ATC170512: Report of the Portfolio Committee on Small Business Development on Budget Vote 31 of the Department of Small Business Development for financial year 2017/18

Small Business Development

Report of the Portfolio Committee on Small Business Development on Budget Vote 31 of the Department of Small Business Development for financial year 2017/18

1. INTRODUCTION

The Portfolio Committee on Small Business Development (“the Portfolio Committee”) having considered the Annual Performance Plans and Budget allocations of the Department of Small Business Development (“the Department”) or (“DSBD”) and its entities, Small Enterprise Finance Agency (“SEFA”) and Small Enterprise Development Agency (“SEDA”), reports as follows: -

1.1 Background

The Constitution of South Africa (Act No. 108 of 1996) recognises that the Legislative Authority has an important role to play in overseeing both the financial and non-financial performance of government departments and public entities. Section 27 of the Public Finance Management Act (No. 1 of 1999) makes provision for Ministers to table the annual budget for a particular financial year in the National Assembly before the start of that financial year. Whereas section 10(1)(c) of the Money Bills Amendment Procedures and Related Matters Act (No. 9 of 2009) makes provision for Ministers to table Strategic Plans and Annual Performance Plans for (APPs) their respective Departments, public entities or institutions, which must be referred to the relevant Portfolio Committees for consideration and adoption.

It is important for the strategic plans to be tabled within the stipulated period because the plans provide information for the budget appraisal process of the relevant Portfolio Committee. Strategic Plans identify strategically important outcome orientated goals and objectives against which public institutions medium-term results can be measured and evaluated by Parliament. Annual performance plans identify the performance indicators and targets that the institution endeavours to accomplish in the upcoming budget year. The Annual performance plan shows funded service-delivery targets or projections. The annual budget sets out what funds an institution is allocated to deliver services and most importantly, indicates the resource envelope for the year ahead, and sets indicative future budgets over the Medium Term Expenditure Framework (MTEF). The budget covers the current financial year and the following two years.

At the beginning of each year following the State of the Nation Address (SONA) by the President, the Minister of Finance tables before Parliament, amidst great expectation and enthusiasm by South Africans, a detailed outline of the State's Budget: how much money will be or ought to be spent, on what, in that financial year. Thereafter, various government Departments present their budget votes before Parliament stipulating how they intend reconciling their resources with service delivery imperatives as outlined by the President of the Republic of South Africa in the State of the Nation Address. One of the main statutory functions of Parliament is to discuss, pass and oversee the State's Budget. The Department of Small Business Development Budget (Vote No. 31) was referred to the Portfolio Committee for consideration and reporting.

1.2 Purpose of the Budget Vote

The budget is a political and financial instrument that the government uses to ensure that its policy programmes are operationalised through the allocation of financial resources to the different spheres of government, specifically to programmes and projects. It reflects an outcomes centred public spending approach. It is further described as a tool that the government uses to evaluate the financing of its key policy objectives. It also used to evaluate whether the macro-economic perspectives of the Budget and the respective Budget Votes meet the requirements of government policies and give substance to the government’s five-year plan. Therefore, the purpose of Vote 31 for the Department is to promote the development of survivalist, small, micro, medium and co-operative enterprises that contribute to inclusive growth and job creation. In compliance with the referral by the National Assembly, the Portfolio Committee held briefings on the 3rd of May 2017 with the Department of Small Business Development, Small Enterprise Development Agency and Small Enterprise Finance Agency to consider their annual performance plans and the Department budget vote.

1.3 Objectives of the Report

The objectives of the report are as follows: -

To describe and analyse the budget of the Department of Small Business Development over the 2017/18 financial year;
To report on its deliberations and consideration, which is essentially the unpacking and examining of the Department annual performance plan and its associated budget vote (Budget Vote 31) in relation to the strategic plan and;
To make recommendations concerning the endorsement, adjustment or rejection of budget vote 31 and any other recommendation regarding the implementation of the Department strategic plan.

1.4 The Portfolio Committee Process

The above exercise explains the significance of the budget and strategic plan process in the calendar of Parliament and the requirement for departments to table these on time to ensure that Parliament is provided with information required for its oversight work. On the 10th of March 2017, the Minister of Small Business Development tabled to Parliament the annual performance plan of the Department for 2017/18 including for the entities, SEFA and SEDA, for corresponding financial years for consideration and report.

Upon referral of these instruments by the National Assembly, the Portfolio Committee scheduled two extended briefing sessions, first with Auditor General of South Africa (AGSA), Department of Planning, Monitoring and Evaluation (DPME), Department of Public Service Administration (DPSA) and Financial and Fiscal Commission (FFC); second with the Department of Small Business Development, Small Enterprise Finance Agency and Small Enterprise Development Agency so as to present their Annual Performance Plans and budget for the following financial years on the 02nd and 3rd of May 2017 respectively.

