for funding.	October 2015
DFC 227	Alleged corruption at CIS involving funding for a secondary cooperative	October 2015
DFC 300	Investigation into possible corruption involving BBSDP applications.	November 2016

(a)(ii) Entities – Internal forensic reports

Small Enterprise Development Agency (SEDA)

REFERENCE NUMBER (NAME)	SUBJECT MATTER	DATE OF CONCLUSION
01/01/15/1	Procurement Maladminstraton	Internal Audit completed the investigation (2015)
01/03/15/2	Fraud	Internal Audit completed the investigation (2015)
01/04/15/3	Procurement Maladminstraton	Internal Audit completed the investigation (2015)
02/04/15/4	Procurement Maladminstraton	08 December 2015
01/05/15/5	Abuse of Privilege Information	01 August 2016
02/05/15/6	Theft	18 February 2016
01/06/15/7	Forgery	Internal Audit completed the investigation (2015)
05/06/15/08	Abuse of Power	19 October 2015
02/06/15/9	Procurement Maladministration	01 March 2016
03/06/15/10	Unethical Behaviour	Internal Audit completed the investigation (2015)
01/07/15/11	Identity Fraud	08 September 2015
02/07/15/12	Procurement Maladministration	Closed due insufficient information (2015)
03/07/15/13	Procurement Maladministration	14 October 2015
01/07/15/14	Misuse of the Seda's resources	12 February 2016
01/07/15/15	Victimisation	19 August 2016
27/07/15/16	Theft	31 October 2015
21/07/15/17	Recruitment Irregularity	22 October 2015
01/08/15/18	Recruitment Irregularity	08 September 2015
04/08/15/19	Theft	08 September 2015
24/08/15/20	Abuse of Power	24 November 2015
03/09/15/21	Dishonesty	07 September 2015
06/10/15/22	Unethical Behaviour	11 December 2015
14/12/15/23	Nepotism, Favouritism & Victimisation	04 July 2016
14/12/15/24	Abuse of Power	17 May 2016
01/09/15/01	Procurement Maladministration	14 October 2016
01/07/16/02	Procurement Maladministration	15 November 2016
29/07/16/05	Recruitment and Procurement Irregularities	18 November 2016
05/08/16/06 NACH Ref: 9920160613034529	Procurement Irregularities	01 October 2016
22/08/16/07	Procurement Maladministration	02 November 2016

Small Enterprise Finance Agency (SEFA)

There were no forensic reports during the period 1 January 2009 – 31 March 2012, sefa was formed on 1 April 2012.

REFERENCE NAME (aa)	SUBJECT MATTER (bb)	DATE OF CONCLUSION (cc)
Gal Logistics	Client submitted a fraudulent Coca Cola contract in his loan application.	June 2013
Aloga Financial Services	Aloga is a financial intermediary of sefa. A client to Aloga submitted a fraudulent Purchase Order in an application for loan funding.	March 2015
Ethandwa Kan Ndlovu	A fraudulent letter was sent from sefa office to a Franchisor, stating that the loan application for the client had been approved, whereas that was not the case.	September 2014
Fraudulent Use of sefa Name	An independent consultant claimed to be working for sefa and solicited fees from potential clients claiming to have secured them loan funding from sefa.	March 2015
Yats Gopaul	A consultant claiming to be working for sefa solicited a fee from a potential client to assist him in obtaining a R5million loan.	September 2015
Public Works Purchase Order	Client submitted a fraudulent Purchase Order in loan application.	January 2016
Rand Water Purchase Order	Client submitted a fraudulent Purchase Order in loan application.	January 2016
Lesikho Human Capital	Client submitted a fraudulent BMW contract in loan application. Two sefa employees were implicated in the scheme and dismissed for gross negligence.	March 2016
Khaba Ya Sembo Trading & Projects (Pty)Ltd	Client submitted a fraudulent Transnet contract in loan application. Two sefa employees were implicated in the scheme and dismissed.	March 2016
Tasotone (Pty)Ltd	Client submitted a fraudulent BAUBA Platinum Mines contract in loan application. sefa employee was implicated in the fraud and dismissed.	July 2016
Brainwave Projects	Client submitted a fraudulent Purchase Order from Department of Energy in loan application.	October 2016
CHW&CNB Logistics	Client submitted a fraudulent Transportation and Delivery Agreement with Premier Fishing in loan application.	October 2016
FRENKSI (Pty)Ltd	Client submitted a fraudulent Purchase Order from Department of Trade and Industry in loan application.	October 2016
Matuesz Marketing Services and Products Supplier	Client submitted a fraudulent Purchase Order from Department of Agriculture, Forestry and Fisheries in loan application.	October 2016
Sharosca Construction & Projects	Client submitted a fraudulent Purchase Order from the Department of Trade and Industry and Fisheries in loan application.	October 2016
Triponza Trading 385 CC	Client submitted a fraudulent Purchase Order from the Department of Health in loan application.	October 2016
Lwenzhe Investment Holdings (Pty) Ltd	Client submitted a fraudulent Anglo American contract in loan application. A fraudulent Cession Agreement was also submitted to sefa.	October 2016

(b)(i) DSBD - There are no external forensic reports for the period

(b)(ii) Entities – External forensic reports

SEDA

Investigations conducted by Service Providers for Seda (Further Investigation requested by management)
05/06/15/08	Irregularities facing the Northern Cape	01 July 2016
03/09/15/21	Recruitment Irregularities	05 July 2016

For the below cases, they were commissioned on behalf of the incubators and performed by the external service providers. SEDA does not have the reference numbers but they are following up on the status of the recommendations emanating from the investigation findings.

Investigations conducted by Service Providers by STP on Incubators
Not applicable	Zenzele (Governance Issues)	January 2015
Not applicable	SoftstartBTI (Governance Issues)	February 2015
Not applicable	SARABI (Governance and Performance Issues)	2015

SEFA: There are no external forensic reports for the period

Reply:

(a)(i) Department of Small Business Development (DSBD)

The DSBD was established in 2014. All the investigations relate to programmes that were transferred from the Department of Trade and Industry (the dti) to the DSBD. All the investigations were conducted to completion by the Forensic Audit Unit of the dti. When these functions were transferred to the DSBD, the Department took over the responsibility for the implementation of recommendations. Only one investigation was conducted and concluded during 2016. The details are included below:

REFERENCE NUMBER (NAME)	SUBJECT MATTER	DATE OF CONCLUSION
NACH 162	Investigation into alleged corruption in the Black Business Supplier Development Programme.	May 2014
DFC 191	Alleged fraud and corruption relating to the Black Business Supplier Development Programme.	June 2014
DFC 200	Alleged fraud and corruption relating to the Black Business Supplier Development Programme.	September 2014
DFC 208	Fraud and corruption relating to the Co-operative Incentive Scheme.	May 2015
DFC 209	Alleged corruption in the Black Business Supplier Development Programme.	December 2014
DFC 216	Alleged irregularities on CIS funding.	May 2015
DFC 224	Alleged bribery at Co-operative Incentive Scheme involving the application for funding.	October 2015
DFC 227	Alleged corruption at CIS involving funding for a secondary cooperative	October 2015
DFC 300	Investigation into possible corruption involving BBSDP applications.	November 2016

(a)(ii) Entities – Internal forensic reports

Small Enterprise Development Agency (SEDA)

REFERENCE NUMBER (NAME)	SUBJECT MATTER	DATE OF CONCLUSION
01/01/15/1	Procurement Maladminstraton	Internal Audit completed the investigation (2015)
01/03/15/2	Fraud	Internal Audit completed the investigation (2015)
01/04/15/3	Procurement Maladminstraton	Internal Audit completed the investigation (2015)
02/04/15/4	Procurement Maladminstraton	08 December 2015
01/05/15/5	Abuse of Privilege Information	01 August 2016
02/05/15/6	Theft	18 February 2016
01/06/15/7	Forgery	Internal Audit completed the investigation (2015)
05/06/15/08	Abuse of Power	19 October 2015
02/06/15/9	Procurement Maladministration	01 March 2016
03/06/15/10	Unethical Behaviour	Internal Audit completed the investigation (2015)
01/07/15/11	Identity Fraud	08 September 2015
02/07/15/12	Procurement Maladministration	Closed due insufficient information (2015)
03/07/15/13	Procurement Maladministration	14 October 2015
01/07/15/14	Misuse of the Seda's resources	12 February 2016
01/07/15/15	Victimisation	19 August 2016
27/07/15/16	Theft	31 October 2015
21/07/15/17	Recruitment Irregularity	22 October 2015
01/08/15/18	Recruitment Irregularity	08 September 2015
04/08/15/19	Theft	08 September 2015
24/08/15/20	Abuse of Power	24 November 2015
03/09/15/21	Dishonesty	07 September 2015
06/10/15/22	Unethical Behaviour	11 December 2015
14/12/15/23	Nepotism, Favouritism & Victimisation	04 July 2016
14/12/15/24	Abuse of Power	17 May 2016
01/09/15/01	Procurement Maladministration	14 October 2016
01/07/16/02	Procurement Maladministration	15 November 2016
29/07/16/05	Recruitment and Procurement Irregularities	18 November 2016
05/08/16/06 NACH Ref: 9920160613034529	Procurement Irregularities	01 October 2016
22/08/16/07	Procurement Maladministration	02 November 2016

Small Enterprise Finance Agency (SEFA)

There were no forensic reports during the period 1 January 2009 – 31 March 2012, sefa was formed on 1 April 2012.

