SMME Booster Fund; Implementation of Economic Procurement Policy in WC

Meeting report

Briefing by the Department of Economic Development and Tourism: SMME Booster Fund

 

Mr Joshua Wolmarans, Director: Enterprise Development, WC Department of Economic Development and Tourism (DEDAT), stated that the SMME Booster Fund provides support to interventions implemented by organisations and municipalities that are geared to supporting Small, Medium and Micro Enterprises (SMMEs) based in the Western Cape. Potential partner organisations were required to demonstrate the services and support that they provide to their beneficiary SMMEs.

 

He stated that the Booster Fund follows a demand led approach. It supports and enhances private and public sector initiatives that support SMME development. A public call for proposals resulted in over 100 proposals received. The value of funding sought exceeded R300 million. 37 proposals were shortlisted (post the Pre-evaluation and Project Evaluation process). 18 projects have been approved for support (post the Project Adjudication process). The value of support for 18 approved projects amounted to R34, 46 million over a period of two years.

 

The economic impact of lockdowns resulted in the closure of businesses including SMMEs. There were delays in project implementation due to the impact of the Covid-19 pandemic, and there have been delays in the finalisation of projects. These provided challenges for the Booster Fund.

 

Mr Wolmarans reported that the total cost of all projects amounted to R31.5 million. 376 businesses would be assisted. The average cost per business assisted is less than R84 000. Jobs created so far from the 9 completed projects total 247. The costs of completed projects amount to R16.5 million. An average cost per job created amounts to R66 627.60. 59% of the businesses that were surveyed indicated increased revenues. The jobs sustained and created ensured livelihoods to employees and their families. 

The projects provided critical business development support which enhanced the ability of the businesses supported to sustain themselves during the COVID-19 induced lockdowns. The majority of the funding went directly to support the SMMEs e.g. relief funding, machinery, equipment, etcetera 

 

(A list of Booster Projects, costs and budget variances was shown)

 

Briefing by the Department of the Premier: Economic Procurement Strategy Feedback

 

Ms Nadia Ebrahim, Director: Provincial Government Supply Chain Management, Western Cape Treasury, informed the Committee that the purpose of the procurement strategy is to provide a unified transversal approach that is focused on maximising the economic impact of public procurement in the Western Cape, with a special focus on the development of SMMEs, businesses located in townships, rural areas and secondary towns.

 

The strategy is focused on creating greater awareness and understanding of the WCG’s overall procurement spend;  reviewing, continually reforming, and streamlining procurement processes and administration; establishing and maintaining a Community Vendor Database to enable EMEs to compete for specific contracts within their communities; strengthening data, its use and analytical capability within the relevant supplier database and across all WCG departments; and providing a strengthened capacity to scale-up focused supplier and enterprise development programmes to improve supplier performance.

 

The following were listed as small business interventions:

 

• SMME Booster Fund – In partnership with SMME support organisations and municipalities provide support and assistance (directly or indirectly) to SMMEs to maintain and/or enhance sustainability, develop the capacity of the business and/or the owner/entrepreneur with the objective to grow, expand and create jobs over time.
• COVID-19 Business Relief Fund to alleviate the economic impact on small and micro enterprises (formal and informal) operating in the Western Cape caused by COVID-19.
• COVID-19 Supplier Development Programme - to increase the capacity and ability of micro and small businesses who manufacture cloth masks, hand sanitisers, sanitiser dispensers (for example a foot operated dispenser) and those that provide disinfecting services.
• Long Street Kiosks –  12 month rent free trading space for micro businesses 
• Western Cape Entrepreneurship Recognition Awards - recognise and support the province’s most deserving and inspiring, high-potential entrepreneurs (increased entrepreneurship awareness and inculcates a culture of entrepreneurship).
• Pick n Pay Market Store initiative - the conversion of existing spaza shops within townships into independently owned mini supermarkets.

 

Ms Ebrahim concluded that the current projects implemented by the DEDAT are focused on the long-term sustainability and growth of SMMEs by creating access to economic opportunities for SMMEs and this links directly to the objectives of the Economic Procurement Strategy. The embedded Good Governance, Supplier Support, Data Integrity Enhancements and Electronic Procurement Enhancement implemented by the Provincial Treasury paves the way for the seamless implementation of the Economic Procurement Strategy and Implementation Plan by all departments to the benefit of SMMEs and the broader citizens. The intent is to relook at the strategy going forward to align to current economic context (Economic Recovery Plan post Covid-19 analysis) in view of further refinements to the strategy.

