SMME Market Access Opportunities in response to Covid-19; with Minister

Meeting report

Opening remarks by Chairperson
The Chairperson welcomed the Minister. She expressed concern over the persistence and resurgence of the coronavirus. As leaders, they needed to assist the President and his team in dealing with the second wave, particularly alcohol abuse. She appealed to her team, the Committee, to work with the President whenever their input was required to curb the spread of the virus.

Apologies were made on behalf of the Deputy Minister who was unwell. A request was made for the Minister to be released earlier as she had to attend a budget meeting scheduled at short notice. The Chairperson said it is a must that the Minister or the Deputy Minister must lead the DSBD delegation by giving opening remarks before the briefing.

Minister’s Overview
The Minister of Small Business Development, Ms Khumbudzo Ntshavheni, said although DSBD is presenting this today, we are going to return to the Portfolio Committee with an update after getting Cabinet approval to table Economic Recovery Plan for the SMME sector to ensure Market Access Opportunities as arising from the Localisation Programme. The Department was in final consultation with the National Economic Development and Labour Council (NEDLAC) and other stakeholders. When lockdown closed the economy, informal and township businesses were allowed limited operations. This created an opportunity for the Department to avail opportunities for Small, Medium, Micro Economic Sectors (SMMEs) in the manufacturing sector to produce products for markets because townships and rural areas had been reduced to consumption-only areas instead of production areas. These opportunities propelled the Department to convert the townships into both consumption and production areas. As such, the Department was tabling what it has done through the Spaza and General Dealer Support Programme, in particular, and what it has enabled for the manufacturing space in identified product categories. She noted that the invasion of malls has not upgraded townships and rural areas to production areas.

The Minister said her Department was also working on trade markets which will be briefly referred to in the presentation. Reference was made to such markets in Nairobi, Addis Ababa, Angola, and Lagos in Nigeria that have been used by our people as automatic buying and trading places. These markets have empowered black people more than they did white people. People own and share spaces in these market places without the hassle of exorbitant rates and rent because of communal ownership. The market places are evidence that Africans were already traders in the pre-colonial period. As such, DSBD is reintroducing a similar concept with the guidance of the President.

Market Access Opportunities in response to Covid-19
Mr Lindokuhle Mkhumane, Acting Director General: DSBD, said that when the President announced the national state of disaster, DSBD and its entities came up with an economic recovery plan for the Small, Medium and Micro Enterprise (SMMEs) Sector. The Department was requested to devise various interventions that would be implemented beyond the lockdown period as part of the economic recovery plan. The presentation covered: Overview of Market Access Mechanisms for Economic Recovery; Wholesale and Retail Linkages; Township & Rural Enterprises and Informal Businesses as Critical to Market Procurement as a Tool for Market Access; Shared Economic Infrastructure Facility and Business Development Support (see document).

DSBD had made progress in the following areas:
- DSBD has facilitated the listing of 48 products so far with wholesalers. These feature as the basket of products most often purchased by spaza shops.
- To date, 78 SMME brands of the basket of 48 products are being listed by wholesalers.
- The wholesalers include Devland, Premjee and Sons, Big Save, Jack Morrison, and BIBI Cash and Carry. Negotiations are currently underway with other wholesalers across the country.
- Given that SMMEs need to increase their production capacity, they require funding and technical support to acquire machinery, tools and equipment. DSBD entities, SEDA and SEFA, have been mandated to provide these services so that the SMMEs linked to the wholesalers and retailers are able to produce goods that are of good quality and in right quantities.
- In September 2020, DSBD commenced discussions with retailers to also consider listing SMMEs as suppliers. As part of the localisation framework, more products will be listed with retailers such as Pick ‘n Pay, Spar, Clicks and other big suppliers such as Unilever and Tiger Brands
- Given the size of the market serviced by township / rural and informal / micro businesses, if well coordinated, these enterprises can serve as critical route to market for other SMMEs products (manufacturers and services). DSBD commenced a programme to avail critical market access to emerging producers as they prepare to replace imports in South Africa and grow trade with the African continent.
- Public Sector expenditure will be used to drive SMMEs through set asides and designation of specific goods and services for procurement solely from SMMEs.