REFERENCE NAME (aa)	SUBJECT MATTER (bb)	DATE OF CONCLUSION (cc)
Gal Logistics	Client submitted a fraudulent Coca Cola contract in his loan application.	June 2013
Aloga Financial Services	Aloga is a financial intermediary of sefa. A client to Aloga submitted a fraudulent Purchase Order in an application for loan funding.	March 2015
Ethandwa Kan Ndlovu	A fraudulent letter was sent from sefa office to a Franchisor, stating that the loan application for the client had been approved, whereas that was not the case.	September 2014
Fraudulent Use of sefa Name	An independent consultant claimed to be working for sefa and solicited fees from potential clients claiming to have secured them loan funding from sefa.	March 2015
Yats Gopaul	A consultant claiming to be working for sefa solicited a fee from a potential client to assist him in obtaining a R5million loan.	September 2015
Public Works Purchase Order	Client submitted a fraudulent Purchase Order in loan application.	January 2016
Rand Water Purchase Order	Client submitted a fraudulent Purchase Order in loan application.	January 2016
Lesikho Human Capital	Client submitted a fraudulent BMW contract in loan application. Two sefa employees were implicated in the scheme and dismissed for gross negligence.	March 2016
Khaba Ya Sembo Trading & Projects (Pty)Ltd	Client submitted a fraudulent Transnet contract in loan application. Two sefa employees were implicated in the scheme and dismissed.	March 2016
Tasotone (Pty)Ltd	Client submitted a fraudulent BAUBA Platinum Mines contract in loan application. sefa employee was implicated in the fraud and dismissed.	July 2016
Brainwave Projects	Client submitted a fraudulent Purchase Order from Department of Energy in loan application.	October 2016
CHW&CNB Logistics	Client submitted a fraudulent Transportation and Delivery Agreement with Premier Fishing in loan application.	October 2016
FRENKSI (Pty)Ltd	Client submitted a fraudulent Purchase Order from Department of Trade and Industry in loan application.	October 2016
Matuesz Marketing Services and Products Supplier	Client submitted a fraudulent Purchase Order from Department of Agriculture, Forestry and Fisheries in loan application.	October 2016
Sharosca Construction & Projects	Client submitted a fraudulent Purchase Order from the Department of Trade and Industry and Fisheries in loan application.	October 2016
Triponza Trading 385 CC	Client submitted a fraudulent Purchase Order from the Department of Health in loan application.	October 2016
Lwenzhe Investment Holdings (Pty) Ltd	Client submitted a fraudulent Anglo American contract in loan application. A fraudulent Cession Agreement was also submitted to sefa.	October 2016

(b)(i) DSBD - There are no external forensic reports for the period

(b)(ii) Entities – External forensic reports

SEDA

Investigations conducted by Service Providers for Seda (Further Investigation requested by management)
05/06/15/08	Irregularities facing the Northern Cape	01 July 2016
03/09/15/21	Recruitment Irregularities	05 July 2016

For the below cases, they were commissioned on behalf of the incubators and performed by the external service providers. SEDA does not have the reference numbers but they are following up on the status of the recommendations emanating from the investigation findings.

Investigations conducted by Service Providers by STP on Incubators
Not applicable	Zenzele (Governance Issues)	January 2015
Not applicable	SoftstartBTI (Governance Issues)	February 2015
Not applicable	SARABI (Governance and Performance Issues)	2015

SEFA: There are no external forensic reports for the period

Reply:

a) The Department has not procured any services nor made any payments to the Decolonisation Foundation.

b) Similarly, the Small Enterprise Development Agency (SEDA) and the Small Enterprise Finance Agency (SEFA) has not procured any services nor made any payments to the Decolonisation Foundation.

Reply:

(1)(a) The Minister is pleased to share ther Sector Prioritisation paper (Annexure A); and

(1)(b) The Draft Development Partnership Guidelines (Annexure B).

(2)(a) The Department of Small Business Development (DSBD) has commissioned (Greater Capital) a service provider to conduct research on the eco-system. The research is conducted in close collaboration with the following organisations: South African Breweries (SAB) Foundation, Sustainable Entrepreneurship Accelerator (SEA) Africa, Allan Gray and Global Entrepreneurship and Development Institute (GEDI).

(2)(b) The final report with findings and recommendations will be presented to DSBD Executive Committee within the second quarter of the current financial year.

(3) Programme Impact Evaluation

This type of evaluation (impact evaluation) measures the non-observable aspects that result from the programme. For example, while the number of enterprises supported by a programme is 200 (as established through monitoring), the number of sustainable ones among these – an intangible and multi-composite attribute – may only be evident through measurements of effectiveness.

A programme’s effectiveness can only be measured through a repeatable study that applies multiple data methods. In this instance, enterprise sustainability may be the effect sought by the programme. “Sustainability” may be one of the components defined for “economic growth”. Outcomes are relevant to cumulative effects that together with other reinforcing aspects have profound socio-economic implications (say, creating a small business-conducive environment, an entrepreneurship culture, etc).

Given this background, the portfolio of Department’s programmes are being evaluated internally on the basis of planning, design and implementation, guided by the Monitoring and Evaluation Framework guidelines developed for the department at this stage. This is motivated by the fact that most of the programmes that are being run by the department are inherited from the Department of Trade and Industry and therefore to assess their relevance to the mandate, Mission and Vision of the department, this process is necessary. The guiding principles are derived from the Acts that govern both SMMEs and Co-operatives nationally coupled with the guideline documents which were developed on inception to guide implementation.

To measure policy impact coupled with outputs and outcomes up to date, with intention to measure effectiveness, efficiency and value for money, the Department undertook to partner with Department of Planning Monitoring and Evaluation-DPME and undertook to embark on an evaluation process of the Integrated Strategy on the Promotion and Support of Small Businesses (2005).

This process is to identify what needs to be done to institute more responsive interventions that will be more responsive given current challenges; highlight an overall impact on the programmes’ responsiveness to the needs of SMMEs to date. The outcome of this exercise will inform an evidence based review and programme improvement plan that will position the interventions as more responsive to needs of beneficiaries and point at more effective methodologies that are better fitting to the developmental mandate.

Reply:

(a) No

(b) No

 (i) (aa – cc) No

 (ii) (aa-bb)

(aaa – bbb) Not applicable

Reply:

a) Sustainable Entrepreneur Accelerator (SEA) Africa was not appointed by Department of Small Business Development (DSBD). The organisation took the initiative of bidding for South Africa to host the Global Entrepreneurship Congress (GEC) to be held in Johannesburg in 2017. The Minister responsible for Small Business Development was requested by the Global Entrepreneurship Network (GEN) to receive the award when the City of Johannesburg was announced as the winner of the bid and subsequently requested her to be the Patron of the event.

b) The programme was finalised and circulated to all stakeholders. The Cabinet Memo regarding the GEC was tabled for information by the Minister in February 2017.

c) The City of Johannesburg was part of the team responsible for organising the event and represented in the Local Organising Committee (LOC).

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Buffalo City the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: by-laws on traffic congestions and by-laws on informal sector, cumbersome supply chain management (which affects the 30-day payment to SMMEs and Co-operatives), and customer notifications systems.

(c) The total amount of administration costs is determined by each municipality, however the examples mentioned in points below outline how the red tape reduction intervention by DSBD has supported the municipality to improve governance and reduce the regulatory and administrative burden for the benefit of SMMEs and Co-operatives. The total value of these administrative interventions have not been calculated by the municipality.

(2) Examples that outline improvement of business environment with Buffalo city municipality include: (i) the by-laws on traffic congestions has been reviewed within the metropolitan this has greatly reduced congestion and potential high accident zones; (ii) the informal sector by-laws for trading has been reviewed for the provision of relevant infrastructure; (iii) supply chain management processes have been reviewed, specifically delegation of powers to amend and allow divisional managers to authorise payment; and (iv) a training programme on project planning and management on SCM processes has been conducted in partnership with Provincial Treasury.

Reply:

To date 7 approved Incubators are from Limpopo, Gauteng and Eastern Cape and none from Kwazulu Natal.

Detailed information pertaining to these Incubators are captured in Annexure A.

Province (Location of Incubator)	(a)(i) Name of Incubator	Entity Name	(a)(ii) Business Credentials	(a)(iii) Names of main Shareholders
Limpopo (Thohoyandou)	Vegetable Market Access Logistic Infrastructure	Africa Excel Advisory Service Pty Ltd	Experience in supporting agricultural cooperatives business support, project and logistics management, and trade and investment promotion. Directorships: Director: Hortgro Director: Perishable Product Export Control Board Director: Fresh Produce Exporters Forum Director: Onderstepoort Biological Products Director: Citrus Growers Development Company	100% ownership by Dr Monodowafa Johannes Mashaba. He holds position as Managing Director.
Limpopo (Levubu)	Matsila Small Business Incubation Project	Matsila Development Community Trust	Experience in comprehensive rural development, land management, and sustainable socio-economic development. Projects components include: organic crops/vegetable; organic livestock, fish farming and waste management.	Trust Members: Chief Livhuwani Matsila (Chairperson) Mr Abraham Matsila Ms Selinah Mathukha Ms Cornelia Mukwevho Ms Chrsitinah Matsila
North West (Rustenburg - Bestekraal)	Limpopo Wildlife Business Incubator	Limpopo Wildlife Business Incubator Pty Ltd	Broad experience in support the development of an emerging wildlife sector through whole-value-chain development and a business incubation process within a structured institutional framework built on a strategic Public Private Partnership with a consortium of major role players in the wildlife industry	Company Directors: Mr Michael Bandile Gcabo Mr Leon Alfred Lourens Mr Johan Hendrik Bisschoff
Gauteng (Westonaria)	Sibanye Gold Construction Incubator	Nunnovation Africa Foundation	Experience in empowering youth, black women and vulnerable groups across the continent to develop new industries through Innovation aided by critical thinking. The Foundation provides specialist innovation skills development programmes that enhances capacity of strategic partners and vulnerable groups of society.	Company Directors: Mr Khathutshelo Nathaniel Mashau Ms Ngwako Ramohlale
Gauteng (Pretoria – Eersterust)	The South African Creative Industries Business Incubator	Imvula Holdings Pty Ltd	Experience in operating the Tshwane School of Music (TSOM). The school provides music education, music therapy, facilitates exposure to and training in music technology and music business and provides a platform for music performances. Currently has 140 students.	Company Director: Mr Freddy Arendse Ms Beth Angela Arendse
Eastern Cape (Port Elizabeth)	South African Automotive Design Engineering Incubator (SAAED)	Steel Best Manufacturing	Steel Best Manufacturing Pty LTD has engaged in an undertaking to incubate design and manufacturing SMME’s that will create opportunities for the selected SMME’s in the automotive and non-automotive markets. They will be able to share intellectual property, optimize assets and expand knowledge and experience. The undertaking will enable the SMME’s rapid access to industries requiring jigs & fixtures, special purpose machinery, prototype and production parts and provide a platform on par with the latest manufacturing technology for a greater market presence. The incubator will also create greater capacity for the local and national industry to provide world standard services to optimize business opportunities generated as a result of the increased automotive model launches in South Africa as well as other African countries and the directive for increased local content in the State-Owned Companies (SOC’s).	Company Directors: Mr Clyde Erasmus Mr Reuben Oliphant
Eastern Cape, (Cegcuwana Administrative Area, Ngamakwe)	Nomakwezi Benya Primary Cooperative	Nomakwezi Darling Benya Foundation Primary Cooperative	Responding to a call by the Hon Minister Lindiwe Zulu during her visit in Idutywa on the 03 December 2016, and while addressing the Amathole District community she urged citizens to start forming cooperatives to address the declining levels of crop farming in the agricultural sector. The economic environment within which rural poor households operate is characterized poverty, unpredictability on food security, uncertainty and risk. The formation of Nomakhwezi - Darling Benya primary co-operative (NDB) is contributing to reverse the declining levels of food security and the agricultural sector.	Company Director: Mr Boyce Hlatshaneni

