ATC161116: Report of the Portfolio Committee on Small Business Development on its Oversight Visit to Limpopo undertaken on 28th January to 02 February 2016, Dated 16 November 2016

Small Business Development

Report of the Portfolio Committee on Small Business Development on its Oversight Visit to Limpopo undertaken on 28th January to 02 February 2016, Dated 16 November 2016

 

1. Introduction

The oversight report of the Portfolio Committee on Small Business Development (“the Committee”) covers its oversight visit to Limpopo Province that took place from the 28th of January to the 02nd of February 2016.

 

The Committee planned to conduct oversight visits to provinces to assess the state of Small, Medium and Micro Enterprises (SMMEs) and Cooperatives after having engaged with the Department of Small Business Development (“the Department”), organisations representing SMMES and Cooperatives as well as other role players including research institutions and the private sector. The visits focused mainly on:

1. The alignment of support services provided to SMMES and Cooperatives to the strategic plan of the Department as well as the alignment of the Strategic Plans of different spheres of government to ensure a shared vision and attainment of the National Development Plan (NDP) goals and targets on job creation, reduction of poverty and inequality.
2. The implementation of national policies designed to enhance development of SMMEs and Cooperatives which include, among others:

• The Preferential Procurement Policy Framework Act (PPPFA);
• 30% Procurement from SMMEs and Cooperatives as announced by the President during the 2015 State of the Nation Address (SONA);
• The development of SMMEs and Cooperatives through public procurement and infrastructure spend and;
• Facilitation of active community participation in the process of their own development through partnerships between government, the private sector,   Non-Governmental Organisations  (NGOs) and Community Based Organisations (CBOs).

1. Identification of possible interventions as well as small business and cooperatives development models initiated in different provinces and municipalities that could be enhanced and replicated in other areas by the Department to assist the development of SMMEs and Cooperatives.
2. Issues raised by organisations representing SMMES and Cooperatives, issues such as:-

• Lack of access to market;
• Lack of access to finance;
• Very high interest rates charged by the Development Financial Institutions (DFIs);
• Poor infrastructure for businesses to operate from;
• Lack of adequate support infrastructure such as roads, electricity, communication services, water and sanitation to enhance business operation;
• High costs of doing business due to high travelling, rental and electricity costs;
• Bureaucratic Red Tape;
• Fragmented support services offered by government that are also not easily accessible;
• Duplication of support services resulting with confusion at community level and competition between different departments of government and spheres of government;
• Lack of adequate skills development and training programmes resulting with poor skills level in small businesses and cooperatives;
• Non-payment of invoices within 30 days mainly by government departments and state owned companie;

It is worth noting that the Department is fairly new and had not been fully established when the Committee undertook oversight visits. The oversight report of the Committee would therefore be used by the Committee to assess the relevance of the Strategic Plan and the Annual Performance Plan of the Department. The Committee would also use the oversight report to assess the alignment of financial and non-financial support services to the strategic plan of the Department and to the felt needs of SMMEs and Cooperatives. The report would also form the basis for further engagement with both Foreign Nationals and South Africans on issues affecting their operations and coexistence as small businesses in order to find solutions to such issues.

The Committee would also reflect on this report during the Budget Review Recommendations Report process so as to facilitate budget allocation to programmes that would have high impact on job creation and poverty reduction with the long-term objective of achieving the NDP target of creating 9.9 million new jobs through small businesses and cooperatives by 2030, which is 90 percent of 11 million jobs.

 

1. Background

The Committee is a new Portfolio Committee that was established after the establishment of the Department which was established after the 2014 general elections. The Committee is constitutionally mandated to conduct oversight over the newly established Department. The Department is mandated to lead an integrated approach to the promotion and development of small business and cooperatives through a focus on economic and legislative drivers that stimulate entrepreneurship to contribute to radical socioeconomic transformation. Before the establishment of the Department, powers and functions of developing SMMEs and Cooperatives were under the Department of Trade and Industry (the DTI) with financial support services provided through Small Enterprise Finance Agency (SEFA) falling under the Department of Economic Development (EDD). In provinces, powers and functions of developing SMMEs and Cooperatives fall under the EDD. At municipality level powers and functions of developing SMMEs and Cooperatives fall under the Local Economic Development (LED) Programmes.  

In executing its constitutional mandate the committee resolved to assess and understand issues and challenges encountered in the whole spectrum of SMMEs and Cooperatives development. Subsequently, the Committee held meetings with various institutions and stakeholders responsible for providing support services to SMMEs and Cooperatives. During the meetings with various institutions and stakeholders the Committee realised the need to go out and meet with the provincial departments of Economic Development and the Local Economic Development Departments and Local Government level. The purpose of this exercise was to get a clear picture and develop a better understanding of the state of SMMEs and Cooperatives including the effectiveness and impact of support services rendered both at provincial and local government as well as their alignment to the mandate of the new Department. The Committee also wanted to have a direct contact with SMMEs and Cooperatives in order to understand their business and operational requirements so as to assess the relevance of rendered support services to the felt needs and challenges faced by SMMEs and Cooperatives. 

Due to vast geographic situation of Limpopo Province, the Committee’s focus was mainly on three District Municipalities, namely, Vhembe District Municipality (to look at market opportunities for cooperatives and SMMEs that are in construction sector), Mopani District Municipality (to look at market opportunities for cooperatives and SMMEs that are in agricultural and manufacturing sector) and Capricorn District Municipality (to look at the developmental model for Cooperatives and SMMEs). The Committee visited and engaged with the following organisations and community structures:-

1. Awelani Community Tourism Project (Mutale Local Municipality).
2. Tshilimangana Agricultural Cooperative: Zwigidini (Mutale Local Municipality).
3. Gombani Women Cooperative-Hydraform Bricks Manufacturers (Mutale Local Municipality).
4. Tshakhuma Fresh Produce Market (Makhado Local Municipality).
5. Vhembe Fresh Produce Market (Makhado Local Municipality). 
6. Furniture Manufacturing Incubator (Makhado Local Municipality).
7. Makhado Military Base (Department of Defence).
8. Ximambani Construction Primary Cooperative.
9. Moyexe Shared Economy Institution.
10. Hanyani Thomo High School.
11. Senwabarwana Market Stalls.
12. Senamoriri Stone Crushers and Bricks Manufacturers.

