National Small Enterprise Amendment Bill: DSBD response to public submissions; with Deputy Minister

Meeting report

Ms Dipuo Peters, Deputy Minister of Small Business Development, commended the Committee for their excellent work in getting the public to participate in the National Small Enterprise Amendment Bill, especially on matters relating to the Ombuds and ministerial powers.

DSBD's response to public submissions on National Small Enterprise Amendment Bill [B16-2023]

Ms Thulisile Manzini, Acting Director-General, Department of Small Business Development (DSBD), said that the Deputy Minister had already made the introduction regarding the Bill.

Mr Mojalefa Mohoto, Chief Director: Enterprise Development, DSBD, took Member’s through the Department’s response to public comments on the Bill.

In Chapter 1 of Act 102 of 1996, which included the definitions, there had been a comment that it must include the word "federation". He responded that the definition for small enterprise organisations included "any federation consisting wholly or partly of such association and any branch of such association..."

There were submissions making the case that the definition of "enterprise" should also include household-based business entities. The DSBD's response was that the definition of a small enterprise included all separate and distinct entities, thus including household-based businesses and sole proprietors, etc. They were of the view that the definition was broad enough to also include sole traders and spaza shops.

The removal of subsection (a) from the definition of a "complaint" was suggested, on the basis that large enterprises could afford litigation, so small enterprises often ensure compliance with contract terms with large enterprises, but not with other small enterprises. Mr Mohoto said they were mindful of the fact that there were also contractual obligations between the small enterprises themselves. In terms of the compliance of the particular provision in the definition for compliance, they had narrowed the reference to "complainant" to the provisions of the Ombuds service.

The definition of cooperative enterprises as defined in the Cooperative Banks Act had been described as different from the definition that was actually encapsulated in the definition of the Cooperatives Act. The Department's response was that the definition of cooperative enterprises did not necessarily need to be conflicting. On the comment that permission for fair trade was not clear, and there was no clear understanding of what was meant by unfair trading practices, he stated that the conditions for unfair trading practices in terms of the Bill were set in Section 17, and it was very clear that the rights of small enterprises and the list of practices concerning small enterprises could be declared unfair trading practices.

Going forward, Section 13 of the Bill deals with agency powers and functions, and subsection (d) provides for establishing provincial structures to ensure the effective implementation of its functions. Then, in Section 17, there is the requirement that the Ombud should engage in educational activities such as workshops and seminars, and fulfil advocacy functions. He suggested that the Ombud should be part of the task force. In Chapter 3A, the Bill allows the DSBD to develop an appropriate administrative structure and national office, which could be expanded to regional offices when necessary.

See attached for full response

Discussion

Mr H Kruger (DA) said he would like to reserve his response to the Department’s briefing as he did not have any time to study it, and the Bill was very important for small business development and for the future of the country.

Ms B Mathulelwa (EFF) said she welcomed the briefing because it seemed like the Bill was passing. She had not heard anything in the report that was limiting, especially the submissions that were limiting the powers of the Minister. Her concern with the submission was why the powers of the Minister had been excluded from the report.

The Chairperson responded that Ms Mathulelwa would need to have her concern crafted the way she wanted it, and the legal team in the Department would assist.

Mr F Jacobs (ANC) said he shared Mr Kruger's sentiment on the importance of the Bill. He outlined issues that had come out clearly and had to be deliberated about, including the provincial composition of the board. He emphasised that there had been some quite significant, thoughtful, considerate and very strategic inputs from the key stakeholders.

Mr J de Villiers (DA) asked if there would still be a further chance to give written comments on the Bill. He was still uncomfortable with the powers of the Minister part of the legislation, as they were not clearly defined. He wanted to know what the Minister was trying to do with new powers that were not covered in existing legislation. He gave an example of one of the biggest problems raised at the public hearings, which involved complaints about illegal nationals operating and trading in a way that impacted their own businesses. He said that lots of current legislation should be better enforced, starting with border control and how border control was being enforced, which would help to deal with that problem.

He said that the South African Revenue Service (SARS) should ask the question of whether small enterprises were paying tax, if they were declaring their accounts, if the people working in these spaza shops had a legal right to work and start a business in South Africa, and whether the goods that they were stocking were legal goods. He emphasised that all of the problems around illegal spaza shops were examples of existing legislation that needed to be enforced in order to deal with the different problems.