 

(Tables and graphs were shown to illustrate procurement regional spend, Western Cape supplier evidence bank, and SCM strategy linkages)

 

Discussion

Deliberations with the Department of Economic Development

 

Ms M Maseko (DA) commended the Department for the sterling work it has done and stated she has visited some of the projects it has embarked on and sustained. She further wanted to know why the Department did not consider allocating funding to other companies when funding to the two companies was cancelled due to the pandemic. Members heard that there was a

 

Mr Wolmarans stated that the criteria were applied to organisations supported. A public Call was made to all organisations and municipalities to apply for funding, using the media as a platform to advertise the Call. Clear deliverables were stated to all projects supported. The challenge was around being unable to give additional funding to all organisations.

 

Mr R Allen (DA) wanted to know how the projects were spread across the province.

 

Mr Wolmarans said the spread of the projects was across the province and this included the Elandsfontein mining project in Hopefield. He said the Department was currently finalising the adjudication of current projects which would come to an end at the end of this financial year. He said the funds provide a myriad of support to organisations and interventions necessary for the life of the organisation.  The provided training has proved not to work and that is why the Booster Fund is there for growth and sustainability. Members asked

 

Ms N Nkondlo (ANC) asked if the jobs created were new or existing. She also wanted to understand how the municipalities were selected for these projects and if the projects were part of LED.

 

Mr Wolmarans stated that 247 new jobs were created, 1 733 jobs have been sustained and retained, and 189 jobs and 239 jobs would be concluded by September and December 2021, respectively. The bulk of the funding went to small businesses.  No project administration costs were paid to assisted organisations. The Booster Fund had made it clear that administration costs would not be funded. He said that the Department has learnt that supported businesses have been trained to think differently. Mentorship has taken business owners along a different path to ensure sustainability and growth. Resilience has been witnessed amongst small businesses while there have been casualties along the way. He further indicated that the GIS mapping would be provided to the Committee on each municipality where an impact has been made. Unfortunately, that was not included in the presentation.

 

Mr D America (DA) asked what the difference is between assisted and sustained businesses and wanted to know if assistance was in a form of a loan or grant or subsidy.

 

Mr Wolmarans responded that most businesses were assisted through interventions, but some had to close down or downscale down due to the pandemic, especially ECD projects. The pandemic impacted heavily on the sustainability of the projects. He stated that the Department provides grants because supported organisations don’t have to repay the money. The Booster Fund is aimed at both public and private organisations.

 

The Chairperson wanted to understand how assisted organisations were selected.

 

Mr Wolmarans explained that when the Department evaluates a project, it looks at the risk to the Department and the impact of the project. These two things are taken into consideration before a support is given to any organisation.

 

Deliberations with the Department of the Premier

 

Ms Nkondlo remarked that the presentation was technical and difficult to understand as a layperson especially issues of procurement. She asked for clarity on the alignment of the procurement strategy to the BBBEE compliance and provincial recovery; and asked if the strategy is covering the provincial departments and their entities.

 

Mr Isaac Smith, DDG: Governance and Asset Management, Western Cape Provincial Treasury, stated that the policy is applicable to all provincial government departments and their entities. The Department is not in a position to dictate to the municipalities, but can only provide guidelines even though they adopt their own approaches. Whatever is done at a provincial space, it has to be done by the municipalities. When it comes to recovery plans, he said some of the procurement processes were focused on small suppliers to make things like masks, etcetera.

 

Dr Harry Malila, Director-General, Western Cape Government, added that the Provincial Cabinet approved the procurement strategy and adopted its approach. The Department has only got to work on the timelines to inform policy. The Provincial Cabinet is the custodian of the strategy and legislation would consider the BBBEE and preferential procurement policy.

 

Mr America wanted to know if there are any attempts to rehabilitate suspended suppliers on compliance so that they continue to provide services to the government, especially women and youth organisations; and he commended the Department for settling invoices within the 30 day period during this the time of the pandemic.

 

Mr Smith explained that according to the Procurement Policy Framework Act, the BEE levels that are targeted like youth, women, disabled, military veterans, emerging small businesses, and etcetera. Those are the targets of the Preferential Procurement Act. The Provincial Procurement Strategy is part of the implementation of the Act. The procurement environment has been refined because regulations have not placed emphasis on monitoring. That is why the presentation is about what the province has achieved in terms of the Act.

 

Ms Ebrahim stated that there was a workforce dedicated to manage suspended suppliers. Early warning messages are sent out and support is given within 24 hours to make sure compliance happens. She also noted that suppliers have to take responsibility for ensuring compliance, and that invoices sometimes ended up in the wrong hands.

 

Mr M Xego (EFF) asked for the breakdown of the 51% procurement owned by Blacks in order to understand the provincial demographics because “Black” is very broad and it is important to see who is benefiting. He wanted to understand the circumstances under which the Department failed to honour the paying of invoices within 30 days. He also enquired about the criteria being followed in the conversion of spaza shops by Pick n Pay because most spaza shops are foreign owned and it is not clear how the locals are going to benefit from this arrangement.

