Chairperson, the answer to (a)(i) is that the risks that Khula is facing are essentially the same as those faced by any other lending institutions. Khula, therefore, needs to ensure that its credit passing and collection are in line with the lending criteria and benchmarked against similar development finance institutions. Khula does however understand the requirements of small businesses, perhaps even better than many other financiers. It is more sensitive to the requirements of small businesses and the problems that may result in them not being able to meet payment obligations.
The answer to (a) (ii) is that Khula does not presently make use of loadable funds.
The answer to (b) is that Khula is a development finance institution committed to providing finance to small and medium-sized enterprises, SMEs, particularly those that are unable to borrow from banks. Khula's risk appetite is therefore different to that of commercial banks. It is prepared to fund businesses that experience problems obtaining bank finance, namely start-up businesses; business in early phases of expansion; businesses that cannot provide collateral for their loans; and businesses requiring loans of less than half-a-million rand. Its priority target market includes businesses owned by women and businesses in the less economically developed provinces.
During the 2008-09 financial year, Khula disbursed R281 million to 2 829 SMEs, of which 36% were in targeted provinces. The main criteria Khula uses to determine whether it will lend to a small business is to evaluate whether the business will be sustainable. If necessary, it will provide mentorship to support and assist business owners in becoming established. Thank you.
Chairperson, I would like to thank the Minister for his illustrative answer.
Now, some banks such as Absa have revised their policy on guarantees issued by Khula to finance start-up businesses. The guarantee scheme offers up to R1 million in finance, but banks are unfortunately not willing to go that far. What plan of action does Khula have to close the gap, considering the economic crisis? Thank you.
Chairperson, I think hon Njikelana is quite right that, despite the provision of guarantees, this has not leveraged from banks the desirable amount of lending to small businesses, particularly small businesses among historically disadvantaged people. For that reason, while we are not abandoning the guarantee programme, we are actually launching Khula as a direct retail operation. So, it is going to move from being a wholesaler working through other intermediaries to providing direct services to customers. By the end of this year or early next year, the first phases of the roll-out of the Khula Direct launch should be completed.
At the same time, and in the context of a number of initiatives, including the continued discussions around the Financial Sector Charter, we are trying to press the commercial banks to increase their lending to small enterprises. It is however the category of between R50 000 and R500 000 that is a particularly hard nut to crack, but that is precisely the area where there are real opportunities for sustainable livelihoods to be created. That is why we are going to have to enhance the role of Khula. Thank you.
Voorsitter, ek wil die agb Minister bedank vir sy verwysing na die uitbreiding van Khula Finance na Khula Direct. Dit word voorgehou as 'n antwoord op die finansieringsprobleme van kleinsakeondernemings.
Met betrekking tot die vestiging van Khula Direct het die agb Minister nou ges dat dit moontlik aan die einde van die jaar sal geskied. In die lig daarvan dat die Kabinet reeds in 2008 verlof verleen het vir die stigting van Khula Direct, kan die agb Minister meer spesifiek wees?
Eerstens, hoe ver is daar gevorder met die implementering van Khula Direct, en wanneer sal die eerste entrepreneurs onder hierdie skema gehelp word?
Tweedens, wat is die begroting vir Khula Direct en die vestiging van hierdie program?
Derdens, hoe gaan die agb Minister verseker dat die fondse effektief aangewend word sodat die mees verdienstelike ondernemings voorrang sal geniet? Dankie. (Translation of Afrikaans paragraphs follows.)
[Mr A P VAN DER WESTHUIZEN: Chairperson, I want to thank the hon Minister for referring to the expansion of Khula Finance to Khula Direct. It is proffered as an answer to the funding problems that small businesses experience.
With regard to the roll-out of Khula Direct, the hon Minister announced here that it would probably take place at the end of the year. In light of the fact that the Cabinet granted permission for the establishment of Khula Direct in 2008 already, could the hon Minister be more specific?
Firstly, what progress has been made with regard to the implementation of Khula Direct, and when will the first entrepreneurs be assisted under this scheme?
Secondly, what is the budget for Khula Direct and the roll-out of this programme?
Thirdly, how will the hon Minister ensure that the funds are utilised effectively so that the most deserving enterprises receive preference? Thank you.]
Chairperson, I agree that, in terms of the timetable, we have been talking about Khula Direct for a while. One of the reasons we have had a bit of a delay was that we had to transition to a new CEO or managing director, MD, and that the new MD took his post on 9 July. Then there is also the question of the board. Notwithstanding those, I think we envisage that the roll-out will hopefully begin before the end of the year, if not, then early next year.
As far as the budget is concerned, even if I had the figures at my fingertips - which I don't, and that's not what was asked in the question - I'm afraid that I am not at liberty to disclose what budget decisions are going to be, ahead of the budget itself. So I cannot give any indication of that.
I want to say that we are aiming at the provision of direct access to the public. Small businesses that need finance should be able to approach the institution directly and make their case directly - that is what Khula Direct is all about - instead of having to operate through NGOs, intermediaries or through the banks. Now, those routes will still be available, but we think that Khula Direct will give greater access to the public. Of course, we are looking at this as an expanding programme as we move ahead. Thank you.
Chairperson, the IFP believes that successful small businesses and co-operatives are essential to the development and growth of our economy, especially in the current economic conditions. My question to the hon the Minister is whether there has been an increase in nonpayment during this period and whether Khula has measures in place to assist their customers who are struggling to pay back their loans. Thank you.
Chairperson, I think that question is actually one the hon member should consider putting down for a more detailed answer.
I don't have the figures with me right now, but I think it is probably worth putting that down as a real question, so that we can see the extent of this.
I am not particularly aware that there is a major emergency, but I do have a sense - as I suppose many hon members do - that small businesses are probably disproportionately affected by the crisis. I have been trying to see what we can do to find out the extent of this but, as far as I am aware, it is not particularly evident in defaults to Khula, but I do think it would be worth putting down the question so that we can find out the exact picture. Thank you.
Chairperson, despite what the hon Minister says, all the evidence seems to bear out that the terms that Khula gives are as onerous as those of private institutions, that the defaults are as high as those experienced by private lenders, and that the success rates - in terms of the performance of the companies - are as low. How will direct lending change this reality?
Chairperson, I don't think that direct lending is a magic bullet; I think there are some very important debates about development finance institutions which we still have to have.
If we want institutions like Khula to take more risk - in particular in a sector where the rate of survival of small businesses, from start-up to surviving the first year, is only about 50% - are we then willing to address the issues of financing in that kind of context? I think those are some of the bigger debates.
Direct lending itself will improve access to the products. Some small businesses obviously seek finance through intermediaries, but then the intermediaries also take their cut.
Some of the work, in particular work done by intermediaries through the banks, has been through the guarantee scheme. We had a long debate with the banks and at the end of the day the banks said that they did not want guarantees against defaults; they actually wanted other customers that they wanted to support. I think that indicates that there is a failure in the market and that there is a gap that Khula needs to fill progressively on an improved basis. Thank you.
Investigation into alleged inhumane treatment of farmworkers in Stellenbosch
125. Mrs N M Twala (ANC) asked the Minister of Agriculture, Forestry and Fisheries:
Whether, with reference to a protest by farmworkers outside Parliament recently, she or her department has conducted any investigation into the alleged inhumane treatment of farmworkers in Stellenbosch; if not, why not; if so, what were the findings of the investigation?