Minister & Department of Small Business Development on 2015/16 Annual Performance & Strategic Plans

Meeting report

Briefing
The Chairperson commented on the delegation being mainly male.

Minister of Small Business Development, Lindiwe Zulu, said women were a priority and should not be limited to the lower sections of the Department. She was committed to the empowerment of women and gender equality. When the Department was fully fledged it would be a more balanced structure. The interim staff complement had just been approved by the Department of Public Service and Administration.

The Department was conscious that the given budget was a challenge but it would work with what it had. All departments in the economic cluster had agreed that the responsibility for small and medium enterprises would not solely lie with the DSBD. The Department would however be the leading voice for Small Medium And Micro Enterprises (SMMEs) in all government structures. The Department would be looking to sign transversal agreements and lobby to attain the 30% government procurement target which it regarded as a minimum figure.

DSBD would be partnering with the Department of Trade and Industry (dti) and the Economic Development Department (EDD) from which it had inherited its programmes and personnel. It would not be a big challenge to ensure that these transferred staff fitted in because they had worked specifically on small business issues.

DSBD had started the process to add the word ‘Cooperatives’ to the name of the Department because cooperatives felt that they were being marginalised once again. The report was in Office of the President and the President has to sign it off.

The game changer framework of DSBD was to:
- to increase and expand the demand for goods and services provided by small businesses and cooperatives;
- to develop enhanced efficiencies of support measures;
- to ensure the active participation of SMMEs and cooperatives in priority sectors;
- to reduce the regulatory burden, and
- to upscale and fast tracking the development of youth.

The Minister said DSBD would not be effective unless the three spheres of government were strengthened and working together in terms of support and intervention. She had written to all provincial premiers on co-coordinating small business efforts but had not received any responses and had to push to get meetings. The need for this coordination was highlighted by the recent xenophobic attacks. DSBD wanted to find ways to stabilise the situation and had formed a task team which included the Departments of Home Affairs, Police, Intelligence and the dti.

She said it was easy to call on a task team but the issues lay at provincial level. DSBD had written to premiers to form their own xenophobic attack task teams but only Gauteng province had responded. The NCOP, because they represented provinces, had the responsibility to pick up on these issues as issues of interest to local government and the provinces. The Department’s intention had been to take the task team’s report to Cabinet but then the Durban xenophobic attacks occurred. So there had been a need to take a step back and look at the weaknesses of the processes.

The Chairperson said the lack of response from the provinces was a serious matter.
 
The Minister said the matter was taken to the MinMecs, but the problem was that these bodies only met once in a while. As the issues were so important, it could not wait for those meetings. DSBD’s relationship with provinces should not be on basis of issues but should be a constant relationship.

She said DSBD had agreed not to shut out what programmes had been done by the dti and do a review informed by proper data. Impact assessment of these programmes needed to be done.

Mr Lindokuhle Mkhumane, the Acting Director General, said the mandate for small businesses and cooperatives which was previously in the dti and then the EDD, had resulted in a fragmented approach, a low survival rate and a lack of specialised and focussed support for SMMEs and cooperatives. The support provided by government had an impact on these outcomes because SMMEs and cooperatives were not the primary functions of the previous departments this was housed in.

A lack of sectoral cohesion for advancing the objectives of SMMEs and cooperatives was a challenge. DSBD had some engagements with common stakeholder interests leading to the decision to establish a designated department to advance the development of SMMEs and cooperatives for their job creation ability, focusing on youth women and people with disabilities. SMMEs were expected to create 90% of the 11m jobs targeted to be created by 2030 and the implementation of the plan would be key.

The overarching themes of the Department’s strategic objectives encompassed radical socio economic transformation; service delivery; reducing red tape; and providing support for township economies. It would provide coaching and incubation programmes supporting SMMEs and cooperatives, promote increased access to employment and entrepreneurship for black women and youth and ensure government compliance with the 30 day payment period.

DSBD would be seeking to amend the primary legislation for small business and cooperatives.