He said that ministerial powers should never be allowed. From the DA's perspective, they wanted to support the Bill, but they could not support it if the reference to the Minister's powers was retained. He emphasised that ministerial powers were never part of what they had discussed as a Committee, and he did not believe that reference to the powers would survive, as they would not solve any problems for small businesses. He pointed out that the DA supported the amalgamation of the Small Business Finance Agency (SEFA) and the Small Business Development Agency (SEDA), and the role of the Ombudsman, but did not support the unknown powers that had been quietly and irrationally put into the Bill.

The Chairperson responded they were working as the Portfolio Committee, not as a political party. They could not come up with new issues involving the seventh Parliament -- they were in the meeting to listen to the responses from the Department. She emphasised that their duty was to put a stamp on the responses, indicate whether they were correct or there were some gaps, and then close the gaps.

Mr B Luthuli (IFP) said that the Department had made all their responses clear, except for certain powers of the Minister, which must be limited beyond what the Bill was saying.

Mr Kruger said the biggest problem that came up every time was the red tape hampering the ease of doing business. The second biggest problem people were speaking about was foreigners. Then, there was access to finance, the footprint of SEFA and SEDA, big businesses bullying small businesses, and  skills development challenges. The place to trade for informal traders in municipalities came up many times, together with favouritism, corruption of Department officials, the Minister's powers, rural development, local development, and lack of empowerment of women, youth, and disabled persons. He said the Committee and the Department needed to find solutions for all the problems he had mentioned. The DSBD did not address all the solutions for people involved in small businesses in South Africa and needed to introduce some section that would address the ease of doing business for small businesses.

The Chairperson said that the Committee did not have time and would request that it be given an orientation on how the Bill was being formulated to understand all the stages up to where they are now.

She said they agreed that the first objective was to merge the three entities -- the SEFA, SEDA and  Cooperative Banks Development Agency -- to resolve all those problems. She commented that she was uncomfortable with the response on the issue of board members, because it was clear from all Members in all the provinces that they needed to be represented. Mr Kruger had indicated it was a serious problem when people were not given the right to choose their representatives, and the Department just decided to appoint people to boards without consultation.

Deputy Minister’s response

Deputy Minister Peters said that once the legislation was passed and assented to by the President, the DSBD had a responsibility to look into the regulations, which would be the instruments that the Minister would be using to apply the legislation. She pointed out that one of the things that they realised as a ministry was that when things happened in informal, micro and small businesses, even if the Minister would want to intervene in that space, they would find that there were limitations. She believed the Minister needed to be empowered to be the true champion and custodian of matters. She emphasised that Members of Parliament needed to adjust the legislation in a way they believed or agreed on as a team, as long as the amendments or changes did not have financial implications. When the advertisement for the board went out, there would be requirements set down that would indicate that they wanted to achieve a particular objective regarding gender and provincial or geographic representation.

DSBD's response

DG Manzini said that the Deputy Minister had covered the areas, and asked the chief director and the team to address the technical areas.

Mr Mohoto said the Deputy Minister had referred to critical points regarding the provincial spread in appointing board members. He clarified that it was correct that when Department issued an advert for the appointment of the board, they actually had to include the parameters in terms of the kind of skills and persons they needed, and also the required provincial spread.

He said that on the issue of powers, the Act was very clear in terms of arbitrary powers, and it was already indicated in the particular provisions of the Act that it did not necessarily give the Minister arbitrary powers -- it simply enabled the Minister to have a say.

Committee comments

The Chairperson said that they were reaching a consensus that they agreed with the responses, and invited Members to engage with them.

The Committee Content Advisor asked if they were doing the amendments, because there was going to be a separate process for that when they did a clause-by-clause analysis of the Bill.

Ms Mathulelwa requested that Members dealing with the laws assist in putting the legislature right. She emphasised that after the Bill had been passed, there must be a limitation of powers, and the legislation must not mess up what had been good before.

Committee's fourth term programme

Members were advised that it was going to be a very congested programme, with timeframes very much squeezed. They were asked to avail themselves to ensure that the Bill was ready for the second reading in the National Assembly, and that the report was adopted. Some meetings would be held in the evenings, with the latest ending at 22:00. The Bill would be debated in the House on 6 December.

Mr Kruger said that he did not agree with the programme -- the process should not be rushed because it involved a future decision for small business development.

Ms L Lubengo (ANC) proposed adoption of the programme.

Mr H April (ANC) supported her proposal.

Mr E Myeni (ANC) stated that after the legislation had been proofread, it must come to the Committee so that they could make a decision based on it.

The meeting was adjourned.