The engagements considered the past performance of the Department of Small Business Development and its entities. Minister Lindiwe Zulu could not make it to both sessions due to World Economic Forum (WEF) in Durban, Deputy Minister Nomathemba November attended both briefing sessions, while the delegation was led by the Director General Prof Edith Vries, Accounting Authorities and Chief Executive Officers from the agencies. The Committee’s consideration of Vote 31 involved a robust engagement with the leadership from the Department and the Director-General, Prof Edith Vries, on the 3rd of May 2017 where they provided the context within which the Department and its entities annual performance plan(s) had been developed and presented. The budget was deliberated against the Departments strategic plan and government priorities as captured in the National Development Plan, Medium Term Strategic Framework, New Growth Path and State of the Nation Address (SONA) within the prevailing economic climate. Also for consideration were SEFA and SEDA annual performance plans and budgets.

2. OVERVIEW OF THE DEPARTMENT OF SMALL BUSINESS DEVELOPMENT

The Department of Small Business Development was established as a National Department in accordance with the re-organisation of some national departments announced by the President in May 2014. The Department is mandated to lead an integrated approach to the promotion and development of small businesses through a focus on economic and legislative drivers that stimulate entrepreneurship to contribute to radical socio-economic transformation as articulated in the African National Congress (ANC) Resolutions adopted in Mangaung, Free State, in 2012.

2.1 Mandate of the Department

The mandate of the Department is premised on the Resolution of the 53rd Congress of the ANC and finds expression in the 2014 ANC Election Manifesto. Furthermore, its mandate is centred on diverse sections of legislations and policies such as the White Paper on National Strategy for the Development and Promotion of Small Business (1995), Small Business Development Act (1980), National Small Business Act (1996), as amended in 2004, Companies Act (2008), Close Corporation Act (1984), Co-operatives Act (2005), Co-operatives Amendment Act (2013), Industrial Development Corporation Act (1940), Business Act (1991), Broad Black Business Economic Empowerment Act (2003), National Empowerment Fund Act (1998), Preferential Procurement Policy Framework Act (2011), Local Government Bylaws, Youth Enterprise Development Strategy, Strategic Framework on Gender and Women Empowerment Strategy, Innovation and Technology Strategy, National Development Plan (NDP), New Growth Path (NGP), the Industrial Policy Action Plan (IPAP), Agricultural Policy Action Plan (APAP) and 2014-2019 Medium Term Strategic Framework (MTSF).

2.2 Vision of the Department

A radically transformed economy through integrated and effective enterprise development and entrepreneurship promotion.

2.3 Mission of the Department

The coordination, integration and mobilisation of efforts and resources towards the creation of an enabling environment for the growth and sustainability of small businesses and co-operatives.

2.4 Values

The values and principles that underpin the DSBDs pursuit of its vision and mission are shared across the three entities, and are predicated on the principles of Batho-Pele as follows: -

Innovation;
Integrity;
Professionalism;
Customer-centric and;
Commitment.

2.5 Strategic Outcome-Oriented Goals

2.5.1 Planning and policy coherence in the sector that promotes an enabling ecosystem for SMMEs and co-operatives;

2.5.2 Equitable access to responsive and targeted products and services that enable the growth and development of SMMEs and co-operatives;

2.5.3 An enhanced contribution to socio-economic development outcomes by the sector;

2.5.4 Sound governance and the optimal utilization of available resources;

2.5.5 A professional and capacitated small business development sector.

3. EXPENDITURE ANALYSIS BASED ON ESTIMATES OF NATIONAL EXPENDITURE

The Department of Small Business Development work supports the realisation of the National Development Plan’s goal of supporting small enterprises to transform the economy and make it more inclusive. The Department further derives its mandate from Outcome(s) four (4) and seven (7) of the Medium Term Strategic Framework (MTSF) 2014-2019, which are ‘decent employment through inclusive growth’ and ‘vibrant, equitable, sustainable rural communities contributing towards food security for all’. Over the medium term, the Department plans to evaluate the strategy for the development of small enterprises and entrepreneurship, increase its support for small enterprises, develop and provide incentives to co-operatives, and support incubators for small enterprises. The Department’s total budget allocation, which includes transfers to the Small Enterprise Development Agency, is expected to increase at an annual rate of 7.1 per cent, from R1.2 billion in 2016/17 to R1.6 billion by 2019/20.

3.1 Evaluating and Reviewing the Strategy

The Department plans, over the medium term, to review the National Small Business Act (1996) and develop the National Small Business Amendment Bill. The bill is expected to include a more accurate definition of a small, micro and medium enterprise, which should allow for the development of more appropriate policy and support interventions. The bill will also propose recommendations to streamline public entities in the sector to avoid duplications in the support government provides to small businesses. The Department is also considering evaluating and revising the 2005 Strategy for the Development of Small Businesses and Entrepreneurship. The evaluation will allow for an evidence-based review of the strategy to ensure that it is relevant and responsive to business cycles, recent economic activities, and the socio-economic effects of high unemployment, inequality and poverty. The Department has allocated R91.6 million, or 2 per cent of its budget over the medium term, for these legislative, regulatory and research activities.

