ATC190220: Report of the Portfolio Committee on Small Business Development on the Motion of undesirability of the Small Enterprises OMBUD Service Bill [B 14-2018], dated 20 February 2019

Small Business Development

Report of the Portfolio Committee on Small Business Development on the Motion of undesirability of the Small Enterprises OMBUD Service Bill [B 14-2018], dated 20 February 2019

1.         Introduction and referral of the Bill

The Portfolio Committee on Small Business Development (“the Committee”) received referral papers from Announcements, Tabling and Committee Report (ATC) of Friday, 25 May 2018 which was the Small Enterprises Ombud Service Bill [B14 – 2018]. The Bill had been introduced in the National Assembly, proposed as a section 75 and was published in the Government Gazette Number 41623 of 10 May 2018.  


2.         Background

Over a period of its existence, the Portfolio Committee on Small Business Development continuously received number of complaints from small enterprises concerning the behavior of its customers, mainly the state sector and big business. Most of the complaints received vary from non-payment or late payment for services rendered or products delivered, contractual disputes, uncompetitive behavior of big businesses, often aimed at ruthlessly shutting down and driving small enterprises out of business. Late payments in particular are at an all-time high as small enterprises wait too long to be paid. The average amount owed to small enterprise amounts to billions. More than half of all small enterprises in South Africa are burdened with late payments, big business and government are mainly to blame. Small enterprises often do not have adequate reserves or resources to afford high cost of litigation and therefore succumb to the dictates and bullying by big business.  Since the creation of the Department, a sizeable number of small enterprises have resolved to approach Parliament to intervene on various commercial disputes, and the Portfolio Committee took time to listen to these grievances with a view to shaping its policy posture and in accordance to its five (5) year strategic plan.


Initially, it has always been clear from the Portfolio Committee point of view that the absence of legislation regulating relationship between big and small business is a challenge. However, it was equally important for the Portfolio Committee not to commandeer or usurp this process or responsibility to itself at the exclusion of the sector.  The reason that these matters had been brought forward was that the Portfolio Committee was a legislative arm of the state. If there were issues that affected small businesses but there was no form of legislation or protection, as well as no structure that handled those issues, the Committee had to discuss the matter to get a sense of whether there was a need to legislate or not. At the first meeting, when this matter was brought up, there had been different viewpoints amongst the Members of the Committee. Some felt the issues were contractual matters between the big and small companies, and that the Committee had nothing to do with them. For instance, the Chairperson of the Committee had then educated members who had held a different view. During the inaugural meeting she pointed out that, a new department -- Small Business Development -- had been created to, inter alia, deal with these matters. The Chairperson suggested that as the Portfolio Committee was a legislative arm, legislation should be considered to regulate the relationship between big businesses and small businesses. All the Committee Members felt this was necessary and should be looked into.


3.         Consideration of the Bill

3.1        Presentation by the initiator of the Bill

On August 22, 2018, the initiator of the Bill, Mr. RWT Chance of the Democratic Alliance presented the Bill to the Portfolio Committee on Small Business Development, highlighting among others, rationale and justification for creating such a bill, and what it intends to accomplish. The Bill was published in accordance with Rule 276(1)(c) of the Rules of the National Assembly (9th Edition) and in line with section 73(2) of the Constitution of the Republic of South Africa, 1996 i.e. Ordinary Bill(s) that do not affect the provinces (section 75 of the Constitution).


Mr. Chance began by explaining why the proposed Bill was necessary. He said there was an uneven playing field between small and big businesses, as well as the fact that small businesses do not operate in the same playground as the government. Big businesses use their financial muscle in order to bully and elbow aside small businesses. The available dispute resolution mechanisms currently in place were failing small businesses. These mechanisms included internal company or government processes, the courts and arbitration services. Members of the Portfolio Committee were generally receptive and appreciative of Mr. Chance’s efforts. However, there was an overwhelming view that Mr. Chance seemed to have put the cart before the horse by introducing the Bill as Private Members Bill on a work that had originally been instigated by the Portfolio Committee. That being the first consideration of the Bill, members of the Committee felt it was prudent and appropriate to go back to their political parties in order to get mandate on how to process the Bill.


3.2        Presentation by the Department of Small Business Development

The first consideration of the Bill was followed by a presentation from the Department of Small Business Development (DSBD) on 29 August 2018. Mr. Mohoto, on behalf of the Department, took the Portfolio Committee through what DSBD was currently involved in relative to the small enterprise ombudsman. His presentation covered three main aspects as follows:-


  • Amendment or Progress of the Amendment to the National Small Business Act;
  • Updating of Schedule 1 of the National Small Enterprise Act; and
  • Alternative Dispute Resolution, which was the core part of today’s presentation


The Department of Small Business Development pointed out that it was planning to pass Amendment Bills to the National Small Business Act and the Cooperatives Act. Those legislations would deal with challenges faced by small enterprises and cooperatives. The proposal to create an Ombud Service Bill would duplicate the process. It would also duplicate costs. He talked about the definition of small business as the Department had a case in terms of where it was going with this which was inclusive of ‘cooperative enterprises’ in the definition of the Small Enterprise Act. The Portfolio Committee was told that the Department was engaging with the Office of the State Law Advisors with a view to finalising Alternative Dispute Resolution Regulations by December 2018.