 

1. Objective of the visits

The objective of the oversight visit is drawn from the mandate of the Committee, that of conducting oversight over the Department of Small Business Development. Since the inception of the Committee in July 2014, it has been engaging with a number of organisations that represent SMMEs and Cooperatives as well as government support services with a view of getting a comprehensive understanding of the state of SMMEs and Cooperatives in South Africa. The objective of the visit was therefore to:

1. engage with the Provincial Department of Economic Development, Tourism and Environmental Affairs which leads programmes of developing small enterprises and cooperatives;
2. interact with informal traders, street vendors, organisations and government institutions assisting in the development of SMMEs and Cooperatives, namely Local Economic Development (LEDs), Vhembe, Motale and Capricorn Districts Municipalities;
3.  assess the impact of both financial and non-financial services given to SMMEs and Cooperatives;
4.  enhance understanding the nature and state of SMMEs and Cooperatives in Limpopo; and
5.  allow the affected groups to speak for themselves.

 

1. Composition of the delegation

The delegation comprised of members of the Portfolio Committee on Small Business Development, Parliamentary Officials, and officials from the Department of Small Business Development, officials from Districts and Local Municipalities Local Economic Development, officials from Limpopo Departments of Economic Development; Human Settlements; Public Works; Basic Education; Social Development and Cooperative Governance and Traditional Affairs as well as officials from financial agencies.

 

4.1        Members of the Portfolio Committee on Small Business Development

Ms NR Bhengu, MP                   (ANC) Leader of the delegation

            Mr X Mabasa, MP                     (ANC)

            Ms N November, MP     (ANC)

            Mr TZM Khoza, MP                    (ANC)

            Mr RWT Chance, MP     (DA)

            Mr HCC Kruger, MP                   (DA)

            Mr TE Mulaudzi, MP      (EFF)

            Mr SC Mncwabe, MP     (NFP)

           

4.2        Parliamentary Officials

Mr NK Kunene   Committee Secretary

Ms N Jobodwana          Committee Assistant

            Mr X Mgxaji                  Committee Content Advisor

            Mr S Gumede    Committee Content Advisor

 

4.3        Department of Small Business Development Officials

Ms Nomvula Makgotlho             Chief-Director: Market Access

Mr Godfrey Phetla                     Department of Small Business Development

Mr Mhlanganisi Masoga             Director: Creative Industries

Mr Oliver Nqubelani                   Parliamentary Liaison Officer

 

1. Oversight visits, Observations and Recommendations
   1. Awelani Community Tourism Project: Mutale Local Municipality

On the 28th of January 2016 the Committee together with officials from the Department, Limpopo Department of Economic Development, Tourism and Environmental Affairs and Local Economic Development for District and Local Municipalities visited Awelani Community Tourism Project situated at Mutale Local Municipality under Vhembe District Municipality.

Awelani Community Lodge is 12 kilometers from Kruger’s Pafuri Gate on the R525. The Lodge offers self-catering chalets as well as camping sites and an on-site restaurant and pub. This is a multi-million-rand park and lodge, covering over 1 700 hectares, given to the Masisi community in Limpopo as part of the government’s land redistribution process. The piece of land or site, where the structure is currently erected was donated by the Chief for the benefit of the community.

The project currently employs 40 people and the management of the Lodge is outsourced at a cost to the District Municipality (DM). There are allegations that employees do not get paid, or, even if they do, there is no consistency, they are paid late, mainly through cash instead of a normal electronic funds transfer. There were concerns raised by the Chief of the village against the management company and the local government, both the local and district municipality that, since the project inception, the Chief has not received royalties.

The presentation by the LED Manager of the district municipality also made it clear that the DM itself has issues with the Management company for a variety of reasons i.e. payments of salaries, lack or absence of skills transfer plan, etc, such that the Committee was informed that the contract will not be renewed. The lack of specific budget allocation towards the development of tourism at local government level has been raised in the National Tourism Sector Strategy as one of the areas requiring urgent attention.

Awelani Community Lodge is a mythical cultural hub, and a catalyst for agricultural and tourism development. Nevertheless, as a tourist attraction, the facility was lacking in fundamental aspects such as network coverage, sizeable showrooms where exhibitions i.e. tourism, agriculture, art, crafts, fashion and regalia showcasing VhaVenda history and culture can be held. Also, the facility does not have paved roads that can be used by all vehicles in all weather conditions, this means that either the time to go there is lengthened or tourists with low cars cannot access the facility.

As indicated above, the existence of a detailed regional Sector Strategy would probably have made it possible to identify and outline several actions to be considered to address such bottlenecks, such as the creation of a dialogue platform among SALGA (South African Local Government Association), National and Provincial Treasuries, as well as CoGTA or COGHSTA in the case of Limpopo to ensure that a comprehensive framework for the tourism activity at local level is developed.

 

5.1.1     Observations and findings

The Committee observed and found the following:

5.1.1.1              Though Awelani Community Lodge being a mythical cultural hub, and a catalyst for agricultural and tourism development, lack of specific budget allocation towards the development of tourism at local government level requires attention of the National Tourism Sector through its National Tourism Sector Strategy.