3.2 Increasing Support for Small Enterprises

The Small Enterprise Development Agency provides non-financial support and incubation to small enterprises and co-operatives through the National Gazelles and incubator support programmes. The National Gazelles programme is an enterprise accelerator that identifies high-potential small enterprises and provides them with mentorship and coaching, training, market development, and access to finance. The programme is set to support 600 small enterprises over the medium term. The incubation support programme provides institutional support for small enterprises and co-operatives to develop, pilot and refine innovations and approaches. The agency expects to place 7 379 small enterprises and co-operatives into incubators over the medium term.

To fund these activities, the Department is set to transfer R2.3 billion, or 50.3 per cent of the Department’s total budget over the medium term, to the agency. The transfers are provided for in the ‘Small, Medium and Micro Enterprises and Co-operatives Programme Design and Support’ programme. The Department will continue to support small, black-owned enterprises through the Black Business Supplier Development Programme (BBSDP), which is allocated R813.8 million over the medium term in the ‘Small, Medium and Micro Enterprises and Co-operatives Programme Design and Support’ programme. The Black Business Supplier Development Programme is a cost-sharing grant offered to small, black-owned enterprises to acquire tools, machinery, equipment and training to the maximum of R1 million per applicant. An estimated 2 033 small enterprises are set to receive support through the programme over the medium term. They will also benefit from the National Informal Business Upliftment Scheme, which is allocated R311.5 million over the medium term.

The scheme aims to develop and grow 5 445 informal businesses and co-operatives by providing financial and non-financial support services to improve competitiveness, facilitate market access, and leverage public and private procurement, spending of which falls under the Competitiveness Support subprogram. The Shared Economic Infrastructure Facility (SEIF) is the main implementation pillar of the National Informal Business Upliftment Scheme. The facility provides a 50-50 cost-sharing grant for public-private sector investments in economic infrastructure. The grant targets mainly infrastructure projects that create an enabling environment for small businesses in townships, rural areas and inner cities. The Department plans to support 18 informal business structures through SEIF over the medium term.

3.3 Providing Incentives to Co-operatives

The Department plans to continue improving coordination between all spheres of government to strengthen support for co-operatives through the Co-operative Incentive Scheme (CIS). The incentive is a 100 per cent grant for registered primary co-operatives, and is aimed at improving the viability and competitiveness of co-operative enterprises by lowering the cost of doing business. Funding for the CIS is expected to increase at an annual average rate of 5.6 per cent over the medium term, from R75 million in 2016/17 to R88 million in 2019/20. However, the number of co-operatives accessing funding through the scheme will decrease from 370 in 2016/17 to 302 by 2019/20 due to budget constraints. The activities around co-operatives policy development will amount to R25.6 million over the medium term, budgeted for in the ‘Cooperatives Development’ subprogram in the Small Medium and Micro Enterprises and Cooperatives Programme Design and Support programme.

3.4 Supporting Incubators for Small Enterprises

Over the medium term, the Enterprise Incubator Programme (EIP) plans to encourage public-private sector partnerships in support of incubators, and improved infrastructure facilities for SMMEs and co-operatives. The programme will incentivise market-driven incubators that will nurture small enterprises and co-operatives to gain competitive technical and business development skills, and mentorship for the fulfilment of supply-chain quality requirements. The Department has allocated R193.5 million over the medium term, of which 83.8 per cent or R162.2 million will fund the establishment of incubators, to the Market Development subprogram within the Small, Medium and Micro Enterprises and Co-operatives Programme Design and Support programme. The Department plans to support 12 incubators over the medium term. In partnership with other stakeholders, the Department will develop programmes aimed at improving the quality of products and services, and assist local suppliers in expanding production capacity, identifying market access opportunities, and facilitating market opportunities internationally.

4. POLICY PRIORITIES FOR 2017/18

4.1 National Development Plan

The Department of Small Business Development was established in 2014 with an inclusive mandate of developing survivalist, small, micro, medium and co-operative enterprises (“Small Business”) as defined in the National Small Business Act, 1996. It plays a vital role towards the implementation of chapters three (3) and six (6) of the National Development Plan (NDP) that deal with the economy and employment as well as rural inclusive growth. The NDP is the country’s vision, with a target of creating 9.9 million new jobs from small businesses by 2030. The NDP identifies the important role that small, medium, micro and co-operative enterprises play in inclusive economic growth and employment. The plan articulates the benefits of increased coordination and support, incubation, and reduced costs of regulatory compliance for small enterprises to achieving a transformed and inclusive economy.

4.2 New Growth Path

The Department has a responsibility to implement various policy propositions for growth, decent employment and equity as captured in the New Growth Path (NGP). The NGP aims to create five (5) million jobs by 2020, and also forge a new and more inclusive, As well as labour intensive and efficient economy. According to the NDP (2011: 117), “the NGP is the government’s key programme to take the country onto a higher growth trajectory”. Of specific interest to the Department are three microeconomic policy propositions advocated in the plan, namely: -

4.2.1 Rural Development Policy

emphasis on rural development and agricultural value chains;
1. Enterprise development in particular the promotion of entrepreneurship

creation of one stop shop and single funding agency;
strict adherence to a 30-day payment period or fiscal penalties for non-compliance;
elimination of red-tape and;
address exorbitant cost of space in shopping Malls;
1. Developmental Trade Policies

Lobbying for a trade policy that endeavours to promote exports while addressing unfair competition against domestic producers i.e. recent developments on African Growth Opportunity Act (AGOA) being the latest example.

