Small Enterprises Ombud Service Bill: comments by Department on Private Member Bill

Meeting report

Mr R Chance (DA) referred to a written question which he had put to the Minister a couple of months ago about the process of replacing the Director-General when her term of office came to an end at the end of this month when she had indicated in that response that there would be a transitionary period. This implied that someone would have been found to replace Professor Edith Vries DG (Director-General). Bearing in mind the fact that there were two more days to go in this month, Mr. Chance wanted a response from the Department on whether it would update the Portfolio Committee on the matter. 

The Chairperson said that when she developed a program, she sat with management to deal with the program. She asked Mr. Chance not to hijack the situation by asking questions that were not posted to the Minister as part of the agenda. 

The Chairperson asked Mr. Chance to follow procedure by proposing an additional agenda item. She said he could propose an amendment to the agenda as this would be the normal procedure for meetings.

Mr. Chance then proposed that an item be added to the agenda in the form of an update coming from the Department.

The Chairperson communicated the proposal to the rest of the floor and said that this item would be dealt with at the end.

The Deputy Minister Mr Cassel Mathathe mentioned that the first speaker would be dealing with item number three of the agenda. He said that this was the Ombud Services Bill that was deliberated on last week.

He then clarified that Mr. Lindokuhle Mkhumane had been appointed as the Deputy Director-General for Enterprise Development and that this decision has not been rescinded.  

The Deputy Minister stated that the Department had structured the presentation in a manner that explained where the Department was with regard to the challenges facing small businesses.

The Deputy Minister then asked with the permission of the Chairperson, that Mr Mojalefa Mohoto, Acting Deputy Director-General: Department of Small Business Development proceeds to make the presentation on behalf of the Department.

Mr. Mohoto thanked the Deputy Minister, Mr. Mathathe. He greeted the Chairperson, the Honourable Members and colleagues. He said the presentation that the Department was making was structured in three parts namely:

• 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. 

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.

When the Department was engaging with the Office of the State Law Advisors, it was pointed to the fact that the Small Businesses Act was now the Small Enterprise Act given the review that was done in 2004 when the amendment of the Small Business Act was done to include institutional development particularly at the arrangement of the CEDA (Citizen Entrepreneurial Development Agency).

He stated that small businesses were the drivers of the economy and that since the promulgation of the National Small Enterprise Development Act, the Department had seen the economy move in directions that were unclear.

Referring to slide 7 he mentioned that this particular legislation was highly administrative. On slide 8 the Department emphasised the processes that were being followed. Slide 11 revealed that the Department was currently at the drafting stage.

Slide 27 noted that the majority of government departments did not make use of the definition of the National Small Enterprises Act. The Department wanted to harmonise the process.

The Department planned to finalise the Alternative Dispute Resolution Regulations by December 2018.

Discussion

The Chairperson said that she would like to make an observation that it was important for the Department to constantly report to the Portfolio Committee. The Committee acknowledged the work that the Department has been doing and could sense that there was also consideration on the Department side for the work that the Committee was doing especially in engaging with big businesses after having received complaints from small businesses.

She said that until the proposed Private Member’s Bill was proposed, the Committee was in the dark about what the Department had been doing and how the Department was relating to the work that was being done by the Portfolio Committee in assessing the problems that small businesses were facing. She stated that there was no communication between the two structures. The point she was making was that the Department and the Portfolio Committee needed to feed information to each other in order to appreciate the work being done by each structure. The Department and the Portfolio Committee were two different structures but they were both responsible for the development of small businesses.

She said that even the Portfolio Committee had a tracking tool which indicated in terms of the legislation whether the Department appeared in the ‘red’. This was important as it provided an opportunity for the Portfolio Committee to appreciate work that was being done by the Department. It was important to mention this before Members asked questions.   

Mr. Kruger said that he was sort of covered by the Chairperson’s inserts but that he was just wondering when referring to page 11, where a Draft Bill was mentioned by the Department. He asked why this Bill has not been seen. If there was one then it had to be on paper.

