Report on Oversight visit to KwaZulu-Natal and Gauteng prompted by recent unrest; with Deputy Minister

Meeting report

The Chairperson opened the virtual meeting, welcoming the Members. She said that the Portfolio Committee is highly committed to addressing with the current situation of dealing with the ramifications of the recent civil unrest in the country. She commended the Department of Small Business Development (DSBD) for their response to the unrest that recently occurred and the work done during oversight visits. 

The Committee had held a virtual meeting to receive a detailed report from the Portfolio and Select Committees on Trade and Industry about a fact-finding oversight visit to KwaZulu-Natal and Gauteng and make recommendations to resolve matters.

Mr King Kunene, Committee Secretary, presented the Draft Third Term Programme for 2021 to Members. The Draft Third Term Programme was adopted without amendments.

Report of the Portfolio Committee on Small Business Development Jointly with Portfolio Committee on Trade, Industry and Competition and Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour Following a Fact-Finding Visit to Kwazulu-Natal and Gauteng provinces

The Committee Content Advisor presented the Report of the Portfolio Committee on Small Business Development jointly with the Portfolio and Select Committees on Trade and Industry following a fact finding visit to KwaZulu-Natal and Gauteng.

The Committee Content Advisor reported on the economic and social aftermath of the unrest, relief packages, objectives of the fact-finding visit in KwaZulu-Natal and Gauteng, and the composition of Parliament’s delegation.

Fact-Finding Visit to KwaZulu-Natal
The Committee Content Advisor said that the visits were localised to uMhlathuze Local Municipality due to the extensive looting in the area. The delegation was well received by the respective mayors. Committees were taken through a detailed presentation before visiting affected sites.

Regarding visiting sites, he said that Members observed the destruction of Nseleni Shopping Mall owned by black women. He noted that some of the small businesses operating in malls in Nseleni, Ngwelezane and Esikhaleni expressed concern over property damages and theft, which would not be covered by insurance. Esikhaleni was vandalised and looted before being burnt. He said that these sites were still undergoing further assessments.

In Ilembe District Municipality, the investigation focused on the KwaDukuza CBD and Shakaskraal where the delegation was received by mayors and local and district councillors and the Acting Chairperson of Illembe Enterprise. The delegation observed severe destruction to a local Checkers and ATMs that were looted and burnt.

In the eThekwini Metropolitan Municipality, it was found that the Port of Durban was completely shut down during the unrest. The Economic Development and Planning Committee (EDPC) issued a preliminary estimation of:

-More than R1.5 billion loss of stock
-More than R15 billions of damages to property and equipment
-More than 50 000 Informal Traders affected
-More than 40 000 businesses affected
-More than 150 000 jobs at risk to be lost
-Close to 1.5 million people are at home with no income due to this unrest
-The total impact to eThekwini GDP in the last five days estimated at more than R20 billion.

At Isipingo Informal Traders Storage and all visited sites, it was noted from interactions with small businesses that the Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency (SEFA) failed to offer assistance. The Committee was the first to visit the sites.

In KwaMashu, garages, shops and a pharmacy were looted and set alight.

Fact-Finding Visit to Gauteng
Cambridge Centre was the first touchpoint that was not operational and traders outside the mall were affected by the shutdown. Mayfield Square Mall and Sintonga Mall were also non-operational. Informal traders in Mayfield Square, Daveyton Square and Sintonga Mall were asked questions regarding the state of affairs and whether assistance was offered.

In the City of Joburg, cars were torched at used-car dealerships in Jules Street, Malvern. It was discovered that this was the origin point for the unrest that spread through Gauteng.

In Alexandra, informal traders expressed concern regarding issuing of licences and permits. Parts of
the Pan Africa Mall was observed to have been burnt.

At Jabulani Mall in Soweto, Dr Mike Nkuna, Executive Chairman and Chief Executive of Masingita Group, presented a detailed report on the extent of the damages in the mall. He challenged the City of Joburg to create initiatives to improve the trading conditions for informal trades.

In Kliptown, Soweto, many shops were looted and remained closed.

At Eyethu Orange Farm Mall and Palm Springs Mall in Orange Farm, looting, vandalism and destruction of property were observed. The malls were not affected by arson attacks, allowing for a faster recovery rate in this area.