4.3 The Medium Term Strategic Framework

Following the adoption of the NDP, Cabinet decided in 2013 that the 2014-2019 MTSF should form the first five-year implementation phase of the NDP and mandated work to begin on aligning the plans of state organs with the NDP vision and goals. Thus, for the next five years the MTSF has made some priorities aiming at achieving radical socio economic transformation through decent employment through inclusive growth. These focus areas will be an integral part in achieving set targets aiming to a radically socio-economic transformation. The Department of Small Business Development has been assigned to champion some of the priorities, namely, outcome four (4): Decent employment through inclusive growth, and outcome seven (7): Rural development.

4.3.1 Outcome Four

Outcome four proposes that employment intensive programmes and initiatives will receive top priority, especially those that target the youth and women. According to the Strategic Plan of the Department the key sub-outcomes and the actions which constitute five-year plan and corresponding annual performance plans are sub-outcomes three, five and eight.

4.3.2 Outcome Seven

Outcome seven’s overarching theme is ‘vibrant, equitable, sustainable rural communities contributing towards food security for all’ but the main areas of contribution for the Department is on sub-outcome six “growth of sustainable rural enterprises and industry – resulting in rural job creation”.

4.4 State of the Nation Address

In the 2017 State of the Nation Address (SONA), President Jacob Zuma impressed on a number of fundamental policy proposals to invigorate the small business sector as follows: -

Government’s commitment to support black smallholder farmers in particular the implementation of a commercialisation support programme for 450 black smallholder farmers;
The State to utilise the strategic levers that are available such as legislation, regulations, licensing, budget and procurement as well as Broad-based Black Economic Empowerment charters to influence the behaviour of the private sector and drive transformation;
And through such regulations and programmes, government will be able to use the State buying power to empower small enterprises, rural and township enterprises, designated groups and to promote local industrial development;
To use the State expenditure of R500 billion a year buying goods and services to achieve economic transformation;
To implement the new regulations making it compulsory for big contractors to subcontract 30 percent of business to black-owned enterprises by the 1st of April 2017;
To focus on a few key areas packaged as the Nine-Point Plan to reignite growth so that the economy can create the much-needed jobs and;
To focus on areas such as industrialisation, mining and beneficiation, agriculture and agro-processing, energy, small, medium and micro enterprises (SMMEs), managing workplace conflict, attracting investments, growing the oceans economy and tourism.

5. BUDGET ANALYSIS

The budget and Medium Term Expenditure Framework (MTEF) allocations below support and contribute to the three Strategic Goals as captured in the Department Strategic Plan, and it is being carried forward in the Department 2017/18 annual performance plan. This section will explore budget allocations per programme for the 2017/18 financial year. Table 1 below breaks down the budget allocation per programme for 2017/18 compared to allocations per programme in 2015/16. The Department’s total budget allocation, which includes transfers to the Small Enterprise Development Agency, is expected to increase at an annual rate of 7.1 percent, from R1.2 billion in 2016/17 to R1.6 billion by 2019/20. The Department’s budget is distributed across the following three programmes: -

Programme 1: Administration;
Programme 2: Small, Micro, Medium and Co-operatives Policy and Research and;
Programme 3: Small Medium Micro Enterprises and Co-operatives Programme Design and support

Table 1: Consolidated Budget Summary 2017/18

Programme (R’000)	Audited Outcome			Main Appropriation	MTEF
Programme (R’000)	2013/14	2014/15	2015/16	2016/17	2017/18	2018/19	2019/20
Programme 1	13,452	22,376	66,447	113,956	127,614	128,799	137,242
Programme 2	13,527	11,707	11,692	25,835	21,999	24,285	25,710
Programme 3	1,025,399	1,091,453	1,020,752	1,178,648	1,300,183	1,376,790	1,455,315
Total	1,052,378	1,125,536	1,098,891	1,318,439	1,449,796	1,529,874	1,618,267

Source: DSBD Annual Performance Plan

As in previous years, the bulk of the allocation, R4.1 billion over the MTEF and R1.3 billion for the current financial year, goes towards Programme 3, ‘Small Medium Micro Enterprises and Co-operatives Programme Design and support’. The main cost driver for the Programme however is transfers to public entities amounting to R3.9 billion (95%) over the MTEF and R1.2 billion during 2017/18 financial year. Programme 2, ‘Small, Micro, Medium and Co-operatives Policy and Research’, has not only received the lowest allocation but it has also been slashed by R4 million, which when combined only amount to less than 2 percent of the total Departmental budget – 0.8 per cent less than in 2016/17. As in the previous year, Programme 1, ‘Administration’ will increase by 12.3 percent from R113 million in 2016/17 to R127 million in 2017/18. This trend will continue over the medium-term, as is illustrated in Table 1 above.