Response to (b)

Budget allocations for (i) 2016/17, (ii) 2017/18 and (iii) 2018/19

Incubator and Location	Budget Allocated
	2016/17	2017/18	2018/19
Vegetable Market Access Logistic Infrastructure	R5 million	Funding for Year 2 is subject to satisfactory performance of the incubator. 90:10 cost sharing. DSBD will contribute 90% of approved amount and applicant 10%	Funding for Year 3 is subject to satisfactory performance of the incubator. 80:20 cost sharing. DSBD will contribute 80% of approved amount and applicant 20%
Matsila Small Business Incubation Project	R8 million	Funding for Year 2 is subject to satisfactory performance of the incubator. 90:10 cost sharing. DSBD will contribute 90% of approved amount and applicant 10%	Funding for Year 3 is subject to satisfactory performance of the incubator. 80:20 cost sharing. DSBD will contribute 80% of approved amount and applicant 20%
Limpopo Wildlife Business Incubator	R8 million	Funding for Year 2 is subject to satisfactory performance of the incubator. 90:10 cost sharing. DSBD will contribute 90% of approved amount and applicant 10%	Funding for Year 3 is subject to satisfactory performance of the incubator. 80:20 cost sharing. DSBD will contribute 80% of approved amount and applicant 20%
Sibanye Gold Construction Incubator	R8 million	Funding for Year 2 is subject to satisfactory performance of the incubator. 90:10 cost sharing. DSBD will contribute 90% of approved amount and applicant 10%	Funding for Year 3 is subject to satisfactory performance of the incubator. 80:20 cost sharing. DSBD will contribute 80% of approved amount and applicant 20%
The South African Creative Industries Business Incubator	R7 million	Funding for Year 2 is subject to satisfactory performance of the incubator. 90:10 cost sharing. DSBD will contribute 90% of approved amount and applicant 10%	Funding for Year 3 is subject to satisfactory performance of the incubator. 80:20 cost sharing. DSBD will contribute 80% of approved amount and applicant 20%
South African Automotive Design Engineering Incubator (SAAED)	R7 million	Funding for Year 2 is subject to satisfactory performance of the incubator. 90:10 cost sharing. DSBD will contribute 90% of approved amount and applicant 10%	Funding for Year 3 is subject to satisfactory performance of the incubator. 80:20 cost sharing. DSBD will contribute 80% of approved amount and applicant 20%
Nomakwezi Benya Primary Cooperative	R8 million	Funding for Year 2 is subject to satisfactory performance of the incubator. 90:10 cost sharing. DSBD will contribute 90% of approved amount and applicant 10%	Funding for Year 3 is subject to satisfactory performance of the incubator. 80:20 cost sharing. DSBD will contribute 80% of approved amount and applicant 20%

Response to (c)

Number of cooperatives / SMMEs supported for (i) 2016/17, (ii) 2017/18 and (iii) 2018/19

Incubator and Location	Number of Cooperatives/SMMEs supported
	2016/17	2017/18	2018/19
Vegetable Market Access Logistic Infrastructure	14 Cooperatives	Number of Cooperatives/SMMEs for Year 2 is subject to satisfactory performance of the incubator.	Number of Cooperatives/SMMEs for Year 3 is subject to satisfactory performance of the incubator.
Matsila Small Business Incubation Project	4 SMMEs with 215 beneficiaries	Number of Cooperatives/SMMEs for Year 2 is subject to satisfactory performance of the incubator.	Number of Cooperatives/SMMEs for Year 3 is subject to satisfactory performance of the incubator.
Limpopo Wildlife Business Incubator	7 SMMEs	Number of Cooperatives/SMMEs for Year 2 is subject to satisfactory performance of the incubator.	Number of Cooperatives/SMMEs for Year 3 is subject to satisfactory performance of the incubator.
Sibanye Gold Construction Incubator	30 SMMEs	Number of Cooperatives/SMMEs for Year 2 is subject to satisfactory performance of the incubator.	Number of Cooperatives/SMMEs for Year 3 is subject to satisfactory performance of the incubator.
The South African Creative Industries Business Incubator	50 SMMEs	Number of Cooperatives/SMMEs for Year 2 is subject to satisfactory performance of the incubator.	Number of Cooperatives/SMMEs for Year 3 is subject to satisfactory performance of the incubator.
South African Automotive Design Engineering Incubator (SAAED)	6 SMME’s	Number of Cooperatives/SMMEs for Year 2 is subject to satisfactory performance of the incubator.	Number of Cooperatives/SMMEs for Year 3 is subject to satisfactory performance of the incubator.
Nomakwezi Benya Primary Cooperative	10 Cooperatives consisting of 50 members in total.	Number of Cooperatives/SMMEs for Year 2 is subject to satisfactory performance of the incubator.	Number of Cooperatives/SMMEs for Year 3 is subject to satisfactory performance of the incubator.

Reply:

1. (a – b ) (i)(aa-bb) (ii) Yes Minister and Deputy Minister provided feedback to the department the progress of each tip undertaken as is standard practice.

2. Yes reports where provided as this is standard practice.

3. All the international trips added value to governments job creation efforts as they sought to enhance measures that impact positively on South Africa’s own entrepreneurial ecosystem. These include: opening up trade and investment and market access opportunities, building necessary skills development for the growth of our economy in targeted sectors, policy formulation that enhances SMME and Cooperatives development, and sharing best practices between development agencies and departments to bring about a strong local ecosystem.

Reply:

(1)(a) The positions for Chief Executive Officers for both the Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency (SEFA) have been filled.

(b) The positions for Chief Financial Officers for both the SEDA and SEFA have been filled.

(c) The position of Chief Operating Officer does not exist on the organisational structure for both the SEDA and SEFA.

(1) (a)(i) Not applicable.

(a)(ii) Not applicable.

(b)(i) Not applicable.

(b)(ii) Not applicable.

(c)(i) Not applicable.

(c)(ii) Not applicable.

(2) No.

(a) Not applicable.

(b) Not applicable.

(3) (a) Not applicable.

(b) Not applicable.

(c) Not applicable.

Reply:

The Gauteng Province Industrial Parks Association (GAPIPA) Executive Committee refused the offer to buy the Properties at the price reflecting the properties Fair Market Value. Their expectation is that the transfer must be free since they are not prepared to pay anything for the properties. We indicated to them that the board approved the sale and transfer at a selling price of fair market value and sefa management team cannot go beyond its mandate by transferring the properties for free. The GAPIPA Executive Committee further demanded to negotiate directly with sefa Board. Sefa is in the process of considering a board meeting with GAPIPA Executive Committee.

Reply:

(1) (a) The Department did not participate in the Dialogue with the President: Unpacking of the SONA 2017 on Radical Economic Transformation Implementation.

(1) (b)

(2) (a) The Department did not participate in the auction of souvenirs or personal belongings of the President of the Republic.

(a) (i) Not applicable.

(a) (ii) Not applicable.

(aa) Not applicable.

(bb) Not applicable.

(2) (b)

(b) (i)

(b) (ii)

Reply:

1. The Gazelles programme approved 200 enterprises to be supported. Out of this number 40 of the enterprises were selected as the premier enterprise to be put under the acceleration strategies and the remaining 160 enterprises are integrated into the Small Enterprise Development Agency (seda) network support system.

TOP 40

(a) Progress from the National Gazelles Programme

1. The Top 40 cohort is showing average growth in turnover of 11% month on month.
2. Refer to (i) above.
3. Profitability fluctuates between 16% and 43% month on month. The reason for the huge fluctuation in profitability is mainly attributed to companies in the construction sector (short term contracts are more profitable than long term contracts).
4. Staff levels have increased by 4% over the 9 months to December 2016.
5. Points (i), (iii) and (iv) reflects the achievements.

(b) Drop-out rate from the programme

     (i) No business failure to date. One company was sold during the reporting period.

60 GROUP

(a) Progress from the National Gazelles Programme

A survey was conducted on the 160 group and the results are as follows:

1. 71 % of business increased their performance by 15%.
2. 43 % of businesses improved their cashflow by 15%. The turnover for the 160 gazelles is not measured yet since their programme exit is April 2017. Once the exit process is concluded the measure for impact on these variables including employees will be done.
3. As a result of the 71 % increase in performance by businesses, this resulted in R51m increase in combined business value.
4. Refer to (ii) above.
5. 65% of businesses increased their growth potential by 15%.

It should be noted that it is difficult to measure the effectiveness of high growth programmes over a short period of time. The experience from both the Organisation for Economic Co-operation and Development (OECD) and Developing Countries, shows that these programmes are measured over a 3 -5 year period. The first Gazelles Grants were paid in December 2016 and the impact of these grants hasn’t been felt yet by the entities.

(b) Drop-out rate from the programme

(i) No business failure to date.

2. The names and business profiles of the Top 40 and the 160 Group are attached as Annexure A and B respectively.

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Ephraim Mogale Local Municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: (i) the reviewing of the informal sector by-laws: (ii) the non-payment of invoices within 30 days as per national treasury regulation 8.2.3, and (iii) reviewing of the building plan approval process .

(c) The total amount of administration costs is determined by each municipality, however the examples mentioned under point (2) outline how the red tape reduction intervention by DSBD has supported the municipality. The total value of these administrative interventions have not been calculated by the municipality.

(2) The examples that outline improvement since April 2016 are as follows (i) the municipality has been able to review informal sector by-laws approved by Council which among others” includes the processes and procedures for the establishment of hawkers and informal traders associations in the area. The informal traders associations will assist the municipality to have an accurate database on the numbers of hawkers in the area and also for the development of target driven programmes for business development and to support hawkers towards formalisation. (ii) The delegation of powers has been amended to allow divisional managers to authorise payments in order to fast track the processing of invoices to SMMEs and Co-operatives within 30 days or less.(iii) the building plans of less than 500 square meters are now assessed within 10 days of receipt.

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Elias Motsoaledi Local Municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations; (i) the building plans approvals processes has been developed and land use by-laws has also been reviewed which aligned with both the National Building Regulations and building Standard Act and Spatial Land Use Management Act).(ii) Additional staff was allocated within supply chain unit on contract basis. (iii) Poor communication of relevant business information to SMMEs and Co-operatives.

(c) The total amount of administration costs is determined by each municipality, however the examples mentioned under point (2) outline how the red tape reduction intervention by DSBD has supported the municipality. The total value of these administrative interventions have not been calculated by the municipality.