5.1.1.2              The management of the lodge is outsourced to TFB Management Company which was procured through an open tender system and also supported by SunPark and Limpopo Economic Development Agency (LEDA. The TFB Management Company receives R50 000.00 monthly from the District Municipality for operating the lodge. However, there were issues with regards to the payments of salaries and lack or absence thereof of a skills transfer plan.  

1. It was also noted that, although the facility is a tourist attraction and destination, it lacks aspects of network coverage, sizeable showrooms where exhibitions such as tourism, agriculture, art crafts, fashion and regalia showcasing Vhavenda history and culture can be held.

 

1. Recommendations

5.1.2.1              Vhembe District Municipality should conduct a workshop wherein various role players together with other departments should participate in crafting a strategy for closing the above-mentioned gaps. A strategy that will also ensure that skills for Limpopo youth and women is developed.

1. Drastic steps should be taken for marketing the facility.
   1.              The Department of High Education and Training and relevant SETAs must provide   the required skills training support services. 
   2.              The Department of Small Business Development must facilitate an integrated planning session with all the above mentioned departments to map a coordinated way forward.

 

5.2                    Tshilimagana Agricultural Co-operative

The Committee further visited Tshilimagana Agricultural Cooperative to view the site as well as the work that is done by the cooperative. Tshilimagana Agricultural Co-operative is located in Zwigodini Village. It was corporatized in 2011 as an agricultural cooperative. The passion and enthusiasm demonstrated by the Project Leader, evidence of work done and various interventions by state departments, State Owned Entities and private sector, transparency in the utilization of state funds, enthralled the PC members. The Farm Manager Mr. Prince Khwerana gave a detailed background and overview of the project. The Committee was informed that the scheme was formed in 2010 by a group of six unemployed professional residents of Zwigodini Village, before being registered as a Cooperative in 2011. The youth in the area had been invited to partake in the project. The National Development Agency (NDA) and Limpopo Economic Development Agency (LEDA), and Small Enterprise Development Agency (SEDA) have all funded the project.

Emerging vegetable and fruit producers in South Africa face a litany of constraints, with lack of post-harvest handling facilities being one of those constraints that emerging farmers can hardly resolve without external intervention and the Farm Manager sensitised the PC members of this reality. He further stated that in instances where emerging farmers are well-organised, sharing of market infrastructure and transport could significantly reduce their expenditure and improve gross farm income. In the case of Tshilimagana Cooperative for instance, the entity does not have a bakkie to distribute its produce locally. What was also made clear is the difficulty of sourcing a stable market locally. Consequently, the product is transported and sold to the Johannesburg Fresh Produce Market.

 

Tshilimagana raised the following issues as challenges that retard their growth:

1. For the Cooperative to increase growth and to meet the demands, they will need a bakkie for delivery of the fresh produce.
2. They also raised a need for the boom sprayer for agro-chemicals.
3. The Cooperative has substantial demand but the supply capacity is inadequate owing to the shortage of resources.

5.2.1                 Observations and Findings:

5.2.1.1              The participation of the National Development Agency (NDA), Limpopo Economic Development Agency (LEDA), and Small Enterprise Development Agency (SEDA) through funding the project, assisted the growth of the cooperative to a certain extent.

1. The approach used by Public Works through Extended Public Works Programme assisted the project in paying salaries of the members of a cooperative.

5.2.2                 Recommendations

5.2.2.1              There is a need for the Department of Small Business Development to broaden the understanding of the project, identify gaps that require intervention and improvement in an effort to making the project more responsive to job creation and poverty extermination.

5.2.2.2              The Department of Small Business Development ought to provide adequate support to the project, lead the process of nurturing the cooperative and spearhead market access intervention programmes particularly in light of the 30% procurement policy from cooperatives and SMMEs as announced by the President during SONA in 2015.

 

5.3                    Gombani Bricks Manufacturing

The Gombani Bricks Primary Co-Operative Limited was conceptualised in 2010 in order to promote the use of alternative approaches and technologies, to improve the quality of life of rural women, thereby facilitating their active participation in infrastructure development and economic empowerment. There is a high level of unemployment in the Gombani community, whose members mainly depend on social grants for survival. The project itself started operating following a donation of a low cost hydraform machine for manufacturing of building and paving bricks from the Department of Public Works in 2011. 

 

The Cooperative manufacture bricks and build houses in the village of Gombani in Mutale, Vhembe District Municipality.  Initially, then Deputy Minister of Social Development, Ms Hendrietta Bogopane-Zulu championed the project, and later, during her tenure as Deputy Minister of Public Works, ascertained that a partnership with the Province of Limpopo, Mutale Local Municipality, Vhembe District Municipality, Independent Development Trust (IDT), Agreement SA, South Africa Women in Construction and Mmabatho Foundation for Women Development is forged.

 

Originally, there were only twelve (12) women in 2011. However, the project has over the years expanded to include 24 women. To date, more than 15 houses have been built using the machine, which requires less cement. There is no tarred access road towards the site, there is limited access to water, the area is seriously lacking in infrastructure, transport and electricity are biggest challenges threatening the existence or survival of the project. The absence or non-existence of the business plan makes it difficult for one to determine at a go, the funding and/or non-financial requirements of a Cooperative, including its target market. 

The kind of support that has already been offered by various state departments and private sector seems not sufficient to make this a self-sustaining venture. It also lacks coordination and the risk of ‘triple-dipping’ on fiscus is real. Amongst other things, the project need a transport for delivery which has a negative impact of losing customers by failure to deliver orders on time; a shelter for machines as well as the maintenance funds. In total, their financial needs amounted to about R 100 000.00 for operations and growth.

 

1. Observations and Findings

5.3.1.1    The Committee was impressed by the project particularly the effort towards providing shelter for poor women, employment creation and eradication of poverty.  The Committee is of the view that such an initiative could be replicated in other provinces with a purpose of creating jobs at grassroots level. If implemented with full support from government, this project has a potential to contribute immensely to the attainment of the NDP goals on job creation and poverty reduction.  