5.1 Programme 1: Administration

Table 2: Expenditure Estimates – Programme 1

Programme 1: Administration (R’000)	Audited outcome			Adjusted appropriation	Medium-term expenditure estimate
Programme 1: Administration (R’000)	2013/14	2014/15	2015/16	2016/17	2017/18	2018/19	2019/20
Ministry	13,452	22,376	29,898	24,993	30,802	26,802	28,622
Departmental Management	-	-	15,232	18,660	21,018	19,333	20,680
Corporate Services	-	-	1,317	42,807	49,956	52,948	56,204
Financial Management	-	-	-	15,514	18,780	17,877	19,123
Communications	-	-	-	11,982	7,058	11,839	12,613
Total	13,452	22,376	66,447	113,956	127,614	128,799	137,242
Economic classification
Current payments	12,539	21,264	63,479	109,956	125,060	126,215	134,519
Compensation of employees	3,837	11,407	34,591	57,765	70,115	68,617	73,834
Goods and services	8,702	9,857	28,888	52,191	54,945	57,598	60,685
Payments for capital assets	913	1,112	2,968	4,000	2,554	2,584	2,723
Transport equipment	856	1 080	-	-	-	-	-
Other machinery and equipment	57	32	2,951	4,000	2,554	2,584	2,723
Software and other intangible assets	-	-	17	-	-	-	-
Total	13,452	22,376	66,447	113,956	127,614	128,799	137,242

Source: DSBD Annual Performance Plan

The purpose of Programme 1 is to provide strategic leadership, management and support services to the Minister, Director-General, the Department and its entities. Programme 1 allocation is up by R13 million from R113 million in 2016/17 to R127 million in 2017/18. During 2016/17 financial year this Programme had originally been apportioned R118 million which was later adjusted downward to R113 million as a result of lower than anticipated expenditure owing to vacancies, and associated goods and services. The amount of R127 million allocated to the Programme during the current financial year is set to be appropriated among its sub-programmes which include, Ministry, Departmental Management, Corporate Services, Financial Management and Services. Of this R70 million will be allocated to human capital, R57 million to operational requirements, R13 million for travel and subsistence and R6 million for stabilisation of information and communications technology support in the Department.

5.2 Programme 2: Small, Micro, Medium and Co-operatives Policy and Research

Table 3: Expenditure Estimates – Programme 2

Programme 2 (R’000)	Audited outcome			Adjusted appropriation	Medium-term expenditure estimate
Programme 2 (R’000)	2013/14	2014/15	2015/16	2016/17	2017/18	2018/19	2019/20
Policy, Research and Legislation	13,527	11,707	11,692	21,563	11,230	12,996	13,811
Monitoring and Evaluation	-	-	-	4,272	6,657	7,111	7,483
International Relations	-	-	-	-	4,112	4,178	4,416
Total	13,527	11,707	11,692	25,835	21,999	24,285	25,710
Economic classification
Current payments	13,437	11,640	11,675	25,775	21,999	24,285	25,710
Compensation of employees	7,801	9,783	9,908	14,186	10,800	11,616	12,470
Goods and services	5,636	1,857	1,767	11,589	11,199	12,669	13,240
Transfers and subsidies	55	22	-	-	-	-	-
Households	55	22	-	-	-	-	-
Payments for capital assets	35	45	17	60	-	-	-
Other machinery and equipment	35	45	17	60	-	-	-
Total	13,527	11,707	11,692	25,835	21,999	24,285	25,710

Source: DSBD Annual Performance Plan

The purpose of Programme 2 is to formulate policies and conduct research for the development and growth of suitable small businesses and co-operatives that contribute to the creation of employment and economic growth. The budget allotted to this programme has been reviewed downward by R4 million to R22 million from R26 million in 2016/17. This programme has three (3) sub-programmes, namely, Policy, Research and Legislation - which aims to generate reliable information for policy formulation on survivalist, small, micro, medium and co-operative enterprises, Monitoring and Evaluation - aims to provide quantifiable analysis and information on small business sector in South Africa as well as International Relations. Of this, R11 million will go to human capital, R11 million to operational requirements and R3.5 million on travel and subsistence. The programme has been allocated R72 million over the MTEF period.

5.3 Programme 3: SMME and Co-operative Enterprises Programme Design Support

Table 4: Expenditure Estimates – Programme 3

Programme 3 (R’000)	Audited outcome			Adjusted appropriation	Medium-term expenditure estimate
Programme 3 (R’000)	2013/14	2014/15	2015/16	2016/17	2017/18	2018/19	2019/20
Competitiveness Support	25,201	32,669	42,555	109,174	112,623	114,603	121,207
Enterprise Development	686,909	681,234	652,834	656,768	762,552	809,734	855,536
Co-operatives Development	-	3,393	3,949	6,847	7,976	8,504	9,083
Market Development	-	-	-	61,346	57,943	65,799	69,756
SMME Development Finance	313,289	374,157	321,414	344,513	359,089	378,150	399,733
Total	1,025,399	1,091,453	1,020,752	1,178,648	1,300,183	1,376,790	1,455,315
Economic classification
Current payments	61,127	67,979	62,299	72,742	69,911	76,273	81,970
Compensation of employees	43,694	52,563	48,634	57,730	56,537	61,123	65,962
Goods and services	17,433	15,416	13,665	15,012	13,374	15,150	16,008
Transfers and subsidies	964,187	1,023,020	958,249	1,105,786	1,230,272	1,300,517	1,373,345
Departmental agencies	661,497	644,398	622,835	633,814	735,701	778,371	821,959
Public Corporations	294,101	362,302	318,625	471,972	494,571	522,146	551,386
Non-profit institutions	8,335	16,320	16,726	-	-	-	-
Households	254	-	63	-	-	-	-
Payments for capital assets	85	454	204	120	-	-	-
Other machinery and equipment	85	454	204	120	-	-	-
Total	1,025,399	1,091,453	1,020,752	1,178,648	1,300,183	1,376,790	1,455,315