Mr. Kruger also indicated that the Department spoke about stakeholders and he reminded the Department that the most important stakeholders were this Portfolio Committee. He said that the Portfolio Committee had never seen a draft before and that it never knew a draft existed. He would like to see this draft.

The Chairperson responded by stating that the process of drafting a bill had been outlined on slide 8. The whole Legislative process was shown on slides 8,9,10 and 11. The Portfolio Committee only saw a bill when it was been tagged. There was no way that the Portfolio Committee would have seen this Bill. The same applied to the Private Members Bill that was presented by Mr. Chance last week which the Portfolio Committee had also not seen and only became aware of in May.

The problem here was that information was not being fed to the Committee. This would have made the Portfolio Committee aware of the work in progress done by the Department. If this feeding of information had happened then the tracking tool used by the Portfolio Committee through the BRRR Report and the Oversight Report would have then assisted and changed the progress of the Department to yellow. Yellow meant that work was in progress. It was within the Department’s interest to come and tell the Portfolio Committee about their progress to see if there might have been duplication of work or no duplication at all.

The Chairperson asked Mr. Kruger if he would still like to pursue his question.

Mr. Kruger responded that he was fine.

Mr X Mabaso (ANC) began by greeting the Deputy Minister and the Department officials. He expressed appreciation for the input made by the Department. He said that it showed that the Department appreciated the challenges faced by small business and that intervention was necessary. This also showed that the Department was not addressing the challenges that were facing small businesses adequately.

He asked about the map and the route towards the conclusion of this Bill. He asked further that the Department clarified whether there were any anticipated challenges.

In the second part Mr Mabaso noted that there were consultative processes where small businesses were disadvantaged when it came to consultations because when hearings were called it was big business that had the resources to attend, and small businesses struggled to communicate their views. He asked if the Department had taken this into account as a possible threat.   

Mr Mabaso also said that when something was implemented it should proceed in a way that rectified the anomalies of the past South Africa context.

He spoke about late payments to small businesses. This was now articulated in categorical order. It had become clear that small businesses were not going to thrive and succeed unless the penalties for late payments to small businesses were taken care of. He hoped that the bill would also take care of this matter regarding payment. 

Mr Chance referred to slide 16 and 17 where he said reference was made to a number of reports and studies. He asked who did those studies and whether they were commissioned by the Department. If yes, who did the work if it was not the Department itself?

Referring to slide 18 which was about the Integrated Strategy on the Promotion of Entrepreneurship and Small Enterprises Ecosystems, a study completed in March 2018, Mr Chance said that this had not been published and the Committee had been asking to see that report for many months now. This was critical to the functioning of this Committee and the Department.  This report and its contents should be made public and available particularly to this Department. 

Regarding page 21 and the proposed areas of amendment, Mr Chance said that this was a very long list which meant that it was going to make for an extraordinarily long Act.

The Department had said that it was not so much the regulations, but more about the enforcement of it. He asked what powers the Department or other entities had to revisit this enforcement.  He asked further what the penalties would be for non-enforcement.

Mr Chance read the following quote: “committing to creating small businesses access to markets.” He said that he did not know how this was going to be made possible by a Bill. He asked how the Department was going to give small businesses access to markets. 

He asked for clarity on the statement: “promotion of clusters and networks” as he did not understand what it meant. 

Mr Chance read the following quote: “sharing of credit information between financiers and credit reference agencies.” He asked if this was not the area of the National Credit Act that was opposed to the Small Business Enterprise Act.

This Act was extraordinarily broad and that it cut across so many areas, many of which were actually Money Bills that could only be implemented by the Minister of Finance.

Mr Chance indicated that he would like to get an insight on matters he has raised. He extracted the quote; “promoting entrepreneurial culture” from the presentation and asked how the Department was going to legislate this matter.  He advised that this could be put in a Preamble but asked how it is going to put in an Act.

Mr Chance referred to page 40 which spoke about the Payment Hotline managed by SEDA. He noted that this seemed to have faded into non-existence. He referred to the statistics given at the end of 2016 and asked what would happen after that.