(2) The examples that outline improvement since April 2016 are as follows (i) the municipality has reviewed the building regulation and land use by-laws which positively contributed to commercial land being accessible for local SMMEs and Co-operatives and also to fast track building plan approvals for small businesses and co-operatives.(ii) The additional staff which were previously employed on contract basis, they are now placed permanent within the finance unit which assisted the municipality to pay creditors twice in the month. (iii) The municipality pay its creditors twice in the month including SMMEs and Co-operatives in order to comply with 30 days payment policy.

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Greater Kokstad Local Municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: the municipality have an inadequate customer complaints system, cumbersome decision making process which affect the delivery time frame, the business permits issuing process has not been reviewed for past 3 years.

(c) The total amount of administration costs is determined by each municipality, however the examples mentioned under point (2) outline how the red tape reduction intervention by DSBD has supported the municipality. The total value of these administrative interventions have not been calculated by the municipality.

(2) The examples that can be referred to since April 2016 are as follows (i) the municipality has managed to develop an effective complaints management system and customer service policy, the monthly management reports are submitted to the Council on the nature of the complaints lodged, and the resolution of complaints. (ii) the municipality has reviewed the delegation of powers where applicable in order to address the decision making process(iii) the business permit issuing has been reviewed which assisted the municipality to process application within 21 days if all accompanying documents received on time.

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vi) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of UMzimkhulu Local Municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: the turnaround times for invoice payments to SMMEs and Co-operatives, informal traders by-laws, turnaround times regarding availability and accessibility of land.

(c) The total amount of administration costs is determined by each municipality, however the examples mentioned under point (2) outline how the red tape reduction intervention by DSBD has supported the municipality. The total value of these administrative interventions have not been calculated by the municipality.

(2) The examples that outline improvement since April 2016 are as follows (i) the municipality has managed to develop an effective supply chain management process is now able to pay all outstanding invoices twice in a month. Every year, during the first quarter, a six month payment schedule is circulated from the Finance Department to all officials indicating the dates when invoices will be paid. (ii) the municipality has also reviewed Informal Traders Policy that are actively implemented and sets out all the requirements with respect to the business permit application process and procedures. The workshops to create awareness are also held. (iii) With the introduction of Spatial Land Use Management Act (SPLUMA) the municipality has made it easier for SMMEs and Co-operatives to access the available land for business usage in the area.

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Moses Kotane Local Municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: ineffectively and inefficiency channels to communicate relevant information to business people, supply chain management system and by-laws.

(c) The total amount of administration costs is determined by each municipality, however the examples mentioned under point (2) outline how the red tape reduction intervention by DSBD has supported the municipality. The total value of these administrative interventions have not been calculated by the municipality.

(2) The examples outline improvement since April 2016 are as follows (i) the municipality has hired additional staff in order to pay creditors on time and upgraded their financial software to fasten the processing of invoices as per National Treasury regulation. (ii) informal business by-laws has also been reviewed in order to address the business permits issuing.(iii) the municipality has developed the communication policy which entails the method of communication to externally stakeholders, the complaint process is aligned with number of hours. The Seda hotline also assist with unresolved issues that affect the non-payment of SMMEs and Co-operatives in the area.

Reply:

1. (a) The Memorandum of Understanding (MoU) will be signed as soon as the Department of Energy has completed the vetting process. It is anticipated that implementation will happen shortly after the MoU has been signed by both parties.

(b) The programme will benefit 200 small, micro and medium enterprises (SMMEs) and Cooperatives.

(c) The programme will utilise the existing pool of SMMEs and Cooperatives in the Department and its agencies databases. It is proposed that 70% of opportunities will be given to existing and experienced SMMEs, while 30% of opportunities will be afforded to start-up small enterprises.

(d) The estimated numbers are approximately 5000 jobs per SMME amongst which target groupings would include semi-skilled personnel (informal plumbers, artisans, etc) and qualified personnel from Technical and Vocational Education Training (TVET) colleges.

2. According to the Department of Energy (DoE), the last installation took place on 30 June 2015. Up to 30 June 2015, the DoE reported approximately 422 429 Solar Water Heater installations nationally. Since 1 April 2016, no installations have been recorded.

3. The programme will reduce energy consumption by about 55GWh per month which would potentially displace the use of expensive diesel by 12% every month.

Reply:

The Department of Small Business Development (DSBD) has never procured any services from and/or made any payments to (a) Mr Mzwanele Manyi, (b) the Progressive Professionals Forum, (c) the Decolonisation Fund and/or (d) the Black Business Council.

The Department uses the Central Supplier Database to source the names of prospective service providers and according to our records, (a) Mr Mzwanele Manyi, (b) the Progressive Professionals Forum, (c) the Decolonisation Fund and/or (d) the Black Business Council has never submitted a quotation to the DSBD, nor render any services to/on behalf of the Department.

Reply:

1. (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Moretele Local Municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: ineffectively supply chain management process with regarding to payment of outstanding invoices. construction by-laws, customer complaints system.

(c) The total amount of administration costs is determined by each municipality, however the examples mentioned under point (2) outline how the red tape reduction intervention by DSBD has supported the municipality. The total value of these administrative interventions have not been calculated by the municipality.

2. The examples that outlines improvement since April 2016 are as follows (i) the municipality has developed an effective supply chain training program and they also upgraded the financial system and hired an invoice clerk in order to pay invoices within 30 days as per National Treasury regulation.(ii) the municipality has also been able to improve construction by-laws in terms of Grading in order for SMMEs acquired level 7 & 8 accreditation. (iii) the overall complaints management system is housed within the office of the municipal within the office of the municipal manager but every unit within municipality has a champion who is responsible for follow-up on the complaints. The municipality has made efforts to adhere to the 7-10 days period for responding to

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Sol Plaatjie local municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: communication to SMMEs and Co-operatives is hampered due to limited and efficient intergovernmental relations, approval processes for small scale mining is cumbersome and too long, SMMEs and Co-operatives find it difficult to access tenders within the municipality and few opportunities are awarded to locals.

(c) The total amount of administration costs is determined by each municipality however the examples mentioned below outline how the red tape reduction intervention by DSBD has supported the municipality to improve governance and reduce the burden regulatory and administrative burden for the benefit of SMMEs and Co-operatives. The total value of these administrative interventions have not been calculated by the municipality.

(2) Examples that outline improvement of business environment with Sol Plaatjie local municipality include: (i) the municipality in collaboration with the Northern Cape Provincial Department of Economic Development and Tourism established am economic forum to strengthen intergovernmental relations and specifically support to SMMEs and Co-operatives, the municipality has created a tender board for SMMEs and Co-operatives opportunities within the local environment, and a constant update on the database for SMMEs and Co-operatives is maintained for local opportunities (ii) the development of informal sector by-laws in underway, (iii) the municipality is part of the revitalisation programme led by Department of Planning Monitoring and Evaluation as well as Department of Minerals to revitalise towns in which mines are closing down to refocus on economic opportunities for SMMEs and Co-operatives.

 

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Khara Hais Local Municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: lengthy processes of issuing of permits within the transport industry which impacts on small businesses, limited information provided to SMMEs and Co-operatives in terms of rezoning processes and procedures, and in terms of construction industry registration process including grading does not prioritise targeted groups (women, youth and disabled).

(c) The total amount of administration costs is determined by each municipality however the examples mentioned in points below outline how the red tape reduction intervention by DSBD has supported the municipality to improve governance and reduce the burden regulatory and administrative burden for the benefit of SMMEs and Co-operatives. The total value of these administrative interventions have not been calculated by the municipality.

(2) Examples that outline improvements in the business environment within Khara Hais local municipality include: (i) the establishment of a dedicated human and financial resources for issuing permits; (ii) workshops are conducted on an on-going-basis regarding the rezoning processes and procedures; and (iii) partnership is created with National Home Builders Registration Council (NHBRC) in terms of grading within the construction sector and the prioritisation of targeted groups..

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Matjhabeng Local Municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: procurement processes for infrastructure development and maintenance are excessively complex and lengthy leading to excessive costs being incurred by businesses, SMMEs and Co-operatives are not paid within 30 days, municipal customer care system is non-operational additionally service standards are non-existent furthermore informal sector by-laws are due for review.

(c) The total amount of administration costs is determined by each municipality however the examples mentioned below outline how the red tape reduction intervention by DSBD has supported the municipality to improve governance and reduce the burden regulatory and administrative burden for the benefit of SMMEs and Co-operatives. The total value of these administrative interventions have not been calculated by the municipality.

(2) Examples that outline improvements in the business environment within Matjhabeng municipality include: (i) the improvement in the turnaround times within the internal supply chain management processes; (ii) reviewing of the delegation of powers regarding payments, in order to address late payments to SMMEs and Co-operatives; and (iii) the design of a complaints/customer notification system as well as standard operating procedures (SOPs) for assessing and addressing complaints; and (iv) centralised town planning and building control offices to reduce turnaround times for building plan approval processes and procedures.

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act;

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Maluti-A-Phofung Local Municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: inadequate municipal communication to business including a lack of a functioning local economic development (LED) forum, lack of information on how the grading system (tourism) is managed and implemented, late payments to service providers and municipal by-laws and policies not translated into the local language.

(c) The total amount of administration costs is determined by each municipality, however the examples mentioned in points below outline how the red tape reduction intervention by DSBD has supported the municipality to improve governance and reduce the burden regulatory and administrative burden for the benefit of SMMEs and Co-operatives. The total value of this administrative interventions have not been calculated by the municipality.

(2) Examples that outline improvement of business environment with Maluti-A-Phofung municipality include: (i) the development of a complaints notification system to allow businesses to submit service delivery complaints; (ii) a partnership has been finalised with provincial government regarding appropriate standards for grading within the tourism industry (these are inclusive of signage, promotion and attraction of investment opportunities) for potential revenue generation; (iii) supply chain management processes have been improved to ensure that SMMEs and Co-operatives are paid within the 30-day period; and (iv) municipal by-laws and policies have been translated into local languages.

Reply:

(1) (a) Since April 2016, the Department of Small Business Development (DSBD) programme in partnership with Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South African Local Government Association (SALGA), begun the process of assessing the implementation of the Red Tape Reduction (RTR) guidelines by municipalities. This process is also supported by the International Labour Organisation (ILO). The assessment is based on reducing the regulatory and administrative burdens as experienced by small, micro and medium enterprises (SMMEs) and Co-operatives within the different municipalities. The assessment is based on the following seven indicators and associated legislation/regulations:

(i) Effectiveness of the complaints notification system as governed by the Municipal Systems Act;

(ii) Communication of relevant business information by municipalities to SMMEs and Co-operatives as governed by the Promotion of Access to Information Act;

(iii) Municipal building plan approval processes as governed by the National Building Standards Act, Spatial Planning and Land Use Management Act as well as Municipal Services Charter;

(iv) Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system). Relevant legislation would be PPPFA, MFMA and Preferential Procurement Regulations;

(v) Municipal business registration and permits relevant legislation includes: Business Act, National Health Act, National Building Regulations and Building Standards Act including various by-laws those which are relevant to the business licensing process e.g. municipal by-law on food or tourism regulations;

(vi) Development and enforcement of municipal by-laws that promote business development, some of the relevant legislation include the Municipal Systems Act and Local Government Transition Act; and

(vii) Assessment of percentage spent in procurement on SMMEs and Co-operatives aligned to the PPPFA and MFMA and preferential procurement regulations.