Source: DSBD Annual Performance Plan

The programme is responsible for supporting the development and growth of survivalist, small, micro, medium and co-operative enterprises through designing and implementing financial and non-financial business development support programmes and interventions. The largest portion of the Department budget goes to this programme. During the 2017/18 financial year it received R1.2 billion up from R1.1 billion in 2016/17. More than half of the allocated budget (R730 million) for this programme is set to be transferred to Departmental agencies and accounts for public corporations.

The Programme comprise of five sub-programmes which include Competitiveness Support, Enterprise Development, Co-operatives Development, Market Development and Small, Micro and Medium Enterprises Development Finance. Funds allocated to human capital accounts for R57 million and R13 million to operational requirements. The focus for the current financial year will be on provision of financial and non-financial business support by the Department and its entities.

6. SMALL ENTERPRISE DEVELOPMENT AGENCY

6.1 SEDA Mandate

Small Enterprise Development Agency (SEDA) is an entity of the Department of Small Business Development whose mandate include, inter alia, developing, nurturing, supporting and promoting small business ventures throughout the country, whilst ensuring their growth and sustainability in a harmonised fashion with various stakeholders. The Minister of Small Business Development is the executive authority of the agency and as such exercise oversight role over the agency as prescribed by the Public Finance Management Act. SEDA was conceptualised in 2004, through amendment of the National Small Business Act, amendment Act 29 of 2004, which essentially made provision for the incorporation of the Ntsika Enterprise Promotion Agency, the National Manufacturing Advisory Centre and any other designated institutions into a single Small Enterprise Development Agency under the Department of Trade and Industry (the dti). It is a schedule 3A national public entity in terms of the Public Finance Management Act (PFMA), Act 1 of 1999, as amended, and incorporated as a company in terms of the Companies Act, 2008.

6.2 SEDA Strategic Pillars

Vision

To be the centre of excellence for small enterprise development in South Africa.

Mission

To promote entrepreneurship and develop small enterprises by providing customised non-financial business support services that results in business growth and sustainability in collaboration with other role players.

Values

Customer centricity;
Nurturing;
Innovation and;
Responsible conduct.

Goal

Ensure that the small enterprise sector grows and increases its contribution to sustainable and equitable social and economic development, employment and wealth creation.

6.3 Strategic Outcome Oriented Goals

During the 2016/17 planning cycle the Department, SEDA and SEFA embarked on a joint planning process that culminated in the development of a Portfolio Strategic Framework 2015/16 - 2019/20 and will feed into an overall Strategic Framework for the entire Small Business Development Portfolio. The Framework has five Strategic Outcome Oriented Goals which are linked to the National Development Plan and the MTSF 2014-2019 Sub-Outcomes, which are: -

Policy and planning coherence in the sector, that promotes an enabling ecosystem for SMMEs and co-operatives;
Equitable access to responsive and targeted products and services that enables the growth and development of SMMEs and co-operatives;
An enhanced contribution to socio-economic development outcomes by the sector;
Sound governance and the optimal utilisation of available resources and;
A professional and capacitated Small Business Development Sector.

The overall national outcomes that the DSBD and SEDA takes the cue from are the creation of decent employment through inclusive economic growth and vibrant, equitable sustainable rural communities contributing towards food security for all. The Results Based Management Framework below depicts how SEDA Strategic Themes links to the Strategic Oriented Outcome Goals, the expected intermediate and ultimate outcomes, as well as the government outcome of decent employment through economic growth.

6.3.1 Alignment of Strategic Themes and Outcomes

Table 5: Government Outcomes

Government Outcome 4: Decent employment through economic growth Government Outcome 7: Vibrant, equitable, sustainable rural communities contributing towards food security for all
Ultimate Outcome (Impact)	Increased contribution of small enterprises and co-operatives to the SA economy, and promotion of economic growth, job creation and equity.
Intermediate Outcomes	Increase in turnover of assisted small enterprises and co-operatives Increased number of people employed in assisted small enterprises and co-operatives Reduced mortality rate of assisted small enterprises and cooperatives
SEDA Strategic Themes	Increased service delivery	Improved operational excellence	Increased stakeholder partnering