DSBD had three programmes: Enterprise Competitiveness Support; Cooperative Development; Enterprise Development and Entrepreneurship (see presentation).

With regard to cooperatives, DSBD would be focusing on primary cooperatives as cooperatives had a high failure rate. It would be looking at incubation programmes for cooperatives. It intended to link cooperatives in the manufacturing sector. It would also be reviewing the incentives the dti had introduced. It would be looking at supplier development and market access support. It intended using SMMEs in BEE. It had targeted having 50 incubators supporting cooperatives in its performance plan. It was driving this in establishing 50 cooperatives in renewable energy. It was seeking to reduce red tape in all three tiers of government. He said the National Enterprise Development Fund (NEDF) money was not being used in a coordinated way.

The short-term priorities for DSBD were skills development, training and capacity building; finalising incentives and access to finance; public sector procurement; private sector procurement opportunities and the roll-out of key interventions in the form of new policies and the review of existing policies

The long-term priorities for DSBD were a national survey; designing training programmes to address skills gaps including sector specific interventions; developing key domestic and international markets; decentralising business development services and reviewing and developing the regulatory environment.

The major portion of the budget was transfers to: Small Enterprise Development Agency (SEDA)
R478m; SEDA Technology Programme R132m and the Black Business Supplier Development R225m. Total transfers were R936m out of a total departmental budget of R1.1b. R50m was allocated to operational costs for the year.

Discussion
Mr E Makue (ANC, Gauteng) said small businesses in tourism faced lots of challenges. He asked whether the Department was cooperating with other departments involved in tourism. He asked if DSBD had held talks with the National Youth Development Agency (NYDA). He said people had extended their homes to accommodate students but that these small businesses were not treated with respect by the universities. Had DSBD experienced similar issues?

Mr J Londt (DA, Western Cape) asked what the timeline was for the policy development the Department intended to do. He asked who took the lead in small business economic development given that the dti and the EDD were also involved in the field. It had been noted that some small businesses only tendered for government business. Would this issue be considered in the policy review? He said the country had a rugged labour policy. How would small business navigate staff HR matters to overcome this? How did the Department help to streamline red tape requirements for small business? Was there any interaction with Mr Winde (the Western Cape MEC).

Ms E van Lingen (DA, Eastern Cape) said that when DSBD reviewed all government programmes, it should look at local government Local Economic Development (LED) units as these had to develop something constructive. She was disappointed to see DSBD’s co-location targets being only five municipalities per year, it should be targeting half of the municipalities. She said registration with SARS was a big problem for small businesses. Regarding amending the Small Business Act of 1996, she wanted to know the timeframe and budget implications of this and also the timeframes for the review and development of the regulatory environment.

Mr B Nthebe (ANC, North West) said a one stop shop for small businesses was long overdue. He said the high failure rate of cooperatives was a challenge. What measures were being put in place to cap the failure rate? Cooperatives had problems with market penetration and access to funds. Banks demanded serious compliance so people targeted the State to provide funding yet the State should only be providing a conducive environment. He said agro processing was a sector that should be booming. SA would be signing a tripartite free trade agreement soon that would open a market of 650m consumers. In response to Mr Londt’s comments, he said South Africa was the embodiment of good labour laws aimed at preventing people being fired willy-nilly.

The Chairperson asked what the thinking of government was about small business in township areas given the recent xenophobic attacks targeting foreign shopkeepers in townships.

The Minister said DSBD’s task team had compiled a report but the issue of foreigners had been there for some time. The enforcement of the regulatory environment had not been there for some time. Local government needed to take responsibility for implementing the regulations. There had been complaints from Soweto traders that they had been crowded out through foreigners bulk buying and supporting each other. These were practices that DSBD needed to deal with but it also had to work from facts and figures and not just beliefs. There was a need to focus on the concerns of SA citizens.