Mr Chance referred to page 49 where the Department would have seen that the United Kingdom had set up a Small Business Commission. He asked if maybe the Department would like to be updated on this.

The other big elephant in the room was that the Cooperative Tribunal that was set up in 2013 was no longer in existence. All these things did not exist nor did the National Small Business Advisory Council which was legislated in the Act in 2004. Despite repeated insistence from this Committee, questions from this Committee and excuses from the Department, these matters mentioned still did not exist.

Mr Chance asked to be forgiven for being skeptical but the Committee was worried that promises made were not being kept by the Department. He then referred to the feasibility of Alternative Dispute Resolution Regulations by December 2018. He asked about the enforceability of these Regulations again. He asked further whether the Department envisaged the Tribunal being set up by 2018; but then he stopped himself and said that he could not see how that would be possible.

He asked if the Department believed that the Ombud Service had many if not all of the features of the proposal produced in this presentation

 

Mr. Chance’s final point made with due respect to the Department was that he was expecting the Department to attend this meeting with the Committee with the observations, criticisms and comments on the Private Members Bill that were tabled in May. He said that this Bill might as well not be in existence because not a word was said about it and no mention was made of it. He said that it was strange how the Department and the Committee seemingly moved as if they were on two different parallel universes.

Mr N Capa (ANC) asked if there was any indication that this Act originated under the custodianship of the Department of Trade and Industry (DTI).

Mr Capa asked if there were any concrete suggestions about what could be done to the Department since there was a delegation that the Department was part of that had ill-treated small businesses and big businesses. In this case what did the parents of the small businesses propose if they were also contributing to the victimisation of small businesses?

Based on the experiences that had occurred after the Act was proposed including the experiences had when meetings with big businesses were held, Mr Capa asked if there were additional mechanisms that were supposed to have been in place. The Committee had seen how the Department behaved and victimised small businesses.

Mr Capa mentioned that the last point may also conclude possible biases towards small businesses. This was positive discrimination. He said that this may anger big businesses but it had to be said. This point would only be meaningful when one found big businesses angry and complaining about the fact that something positive was being done for small businesses.

Mr Capa asked if there might be some incentives in the legislation that made small businesses feel safe to engage in businesses being assisted or being protected with some incentives.

Mr Capa asked what was expected from this Committee when this presentation was presented before the Committee.

 Mr T Mulaudzi (EFF) apologised for arriving late because he was attending another Committee Meeting. He expressed concern about the late amendment of this Act. He asked if the Chairperson remembered well when this Department was started on the first term of this fifth Parliament. At this time the Portfolio Committee had been trying to speak to the Head of the Department to adjust the legislation so that this Department could work properly. He said that he was very surprised now because this was the end of the fifth Parliament and it looked like the Department was only starting to wake up at the end and were now deciding to amend this.

Mr Mulaudzi said that during 2014 there was a suggestion by Mr. Mabaso about the naming of the Department and that the name included the word ‘Cooperatives’.

 

He said that if one looked at slide 28, the current processes were still talking about the sizes of small businesses. Nothing in this presentation was talking about enterprises except for in the first two slides.

Mr Mulaudzi asked why the department had taken so long to amend this legislation. He asked whether it was due to a lack of capacity. He said that this needed to be known so that there was a way that these processes could be completed so that they could also proceed to the next Parliament.

The Chairperson said that there was a question asked by Mr. Chance on how the Department would legislate the promotion of access to markets. It was the Committee’s understanding as members that there was a policy position that was pronounced by the former President Jacob Zuma during the State of the Nation Address for 2016 regarding access to the market. The issue of the 30% procurement of goods and services from small businesses was raised. She stated that this was how legislation was done. If one pronounced and made a policy that a 30% procurement of goods and services could take place then this was a policy. One had to check and follow up with the departments and the SOE’s.

Mr. Chance said to the Chairperson that she was 100% correct and that he was not disputing this. Those Acts and Proclamations were already covered in other pieces of legislation. The question he was asking was how this particular piece of legislation would provide for additional things. This was not a trick question.