Discussion
Mr Z Mbhele (DA) said the small business development plan presented covered all the key points. The Committee would easily support and promote it to give awareness to all the stakeholders on how they could contribute to it. He referred to the State of the Nation Address (SONA), where the President mentioned that the key pillars of the lockdown recovery framework would be a social partners compact involving government, organised labour, civil society, and other stakeholders. He asked if there were concrete thoughts on how DSBD can drive and champion the inclusion of small business and the items covered in the presentation within the social partners compact formulation and discussion.

Experience in the past two decades showed that in discussions, big business, big unions, and other larger players and their agendas comes to the fore and small business concerns are often excluded and undermined. Hence, the Minister as the head of this portfolio should be the advocate, voice, and champion of small business. Is that on the agenda and how will the Minister strategically represent the small business landscape and their concerns within the social partners’ compact discussion? To the DG, how would small and micro-enterprises be able to proactively come forward and avail their contribution to the supplier chains that are going to be facilitated in the discussions with retailers, wholesalers, and government department and their procurement plans? As Members, we get approached by small, micro emerging enterprises about marketing their products, but find ourselves clueless about the guidance to provide or referral to contacts.

Mr E Myeni (ANC) asked the terms and conditions for the 48 SMME products participating with the wholesalers? Of the 48 products how many are produced by cooperatives? What challenges did the Department come across in the listing of the emerging suppliers?

Prof C Msimang (IFP) commended the presentation because it gives practical items that should be happening in the market place. He was delighted because it should not just be theory but practical. As Members of Parliament we should be moving amongst our people doing oversight. MPs need to be empowered on how to respond to questions when approached by the public for guidance. How do we guide them and direct them to the places where they can receive this help mentioned in the presentation? Apart from the Small Enterprise Development Agency (SEDA) and the Small Enterprise Finance Agency (SEFA) premises in Durban, are there other premises? If there is, the Members need to know so they can direct potential entrepreneurs to those places. Due to the pandemic, many people who lost jobs have turned to small business and they need guidance. How does DSBD bring awareness to their potential clients? How do they meet and identify them to refer them to places of help?

Mr D Mthenjane (EFF) acknowledged Minster's presence stating that she needed to avail herself to the Portfolio Committee even in her busy schedule because this will show her commitment. Although the document was well presented, what matters is its implementation. He agreed with the Minister that our people have been suffering far too long. In the townships and rural areas, shopping malls have not improved the lives of the people and the spaza shops are worse off. Thus this plan could help. The DG’s point that SMMEs should start producing items such as government uniforms was welcomed. It has been suggested before, that the country should not depend on Europe and Asia when locals can do all this. Small items such as Personal Protective Equipment (PPE) can be produced by SMMEs. It was a good plan that will be supported nationally. However, the main concern was accountability. Who will ensure the implementation of the proposal? In the past, proposals from many Departments were not successfully implemented. Who is in charge, so that when it is not implemented, we can hold them accountable? The Committee does not support illusions, but practical activities that can help the people who are still suffering very much in our townships and rural areas. Women, youth, and especially people with disabilities are most affected. As such, accountability would ensure that Members practiced what they preached.

Mr F Jacobs (ANC) said there was a lot of well thought out processes in the presentation. The President in his SONA address referred to 1000 locally produced products procured from SMMEs. How long will it take DSBD to reach those 1000 products? Is the 48 part of that 1000 and how far are they with that? He noted that Covid-19 sanitisers and masks were listed but why were disposable masks not listed? He asked for a breakdown of the wholesalers per provinces in which each are working. He asked about the role of the big retail companies in the localisation process. Is there not a process around supply chain development for SMMEs that big retail companies must adhere to? What is that? Can you please share it with us? He suggested that if they are not coming to the party they should be asked to have a percentage of locally produced goods. How many women and youth businesses are impacted by these listings so far?

Mr H April (ANC) said it was true that empowerment was intentional and commended the detailed plan presented by the Minister and Department.

Response
Minister Ntshavheni thanked Mr Mbhele for the compliment and acknowledging the work DSBD was doing. In response to his question about social partners, DSBD was part of the arrangement. Starting with big business, the presentation referred to the engagement the Department had with the Spar Group, Pick n Pay Group, Massmart, already participating as wholesalers through Makro and Masscash, Tiger Brands, Clicks, Dischem, and many more. It was going to meet the food retailers, including McDonalds, KFC, and Tiger Brands as per agreement with Business for South Africa that big business must support government efforts. As such, big businesses committed available retail space. Some teams were already working with them and there were monthly follow-ups with the teams to monitor progress.