Source: SEDA Annual Performance Plan

6.3.2 Strategic Outcome Oriented Goal Alignment – DSBD and SEDA

Table 6: Alignment of SEDA and DSBD Strategic Goals

DSBD Strategic Outcome Oriented Goal	SEDA Strategic Theme
Goal 1: An effective and efficient administration	Theme 2: Operational Excellence
Goal 2: An enabling environment for competitive small businesses and co-operatives	Theme 1: Service Delivery Theme 3: Stakeholder Partnering
Goal 3:Sustainable small businesses and co-operatives in townships and rural areas	Theme 1: Service Delivery Theme 3: Stakeholder Partnering

Source: SEDA Annual Performance Plan

6.4 SEDA Programme Summary

Table 7: Programme Overview

Programmes	Purpose	Description
Programme 1: Organisational Capacity;.	To capacitate the organisation to deliver needs based and growth oriented business support to small enterprises;	SEDA will improve organisational capacity by ensuring that the organisations is well organised to respond to stakeholder expectations mainly delivering on the shareholders compact. The programme also aim to ensure that SEDA attract, develop and retain skilled employees with competencies to deliver on the organizations mandate. Another focus is to improve the organisations efficiencies in delivering services to customers through information system integration. Most importantly is to ensure that SEDA continuously strive to improve the service access to current and aspiring customers;
Programme 2: Internal Process;	To optimise organisational processes to enable improved collaboration and efficient service delivery to our customers;	SEDA will improve the organisations processes by focusing on improving service quality and reducing process turnaround times for both internal and external customers. This also includes identifying and maintain value adding partnership to support service delivery. Moreover, continuously striving to ensure that the organisations service delivery approach is inclusive and seek to support all eligible customers who needs SEDA support. The ultimate goal is to ensure that the improved organisations processes enable SEDA to improve its performance in line with the stakeholder’s expectations;
Programme 3: Finance;	To ensure that the organisation maintain sound financial management and correctly allocates bulk of its resources to support service delivery;	SEDA will intends to allocate bulk of its budget to support service delivery, as such prudent financial is necessary to ensure that the organisation adequately provide necessary support to customers. The organisation also acknowledge that the funds received from the shareholder is not adequate to effectively operate optimally, therefore initiatives will be implemented to ensure that SEDA identify partners to augment the budget received;
Programme 4: Customer and Stakeholder Engagement;	To ensure that SEDA considers and incorporate the needs and expectations of customers and stakeholders in the organisations planning and programme implementation.	SEDA will continuously assess and respond to customer and stakeholder’s expectations by actively seeking their input and feedback on how the organisation is conducting its business. The intention is to ensure that inputs are sources from various stakeholders as such, tools and techniques including platforms used to gather inputs will be evaluated and the input obtained will be integrated in the organization’s planning.

Source: SEDA Annual Performance Plan

6.5 SEDA Budget Allocation

Table 8: Budget Summary (MTEF)

Income R’000	Audited Figures	Draft
Income R’000	FY 15/16	FY 16/17	FY 17/18	FY 18/19	FY 19/20
SEDA- DSBD Budget from MTEF	478,2	481,5	577,4	610,9	645,1
STP-DSBD from MTEF Budget	132,2	152,3	158,3	167,5	176,9
External earnings	69,3	114,0	16,8	-	12,0
Other income	16,0	14,4	5,0	5,0	5,0
TOTAL INCOME	695,7	762,2	757,5	783,4	839,0

Expenditure
	FY 15/16	FY 16/17	FY 17/18	FY 18/19	FY 19/20

Compensation of employees	263,4	293,4	314,0	336,0	359,5
Goods and services	463,8	459,0	429,8	443,1	464,6
Depreciation	15,1	9,8	13,7	14,3	14,9
Interest	0,4	-	-	-	-
TOTAL EXPENDITURE	742,7	762,2	757,5	783,4	839,0

Source: SEDA Annual Performance Plan

Expenditure Analysis

The Small Enterprise Development Agency gets more than 90 percent of its revenue over the medium term through transfers from the Department of Small Business Development. The total revenue budget for SEDA for the 2017/18 financial year amounts to R796,19 million and the total expenditure budget amounts to R796,19 million. The Vote 31 contribution to the SEDA budget is R575,766 million and R159,935 million is allocated to the SEDA Technology Programme (STP). As alluded to earlier the agency has a significant role to play in augmenting the public sector attain its national development plan targets. The Small Enterprise Development Agency will continue to contribute to government’s small business strategy by developing, supporting and promoting small enterprises throughout South Africa, ensuring their growth and sustainability in coordination and partnership with stakeholders. The agency remains focused on providing support through its footprint and its business incubation initiatives, participating in interventions directed towards small and medium enterprises, assisting cooperatives, and prioritising growth in sectors such as manufacturing, agro-processing, and ICT. Over the medium term, this will require driving high impact programmes that include incubation, access to markets, mentorship and coaching, technology transfer, and supplier development. In support of these initiatives, the agency has initiated National Gazelles, a programme that proposes an innovative approach to small business development through identifying and strengthening potential high growth businesses that add value and have a manufacturing focus.