5.3.1.2    The Committee was also impressed by the intervention of private sector, namely PPC cement that sponsored the project with 1500 bags of cement and a mobile storeroom, Lafarge sponsored with 680 bags of cement and MTN that donated R500 000.00 that the Cooperative used to purchase diesel, pay stone’s providers and stipend for workers.

1. Although the project is located at Gombani, and had been visited by a number of government departments, there had been no attempt from the side of the provincial government to embrace it or integrate it to the Integrated Development Plan of Vhembe District Municipality. There have also been no attempts to treat this as a pilot project.

 

1. The gravel access road leading to Gombani is very poor making it difficult for anyone to access the site. The gravel road also has a negative impact on delivering the product to orders and potential market in other neighbouring villages outside the area. Had this been adopted as experimental project by the local government it would certainly have been incorporated in the IDPs of both the local and district municipality.

 

1. Recommendations

5.3.2.1    The Department of Small Business Development should consider structuring a working relationship using the model of Gombani Bricks Manufactures to develop Cooperatives in various other regions.

 

5.3.2.2    The Department of Small Business Development should consider using its transversal agreement mandate to establish an Intergovernmental Task Team on development of SMMEs and Cooperatives in construction. That Intergovernmental Task Team would be similar to the Intergovernmental Task Team on 2010 Soccer World Cup. Such a Task Team would integrate planning, facilitate alignment of budgets and reduce duplication. Government departments would share resources and set targets that relate to complementary roles played by each department and each sphere of government in the process of developing infrastructure.

1. The Department of Small Business Development should sign transversal agreements with the Departments of Rural Development, Human Settlements and of Roads and Transport so as to facilitate coordination of resources and complement each other in the process of developing Small Business and Cooperatives that are in construction.

 

1. An inaccessible road to the project, lack of power supply, lack of a communication network and water supply hinders the project to maximise its output. Therefore, Gombani Bricks Manufacturers seeks the buy-in of the government to ensure access to funding and markets for expansion of the project to South Africa as a whole and further meet supply and demand of the industry.

 

5.4        Tshakuma Fresh Market Stalls

On the 29th of January the Committee kick-started its oversight programme by visiting Tshakuma Fresh Market in Venda in Makhado Local Municipality. Tshakuma is a local and vegetables market that also accommodates traditional Vhavhenda sculptors and craftsmen, and is located halfway between Louis Trichardt and Thohoyandou next to Levuvhu on the R24. It is the Largest open air fresh produce market in Limpopo.

Initially, the long-term vision and strategy was to construct a market infrastructure which would allow the farmers to centrally bring in their produce, subject them to cleaning, managing post-harvest pests, grading, packaging, loading and transporting to fresh produce markets. The proposed depot facilities could also act as points of leverage, where market information, production information and extension services are discharged to the farmers. Nevertheless, this did not happen.

Consequently, the last form of assistance offered to these women was during the era of then Premier Ngoako Ramatlhodi. The market is seriously lacking in infrastructure i.e. there are no cover or shelters, no ablution or sanitation facilities, no storage, no refuse removal by the Municipality, no lights which ideally would have allowed the market to operate 24 hours. Most of the issues have consistently been raised with the Local and District Municipalities but the assistance has not been forthcoming. The Municipal representatives who were present during the oversight visit, were told in no uncertainty that they were there only because of the Committee’s visit. Otherwise, they would never have come.

On market access, it was also made clear that there is no formal arrangement to access state market neither from the Local Municipality nor Province. But the point that was consistently raised as necessitating urgent intervention by the state was that of infrastructure. Tshakuma Fresh Market potential remains untapped largely as a result of the poor supporting infrastructure.

 

1. Observations

5.4.1.1    The Committee observed unpleasant conditions under which these women are selling. They spend the whole day with children in a place that does not have ablution facilities, proper shelter and proper refuse waste removal.

5.4.1.2    By-laws of the municipality hinder the growth and manner of making business as they state that it should be a person who has applied for a license. Should then a person be sick, no relative or any other chosen person can go and sell on that spot.

1. Recommendations

5.4.2.1    The Department must investigate an application that was made to the Department for assistance under the National Informal Business Upliftment Scheme (NIBUS).

 

5.4.2.2    The Department must facilitate a process that would lead to the signing of a transversal agreement between itself and the Department of Cooperative Government and Traditional Affairs (COGTA) so as to align the upgrade of the market with relevant stakeholders.

 

5.4.2.3    The Department must engage the Vhembe District Municipality in order to establish a working relationship with the DM that is aimed at enhancing the development and maintenance programme which was initiated by the former premier.   

 

1. Vhembe Fresh Produce Market

Two to three kilometres away from Tshakuma Fresh Market Stalls, there is Vhembe Fresh Produce Market (FPM) with refurbishments to the tune of R9.5 million in 2011. The facility, was officially opened by then Vhembe Executive Mayor Florence Dzhombere with the support of the European Union and the Vhembe District Municipality. The Fresh Produce Market further received a shot in the arm when it ratified a Memorandum of Understanding (MOU) with the Johannesburg Fresh Produce Market (JFPM), an agreement that never came to fruition. 

From the presentation done by the Board’s Chairperson of an entity, the alleged owner or tenant of the facility, the Committee was informed that the FPM started operating in September 2011. Its operation has however been very erratic and unpredictable simple because there is not enough produce. The main reason advanced by the Chairperson of the Board was drought. When pressed for more answers and further interrogation by members of the Committee regarding the performance of the previous year’s i.e. 2012, 2013 and 2014, considering that drought only intensified towards the end of 2014 and 2015, the response was utterly not convincing and at worst ambiguous.