The Minister explained that it was for this reason she said her Department will get back to the Committee with a full localisation plan that will give the details of how big business was coming through both about shared space in their shops and their contribution to the enterprise development and supply development programme. The agreement was that they should complement the provision of shared space with ensuring that small businesses and cooperatives qualified to be on their shelves. The promotion and marketing of the products once they were on their shelves, and quantifying their budget contribution was also part of the agreement. DSBD will update the Committee on the contribution of big business in the programme. The Department was using its manufacturing scheme to contribute towards this and will update the Committee on this. There were also community stakeholders in the NEDLAC arrangements that are part of the social partners compact. Even if the products were listed and available in wholesalers, spaza shops, general dealers, and retail shops; however, if South Africans are not buying local products, there would not be any traction. The agreement with the community constituency in NEDLAC was that they would help the Department drive the “buy local” campaign so that would lead to a brand awareness campaign. This would encourage people to buy the South African brand. The Minister acknowledged the contribution of Brand SA who partnered with DSBD in listing some of these products on their online channels and in contributing to creating brand awareness about these products.

On how to get small enterprises to register to be supported and to participate in the scheme, the Minister said DSBD would provide the email addresses of everybody involved in the DSBD localisation team so they could be passed on to people interested in being supported to list their products. The Minister encouraged Committee Members to share the contact details. There would be an indication of the sectors/categories they work in so that people are sent to the right individuals. A breakdown would be provided in writing.

The Minister replied that the 48 products are not the end. There is the localisation framework DSBD has done which the Committee will be updated on after Cabinet approval. That is what the President was talking about. Over 1000 products have been listed and there were also 250 products the President mentioned that should be procured from SMMEs by the public sector. The Department has identified the 250 and was working with Government Technical Advisory Centre  (GTAC) and National Treasury in the process of getting them. The Committee would be updated on the 1000 products that DSBD already had and those that are earmarked for the export market and those for the import market from the African continent.

The Minister thanked Prof Msimang for his support. Given that his constituency is in the rural areas, DSBD would share with him its district champions. Apart from SEDA and SEFA that are all over the country, DSBD had designated each of its senior management – the Acting DG, Acting Deputy DG, Chief Directors, and in some instances, Assistant Directors – to an individual district as district champions. For instance, in KwaZulu Natal (KZN), for the Ugu District, Ethekwini, or uMgungundlovu the district champion can be contacted directly who could link one with SEDA and provide contact details to members of the public who need help. The champion will direct and share the journey with them. The full list would be shared with the Members.

The Minister noted that Mr Mthenjane was new in the Committee which explained why he thought she did not take the Committee seriously. The Minister took the Committee seriously and Committee Members were aware of her Cabinet engagement on Wednesday mornings. The matter had been clarified in the Committee and the agreement was that whenever matters required her presence, she had to avail herself. She has done that and made herself available when required. However, at times the Deputy Minister was available who she believed had the same capabilities as her. On accountability, both the Minister and the Deputy Minister were to be held accountable by the Committee.

The Minister pointed out that DSBD was not talking about plans, but about implementation – what had been done. The first round was during hard lockdown where it identified 48 products as the basket of products most often purchased by spaza shops. To date, 78 SMME brands of the basket of 48 products are being listed by wholesalers. The DG had referred to the discussion with government departments on uniforms. These included SAPS and the SANDF uniforms. For example, an agreement had been reached with the Minister of Police that 5 000 vehicles will be serviced by young motor mechanics and panel beaters at auto fitment centres supported by DSBD as part of the route to markets. Registration of motor mechanics has already commenced. We have the panel beaters, the auto fitment centres, including providing training to ensure they are certified by the insurance bodies so cars could be fixed by them and paid for by insurance companies. The Minister reiterated to Mr Mthenjane that the time of planning is over. For the benefit of the Committee, the Minister said the localisation framework and the implementation plan was going to Cabinet for approval by 17 November at the latest, and then DSBD will update the Committee on the details of that plan on a broader scale.