(b) In terms of Lukhanji Local Municipality the total number of unnecessary (i) policies, (ii) by-laws, and (iii) regulations including associated administrative burdens considered for review regarding red tape reduction as guided by the above mentioned indicators and associated legislation/regulations are as follows: unavailability of the complaints/customer notification system, lack of standard or uniform enforcement of by-laws leading to different standards being utilised for business in the same sector, improvement of supply chain management processes including appropriate approval turnaround times.

(c) The total amount of administration costs is determined by each municipality however the examples mentioned in points below outline how the red tape reduction intervention by DSBD has supported the municipality to improve governance and reduce the burden regulatory and administrative burden for the benefit of SMMEs and Co-operatives. The total value of these administrative interventions have not been calculated by the municipality.

(2) Examples that outline improvement of business environment within Lukhanji local municipality include: (i) the by-laws on tourism are currently being reviewed, standard operational procedure (SOPs) for implementation of by-laws on informal businesses are being developed; (ii) the delegation of authority is also currently being reviewed, to ensure that payment to SMMEs and Co-operatives is conducted within the stipulated 30-days; (iii) the municipality has started to convene briefing workshops on tender application processes in collaboration with business chambers and associations; and (iv) SMMEs and Co-operatives database is updated on an on-going basis to ensure that relevant adverts are sent to local businesses.

Reply:

The Department of Small Business development (DSBD) Red Tape Reduction (RTR) Programme initially targeted twelve municipalities in six provinces country wide. The Red Tape Reduction programme was informed by the results of the 2011/12 National Red Tape Reduction Pilot. The municipalities that participated in this national red tape reduction action plans were viz;

Provinces	Municipalities
(i) Eastern Cape	Buffalo City
(ii) Eastern Cape	Lukhanji
(iii) Limpopo	Elias Motsoaledi
(iv) Limpopo	Ephraim Mogale
(v) KwaZulu-Natal	Greater Kokstad
(vi) KwaZulu-Natal	UMzimkhulu
(vii) Northern Cape	Khara Hais
(viii) Northern Cape	Sol Plaatjie
(ix) North West	Moses Kotane
(x) North West	Moretele
(xi) Free State	Matjhabeng
(xii) Free State	Maluti-A-Phofung

The Western Cape, Mpumalanga and Gauteng Provinces are currently not part of this initiative. Theewaterskloof Local Municipality in the Western Cape Province was therefore, not part of the initial pilot stage. The current plan of the Department of Small Business Development is to revisit all the piloted municipalities to assess the progress made in relation to the major red tape issues identified. The DSBD has already started with the first phase of the Red Tape Reduction programme by assessing the implementation of the red tape reduction guidelines to four municipalities (Greater Kokstad and UMzimkhulu in KZN and Matjhabeng and Maluti-A-Phofung in FS) from twelve piloted municipalities.

Reply:

1 (a) The expenditure of R 4 492 250 which is referred to in the enquiry was for the broadcasting of a television advertisement. The expenditure was for airing costs of a Seda multi-media, advertising and Public Relations campaign which profiled and created awareness of Seda’s products and services to its customers and potential clients. The advertisement which was 30 seconds long, featured 438 times on these stations over a five week period.

(b) The advertisement was part of a marketing campaign to raise the level of awareness of Seda’s service offerings for SMME’s and cooperatives in the country.

(c) Breakdown of the R 4 492 250 expenditure per TV station:

Item	Cost
ETV	R 1 659 635
SABC	R 1 939 842
ENCA	R 410 400
DSTV	R 482 371
Total	R 4 492 250

 

Breakdown of the advertising expenditure per TV station:

Item	Production costs	Airing Costs
ETV	R 1 117 136(This is the only production cost and was the money spent on producing the TV advert aired on SABC channels, ETV, ENCA and DSTV)	R 1 659 635
SABC		R 1 939 842
ENCA		R 410 400
DSTV		R 482 372
Total	R 1 117 136	R 4 492 250

 

Note: The production cost of R1 117 136 was the only production cost and was the money spent on producing the TV advert.

Further breakdown of the SABC advertising and airing costs:

Item	Advertising production	Airing costs
(aa)SABC 1	R1 117 136 (This is the only production cost and was the money spent on producing the TV advert aired on SABC channels, ETV, ENCA and DSTV)	R 495 990
(bb)SABC 2		R 623 295
(cc) SABC 3		R 277 020
SABC NEWS		R 543 587
TOTAL	R 1 117 136	R 1 939 842

2. Post campaign analysis was done through measuring the impact of the campaign via the influx of calls to Seda’s national information centre. The impact of the campaign was measured through media reports provided by Seda’s media monitoring service.

The impact of the advertising campaign measured through Seda’s national information centre is reflected in the link below:

https://pmg.org.za/files/RNW14SEDA-170403.docx

Reply:

(a) MAKE	(b)MODEL	(c) PRICE	(d) PURCHASE DATE	(i) (aa)	(ii) (aa)
Prior 2014/15
Volvo Cape Town Office	XC90	R 659 728.51	27 September 2011		(ii) Deputy Minister Elizabeth Thabethe
Mercedes Benz Pretoria Office	ML500	R 855 696.36	23 January 2014		(ii) Deputy Minister Elizabeth Thabethe
2014/15
Lexus Cape Town Office	GS350 EX	R 538 048.08	17 September 2014	(aaa) Minister Lindiwe Zulu
Lexus Pretoria Office	GS350 EX	R 542 458.74	02 December 2014	(aaa) Minister Lindiwe Zulu
2015/2016	No vehicle purchases took place in this period for the Minister and the Deputy Minister.
2016/2017	No vehicle purchases took place in this period for the Minister and the Deputy Minister.

Reply:

For purposes of the response, the payments to SMMEs and co-operatives cannot be separated as these are recorded together.

Information below covers the period from 01 April 2015 to 31 March 2016.

(a) The Department of Small Business Development (DSBD)

The total procurement on goods and services in respect of the 30% set aside target is as follows:

No	Description	LOGIS transactions	BAS transactions	Total	%
(i) and (ii)	SMME’s and Cooperatives	R11 715 235.01	10,332,498.72	22,047,733.73	69.34%
(iii)	Non-SMME’s	R18 450.00	9,728,481.73	9,746,931.73	30.66%
Total procurement	11,733,685.01	20,060,980.45	31,794,665.46	100.00%

 

In addition the R3.5 million spent on capital assets was procured through the SMME’s.

(b) Entities reporting to the DSBD

The Small Enterprise Development Agency (SEDA)

The Small Enterprise Development Agency (SEDA) total procurement on goods and services in respect of the 30% set aside target is as follows:

No	Description	Total	%
(i) and (ii)	SMME’s and Co-operatives	R255m	56%
(iii)	Non-SMME’s	R200m	44%
Total procurement	R455m	100%

The Small Enterprise Finance Agency (SEFA)

The R 126,016,582 total procurement on goods and services in respect of the 30% set aside target is as follows:

No	Description	Total	%
(i) and (ii)	SMME’s and Co- operatives	R 88, 211,607.40	70%
(iii)	Non-SMME’s	R 37, 804,974.60	30%
Total procurement	R 126,016,582

Reply:

1.1. The DSBD is conducting the national study on the regulatory and legislative protocols impeding small, micro and medium enterprises (SMMEs) and Co-operatives as one of the target for the 2016/17 financial year. The research will combine analysis of the existing laws, which should point to the potential for unintended consequences, with evidence on SME experience of implementation. For this reason, the approach to the studies has four main elements

(i) To identify practical and viable ways to reduce the administrative burden of legislation and regulations on SMMEs and Co-operatives;

(ii) An engagement strategy including the relevant departments and agencies to implement the preferred option.

(iii) An evaluation of remedial options, including at least one option that would not require changes to the law or regulation; and

(iv) Analysis of the existing laws and regulations themselves in order to identify the likely costs, benefits and risks for small enterprises and other stakeholders;

1.2 The Department intends to commence with the Provincial study to assess regulations affecting SMMEs and Co-operatives within the 2017/18 financial year.

1.3 The Department as part of the Local government Red Tape Reduction Programme has been conducting an assessment on the implementation of the National Red Tape Reduction Guidelines; this is currently being conducted in four municipalities in the Free State and KwaZulu-Natal. The assessment was based on the critical red tape issues as listed on the National Red Tape Guidelines including, but not limited to:

• • 1. Lengthy and inefficient supply chain management processes (which ultimately affects the 30-day payment system to SMMEs and Co-operatives and non-compliance with section 38 (1) (f) of the MFMA as aligned to the PFMA and Treasury Regulations 8.2.3);
    2. An assessment of existing municipal by-laws and which are relevant to SMMEs and Co-operatives. The municipalities need to review by-laws every five year period as per Municipal Systems Act (MSA) (No. 32 of 2000); and
    3. Assessment of business registrations and permits in order to identify red tape issues in relation to starting the business and also the compliance with all the requirements as set out within the Business Act No. 71 of 1992 and as amended No. 186 of 1993.

1.4 The department of Trade and Industry working with the National Small Business Council has in its work during 2008 to 2010 been more involved in regulatory environment related work. This was upon the 2007 Cabinet’s approval of the Regulatory Impact Assessment (RIA) Framework followed by guidelines for RIA, a tool used to analyze objectives of regulatory proposals and respective unintended consequences. Initially this focused on national and provincial regulatory regime. Regulatory and administrative bureaucracy /red tape areas that received attention in this period and pertinent to the small business sector have been; business registration, access to finance and access to markets. In the municipal ordinances and by-laws focus has been on trading licenses and business registration as well as street trading and trading hours. No recent studies have been done by the Department of Small Business Development, however, stakeholder engagements as recently held in the current process of the review of the Small Business Act have elicited input on regulatory impact areas that still need to be addressed.

2. The Department has not made an assessment of the possible impact that the lack of access to SEDA and SEFA by potential entrepreneurs may have on the success rate of small, medium and micro-sized enterprises to create sustainable jobs.

2.1 The DSBD has however conducted and concluded the 2014 Annual Review of SMMEs and Cooperatives in South Africa which assess the constraints and enablers for SMME and Cooperatives growth sector-wide and not just specifically on the role of SEDA and SEFA.