On whether DSBD was working with other departments, she said DSBD was looking to sign transversal agreements with departments. Meetings had taken place with the Departments of Human Settlements, Higher Education, Agriculture, Energy and the private sector. She said the signing off of the solar heaters project had been delayed because DSBD had sought input in the manufacturing, installation and maintenance of the solar water heaters. DSBD had also had discussions with the Minister of Tourism on the matter of bed and breakfast (B&B) establishments. The Small Enterprise Finance Agency (SEFA) had supported B&Bs. People in Limpopo had said they had responded to governments call to build B&Bs for the World Cup but today were struggling. They were pleading that they be connected to tourism business. Government cost cutting had impacted on tourism and catering businesses.

On who took the lead, she said that the Ministry had been established because small business as a focus area had been swallowed up when it was lodged at the dti. DSBD was meeting with SEFA the following day to consider if the departmental review should include SEFA. She queried whether there was anything wrong with SEDA and SEFA, for example, being one body.

DSBD has had meetings with the NYDA because there had to be synergy otherwise there might be double dipping of funds by agencies. DSBD had a big task and it could not do it on its own and without the support of other institutions of government.

Regarding labour relations, she said there had been discussions with SARS about registration. DSBD’s responsibility was to make ‘doing business’ easy to do for business.

The Digital Terrestrial Television migration created an opportunity for small businesses involved in production. DSBD had met with the Minister of Telecommunication and was working the EDD and the dti. The challenge was that departments still tended to work in silos.

The organogram in the presentation was not the full organogram of DSBD. Ultimately the Department was looking at doing some things differently. It was looking at a system where it had an official responsible for Gauteng, for example. DSBD could not act in isolation nor could the province. In any event the Gauteng budget was bigger than the national budget. DSBD needed to be the centre of communication where a solution could be provided.

Mr Mkhumane said the turnaround was being done in partnership with the provinces.

On the township development strategy, he said the three tiers of government needed one strategy.

The timeline for legislative amendments to the Small Business Act were targeted for the end of this financial year.

DSBD was looking at provinces to assist in the hosting of workshops and conferences as it did not have the resources to do so. He said DSBD would not come up with policies that were a hindrance to SMMEs. It would be looking at existing strategies and consolidating them.

Mr Mkhumane said the numbers regarding co-location were low because DSBD had started by using what existed. It needed to come up with a co-location strategy first before rolling it out to all municipalities and municipalities had to provide the space. He added that agencies did not want to expand because these did not have funds to do so. He agreed that the numbers were low for the co-location figures. Co-location currently only meant agencies were in the same building but DSBD wanted to have a co-location strategy first which incorporated a link between the different entities operating in the same place so that a SEDA business plan, for example, was not rejected by SEFA.

DSBD was working on the Cooperatives Act where some loopholes needed to be closed. Some textile companies had converted to cooperatives to bypass labour laws. People claimed they were Apex bodies and then started recruiting cooperatives. Apex bodies needed to be formed from the bottom up. The Preferential Procurement Policy Framework Act (PPPFA) also presented some challenges in accessing procurement opportunities especially for SMMEs and cooperatives. DSBD was addressing the procurement challenges and were in talks with Treasury on the matter as well as on Treasury Practice Notes to enable DSBD to attain the 30% procurement target.

On the high failure rate of cooperatives, Mr Mkhumane said people had started cooperatives for the wrong reasons or because there was money available. DSBD needed to come up with a suitable model and this included reviewing the value chain of a cooperative with respect to funding the cooperative.

The Minister said that the mind-set needed to be changed. A cooperative was a very good vehicle to address challenges on the ground especially in rural areas so DSBD was working with the Department of Agriculture.

In response to a query to make herself available to visit the North West province, she said she and DSBD would be in the North West for the International Day of Cooperatives.

On procurement and localisation, Mr Mkhumane said it was a matter of buying in bulk especially for informal businesses.
 
Committee Business
The Committee considered and adopted its report on the strategic and annual performance plans of DSBD.

The Chairperson noted that he would be leaving the NCOP soon and would be making an announcement in the House.

The meeting was adjourned