Furthermore, the presentation around the corporate governance of the facility was also called into question. It was made clear to the Committee that, unlike other Fresh Produce Markets i.e. JHB FPM, DBN FPM and/or Pretoria FPM which are wholly owned by the respective Municipalities, and therefore rendered municipal entities in terms of the Municipal Finance Management Act (MFMA) and Municipal Systems Act (MSA), the PC learned that this particular FPM is actually under the ownership of a Cooperative. Vhembe Fresh Produce Secondary Cooperative, trading as Vhembe Fresh Produce Market was formed by 19 primary Cooperatives from Vhembe District Municipality. The shareholders of the Cooperative are not known, or, were not divulged during the presentation. This raises a plethora of questions regarding the corporate governance and shareholding of the facility.

Additional troubling anomalies with Vhembe FPM are that, there is a tractor inside the FPM lying there underutilised, there is staff currently under the payroll of the municipality, while across the road, there is a fresh market stalls running efficiently and productively, albeit without the amenities comparable to those found at Vhembe FPM.  The DBSD officials present throughout the oversights, were prompted to follow up on these, explore possibility of integrating activities of the Fresh Market Stalls and Vhembe FPM.

1. Observations and Findings:

5.5.1.1              The existence of Vhembe Fresh Produce Market presents an opportunity for development of agricultural cooperatives and improving the performance of emerging farmers in and around Vhembe District Municipality.

1. There is a lack of capacity in the LED of Vhembe to develop a coordinated and integrated plan with the national Departments of Small Business Development, Rural Development, Agriculture as well as Provincial Department of Agriculture and Economic Development, for the purpose of developing agricultural cooperatives and/or improving the performance of emerging farmers to a level where they would be able to channel their produce to the retail sector through Vhembe Fresh Produce Market.
2. Although National Spatial Development Perspective (NSDP) direct and highlight Vhembe District Municipality sectoral strengths i.e. Agriculture, Tourism and Manufacturing, there is little that is being done to improve underdeveloped rural areas and assist emerging farmers.
3. Vhembe Fresh Produce Market fruitlessness can be attributed to, inter alia, lack of development and an integrated approach, mentoring as well as monitoring and evaluation in the development of small and medium enterprises by Local Economic Development of Vhembe District Municipality.
4. There is acute shortage of funding, lack of relevant expertise in the market to handle complexities associated with large scale commercial projects that is required in order to satisfy the retail market.
5. The lack of entrepreneurship and understanding of the needs of the retail sector is a huge impediment for proper functioning of Vhembe Fresh Produce Market and performance of agricultural cooperatives and emerging farmers in balancing the supply and demand of the retail sector.
6. Vhembe Fresh Produce Market remains a strategic facility for development of agricultural cooperatives and emerging farmers around Vhembe District Municipality.

 

5.5.2     Recommendations

5.5.2.1              It is recommended that the use of Public-Private Partnership (PPP) be considered in operation of this fresh produce market in order to extract necessary resources (such as relevant personnel with relevant expertise) required to run this fresh produce market in an efficient and effective manner.

5.5.2.2              The Department of Small Business Development should consider signing a transversal agreement with Vhembe District Municipality to adopt and facilitate development of an integrated plan that would result with a value chain starting with the proper training of agricultural cooperatives, adequate funding, mentorship, adequate use of Vhembe Fresh Produce Market and supply of vegetables to the retail sector.

5.5.2.3              The Department of Small Business Development should consider signing transversal agreements around the revival of Vhembe Fresh Produce Market and facilitation of access to market with the following departments:

• The Department of Agriculture and Rural Development;
• The National Department of Agriculture, Forestry and Fisheries,
• The National Department of Rural Development,
• The Department of Social Development.
• The Department of Public Works.

 

5.6        Furniture Manufacturing Incubator [FurnTech]

Furntech has seven branches located across South Africa. It is headquartered in Cape Town. It focuses on the provision of training, skills development, and business incubation support to potential entrepreneurs and small enterprises involved in furniture manufacturing. It is an accredited training Service Provider for the furniture industry, and provides training to over 600 people each year. The Local Economic Development (LED) of the Makhado Municipality, in partnership with Furntech, received a funding from Transnet of over R10 million to implement a Furniture Manufacturing Business Incubator with at least 30 people, including those living with disabilities.

 

The Committee was informed that Furntech has, among other things, bought material with the grant funding which assisted towards acquiring of equipment and machinery that is currently being used for training. The management of the incubation facility also sensitised the Committee to the challenges ranging from lack of adequate or predictable funding, lack of suitable equipment and machinery, marketing material, transport, persons with disabilities, learner allowances to power and hand tools. One of the learners, indicated that the state of the building does not necessarily meet safety standards, there are water leakages during rainy seasons, no emergency exit instead there is only one exit/entrance.

 

It was also reported that, regarding the raw material Mr Reddy told the Committee that it is sourced locally, the actual source or supplier being SASCOL. On SABS, he stated that their product does not meet compliance standards as prescribed by SABS, this is not a requirement as far as he was concerned. The Committee was further informed that the rental amount per month, most expensive line item on the organisation’s monthly expenditure, was a rental leakage of R33000. The organisation, FurnTech, is incorporated as a Section 21 in terms of the NPO Act and Public Trust, there are three Cooperatives participating in the project. Over and above assistance from the Municipality and Transnet, SEDA has through its Technology Fund (STF) programme, made some contribution towards acquisition of machinery.

 

The LED Manager spoke about procurement predicament regarding sourcing from Cooperatives largely as a result of prohibitive supply chain management processes. He went further to indicate that a number of schools in the area have been approached looking for refurbishment of desks opportunities without success. On the land/structure issue, the LED Manager cited the Municipal Resolution which, for some reasons stalled, which was aimed at instigating the Municipality to engage Public Works with a view to acquiring the land supposedly on behalf of the Cooperatives.