2.2 The 2014 Annual SMME Review which the Department is yet to publish shows that:

• • 1. South Africa boasts a wide range of public and private sector small business support institutions, presently estimated at around 214 in total, providing a variety of support services.
    2. While the comprehensiveness of the range of support services is generally acknowledged, these services tend to be fragmented or unintegrated and the quality of some of the services, particularly business advisory services, is continuously being questioned.
    3. The 2008-2014 period was characterised by considerably difficult external economic conditions, with generally subdued overall growth performance, high lending rates, falling business and consumer confidence resulting in slowing demand and weakened capacity utilisation in the private sector. These tough trading conditions undoubtedly have impacted the business prospects and performance of SMMEs.
    4. There has been an increase in the number of SMMEs and Cooperatives from 512 518 in 2007 to 1 155 854 in 2013, an overall growth rate of 14.4%.
    5. Bankruptcies, liquidations and insolvencies increased during the economic downturn from 2314 in 2007, to 4763 in 2008, 6078 in 2009; but have since dropped to 3189 in Q1 or 2013.
    6. Lack of skilled staff are the main challenges faced by all SMMEs, followed by lack of finance and burdensome regulations.

2.3 The Department’s application for its ‘Integrated Strategy for the Promotion of Entrepreneurship and Enterprise Development’ to be included in the National Evaluation Programme has been approved by DPME. The evaluation of the Integrated Strategy will enable the Department to assess the impact of the interventions outlined in the Strategy as well as the impact of the Institutions, (particularly SEDA) that were to implement these interventions and programmes.

2.4 The Department together with SEDA and SEFA has also embarked on the 2016 Annual Review of Small Business and Cooperatives in South Africa and may also use this study to focus on the accessibility and procedures of SEDA and SEFA by potential entrepreneurs to determine if this is a contributing factor to the low success rate of small, medium and micro-sized enterprises to create sustainable jobs.

2.(a) There is extensive literature on factors resulting in the low success rate of small enterprises. Seda continues to contribute to research work in this regard, especially through its annual contribution to the research focus on South Africa in the GEM report (Seda is one of the main funders). Findings in this report cite access to non-financial and financial business development support as well as access to markets as the key critical success factors for small businesses. The recommendations from these periodic reviews highlight the need for coordinated support and utilising other means toward better access to support, such as; co-location among development support agencies to increase their geographical coverage and pool resources for office presence in as many needy parts within a district municipality jurisdiction. Provision of infrastructure resources in municipality infrastructure plans as part of their Local Economic Development plans and exploring possibilities for partnership with the private sector as part of their Enterprise Support Initiatives to accommodate development support agencies.

SEDA currently proactively identifies partners to pool resources in order to expand its co-location points. As at the end of June 2016, SEDA has established a network of 55 branches, and 35 co-location points. In 2017, SEDA will conduct a study to identify underserviced areas in order to plan for new access points and support modalities. In 2016, SEDA has done a study on the township SMME environment as is currently piloting a model of how to assist rural & township enterprises in Hartwater (PhokwaneMunicipality), Phillipi, KwaNobuhle (Uitenhage) and Oakney (Matlosana municipality). SEDA is also looking for funding for cadet programmes in order to increase human resource capacity trained to service more clients.

2.(b) During the 2015/16 financial year, the Small Enterprise Finance Agency (SEFA) commissioned a study through an external market research organisation to:

• • 1. Review the products and services offered by the SEFA to determine whether they are aligned to the mandates of the DSBD and the sefa;
    2. Review the sefa products with respect to their effectiveness, efficiency and relevance, ensuring that they are aligned to the mandates of the DSBD and the SEFA;

A 360-degree approach was adopted to conduct the review which comprised of the following:

• • 1. Desktop research - This included an extensive literature review as well as an examination of relevant documents to assist in providing context to the review process;
    2. Interviews with SEFA’s key stakeholders were undertaken; and
    3. Surveys with beneficiaries and non-beneficiaries of the SEFA products and services were conducted to solicit their views. (Beneficiaries are described as 'Approved SMMEs and Cooperatives'. These are SMMEs and Cooperatives that were successful in their applications for funding from SEFA. The non-beneficiaries are those that were not successful in their applications for funding from SEFA.

The review focused on determining the extent to which the products and services are relevant (appropriate) and whether they are provided effectively and efficiently (i.e., whether or not the products have improved the sustainability and growth of the target beneficiaries).

The study results concluded that SEFA is reaching its target market and that its reach is extending well into rural, semi-urban and urban areas. Furthermore, the study found that SEFA products and services broadly address the needs of small businesses in a way that is consistent with policies and priorities of the government.

Seventy-three percent (73%) of the SMMEs and Co-operatives indicated that SEFA funding interventions enabled them to achieve their long-term objectives of profitability, growth, job creation and sustainability.

• • 1. Change in turnover – 87% of SMMEs and Co-operative Enterprises indicated that SEFA funding enabled a positive percentage change in their turnovers
    2. Change in employees – 92% of SMMEs and Co-operative Enterprises indicated that SEFA funding enabled a positive change in the number of employees
    3. Benefits derived from sefa funding - 94% of SMMEs indicated that overall, SEFA funding was beneficial to their businesses.

The table below indicates the audited results of SEFA funding intervention.

Financial Year	2013	2014	2015	2016	Total
Loan Financing Approved	R440m	R1,065b	R1,009b	R1,109b	R3,6 billion
Loan Financing Disbursed	R198 m	R822 m	R1,294 b	R1,168b	R3,4 billion
Enterprises Funded	28 362	46 407	68 724	54 833	193 320
Jobs Facilitated	9 853	46 402	60 169	75 670	202 876

Reply:

1.The current model involving the Cooperatives Incentive Scheme (CIS) that provide grant funding to the cooperatives without being integrated closely with non-financial support or post investment support has had mixed results on the development of cooperatives in South Africa. 

  1.1 On the one hand, it contributed to the sustainability of jobs through the provision of financial support coupled with training that have been provided to   cooperatives. Thus, via the CIS 246cooperatives were supported resulting in the Department creating and sustaining 1542 jobs to the tune of R75 million.

  1.2 Using various non-financial support instruments, the Small Enterprise Development Agency (SEDA) supported a total of 118 cooperatives resulting in   6239 jobs sustained.

  1.3 In addition, the Small Enterprise Finance Agency (SEFA), which applies a cooperatives value-chain model, has supported cooperatives in all sectors   of the economy including sub-sectors such as waste recycling, greenhouse and poultry farming that play critical roles in restructuring local economies,     creating jobs, and increasing disposable income available to communities.

  1.4 Furthermore, SEFA developed financing package programmes in partnership with municipalities and/or other strategic partners to support     cooperatives. Such partnerships were entered into with the Dr Kenneth Kaunda District Municipality (Waste Recycling Project) worth R35.1 million which   created 63 jobs (target 320 jobs), Chris Hani District Cooperative Development Centre - Greenhouses project (broiler production) worth R9.5 million which   is expected to create 127 jobs and Super-Grand–Poultry Farming project for R20 million – which created 12 Jobs.

  1.5 On the other hand, the CIS model provides grant funding for certain business transactions particularly involving cooperatives in the rural and township   settings whereby the challenges for development are proving to be difficult has had limited success. Most of the beneficiaries find it hard to sustain their   cooperatives given that their entrepreneurial skills are low and they rely on hand to mouth operations to sustain themselves and find it difficult to engage   in self-income generating activities, which requires medium to long term horizon to achieve incomes that could also sustain them.

  1.6 Thus, for success to be achieved the new Integrated development model must involve both financial and non-financial support deployed to work   closely together on each transaction to ensure success.

 

2. In providing impetus to the development and promotion of Cooperatives in South Africa, the Department of Small Business Development (Department) is formulating and piloting various cooperative models by kick-starting the process with the task of reviewing the Integrated Strategy on the Development and Promotion of Cooperatives adopted by Cabinet in 2012, whose output will be the final adoption of the two models that proved to be effective in developing cooperatives in the country. The one-stop-shop model involving the Cooperatives Development Agency (CDA) will be utilised to bring about this integrated support involving pairing non-financial with financial support to effect cooperatives development. This will be coupled with the provision of demand-side support measures (i.e. public and private procurement opportunities) and for cooperatives products and services and developing cooperatives networks in the form of shared services, user cooperatives, secondary cooperatives whose raison detre is to provide various support services aimed at enhancing the sustainability of primary cooperatives. In other words, the model will aim to address the following considerations, namely, ‘what works’, ‘for whom it works’, ‘why it works’, ‘how it works’ with the view to replicate and ensure cooperatives sustainability. Where the programme and projects of the model are found not to be working to optimally benefit the beneficiary cooperatives, adjustments will be made accordingly. The model(s) adopted will be designed to enable them to be open to contextually respond to relevant prototypes that are responsive to the nuanced needs of the various sectorial beneficiary cooperatives.

  2.1 The first cooperatives model that the Department is piloting contains four strategic pillars that will be utilised to promote and develop cooperatives in   the country’s economy. The first and second pillars involve the provision, on a massive scale, of non-financial and financial support services to   cooperatives, which will be implemented through the CDA in partnership with national government departments, provincial governments and district   municipalities. While various support programmes will be utilised to support cooperatives financially, cooperatives will also be encouraged to develop their   own financial systems, through the formation of cooperative banks, as envisaged in the Co-operative Banks Act, No. 40 of 2007.The CDA is one of the   institutions that will beestablished under the Cooperatives Amendment Act, No 6 of 2013 and operate under the direct supervision of the Minister of Small   Business Development.

  2.2 The third strategic pillar involves ‘creating demand for cooperatives’ products and services through leveraging the 30% public sector procurement   opportunities designated by government to benefit cooperatives and small enterprises. Transversal agreements will be entered into between the   Department and various national governmentdepartments, provincial governments and municipalities with the purpose to leverage opportunities from these   entities. The Department will also leverage private sector procurement opportunities arising from B-BBEE legislation and regulations.

  2.3 The fourth strategic pillar involves improving the sustainability of cooperatives through the formation of enterprise networks and provision of business   infrastructure support. The Enterprise Networks Programme (ENP) aims to promote the vertical and horizontal integration of cooperatives, resulting in the   creation of shared services platforms, user cooperatives and secondary sector cooperatives that are designed to support the growth of primary   cooperatives. The ENP will also be implemented through the envisaged CDA. Incubation support and after care will also play a meaningful role in   enhancing the sustainability of cooperatives.

  2.4 The fifth and last pillar aims at increasing the supply of financial support services to cooperatives. As with the other pillars, this pillar will be   implemented through the CDA. This strategy posits an integrated approach that provides adequate and relevant support and delivery mechanisms that   cover the entire collective entrepreneurship and cooperatives life cycle from pre-formation; survivalist; micro, small to medium; growth and expansion; and   turnaround of ailing cooperatives.