Mr Mthenjane felt that the Minister was becoming too personal and was intimidating him in the Committee. He warned her against that and involving other colleagues in driving a point. He was not the priority, the Committee was. The Minister should not dictate how Members seek clarity when they are allowed to do so. There is nothing wrong with asking a question but there can be a wrong way to answer it. He had the right to seek clarity as a member of the Committee.

The Chairperson said it was her responsibility to protect all Members. In the next meeting she will advise how Members are supposed to approach each other. She had no intention to talk on behalf of the Minister but addressed the Committee members saying that usually they should stick to asking clarity-seeking questions about the presentation itself. However, should other issues arise, Members have the right to raise them. It was not appropriate to attack each other as that is not the intention of the Committee. The role of the Committee is to do oversight of the Department. The Chairperson advised the Minister to respond by addressing the entire Committee instead of individuals.

The Minister told the Chairperson that in her conversation with the Member she should indicate that when he attacks her accusing her of not taking the Committee seriously, she is also a member of the Committee and will respond accordingly. She said the respect should be mutual.

Ms Yonela Solomon, DSBD Deputy Director: Monitoring and Evaluation, replied to the question about the terms and conditions in place for SMMEs when listing products for markets. When DSBD came up with the list it was looking at day to day food essentials required by households and bought from spaza shops. DSBD then entered into a negotiated pricing agreement with wholesalers and spaza shops that participate in the Spaza programme. The terms for listing include that products have gone for testing and been certified by the relevant authority in terms of safety standards, bar-coding, and appropriate packaging. Properly packaged products sell better than ones that are not. However, some wholesalers said as long as a product can move from the shelves, some of the conditions were waived, particularly certification, given that the majority of those submitted at the time had a problem with certification. This is on condition that they are given assurance about product composition by the SMMEs.

Ms Solomon replied about the challenges experienced in trying to list these emerging suppliers. Pricing was one of the key challenges. The wholesalers said locally produced products are costing more than the popular imported brands. Consequently, the SMMEs are referred to SEDA training on pricing strategy. The other challenges were quality, standards, and listing. The challenge with listing was particularly so with wholesalers in rural towns because most of them are foreign-owned. This created difficulties in furthering government’s agenda of promoting locally produced goods.

On how DSBD identifies and sources SMMEs and directs them to support centres, Ms Solomon replied that the introduction of the SMME portal as the main database for SMMEs to register on is DSBD’s main SMME source. Other sources include SEDA databases of SMMEs that are current clients and provincial government databases. These are the databases DSBD is currently using in consolidating and verifying SMMEs that are in production and when DSBD is conducting some due diligence.

On the progress made on the 1000 products mentioned by the President, she said there are 60 locally owned products by SMMEs that DSBD can confidently talk about and that it is mobilising and listing with retailers. Through its engagements with retailers and through expanding the sectors being covered, DSBD is confident that it will meet the target. It is a target that must be achieved by 2021.

On the breakdown of wholesalers by province, the presentation mentioned Devland, Premjee and Sons and Bibi Cash and Carry. There is Masscash, Makro, Jumbo Cash and Carry who are some of the major partners in this programme and have a national footprint. Premjee and Sons is based in Limpopo with some coverage in Mpumalanga and parts of Gauteng; Big Save is in Gauteng; Jack Morrison is based in KZN; Bibi Cash and Carry is in the Free State and Power Save covers the majority of the Northern Cape.

Ms Solomon replied that six products on the list were produced by wholly youth-owned enterprises.

Mr Mkhumane, Acting DG, added that 20 women-owned enterprises are supplying to the wholesalers we are working with.

The Chairperson was happy with the briefing from DSBD and looked forward to the further briefing as the Minister had indicated. She suggested that there should be coverage of all provinces including the rural areas. It will be heartbreaking to discover that some areas were not attended to when we go out to engage stakeholders. Addressing poverty and sustaining SMMEs would mean taking that route.

The minutes of the 21 October 2020 were considered and adopted.

The Chairperson stated that at the next meeting she would like to address the Committee privately on a matter that she feels needs addressing so that going forward, Members move with a common understanding. She thanked DSBD for the briefing and Members for their constructive contribution which showed commitment to their work to ensure job creation.

 The meeting was adjourned.