 

There were grey areas that the members of the Committee recommended be followed up i.e. names and status of the Cooperatives purportedly benefiting from the incubation programme. And also, whether assets, in the form of donations from Transnet, the Municipality and SEDA are ceded to Cooperatives, or, they are to remain the assets/property of the Non Profit Company.

 

5.6.1     Observations and Findings

5.6.1.1              The organisation, FurnTech, is incorporated as a Section 21 in terms of the NPO Act and Public Trust, and there are three Cooperatives participating in the project.

5.6.1.2              Over and above assistance from the Municipality and Transnet, SEDA has through its Technology Fund (STF) programme, made some contribution towards acquisition of machinery.

5.6.1.3              The Municipal Resolution which, for some reasons stalled, which was aimed at instigating the Municipality to engage Public Works with a view to acquiring the land supposedly on behalf of the Cooperatives.

5.6.1.4              The Committee observed that the facility faces a challenge with the availability of raw material, its sources, the ownership of the land and the structure where the training facility is currently being erected.

5.6.1.5              There was also a question pertaining the type of an entity, FurnTech, whether it is a private company (PTY) or a Non Profit Company (NPC), the nature of support received thus far, financial and non-financial, number of small businesses participating on the project, other government departments that have been approached, salaries, people with disabilities.

 

5.6.2     Recommendations

5.6.2.1              It is recommended that the use of Public-Private Partnership (PPP) be enhanced in ensuring that operations of this nature are sufficiently assisted and functional.

5.6.2.2              The names and status of the Cooperatives purportedly benefiting from the incubation programme be followed up and also further developed. And also, be ascertained whether the assets, in the form of donations from Transnet, the Municipality and SEDA are ceded to Cooperatives, or, they are to remain the assets/property of the Non Profit Company.

 

 

 

5.7                    Air Force Base Makhado

Air Force Base Makhado is an airbase of the South African Air Force, situated at Louis Trichardt and was visited by the Committee. The visit to the base emanate from the August 2015meeting the Committee had with the Department of Defence, in which the Committee had identified hanging fruits for Small and Medium Enterprises and Cooperatives in the implementation of 30 percent procurement policy.

 

5.7.1                 Observations and Findings

5.7.1.1              A mutual relationship has been established between the Department and the Department of Defence (DOD) to plan on how the two departments would work together in developing SMMEs and Cooperatives to meet the demands of DOD.

5.7.1.2              A memorandum of understanding (MOU) has been developed and was under the consideration of both parties for approval. The MOU constitute an implementation plan, key performance areas and outputs for each financial year.

5.7.1.3              Both Departments have collaborated on key activities that are aimed at empowering SMMEs and Cooperatives as well as creating awareness on business opportunities available in the DOD. Both departments visited Air Force Base Hoedspruit wherein 16 suppliers were in attendance and also Army Support Base in Mtubatuba, wherein 109 suppliers were attendance.

5.7.1.4              Both Annual Suppliers Day, which takes place in every October, and Sub-Directorate for Supplier Development has been developed in the implementation of the policy that seeks to develop Cooperatives through infrastructure spending and public procurement.

5.7.1.5              With regards to 30 percent procurement from SMMEs and Cooperatives, it was observed that the Central Procurement Service Centre for DOD has spent R 620 million, (22% of the budget), on procurement of goods and services from SMMEs in 2015/16 financial year.

 

5.7.2                 Recommendations

5.7.2.1              The memorandum of understanding between the DOD and the Department should be speedily formalised in order to ensure implementation of initiatives that are already in progress.   

 

5.8        Ximambani Construction Primary Cooperative

Ximambani Construction Primary Cooperative (The Cooperative) is situated in Giyani Local Municipality which falls under the Mopani District Municipality. This Primary Cooperative is constituted of seven (7) members of which two (2) are women and five (5) are men. It has currently employed thirty seven (37) employees. This Cooperative which operates in construction sector produces and sells paving bricks, concrete/crush stone, granite stone, Bulk River sand and construction work. It is registered in Construction and Industry Development Board (CIDB) and National Housing Builders registration Council (NHBRC) and all their products are South African Bureau of Standards (SABS) approved.

 

Flowing from the above, Chairperson of the Cooperative, Mr Shilowa, indicated that they got assistance from government through Small Enterprise Development Agency, which linked them with South African Bureau of Standards (SABS). As such their paving bricks have passed the required standards. He further informed the Committee that the Cooperatives got a loan amounting to R2.5 million from Limpopo Development Agency (LEDA), of which the balance of R1 million is still yet to be paid.

 

Even though they have received some form of assistance, they still request some further assistance, in particular for equipment and market access. For example, they indicated that they can operate in a full capacity if they can be assisted with 1x8 ton delivery truck, 2 TLB front loader truck, 1xHD3 brick making machine and 1 forklift to offload cement.

 

Concerning access to market, they indicated that they export granite stones to Zimbabwe and sell other products locally. The Cooperative further raised its frustration with regard to the promise that was made by the MEC for Limpopo Provincial Department of Cooperative Government, Traditional Affairs and Human Settlement (COGTSA) to allocate the construction of 100 RDP houses to them. According to the Cooperative, up until to date, nothing came forth. Furthermore, a Cooperative had also requested Mopani District Municipality to allocate them 30% of toilets that were to be built so that they could be able to use the profits for increasing employment and also for repayment of a standing loan.

 

5.8.1                 Observations and Findings

5.8.1.1              The Committee was pleased to see such an organised and working Cooperative and the support that had been done by various governmental departments.