  2.5 In a nutshell, all support programmes for cooperatives throughout the economy will be increased and streamlined under a single, identifiable, one-  stop-shop (CDA) dedicated to cooperatives development. It is the aim of this model to ensure the establishment of a CDA that will have provincial and   district branches to aid in the implementation of the one-stop shop model. The one-stop shop model ensures an integrated and seamless support to all   the targeted cooperatives which increases the probability of success and sustainability of the entities.

 

3. The core thrust of this model underpinned by the integrated strategic approach will be the provision of support across the entire value chain of support services covering the entire spectrum from pre-  formation support, non-financial support (i.e. technical and management training, business development support, market intelligence, access to   technology, etc.), financial and post-investment support (i.e. mentorship or hand-holding, shared services support platforms, incubation and access to   market support, etc.). In addition, the model also posits the provision of the following support, namely, the on-going profiling of cooperatives, communication outreach, improving access information, conduct research, strengthening the monitoring and evaluation of impact of support services.

 

4. The second co-operative model entails developing new generation cooperatives. In the past, the focus was to solely support the development of traditional cooperatives, a shift in emphasis will now be to develop new generation cooperatives. A New Generation Co-operative (NGC) is a relatively new type of cooperative used primarily in the value-added processing of agricultural commodities. The NGC is not a specific legal structure. Rather, the term New Generation Cooperative is used to describe how a firm operates. It primarily describes the relationship between the firm and its members and how the firm is financed. Unlike traditional cooperatives, in which start-up expenses are minimal and growth is financed through members' retained earnings, permanent equity to fund NGC start-up and growth is financed through the sale of delivery rights. These delivery rights represent a member's right to deliver a specific amount of commodities to the cooperative. Members benefit in proportion to their use, and nearly all NGCs are democratically controlled through one member/one vote.

 

5. There are six primary characteristics of New Generation Cooperatives:

  5.1 Defined membership. Frequently, NGCs are referred to as closed cooperatives. The number of members in an NGC depends upon the proposed   capacity of the cooperative's operations. One of the key features of the NGC is its ability to control supply or access to the cooperative's operations. In   other types of cooperatives, members can enter and exit as they please, and cooperatives operating without marketing contracts with their members have   no way to guarantee a specific operating capacity at any one time. By limiting membership to those members who purchase the right to supply the   cooperative, the NGC is able to ensure a steady supply of the agricultural inputs required for running operations at the most efficient level possible. In an   NGC, the membership is generally not permanently closed. If the cooperative decides to expand production, for example, it could seek equity from   producers outside the initial membership.

  5.2 Delivery rights: a right and an obligation to deliver. Once members contribute equity towards the NGC, they receive the right and obligation to   deliver a specific quantity of the commodity each year. This means if producers have purchased the right to deliver 5,000 bushels of corn each year, they   must deliver 5,000 bushels-no more, no less. If they cannot deliver that amount or if the commodity does not meet the quality standards set forth in the   marketing agreement, the cooperative may have the right to buy the commodity on the producers' behalf and charge for the difference in price.

  5.3 Upfront equity required from producers. Adding value to agricultural commodities can be capital-intensive. Before lending money to a project,   banks and other lending institutions will require producers to raise part of the project cost. Often, this means producers must raise 50 percent or more of   the total project cost. If the project is estimated to cost R1million, for example, producers will need to raise R500,000 or more. Although it may be   possible to find private investors to reach the required equity level, producers are often the sole source of equity. As a way to tie members' use to the total   project equity required, the total amount to be raised is broken into smaller units. These units are tied to the amount of product required to be delivered.   A market feasibility study will help determine the most economically efficient size for the processing facility. Once you know the amount of commodities   the plant will require each year, you should then determine how to allocate this total amount into shares. For example, if the most efficient size plant   requires one million bushels of soybeans a year, you should divide one million into a specific number of shares. To determine the specific number of   shares, you should set minimum and maximum amounts of delivery rights to be purchased. To determine this, you need to balance two issues: how   many producers do you want involved in the business and what is financially viable for you and other producers to commit. For example: assume on the   R1 million project above, producers need to raise R500 000. If one million bushels a year are required to run the plant at the most efficient level, you could   divide the number of bushels into a minimum delivery right purchase of 5,000 bushels and a maximum of 50,000 bushels. Thus, the cooperative could h   have as many as 200 members or as few as 20 members.

  5.4 Delivery rights are transferable and may fluctuate in value. The delivery right is similar to a share of corporate stock because it represents a   firm's permanent equity. As with a share of corporate stock, the value of your delivery right will depend on your firm's profitability. If an NGC is successful   and provides value for its members, the delivery right may appreciate in value. If the NGC does not provide value to its members, the value of the delivery   right may decrease. Unlike stock in a public corporation, however, the delivery right has a very limited resale or trading market. To comply with antitrust   laws, tax, and registration law, NGC constitutions limit transfer to other producers and usually require the board of directors to approve any transfer.

  5.5 Marketing agreement entered into between member and cooperative. Upon purchasing delivery rights, members are required to sign a   marketing contract outlining the duties of both the members and the cooperative toward each other with respect to the delivery, quality, and quantity of   producers' commodities. These contracts are usually evergreen contracts, meaning they are for specified periods of time (from one to five years). They are   renewed automatically unless either party gives notice to the other within a window of time specified in the marketing agreement. The market agreement   often specifies the high quality standards required of members' commodities, especially in cooperatives producing consumer-level goods. The marketing   agreement outlines the specific quality required to be delivered, how quality will be measured, and the producer's rights and obligations if the quality   standard is not met.

  5.6 Members and their NGC share three primary legal relationships: Members must purchase a share of common stock or other membership   share to enable them to vote in all decisions set forth in the constitution. Members also purchase delivery rights, which are both a right and an obligation   to deliver. The delivery rights are evidenced by legal documentation and are usually transferable upon approval from the board of directors. Finally,   members must sign a marketing agreement when purchasing delivery rights and voting stock. The marketing agreement defines the rights and obligations   of both the member and cooperative toward each other with respect to the delivery of commodities from the member to the cooperative.

  5.7 As a result, members must pay money to the cooperative for both the voting stock (usually very minimal) and the delivery rights (amount varies on   project size, minimum and maximum purchase requirements, and the specific amount of commodity to be delivered by the member). Members are   required to deliver the specified quality and quantity of commodities at pre-specified intervals for the length of the marketing agreement (which is usually,   through evergreen contracts, perpetual in nature). The cooperative, in turn, is required to pay members a pre-specified price for the commodities delivered   (usually a formula price based on spot market prices at a specified exchange, with additions or subtractions based on quality). The cooperative also is   required to return any profits to members on a pre-specified schedule determined by the board of directors. Depending on operating cash requirements,   the timeline for returning profits could be immediately. Due to securities law issues, cooperatives are not actively involved in the transfer of delivery rights.   The cooperative usually requires approval from the board of directors before any transfer is complete, and sometimes an outside broker handles the   actual transfer of delivery rights.

 

6. The new generation cooperatives deal with all those risk areas that rendered the traditional cooperatives vulnerable, weak and unsustainable. These involved providing a closed market through membership ensuring members operate within the ambit of the cooperatives and cannot easily transfer its trading rights to other entity. By allowing equity ownership structure new generation cooperative can easily raise external capital which was not easy for the traditional cooperative whose democratic ownership structure made it possible to attract foreign equity owners in the traditional cooperatives. Sustainability of primary agricultural cooperatives will be guaranteed with the promotion of the utilisation of the new generation cooperative model.

 

7. The core beneficiaries of the two models are poor households, youth, women and men. The two models are to focus on developing cooperatives in rural and township areas in critical sectors such as agriculture, construction, retail/consumer cooperatives, Cooperatives Financial Institution (CFI), Arts and Craft, Textile, and Informal Sectors of the economy. This does not mean other sectors are excluded, it only means that these will be given priority

The new models, which among others, place a considerable emphasis on community development,are envisaged to be rolled-out effectively during the 2017/18 financial year. The envisaged outcome with respect to the implementation of the models will be an increase in the number and sustainability of cooperatives, which will, in return, contribute to employment creation and poverty reduction thus assist government to move closer to fulfilling the socio-economic goals set out in the National Development Plan.

Reply:

(1)(a)(i)(aa) Primaryco-operatives have been funded by the Department of Small Business Development

CO-OPERATIVE INCENTIVE SCHEME
DEPARTMENT	YEAR	NUMBER OF APPLICATIONS APPROVED	VALUE OF APPLICATIONS APPROVED	ESTIMATED NO OF JOB CREATED	VALUE OF DISBURSEMENT
Small Business Development	2014-15	207	R 56 103 695	1359	R 64 965 564
Small Business Development	2015-16	247	R 84 423 016	1872	R 75 000 000
Small Business Development	2016-YTD	172	R52 891 797.54	1115	R 47 214 253.97
Total A	626	R 193 418 508.54	3603	R 187 179 817.97

Table 1 – CIS under DSBD

Breakdown of funded primary cooperatives under DSBD

Link for Table 2.1 below depicts DSBD CIS programme data for the 2014/15 Financial Year

RNW10-170310Table2 1

Link for Table 2.2 below depicts DSBD CIS programme data for the 2015/16 Financial Year (Primary Co-operatives)

RNW10-170310Table2 2

Link for Table 2.3 below depicts DSBD CIS programme data for the period April 2016 to date

RNW10-170310Table2 3

(1)(a)(ii)(aa) Secondary co-operatives have been funded by the Department of Small Business Development

There was only one secondary co-operative supported, information is provided in the table below:

Table 3

TOTAL NUMBER OF BENEFICIARIES 2015/16 (SECONDARY MARKETING)
Province	No. of Approved Projects	Approved Amount	% Per Province	Total Supported	Total
Limpopo	1	R7,648,690.00	100	1	R7,648,690.00

 

(1)(a)(i)(bb) Primaryco-operatives have been funded by the Department of Trade and Industry (the dti)

Table 4 below depicts thedti CIS programme data for primary co-operatives:

CO-OPERATIVE INCENTIVE SCHEME
Department	YEAR	NUMBER OF APPLICATIONS APPROVED	VALUE OF APPLICATIONS APPROVED	ESTIMATED NO OF JOB CREATED	VALUE OF DISBURSEMENT
Trade and Industry	2008/09	93	R 14 634 075	744	R 9 330 000
Trade and Industry	2009/10	224	R 47 345 447	1792	R 34 523 371
Trade and Industry	2010/11	235	R 55 228 903	1880	R 44 170 626
Trade and Industry	2011/12	182	R 47 824 520	1456	R 52 555 674
Trade and Industry	2012/13	314	R 85 323 599	2512	R 64 979 000
Trade and Industry	2013/14	243	R 62 331 729	1944	R 75 479 830
Total (B)	1291	R 312 688 273	10328	R 281 038 501

(1)(a)(ii)(bb) Secondary co-operatives have been funded by the Department of Trade and Industry

No secondary co-operatives were funded by the Department of Trade and Industry

Table 5: Grand Total

Department	Number of approved projects	Value approved	Estimated no. of jobs supported	Disbursements
Small Business Development	626	R 193 418 508	3603	R 187 179 818
Trade and Industry	1291	R 312 688 273	10328	R 281 038 501
Grand Total	1917	R 506 106 782	13 931	R 468 218 319

2. Specified co-operatives still operating

Not all the funded projects have been visited after implementation of the interventions. Post investment support is done on a sampling basis.