Briefing by the South African Risk Insurance Association (SASRIA)
On 12 August 2021, SASRIA briefed the Portfolio on Small Business Development and Select Committee on Trade, Industry & Competition, Small Businesses, Tourism, Employment and Labour. In this meeting, issues were raised concerning the liquidity of the agency. It was also discovered that R3.9 billion has been invested by National Treasury to avoid liquidity issues.

It was observed that incidents were reported to a total of R12 billion in claims. It was estimated that the claims were not likely to exceed R15 to R20 billion. This indicated that SASRIA would be able to honour their obligations.

SASRIA decided that all claims below R1 million will be settled immediately without SASRIA approval to speed up turnaround times. SASRIA has considered increasing this to claims below R5 million without delay.

Committee Observations
Following the fact-finding visits, the Committees made the following observations:

-The Committees welcomed the government’s economic relief support to offset the impact of the unrest. They noted that approximately R20 billion of the financial aid will be by way of insurance claims through SASRIA.
-Small businesses not covered by SASRIA will be allocated R2.3 billion, which may not suffice to kickstart the economy from the effects of the pandemic and civil unrest. The allocation will be sourced via reprioritisation and reallocation of existing baselines.
-It was detected, throughout the site visits, that SEFA and SEDA were not present on the ground, and their products and services are almost not known nor accessible, especially by informal traders. The Business Recovery Support application form was found to be strenuous and complex, and some of the information or documentation required may not be attainable within a short space of time.
-It was predicted that, unless extraordinary measures taken, informal traders would miss the 20 August deadline for the Business Recovery Support application form.
-Application deadlines and various other applications would require differential approaches to see to the prevalence of arson attacks in KwaZulu-Natal, when compared to Gauteng.
-The Committees discovered that, while there is an interdependent relationship between traders and malls, many traders were perceived to be in direct competition with malls.
-In other areas, shopping malls are suspected of deliberately alienating informal traders from participating in the retail opportunity, where traders work on the periphery in conditions that are not ideal for conducting business.
-Outside Mayfield Square in Daveyton, Committees learned that informal traders are considered illegal since the spaces have not been set aside for trade by Ekurhuleni Municipality.
-Street vendors and informal traders have been noted to be perhaps the most regulated and the least protected; they are deemed to be trading unlawfully due to a lack of recognition and licenses.

Committee Recommendations
The Committees made the following recommendations to the Minister of Small Business Development:

SEDA and SEFA must embark on collaborative efforts with SASRIA to intensify financial literacy campaigns targeting small businesses and informal traders forming part of the Annual Performance Plan (APP). SASRIA is encouraged to expand its outreach programme, educate small businesses about its products and services, and introduce technology where small businesses can access cover direct from the agency;
The allocation of R2.3 billion was noted as inadequate. Committees must consider convening an urgent meeting with the Department of Small Business Development to resolve a host of issues;
SEDA and SEFA are encouraged to consider hiring graduates to physically call on informal traders to assist with dissemination of information and filling of application forms;
The Department should concretise and lead measures to improve relationships between the shopping centres, supermarkets and informal traders;
The Department must give a serious consideration to the reinstatement of the Shared Economic Infrastructure Facility (SEIF);
Working with the metro and district municipalities, the Department should scale up endeavours to lead the deployment of cleaners through Extended Public Works Programme (EPWP) to assist in cleaning the area as well as toilets;
Law enforcement authorities must hasten arrest of perpetrators;
The Department must accelerate the process of reviewing the Business Act (1991) or table a new bill before the end of current financial year.

Discussion

Mr G Hendricks (Al Jama-ah) appreciated the leadership taken by Municipal Management and the Portfolio Committee. He felt that the mayors in municipalities, SEDA and SEFA should have prioritised investigating into matters after the unrest.

Concerning issuing permits, Mr Hendricks called for a moratorium on the harassment, eviction and confiscation of stock until the matter has been sorted. He recounted that the President had wavered the need to pay for permits. He said that it is unacceptable that foreigners are able to obtain permits through bribery, while South Africans have to wait up to 12 months for permits.

Regarding SASRIA, Mr Hendricks commended the entity for its efforts. He felt that Parliament should offer a legal opinion on the damages in preparation for reoccurrence of this event. He said that the leadership of ethnic groups predominantly involved in the riots should be consulted to avoid placing the nation at risk. 

He said that SEDA has been rising to the occasion during the unrest. He suggested that the Minister of Small Business Development should issue a statement assuring that SEDA is on its way upwards and needs not be wary of go-slows, prevalence of subagents and kickbacks.