 

5.8.2                 Recommendations

5.8.2.1              The Department of Small Business Development should facilitate a process that would lead to the signing of a transversal agreement between the Department of Small Business Development and the Department of Cooperative Government and Traditional Affairs (COGTA) and other spheres of government so as to align the assistance and upgrade of the Cooperative with relevant stakeholders.

5.8.2.2              The Department can intervene to assist Ximambani Cooperative project through the use of Cooperative Incentive Scheme (CIS), so that this Cooperative can procure some of the machinery it proposed; and to enable the 30 percent policy of procurement to small businesses and cooperatives.

 

5.9                    Twananani Muyexe Beads Works

Ms Baloyi who is a member of the Cooperative that produces Xitsonga beads and traditional attire indicated that they started as a group of 18 women in 2008. By that time they were operating in a clinic because they did not have space to operate. In 2010, the Chief of the Area gave them a land which they later operated from it. She indicated that through assistance of R150000 they got from Department of Social Development, they managed to build a house to operate. In addition, they fenced the place and later bought two sewing machinery.

 

She further informed the Committee that they normally get assistance from the Department of Arts and Culture and the Limpopo Provincial Department of Economic Development, Environment and Tourism (LEDET) in exhibiting their products. Moreover, it was transpired that they got assistance from the Department of Rural Development which it bought them three sewing machines, but unfortunately those machines were faulty. Despite the afore-said assistance they got from different government institutions, they indicated that they require assistance in the form of equipment such as computer, photocopying machine and sewing machine in order to operate effectively. In addition, they require assistance in market penetration.

 

5.9.1                 Observations and Findings

5.9.1.1              The Committee was pleased to see such an organised and working Cooperative and the support that had been done by various governmental departments.

 

5.9.2                 Recommendation

5.9.2.1              The Department should consider facilitating an integrated development approach with a view of assisting such projects through the signing of a transversal agreement with Mopani District Municipality and government departments and other spheres of government and further link the project to markets and exhibition centres.

5.9.2.1              The Department should consider funding this Cooperative through CIS and further link this Cooperative with SAWEN so that their products can get exhibited internationally and create necessary networks.

 

5.10                  Hanyani Thomo High School

Hanyani Thomo High School is a quintile four school, situated in Thomo Village in Klein Letaba Circuit under Mopani District Municipality. The objective of the visit was to assess the implementation of the National School Nutrition Policy (NSNP) and the participation of Cooperatives.

Mr MM Hlungwana, the principal of the school gave the background of the school. He indicated that Hanyani Thomo is an old school hence the Committee saw that it still under renovation. He further indicated that in 2015 the school obtained a 98 percent matric pass. Mr KM Mashaba, Chief Finance Officer of the Provincial Department of Education outlined the provincial NSNP programme wherein he explained that 268 service providers are supporting the programme. Funds are deposited in schools accounts and they manage their procurements under the guidelines provided by the province. The province is also offering trainings for SMMEs for a period of two years. With regards to procuring school furniture, he explained that the Department was still exploring the method of transferring funds to schools so that they can also run its operations.

 

5.10.1               Observations and Findings

5.10.1.1            The Department of Education (DoE) is still struggling in implementing 30 percent procurement from SMMEs and Cooperatives, indicating that the policy pronouncement could not be drawn from the Schools Governing Act

5.10.1.2            The DoE have developed guiding document for procuring from Cooperatives and an Enviro-loose Sanitary Project, for girl child, has been identified for Cooperatives. The project is implemented in partnership with Limpopo Economic Development Agency (LEDA).

 

5.10.2               Recommendations

5.10.2.1            The Department of Small Business Development should facilitate a process that would lead to the signing of a transversal agreement between the Department of Small Business Development and the Department of Education (DoE) and other spheres of government so as to align the assistance and upgrade of the Cooperative with relevant stakeholders.

5.10.2.2            The Department can intervene to assist in training cooperative through the use of Cooperative Incentive Scheme (CIS), so that cooperatives can ready and enabled to benefit from the 30 percent policy of procurement from small businesses and cooperatives.

                       

5.11      Senamoriri Stone Crusher & Brick Making Cooperative

Mr Petros Molokomme, the Chairperson of the Cooperative, gave the background of the Cooperative. He indicated that this Cooperative has started operating in 2008 with the objective to fight poverty within the area. The Cooperative was started by 12 members of which one has passed away and one resigned. Currently, the Cooperative has employed seventeen (17) employees of which two (2) are women and fifteen (15) are youth. Mr Molokomme informed the Committee that their Cooperative produces bricks and concrete.

 

He further indicated that their Cooperative has received numerous support from government institutions such as, LEDA, Department of Social Development, and National Development Agency (NDA). Much of such assistance they receive resulted them buying an additional and necessary equipment and construct physical infrastructure. For example, a grant of R2.3 million they received from NDA was used to fence their space and build physical infrastructure.

 

Regardless of the support received, Mr Molokomme cited other challenges that their Cooperative is currently faced with. These challenges include, amongst others, lack of equipment and lack of access to market. He requested assistance with the acquisition of TLB and shade for crushing machine. Importantly, according to him, he indicated that if the Cooperative can acquire these machinery, that could increase efficiency to the Cooperative. And, with regard to access to market, he indicated that their Cooperative has tried several times to benefit from 30 percent procurement on small businesses and cooperatives announced by President but all their attempts were unsuccessful.

 

Importantly, he further indicated that their cooperative also provide social responsibility to the area in which they operate. Subsequently, they build offices to local tribal authority, supply of water network within the community and supply stationery to school kids such as rulers, printed envelopes, printed reports and pens.

 

5.11.1               Observations and Findings:

5.11.1.1            The Committee was pleased to see such an organised and working Cooperative and the support that had been done by various governmental departments.                     