 

 

The Chairperson stated that her understanding of the question asked by Mr. Chance was how the Department was going to promote access to markets. She has answered this question. She apologised if she misunderstood his question. The point she was making was that it was possible to legislate access to markets. It was not out of order to look at it from a small business perspective in terms of existing laws, and then ask if the Portfolio Committee felt, as the custodians, that the measures in existence were adequate enough to promote access to markets. 

 

 

The Deputy Minister Mr. Cassel Mathathe stated that responsibility should be taken by the Department as it had failed to provide an update. Providing information to the Committee assisted the Committee to effectively do its oversight thoroughly. In terms of the tracking process, the Department had been very quiet. Because the Department did not come forward with what they are doing, the Committee started a process of their own which was the proposed Private Members Bill. It was understandable why this had happened. The Department should take responsibility for having failed the Committee by not providing regular updates. A question that was justifiably asked was why the Department was not critiquing the Bill. This was not the message that the Department wanted to communicate to the Committee. All other Members should take initiatives where there was a vacuum and it was the Department’s initiative to make sure there was no vacuum.

 

 

The presentation given today did not talk to the content of the Amendment. Some of the issues raised were going to find expression in the actual Amendment Bill. Coming in late was not appropriate. It was August and the Department was already campaigning. He said clearly that this would affect the Bill and for this the Department should apologise to the Committee as it should not do things that would make it difficult for the Committee to conclude the work that it was supposed to do. The Committee would be happy if it was able to witness the Bill passed and it being made an Act even before the elections. The Department has noted what has been said and it would try and fast track the processes to ensure that even the Portfolio Committee was able to have a final say before the Bill became an Act. The Portfolio Committee had to be given the space to make their contribution.

 

He noted that the experience gathered by the Portfolio Committee over time was valuable and it could only benefit small business if the Department made sure that everyone was taken on board regarding the matters raised by the cooperatives.

 

Mr. Kruger said that if he looked at the agenda, it read: “briefings and comments of the Department on Small Business Development on the proposed Small Enterprise Ombud Service Bill”.

 

The Chairperson stated that the Deputy Minister has answered that. It depended on where your thinking was and your perception. The Department had put forward a broader perspective of transformation that needed to take place and the matters that needed to be considered. She also mentioned that the issue of bulling small businesses by big businesses became part of that broad perspective. The amount of work that has been done in looking at a broader perspective and what has been presented was one part of the work that the Department has been doing currently. The Portfolio Committee should not be of the opinion that the Department had not responded. If the Department was only going to respond to the Private Member’s Bill without communicating the broader perspective, the Portfolio Committee would not have appreciated the amount of work that the Department has done. Also the Portfolio Committee would not have become aware that the very same matter that led to the Private Member’s Bill has been taken care of in the process that the Department was involved in. This depended on whether the Portfolio Committee wanted to take a narrow approach to the presentation or whether it wanted to appreciate the work that the Department has done.

 

 

Mr. Kruger (DA) stated that he appreciated the work done and that was why he mentioned that the Portfolio Committee needed to know what the Department was busy doing. He reminded the floor about what Mr. Chance said that this Bill wasn’t mentioned once in the presentation. He agreed with the Chairperson, but what the Department should have done was to state that there was a Private Member’s Bill and say what it had done in the process.  Comparisons between the two should have been looked at too.

 

 

The Chairperson stated that Mr. Kruger was correct and the response by the Deputy Minister covered this. The Department had stated that they appreciated the Bill and that they did not want to undermine it. The only matter was the approach used in introducing it.

 

 

The Deputy Minister stated that the Chairperson had been very helpful and mentioned that Mr Chance had done an honourable deed in drafting the Bill. It would not have been appropriate for the Department to tell Mr. Chance that he should not have drafted this Bill. He should have done this. Mr Chance chose an approach that indicated where the Department was located as well as what the Department was saying. He advised that because as a Committee a decision had to be made based on what was discussed in order to assist the Committee further. He said that the Department being here was to help the Committee arrive at a decision. In light of what had been presented the Committee would have a session and deliberate on what the Department had presented in order to arrive at a decision. He said that the Department could not influence or advise a decision, it could only provide assistance.

