ATC140716: Report of the Portfolio Committee on Small Business Development on its inception and establishment, dated 9 July 2014

Social Development

Report of the Portfolio Committee on Small Business Development on its inception and establishment, dated 9 July 2014

The Portfolio Committee on Small Business Development, having participated in the consideration of the Annual Performance Plan and Budget of the Economic Development Department and the Department of Trade and Industry for 2014/15 on 1 July 2014, reports as follows:

1. Introduction

The Department of Small Business Development (DSBD )is a new Department that has been announced and established by the President of the Republic of South Africa after the formation of the new Administration, following general national elections that were conducted on 7 May 2014. The Department does not have a Budget Vote at the moment as its Programmes will migrate from the Economic DevelopmentDepartment (EDD) and the Department of Trade and Industry( DTI).Members of the Committee are therefore likely to participate in the debates on the Budget Votes of the Economic Development Department (Vote 28) and of Trade and Industry (Vote 36).

2. Mandate of the Department

The mandate of the Department of Small Business Development is to enhance support to small business and cooperatives development, with emphasis on programmes that will advance entrepreneurship amongst women, people with disabilities and youth, to effectively contribute to job creation and economic growth. Support mechanisms will include:

· access to finance,

· business skills development,

· cooperatives skills development,

· market access,

· competitiveness,

· easing regulatory environment,

· advancing localization,

· leveraging on public procurement,

· enhancing coordination and transversal agreements, and

· facilitating growth of SMMEs and cooperatives.

3. Legislation within which the Department will operate

The Department will draw authority from Small Business Development Act of 1980, National Small Business Act of 1996 as amended in 2004, Companies Act of 2010, Cooperatives Act of 2013, Industrial Development Cooperation Act of 1940, Broad Based Black Economic Empowerment Act of 2003 as amended in 2013, National Empowerment Act of 1998, Tax Incentive Act of 2013, Preferential Procurement Policy Framework Act of 2000, National Youth Development Act of 2008, Women Cooperatives Development Empowerment Strategy of 2012, Cooperatives Strategy of 2012, Innovation and Technology Strategy and other appropriate pieces of legislation which may have an impact on small businessesand cooperatives.

4. Primary and Secondary Mission of the Department

The primary mission of the Department is to enhance support of small and informal business development as well as cooperatives through entrepreneurship, to foster financial inclusion through creation of market access for small business and cooperatives. The s econdary mission of the Department is to advance localization leveraging on public procurement while ensuring measurable accountability of State institutions in support of small business.

5. Small Business Development Business Streams

The SBD business streams will be on:

· research, policy formulation, monitoring evaluation and intergovernmental relations;

· innovation, intellectual property and indigenous knowledge;

· incubation and technology programmes;

· customised interventions and programmes on enterprise development, cooperatives development and national informal business upliftment support;

· incentive programmes; and

· impactassessment .

The DSBD will also be playing a support function role within corporate services, namely on administration, finance, information technology, human resources, legal administration and in communication and marketing.

6.Key milestones of the Department

Key milestones that were indicated are:

· the configuration of the Department;

· the migration of functions;

· the consolidation of policy measures;

· the development of transversal agreements; and

· theestablishment of the financial institutions.

(Timelines will be discussed in the workshop)

7. Programmes and Budget Allocation

It was indicated that, although the Department has not yet been proclaimed, programmes that will be transferred from the DTI are Broadening Participation Division (BPD) and Incentives and Administration with a budget of R1billion for 2014/15 financial year. Programmes that will be transferred from the EDD is Small Enterprise Finance Agency (SEFA), so far without any indication of the amount of budget allocation.

8. Challenges

The Ministry raised challenges with regard to the non-proclamation of the Department as it delays progress of meeting timelines, and dependency on the departments which programmes for SBD should migrate from. It also creates a challenge of processing the budget vote and transversal agreements.

9. Matters raised by the Members of the Committee

While deliberating on the Ministry’s presentation, members of the Portfolio Committee on Small Business Development raised the following matters with regard to the presentation and the Department at large:

· The name of the Department should be looked into for it to include “Cooperative” because that will placeemphasis on cooperatives development and assistance;

· A definition of sectors and financial institutions should be clearly defined;

· Policies should give emphasis to programmes that are aimed at interventions, incubation, localisation, that are able to be measured on job creation, that seek partnerships with the private sector and that are enterprise friendly;

· The Department should take full functions of mentoring, capacity development and incubating ofSMMEs and cooperatives to ensure that they are not swallowed by big or foreign businesses;

· The Department should ensure that black-owned cooperatives are strengthened and sustainable. By so doing, an inclusive economy wouldbe enhanced;

· The Department should consult STATS SA to collect data on the number of existing SMMEs and cooperatives that will assist in determining their impact. With transversal agreements, other departments should not relinquish their functions of taking cooperatives into consideration;

· The Department should also consider international best practices in the field of Small Business Development and cooperatives.

10. Recommendations

Based on matters raised by the Committee, and on the question that the Department has not received a proclamation, it was recommended that:

· a strategic workshop of the Committee and the Department be conducted. This strategic workshop will give members of the Committee an opportunity of understanding the formation, mandate and programmes of the Department. Members will also have an opportunity of expressing their views on the institutional design.

· atthe workshop, the Ministry should come up with timeframes for milestones.

· ofthe R1billion budget for Broadening Participation Division, the Ministry should clearly find out what percentage will be retained by the DTI and Industry for Broad-Based Black Economic Empowerment.

11. Conclusion

After considering the presentation of the Ministry, the Committee agreed that the matter of conducting a workshop should be pursued and that members of the Committee will participate in the Budget Votes of the Department of Trade and Industry and Department of Economic Development.


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