Link to Table 5 below depicts CIS post investment verification for the financial years 2013/14 and 2014/15

RNW10-170310Table5

NB: There are still 165 fully paid projects that are in the process of being monitored.

It should be noted that the function of monitoring was done by the monitoring and evaluation Chief Directorate under the dti when the CIS Unit was still part of the department. Therefore, due to capacity constraints, only one hundred and eighteen projects were visited post disbursement and plans are afoot to remedy the situation into the future.

The CIS Unit and Seda are currently piloting a working relationship whereby all new applications will be received through Seda branches and as well as conducting post disbursements visits to all funded cooperatives. The CIS unit has not been able to fully perform this function after being migrated from the dti to the DSBD. Post investment support was conducted through a chief directorate unit focusing on Monitoring and Evaluation (M & E) while the CIS Unit was still at the dti. the dti was able to publish two M & E reports for financial years 2013/14 and 2014/15. Since migration no full M& E has been conducted to date.

Reply:

The table below provides the amounts as budgeted for, for the different programmes in the different department in the Medium Term Expenditure Framework (MTEF) period.

Spending in terms of the budgeted allocation for the current financial year will only be available after the financial year.

The table below also provides information in terms of the kind or type of support each department will provide with regard to the budgeted amounts.

Department	Incentives/Initiative/Public Entity	Briefly explain Purpose/Possible Duplication within Government	2016/17	2017/18	2018/19	Total MTEF
			R'000	R'000	R'000	R'000
DHS (NURCHA)	Loans to emerging contractors	Affordable housing development	345 000	360 000	390 000	1 095 000
DHS (NURCHA)	Loans to emerging contractors	Infrastructure development	180 000	180 000	270 000	630 000
DHS (RHLF)	Incremental loans to retail intermediaries and CBO's for housing development in rural areas	Rural housing financing and development	225 000	277 000	305 400	807 400
DSBD	Black Business Supplier Development Programme	Is a cost sharing grant offered to small black-owned enterprises to help them in improving the competitiveness and sustainability	245 000	256 750	270 953	772 703
DSBD	Cooperatives Incentive Scheme	Is a cost sharing grant offered to cooperatives to help them in improving the competitiveness and sustainability	75 000	78 750	83 318	237 068
DSBD	Industrial Development Corporation: Craft customised Sector Programme	Establishment of a Sector Coordinating Body, Enterprise Development Programme, Establishment of Craft Hubs, Market Access and Research and Development	10 000	10 000	10 000	30 000
DSBD	National Informal Business Upliftment Scheme	To create a conductive business environment for informal businesses and provide adequate skills and infrastructure	95 698	99 406	103 138	298 242
DSBD	Enterprise Incubation Programme	To provide funding for incubators that can generate revenue through the provision of services and initiatives that can be self-sustainable	46 274	49 665	54 737	150 676
DSBD	Small Enterprise Development Agency	Provides non-financial support through advice, consultancy, training, and monitoring, and assisting SMMEs with technology through the technology programme.	633 814	743 132	786 233	2 163 179
DMR	Industrial Development Corporation of South Africa (IDC)	Implementation of small scale mining projects	27 434	28 805	30 476	86 715
DMR	Marginal Mines	This entails providing subsidies to marginal mines to pump extraneous water from underground mine openings; and researching, developing and implementing strategic solutions for mine water management.	5 275	5 555	5 877	16 707
Tourism	Tourism Incentive Programme	To assist SMMEs to participate in local and international trade exhibitions, thus creating direct linkages with international tourism companies.	188 931	188 002	198 777	575 710
DST	Technology Innovation Agency	To support the development and commercialisation of new products from SME through the technology station and technology platform programmes	382 364	396 732	420 322	1 199 418
RURAL	Rural Enterprise and Industrial Development	The creation of an enabling institutional environment for sustainable rural development,	390 628	417 478	449 986	1 258 092
DAFF	Comprehensive Agricultural Support Programme	Provides post settlement support to targeted beneficiaries of land reform and redistribution	1 565 090	1 678 413	1 769 821	5 013 324
DAFF	Cooperatives and Rural Enterprise Development	Facilitates and supports the development of businesses to ensure the transformation of the agriculture, forestry and fisheries products	120 334	73 119	74 880	268 333
DAFF	Agro-processing and Marketing	Develops and implements support programmes to promote market access and value addition for agriculture, forestry and fisheries products	55 921	63 425	66 662	186 008
EDD	Small Enterprise Finance Agency	Focuses on developing SMMEs by providing access to finance.	213 124	223 780	236 759	673 663
Total Spending on SMMEs	4 804 887	5 130 012	5 527 339	15 462 238

Reply:

The Department of Small Business Development is a newly established department that was allocated a separate Vote from the 1st of April 2015. There is no expenditure for the requested periods.

(a) 2012-13 not applicable.

(b) 2013-14 not applicable.

(c) 2014-15 not applicable.

Reply:

1. The department of small business development was proclaimed in July 2014 and currently does not have this information. Since this is a critical sector of the economy the department has prioritized the development of an Integrated Strategy and Implementation Plan on Township and Rural Enterprise Development. Amongst other things this strategy will assist with the following:

• A detailed analysis of the existing strategies and frameworks on township and rural enterprise development
• A detailed analysis of the programmes that are being implemented by different government departments and agencies on township and rural enterprise development
• Design of most appropriate programmes or other support interventions to ensure the optimal development of small enteprises and co-operatives in townships and rural areas

The department is confident that this study which is going to be done in 2016/17 financial year in partnership with the departments that fall under the Economic Sectors, Employment and Infrastructure Development (ESEID) Cluster will address some of the questions that have been asked in this question.

2. 

(a) Noting that there are insufficient and nonstandardised measurements of what consists the totality of a township economy relative to a regional, provincial, national and global economies, it is not yet possible to rank the performance and responsiveness of townships’ economies.

(b) Consequently, save for a framework that defines the nature and structure of township economies as well as the data sources for measuring it, thus far, reliable methods by means of which the monetary value of the goods and services produced within townships have not been isolated and represented during any specific time.

Reply:

The Department of Small Business Development and its entities’ total spend on advertising on media is as follows:

#	(a) Department	(b) Entities
		Small Enterprise Finance Agency (sefa)	Small Enterprise Development Agency (seda)
(i)	Africa News Network 7 (ANN7)	ANN7	ANN7
	(aaa & bbb) 2015-16 financial year and since April 2016: No amount was spent.	(aaa & bbb) 2015-16 financial year and since April 2016: No amount was spent.	(aaa & bbb) 2015-16 financial year and since April 2016: No amount was spent.
(ii)	SA Broadcasting Corporation (SABC)	SABC	SABC
(aa)	(aaa & bbb) 2015-16 financial year and since April 2016: No amount was spent.	(aaa & bbb) 2015-16 financial year and since April 2016: No amount was spent.	(aaa) 2015-16 financial year and since April 2016: R4 492 250.
			(bbb) Since April 2016: No amount was spent.
(bb)	(aaa) 2015-16 financial year: R125 400.	(aaa) 2015-16 financial year: R220 000.	(aaa) 2015-16 financial year: R330 132.
	(bbb) Since April 2016: No amount was spent.	(bbb)Since April 2016: No amount was spent.	(bbb) Since April 2016: No amount was spent.
(iii)	National commercial radio stations	National commercial radio stations	National commercial radio stations
	(aaa) 2015-16 financial year: No amount was spent.	(aaa) 2015-16 financial year: R320 000.	(aaa) 2015-16 financial year: R456 522.
	(bbb) Since April 2016: R189 999.24.	(bbb) Since April 2016: No amount was spent.	(bbb) Since April 2016: No amount was spent
(iv) (aa)	Community television stations	Community television stations	Community television stations
	(aaa) 2015-16 financial year: No amount was spent.	(aaa) 2015-16 financial year: No amount was spent.	(aaa) 2015-16 financial year: R28 000.
	(bbb) Since April 2016: No amount was spent.	(bbb) Since April 2016: No amount was spent.	(bbb) Since April 2016: No amount was spent.
(iv) (bb)	Community radio stations	Community radio stations	Community radio stations
	(aaa) 2015-16 financial year: No amount was spent.	(aaa) 2015-16 financial year: R157 000.	(aaa) 2015-16 financial year: R445 289.
	(bbb) Since April 2016: No amount was spent.	(bbb) Since April 2016: R62 000.	(bbb) Since April 2016: No amount was spent.

Please note further that for the 2015 International Cooperatives Day, the department advertised in SAFM and Motsweding FM (both SABC radio stations). However, the budget came from the DTI.

Reply:

The goods and services above R500 000 that were procured without inviting competitive bids for the Bavumile Skills Development Project are broken down as follows:

SUPPLIER  NAME	Date of training	Service area	R(Total amount of contract/quotation)	R(Amount paid)
Aranda Learnership College	16/02 to 19/03/2015	Hammanskraal, Gauteng	293 742,66	44 061,00
	16/02 to 19/03/2015	Mamelodi, Gauteng	277 782,66	41 667,00
	16/02 to 19/03/2015	Mamelodi, Gauteng		138 992,66
	16/02 to 19/03/2015	Kimberly, Northern Cape	360 008,58	180 004,58
Total			931 533,90	404 725,24
Kaoz Afric Design	15/02 to 11/03/2016	Lephanane, Limpopo	339 000,00	339 000,00
	15/02 to 11/03/2016	Nelspruit, Mpumalanga	349 000,00	349 000,00
Total			688 000,00	688 000,00
Injiya Trading and Projects	29/02 to 26/03/2016	Khayelitsha, Western Cape	376 000,00	376 000,00
	20/07 to 14/08/2015	Harrismith, Free State	364 725,00	364 725,00
Total			740 725,00	740 725,00
Grand total			2 360 258.90	1 833 450 .24