 

Dr Malila said he is prepared to engage with the Committee about the 51% issue and provide further details. He further indicated that the matter of BBBEE non-compliance would be taken up with the National Commissioner and the Treasury on the interpretation of the law. The legal issues are not completed as yet and communication would be provided to the community because the matter is still with the Department of Trade and Industry.

 

Mr Smith stated there are various reasons for the non-payment of invoices. It could be that the invoice is incorrectly done or the work has not been completed. In that case invoices are sent back to the suppliers for revisions. It was a small percentage of invoices not paid within 30 days.

 

The Chairperson asked for clarity between the BBBEE and Preferential Procurement Policy because there is no clarity which one is replacing the other or if they are complementing each other. He also asked for clarity on the relationship the province has got with spaza shops because Pick n Pay does not have the interest of the spaza shops at heart. That is why Pick n Pay wants to destroy them and monopolise the township economy.

 

Mr Smith indicated that the Preferential Procurement Act is the mechanism used by the National Government to give emphasis to the BEE Act and to drive suppliers to adhere to the BBBEE Act. That is why the point system is included.

 

Mr Solly Fourie, HOD: DEDAT, explained that the Pick n Pay model is an interesting one and it is a response to challenges faced by locally owned spaza shops. The model has proved to be a success in Gauteng. The Pick n Pay model is not a franchise one because spaza owners are still owners of their enterprises although they benefit from the Pick n Pay logistics chain. The model provides a wide range of choices because there are few malls in the townships and this is a supplier development model which enables spaza owners to be trained in a business model and to start introducing financial services products and create more jobs.

 

Mr Van Der Westhuizen asked if the 30-day invoice period starts when the invoice is received or signed off, or when the work has been done.

 

Dr Malila said according to the PFMA all invoices should be settled within 30 days on the assumption that the work is done and the invoice is correct. But if not, the invoice is sent back to the supplier for revisions.

 

Ms Nkondlo wanted to understand how local supply and demand capabilities are managed; and asked if there is interface between the province and the Treasury on the Public Procurement Bill. She asked how data is collected in the procurement system.

 

Mr Fourie said the Booster Fund is aimed at driving the supplier development programme so that suppliers can provide at a higher competitive level. The Department partners with Seda and Sefa to provide tools for businesses to improve their capabilities and deliver at a higher level and compete with big organisations. This would create sustainability for these small businesses going forward.

 

Dr Malila stated that comments about the Public Procurement Bill would be forwarded to the Committee and there is an interface between the Department and the Treasury.

 

Mr Smith said data is being collected but the system is still evolving. And not everything is on a central level. The systems are not fully developed but they do liaise with departments and were trying to make the e-procurement system an in-house one. Currently, the systems are done manually and were not able to monitor everything.

 

Deliberations with Casidra

 

The Chairperson remarked that it would be difficult to engage with the entity which presented a one page report that was not the same as the one sent to the Committee.

 

Ms Maseko said Casidra should explain what has changed from what has been sent to the Committee and what it presented.

 

Ms Nkondlo stated that if Casidra was not ready, it could go back and send the Committee a full report.

 

Mr Freek van Zyl, Casidra CFO, said that the one page report showed the reconciliation that was not mentioned in previous presentations to the Committee. This has got to do with the 17 issues mentioned by the AG for implementation. 13 of the issues indicate what has been implemented, and the remaining four are on-going.

 

Ms Maseko said the Committee wanted a detailed report and asked if Casidra wants to be given enough time to prepare for a full presentation.

 

The Chairperson suggested Casidra should go back and prepare a detailed presentation and send it to the Committee before engaging with it at a future agreed upon date.

 

Mr van Zyl admitted that he was new in the job and took full responsibility for the actions of the entity.

 

Committee Resolutions

 

The Committee resolved that the document that recorded all that had been done during the month of June 2021 would be circulated to all Members; further, the programme document should state what the Committee would be doing in the next coming quarters; and the Provincial Departments should send the Committee written reports about their BBBEE policies. The Committee also resolved that it should hold workshops with provincial departments on the BBBEE to understand challenges around non-compliance and to come with recommendations. Lastly, it was pointed out that a letter had been sent to the Speaker’s Office for the empowerment of Scopa Members and the response indicated it was the duty of the HR to provide Members’ with capacity training and that would happen in the next quarter.

 

Committee matters

 

The Committee considered and adopted its minutes of 25 June 2021.

 

Committee Quarterly Report (April 2021 – June 2021)

 

The report was adopted with no amendments.

 

The meeting was adjourned.