 

Responses

 

Mr Mojalefa Mohoto, Chief Director Enterprise Development appreciated what the Deputy Minister had said in clarifying matters. He wanted to respond to specific matters, not the broader view of how the presentation took place. He said that Mr Chance’s questions had been covered.

 

Mr Mohoto said that on the matter of the threats experienced when embarking on a process, risks would be assessed and questions on what the mitigating factors would be against the risk would be looked at. This happened especially when a process which involved a lot of players that were outside of the Department was being handled. The Department should put some kind of mechanism in place.  In the process that was mapped for this presentation, the Department had looked at risk areas and threats in terms of overseeing the process.

 

Mr Mohoto said that in terms of consultation, Mr. Mabaso was correct that sometimes small businesses found themselves not being represented. The reason for this was that consultation at a provincial level was opted for so as to localise these consultations so that pertinent matters could be picked up before a national level was reached.

 

On the topic of the review of the strategy not being published, Mr Mohoto said that this was because the Department was still embarking on the process where it was agreed that this should be dealt with on a cluster level. He reminded the floor that this work was being done in conjunction with the Department of Planning, Evaluating and Monitoring. The latter Department had its own line-up process.

 

On the question of the existence of the hotline, Mr Mohoto said that it still did not exist. The only matter here was the financial constraints involved. The Department wanted to allude to the fact that as it had moved into a new era; a regime where the coming up with a proposal around the tribunal would factor in processes of the hotline. While the hotline was successful, it only touched on the matter of late payments. He said that the Department would also like to anchor some of these interventions within the tribunal concept. He agreed that the hotline was discontinued because of financial constraints. 

 

The Chairperson said that the questions asked by Mr. Capa would be asked when the amendment to the Small Business Act was addressed. She noted that Mr Mulaudzi had raised the matter of why the Department took so long. For this she said that she may need to go back to what happened in the meeting before Mr Mulaudzi had arrived. The observation made was that if the Department when called upon to report on the quarters had included this presentation, then there was not going to be a need for a Member to propose the Bill. Secondly the colours appearing on the tracking tool would have changed. She said that the Portfolio Committee should thank Mr. Chance for proposing this Bill as had he not proposed it, the Committee would not have known what the Department was currently busy with.

 

The Chairperson stated that there was a question that was asked by Mr. Chance about the corporative tribunal being legislated in 2013, and that it has not been established. She said that she wanted to assist Members to also take into consideration that when the corporative tribunal was legislated, this Department was not in existence. The Department was established in July 2014 and what then followed was the migration of the functions from the Department of Trade and Industry to the Department of Small Business Development, and the main focus of the Department was the establishment of the Department itself. It was not going to be possible for the Department to implement legislation that was promulgated in 2013 before the Department itself was established because it was going to be this very Department that was responsible for the implementation of the legislation. As soon as the Department was established, it embarked on the program review. This process was presented to the Portfolio Committee.

She said that it was important for the Portfolio Committee to acknowledge the transition of functions from the Department of Trade and Industry, including the implementation of legislation that was passed when the function was still with the Department of Trade and Industry.  The time it took to establish the Department of Small Business Development also had to be acknowledged as well as doing the program review so that the Department could then state what it continue with and what it would not continue with.

She explained that when the term of the Fifth Parliament ended and the Sixth Parliament was established; this did not mean that the work of the Fifth Parliament could not be transferred and continued to the Sixth Parliament. This was why a legacy report was done to handle these matters so that the matters of the Fifth Parliament that were still in process could then be move to the Sixth Parliament smoothly. 

The Chairperson stated that this has brought today’s presentation to a close. The Portfolio Committee would now have to engage on what was presented last week (22/09/2018) and what the Department has presented. She also asked what the Committee wanted to see moving forward and whether it would be continuing with the Private Member’s Bill, the Bill that would be coming, the Amendment of the Small Business Act 102 or whether the two would be brought together. 

Mr. Kruger stated that he had to sit here and make an uninformed decision on this matter because he did not know the position of the Department. Maybe the Department should lead the Committee here. He had also not heard from the Department in terms of the Private Member’s Bill and whether it was necessary. He asked the Department to give the Portfolio Committee, a yes or a no.