4.         Deliberations on Small Enterprise Ombud Services Bill

The final consideration of the Bill took place on 24 October 2018. The Portfolio Committee reflected extensively on the proposed Private Member’s Bill: Small Enterprise Ombud Service Bill. In attendance, was the Department of Small Business Development officials who reiterated that DSBD was in the process of amending the National Small Enterprise and the Cooperatives Acts. Those legislations would deal with challenges faced by small enterprises and cooperatives. The proposal to create an Ombud Service Bill would therefore duplicate what was currently being done by the Department. Committee Members discussed at length the fact that the Cooperative Amendment Act of 2013 had not been implemented and that the Cooperative Amendment Act was still awaiting the signature of the President. The Department was informed that the Tribunals envisaged by the Department had to be contained in primary legislation passed by Parliament. Members informed the Department that it was highly unlikely that the Department could have other legislation to protect small businesses and cooperatives before the end of the term of the Fifth Parliament. DSBD further pointed out that the Department was seeking a mechanism that sought to respond to the challenges faced by small businesses. While amending the National Small Business Act, the focus had been given to moving forward with some initiatives and alternative dispute resolution mechanisms to deal with challenges faced by small business. The Department was seeking to establish a Tribunal, in terms of Section 18 of the Small Business Act and wanted the Minister to issue regulations. The regulations were being drafted and the aim was to finish them before the end of 2018. The regulations dealt with specific issues on dispute resolutions.


The Acting Chairperson argued that the Committee had deliberated long enough on the Ombud Service Bill and the National Small Business Act.  He appreciated Mr. Chance’s contribution and efforts to provide the Committee with a solution for the challenges faced by small enterprises, but the Department was currently busy with the National Small Business Act that it wanted to amend. The task of the Department was to understand that the matters raised by Mr. Chance were shared by the Committee. The Committee shared the same concerns as Mr. Chance but proposed a different mechanism to address them.


5.         Minority Report by Democratic Alliance

The Democratic Alliance herewith submits this minority report on the above motion.


ANC members of the committee claimed that the sponsor of this bill, Mr Chance (DA), “stole” the idea of the bill from the Committee which had been hearing submissions from small business owners suffering from bullying and late payment by their customers since 2016.


Mr Chance rejects this accusation. Private Member’s Bills are a legitimate means by which individual Members of Parliament can introduce legislation and Mr Chance was simply fulfilling this function with the Small Enterprises Ombud Service Bill. Mr Chance cannot be held accountable for the failure of any other members of the Committee to introduce legislation. The Committee Chair had ample opportunity to propose a Committee Bill to Committee members but for whatever reason chose not to do so.


In the meeting of the Portfolio Committee on 24th October 2018 when Members deliberated on the desirability of the Bill, the Department of Small Business Development stated its intention to introduce regulations in terms of the National Small Business Amendment Act No 29 of 2004 to establish a Small Enterprises Tribunal.


Mr Chance asked the Senior Parliamentary Legal Advisor present at the meeting, Advocate Charmaine van der Merwe, whether the legislative framework permitted such regulations to be introduced.


Adv van der Merwe stated that regulations could only be introduced in an Act if they related to existing relevant provisions of that Act and that the formation of a National Small Business Tribunal would fall outside the provisions of that Act. The formation of such a tribunal would require an amendment to the Act, which would have to follow the standard legislative process. This could take up to a year.


Mr Chance stated that it was disingenuous and misleading of the Department to state that it was intending to publish the draft regulations it referred to as they would have no force whatsoever. The Department was unable to offer a convincing rebuttal of Mr Chance’s point.


The Department and ANC members of the Committee tried another tack and proceeded to claim that the Cooperatives Amendment Act, which the President was to proclaim in December, made provision for the formation of the Cooperatives Tribunal and that this would be amended to include all forms of enterprise including private companies. Mr Chance reiterated this proposal suffered from the same defect as the proposal to amend the National Small Business Amendment Act and therefore had no force in law.


Members of the ANC in the Committee asserted that Mr Chance’s bill would duplicate what the Department was already working on both in terms of the National Small Business Amendment Act and the Cooperatives Amendment Act.


Mr Chance expressed the contrary view that it was in fact the Department that was unnecessarily duplicating the work already completed in the Bill for the Bill provides for an Ombud service for all small enterprises including cooperatives.


Mr Chance also pointed out that the Committee had ample opportunity to process this Bill. An Explanatory Memo on the Bill was gazette on 10th May calling for written submissions and comments on the Bill.


The legislative programme of the 5th Parliament meant it was entirely feasible for the Committee to call for further written and oral submissions, consider them in Committee then for the Bill to have its first and second readings and be passed in the National Assembly before the dissolution of Parliament in 2019. As a Section 75 Bill there was no requirement for it to be considered by the NCOP.


Therefore, the ANC members of the Committee were not serious in their claim to have the interests of small businesses and cooperatives at heart because they declined the only opportunity available to them to pass legislation that would give effect to that claim.


The Committee has not processed a single piece of legislation in this 5th Parliament. It had an opportunity to do so with the Red Tape Impact Assessment Bill introduced by the DA’s Mr Kruger in 2016 but also declared this bill undesirable.


In declaring the Small Enterprises Ombud Service Bill undesirable, ANC members put their party’s interests before those of the community they were appointed to serve. In doing so they displayed a cynical disregard for the duties of public representatives and Members of Parliament and should be called out and censured by all interested parties.


6.         Voting on the Private Member’s Bill: Small Enterprise Ombud Service Bill

The matter was put to the vote. Three Members voted for the passing of the Private Member’s Bill: Small Enterprise Ombud Service Bill (two DA Members and one ACDP Member.) Four Members voted against the Bill (four ANC Members). The Committee rejected the Bill.


Votes in favour of the motion of the desirability of the Bill:         3 (Three)

Votes against the motion of the desirability of the Bill:    4 (Four)

Abstention:                                                                               0 (Zero)


Report be considered



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