Regarding informal businesses, Mr Hendricks said that businesses need to be registered with the Companies and Intellectual Property Commission (CIPC). He felt that the burden of paperwork and permits should not lie with informal business owners. He was in agreement with the recommendation that the closing date should be extended.

Mr Hendricks said that there should be an action plan implemented by the sixth Parliament that assists small businesses, create jobs for the next generation to reach the nine million target and to create new revenue streams.

Regarding the R2000 grant, he said that it is vital that elders are prioritised when issuing the grant.

Regarding the SASRIA presentation delivered to the Portfolio Committee, Mr J De Villiers said that it is important to note the R50 billion total property cost. This could mean that there is R35 billion that would not be able to claimed by businesses, negatively impacting the economy.

Mr J De Villiers (DA) noted that the COVID Relief Fund administered by the DSBD through SEDA and SEFA failed to fully utilise the budget. He said that qualification processes were so stringent that it prevented small business owners from qualifying for COVID funding. This resulted in money issued by government not being spent. He felt concerned whether the same pattern would happen with the R2.3 billion issued by government.

He recommended that SEDA and SEFA must urgently develop a plan detailing how the R2.3 billion will be spent. He felt the money would greatly help informal traders, though they are prevented by red tape from qualifying.

Mr De Villiers expressed that many small businesses felt betrayed by the lack of protection from South African Police Service (SAPS) and Metro Police Services during the looting. He reckoned that the magnitude of the damage was completely unprecedented. He recommended that the Portfolio Committee create contingency plans for small businesses and entrepreneurs and assure them that law enforcement and SAPS will prepare for the eventuality of a similar event in each province.

He reported that business owners have expressed worry concerning justice being upheld against looters and people who have incited violence. He said that small businesses are looking to see the Rule of Law upheld against the architects of the looting, people inciting violence over social media and looters.

The Chairperson said that Officials are currently trying to catch the architects. She agreed that issues of security and rapid progress on issues of vendor permits should be included in the follow-up report for Committee oversight.

Mr F Jacobs (ANC) recommended that all relevant stakeholders should be invited to the response from the Ministry, DSBD and government. Stakeholders must have the opportunity to speak for themselves to the Committee regarding fairer economic systems that are inclusive of everyone.

He noted that many businesses have to operate in communities that are not receiving support from municipalities for a long time. He said that looting experience has created an opportunity for an economic reset where all communities have accessibility to support and licensing. He recommended that the Committee aid the economic recovery plan by gathering and fostering harmonious relationships between all stakeholders in the economy.

Regarding access to vendor licenses, he suggested that the DSBD employ South African graduates to assist in the paperwork and survey process in townships. He said that it is the responsibility of Committee to bring the municipalities together through local relief.

The Chairperson said that the Committee will have meetings with other provinces to address issues of empowerment and employment across the board. She said that it is imperative that the Committee and DSBD create strategies to create employment through collaborating with other Departments.

The Chairperson agreed with the notion to employ graduates and that delays should be sped up through creating learnerships to assist under-resourced communities. She reiterated that the Committee should investigate into budget expenditure to provide accessibility.

Ms B Mathulelwa (EFF) recommended that SEDA or SEFA ease the qualifications required to obtain permits, as they are not favourable to informal businesses.

The Chairperson agreed that application processes should be eased to allow for inclusive access to funds.

Deputy Minister’s Response

Mr Sdumo Dlamini, Deputy Minister of Small Business Development, appreciated the presentation and that the Committee is creating resolutions for the way forward.

The Deputy Minister indicated that a workshop would be held concerning issues raised in the presentation regarding SEDA and SEFA. He thanked the Portfolio Committee for the work done and assured Members that there would be harmonious work going forward to deal with the challenges at hand.

The Chairperson recommended that administrators assist the Committee to adopt the report and avoid the violation of rules. She reassured the Deputy Minister that the Committee would discuss the matter with the DSBD to see the follow-through recommendations and plans.

Mr K Kunene, Committee Secretary, said that the Committee must either adopt the report with the amendments and recommendations or redraft certain sections of the report and appoint another day to adopt it.

The Chairperson said that the Committee should vote to adopt the report with amendments.

The report was adopted with amendments.

The Chairperson requested that the adoption of minutes be deferred to the next Committee meeting. She then thanked Members for their efforts and responses to the unrest.

The meeting was adjourned.