Mr. Mncwabe (NFP) in response to Mr. Kruger said that he was listening to the Deputy Minister when he said that the Department has presented and that it was now up to the Committee as the law makers to make a decision. He said that at the end of the day, the Committee had to make a decision. 

Mr. Kruger responded and said that he never said that the Department had to make a decision. His words were that the Department had to give the Portfolio Committee direction on whether the Bills would be put together or not.

The Deputy Minister stated that the Department would advise the Committee to allow the processes of the Department to unfold.

Mr. Chance said that the practicalities here should be weighed up with the possibility of the new Act being tabled during this Parliament. If it was not going to be tabled then he thought that the Committee did not have a choice but to proceed with the Private Member’s Bill. A decision should not be made today, that was not what he was expecting because of the hearings mentioned. The Committee’s decision should not be based on the promise of a Bill being tabled.

Mr. Capa reminded the floor of the question he had asked stating that now that there was a presentation by the Department, what was expected of the Department? He said that given the existing situation of parallel processes that were at play, this Committee should leave the Department to continue with that it was doing. The Committee should then discuss what the right thing to do was given these processes.

Mr. Mabaso said that Mr. Capa covered him because what should be avoided were parallel processes for the same objective. What should also be noted were the expenses that would be involved? The Committee should sharpen their minds and panel beat the positive matters that Mr Chance was pursuing so that they did not fall within the cracks of the Departments Bill. He stated that realistically the Department’s Bill was a broader account and Mr. Chance’s Bill was an element, but an element that would enrich the Department’s Bill.

Mr. Chance reiterated that the Department today had done its best to pretend that it had a Bill when in fact it did not have a bill. There was nothing close to being tabled and that for the record; this Committee would not consider a Bill in the current Parliament because there was no time for this. The Committee should take a decision to drop the Private Member’s Bill and postpone a very important part of the amendment of the Bill to the next Parliament which would probably be a further two years.

The Chairperson stated that what should be taken into consideration as a fundamental principle was that even the Private Member’s Bill emanated from the work of the Portfolio Committee. The Committee was also not aware of the work that Mr Chance had done. She said that the work of the Portfolio Committee was still a work in progress, and this was expressed clearly in the same way the Department was also still a work in progress.

She said the Committee needed to take a decision on whether it wanted to go on record as having passed a Bill that would repealed when the Bill that the Department was talking about would be presented, and then subject the new Parliament to a situation where it would have to repealed. She also wanted to correct one thing here that the Department has presented the work that has been covered for the amendment of the Bill and consultations have been conducted. The only thing that led to Mr Chance’s hijacking this process and introducing a Bill was that there was no information presented to the Portfolio Committee to say that this was what the Department has been working on. She said that this has been acknowledged in this meeting.

This was not going to happen; the Portfolio Committee had choices to make to figure out whether it wanted to come out with a done Bill or a rushed Bill. The Committee was still going to go through the very same process that the Department was undergoing and that was consultations as a Committee now not as Mr Chance. She said that this process would not be concluded in this term.

Mr. Capa repeated his proposal that the Committee should stop it here and go and have an agenda item that further discussed this.

Mr. Mncwabe supported the decision that the Committee stop it here. It was moments like these when there was confusion where each member was encouraged to consult their respective parties.

 Mr. Kruger noted that small businesses were the ones suffering in this regard and the little that has been heard from IT and the Communication industry was just the tip of what was really going on.

Chairperson said that the input made by the Deputy Minister had covered this matter. The Committee had to reflect on all the matters. The Department was asked to look at the broader perspective and then zoom into matters that could be regulated. She appealed to this Committee and said that she was glad that the Deputy Minister was present.  The lack of information coming to the Committee was the reason why the Committee and Department were in the current situation.   The Private Member’s Bill issued by Mr. Chance came because there was a lack of information by the Department on what they were doing, and it would have not been brought up if the Department communicated what it was doing.

The meeting was adjourned.