5.11.2               Recommendations

5.11.2.1            There is a need for the Department of Small Business Development to enter into transversal agreements with the Department of Basic Education, the Department of Social Development and the Department of Public Works with the intention of implementing the Cooperatives Development Model approved by the Portfolio Committee on Small Business Development.

5.11.2.2            The Department of Small Business Development should consider funding this Cooperative through CIS for buying machinery, and also to enable the 30 percent policy of procurement on small businesses and cooperative’s.

 

5.12      Senwabarwana Market Stalls

 

The Committee had an interesting interaction with informal traders at Senwabarwana Market Stalls at Capricorn District Municipality. Members of the Committee spoke to informal traders including Mr Ranofemu, who is a secretary for traders committee. Mr Ranofemu indicated to the Committee that each member is assigned a shelter for a monthly rental fee of R 140.00. Most of traders are selling African food and cool drinks. In interacting with traders it become clear to the Committee that most of traders do not have an understanding of business management as they could not account on how much is their monthly turn-over.

Though they have been assigned shelters, their challenges are that they are neither electrified nor prepared for the use of gas, thus creating a challenge when cooking and in keeping their merchandise to be kept cold. Water supply, waste management, management regulations, lack of ablution facilities, filthiness of the area and illegal traders who intrude in their space without paying a rent nor having a license also create challenges in their trading work.

They then raised a recommendation that the municipality can deploy cleaners through Extended Public Works Programme to assist in cleaning the area as well as toilets.

 

1. Observations and Findings:

 

5.12.1.1       Blouberg Local Municipality had provided the informal traders with ordinary stalls to trade from although they are not electrified.

1. There is a lack of adequate business skills training support for informal traders to make them run successful businesses.
2. There is a lack of access to funding.
3. Although the local informal traders belong to an association, they do not used the association for bulk buying purposes to reduce the costs of goods and transport, they operate as individuals.
4. The Department of Small Business together with the Blouberg Local Municipality should consider providing mobile shelters through mobile business solution. The mobile business solution can be used as an effective way of operating businesses such a small restaurants and hair salons which operate near taxi ranks. The mobile business solution could also assist such small business to comply with the Department of Health on safety and Health regulations especially those small businesses which sell cooked food at taxi ranks and street vendors. For instance, in Langa township taxi rank, a group of small businesses sell food and chicken  on open tables exposed to dust and sun heat creating a health risk to consumers. Mobile business solutions could help improve this situation.

 

5.12.2               Recommendations

5.12.2.1            There is a need for the Department to provide the informal traders with business management skills training such as cost management accounting, financial management and general business management to enable them to run successful businesses.

5.12.2.2            There is a need for the Department to ensure that any development directed to benefit small businesses and cooperatives considered their felt needs as opposed to perceived needs. This assurance can be derived from the implementation of transversal agreements with not only national departments but with other spheres of government to address issues like the provision of solar energy in the stalls by municipalities.

6.         Summary of Key Findings/observations

6.1        There is a lack of understanding about the importance of Cooperatives and the role that they can play in particular in community economic development and facilitating participation of communities in the mainstream economy. This lack of understanding results in a situation where more attention is given to SMMEs neglecting cooperatives which have more potential of enabling communities to actively participate in their own development thereby reducing dependency of poor families on government hand-outs.

6.2        There is a lack of understanding of an integrated development approach by those that are in charge in the government departments.

6.3        The government has to open itself up as a market for SMMEs and cooperatives. Furthermore, government must exploit all possible opportunities as far as SMME and Cooperative development are concerned.

6.4        There is a need to forge partnerships with other relevant stakeholders such as the private sector and NGOs in order to achieve the goals set out in the NDP, including job creation, poverty reduction and fairer distribution of income.

6.5        The idea of locating centres aiming to assist small businesses is very good but it should be done in such way that assists struggling small businesses in particular those that are situated in underdeveloped areas. These centres can end up being utilised by well-resourced small businesses situated in developed areas only, which escape paying higher rentals and consultation fees that they are currently paying in other areas.

6.6        Mobile business solutions can be cost effective for small businesses because they reduce operating costs such rent, energy/electricity and help mitigate the volatility of our energy supply.

6.7        The one-size-fits-all approach to enterprise development does not work. There is a need to tailor-make enterprise development according to the size, geographic allocation, type, industry and the specific needs of the enterprises.

6.8        Most of the areas SMMEs and Cooperatives visited by the Portfolio Committee had not been visited by government officials charged with the responsibility of developing SMMEs and Cooperatives. One wonders then how government officials would understand the needs of SMMEs and Cooperatives by interacting with them through emails and application forms.

6.9        There seems to be no hands on approach and monitoring process in the Department to assess development process of SMMEs and Cooperatives and nurture them to maturity stage.

 

7.         Recommendations

Based on the summary of key findings /observations, the Committee offers the following recommendations:

7.1        The Department of Small Business Development should conduct advocacy on the importance of cooperatives to other government departments and society at large. This can be done by developing a marketing drive to increase awareness of Cooperatives. Thus, there is a need to create a Marketing Unit which will be responsible for this marketing drive.

7.2        The Department should coordinate the development of SMMEs and cooperatives so that all other relevant departments, including the infrastructure departments are properly guided so that their support to the Development of SMMEs and cooperatives is integrated.

7.3        The development strategy aiming at growth and development of SMMEs and Cooperatives should show how the SMMEs run by youth, women and people with disabilities can benefit.

7.4        The Department should sign transversal agreements that include SMMEs and cooperatives in the procurement processes of all spheres of government and state institutions.

7.5        Consideration should be given to relocate some offices of SEDA and SEFA in underdeveloped areas, where there is a greater need to develop SMMEs and cooperatives.

7.6        The department should ensure that both SEDA and SEFA embark on a more vibrant marketing awareness drive to highlight their existence and the products they offer.

 

Report to be considered.