To ensure the growth and sustainability of small businesses, and that jobs are created, expenditure over the medium term will continue to be driven by the provision of non-financial services and improved support to SMMEs. The agency will provide business advice, assess, consult, train, mentor and assist more than 30 000 small enterprises over the medium term. Providing assistance to small businesses and maintaining its national delivery network of offices throughout the country is expected to drive expenditure on goods and services over the medium term. Also, as the agency’s personnel deliver services directly to small businesses the nature of its work is labour intensive. Although the number of personnel is expected to remain constant over the medium term, compensation of employees remains a significant driver of expenditure, representing 42 percent of total expenditure, or R983 million.

7. SMALL ENTERPRISE FINANCE AGENCY

7.1 Mandate of SEFA

The Small Enterprise Finance Agency (SEFA) is a fairly new entity established in April 2012 through the amalgamation of South African Micro-Finance Apex Fund (SAMAF), Khula Enterprise Finance and Industrial Development Corporation’s small business activities. It is incorporated as an entity in terms of the Companies Act of 2008 and Section 3(d) of the Industrial Development Corporation (IDC) Act, 1940, and thus a wholly owned subsidiary of the IDC. Section 3(d) of the IDC Act seeks “to foster the development of small and medium enterprises and co-operatives”. SEFA is thus a schedule 2 (in line with the parent entity IDC) but not a schedule 3A entity like SEDA. There are no provisions within the body of the PFMA dealing with subsidiaries as a corporate form, separate from their parent entities. Therefore, in a truest sense, the Minister of Small Business Development is not the Executive Authority and therefore her ability to exercise oversight responsibility over the agency as prescribed in the Public Finance Management Act is absolutely impaired.

7.2 SEFA Operating Model

SEFA provides loan financing and business support directly to small, micro, medium and co-operative enterprises through its regional office network and indirectly through intermediary financial institutions such as Retail Finance Intermediaries (RFIs), Micro Finance Institutions (MFIs), Funds, Joint Ventures (JVs), and Co-operative Financial Institutions (CFIs). The agency also administers a Credit Guarantee Scheme that indemnifies banks and other financial institutions who provide credit facilities to small businesses against possible default, and also an agency agreement to administer the Land Reform Empowerment Fund (LREF) on behalf of the Department of Rural Development and Land Reform. This fund supports black emerging farmers who individually apply for funding from financial institutions.

7.3 SEFA Strategic Pillars

Vision

To be the leading catalyst for the development of sustainable small, micro, medium and co-operative enterprises through the provision of finance.

Mission

To provide simple access to finance in an efficient and sustainable manner to small, micro, medium and co-operative enterprises throughout South Africa by: -

Providing loan and credit facilities to SMMEs and co-operative enterprises;
Providing credit guarantees to SMMEs and co-operatives;
Creating strategic partnerships with a range of institutions for sustainable SMMEs and co-operative enterprise development and support;
Developing, through partnerships, innovative finance products, tools and channels to catalyse increased market participation in the provision of affordable finance.

Values

SEFAs values and guiding principles to deepen institutional culture and organisational cohesion are: -

Kuyasheshwa: We act with speed and urgency;
Passion for development: Solution-driven attitude, commitment to serve;
Integrity: Dealing with clients and stakeholders in an honest and ethical manner;
Transparency: Ensuring compliance with the best practice on the dissemination and sharing of information with all stakeholders;
Innovation: Continuously looking for better ways to serve our customers.

Objectives

Increase access and provision of finance to SMMEs and co-operatives and contribute towards job creation;
Build an effective and efficient SEFA that is sustainable and performance driven.

7.4 Alignment to Government Priorities

7.4.1 Policy and planning coherence in the sector, that promotes an enabling ecosystem for SMMEs and co-operatives;

7.4.2 Equitable access to responsive and targeted products and services that enables the growth and development of SMMEs and co-operatives;

7.4.3 An enhanced contribution to socio-economic development outcomes by the sector;

7.4.4 Sound governance and the optimal utilisation of available resources and;

7.4.5 A professional and capacitated Small Business Development Sector.

7.5 SEFA Programme Overview

On the 1st of April 2015 SEFA was migrated to the Department of Small Business Development. As per 7.4 above, SEFA strategy as captured in its Corporate Plan and Annual Plan is in line with DSBD mandate and strategic plan. To ensure effective implementation of the Corporate Plan SEFA has perfected and strengthened its resolve in realising the following programmes: -

Table 9: Strategic Programmes

Strategic Programmes	Strategic Initiatives
Access to finance for SMMEs and co-operatives;	Informal Sector and Micro Enterprise Finance; Direct Lending; Wholesale SME Lending; Co-operatives Enterprise Lending; Credit Indemnity Scheme.
Post Investment Monitoring/Workout and Restructuring Management;	Client Sustainability; Loan Repayment; Post Investment Support; Workout and Restructuring.
Build an efficient and effective SEFA that is performance driven and sustainable;	Financial and Supply Chain Management; Human Resource Management; Information and Communication Technology; Corporate Strategy and Reporting.
Build a strong and effective brand emphasising accessibility to funding;	Build a strong and effective SEFA brand emphasizing accessibility to SMMEs and Co-operatives.
Governance, Compliance and Enterprise Risk Management;	Enterprise Risk Management; Credit Risk Management; Compliance Management; Internal Audit; Corporate Secretariat.
Property Management	Management of SEFA Property Portfolio.