SEFA & SEDA on Quarter 4 performance; with Deputy Minister

Meeting report

The Chairperson welcomed all the Honourable Members to the meeting and stated that the purpose of the meeting is to get briefings from Small Enterprise Development Agency (SEDA) on its Fourth quarter performance report, and the Small Enterprise Finance Agency (SEFA) its 2017/18 Fourth quarter report.

She stated that an item has been added; Parliament was supposed to go on recess next week but a week has been added. This meant that there will be a sit-in for Parliament next week where the meeting will also consider the Private Member’s Bill by Mr F Chance (DA). Initially there was not enough time to consider it so at the next meeting next week Wednesday Private Member’s Bill as sponsored by Mr Chance will be considered. He has done a presentation as well as the Department; the next meeting will be to deal with these matters to consider the Bill as the Portfolio Committee.

She mentioned that the Portfolio Committee’s study tour to Spain has been approved. The tour will be from the 15th September to the 22nd of September. The delegation is made up of seven members. These members included Mr X Mabaso, the Chairperson, Mr N Capa and Mr S Bekwa from the ANC. From the opposition it was Mr Chance, Mr T Mulaudzi (EFF), and Mr S Mncwabe (NFP). Proportional representation was used based on the ruling party, followed by the Democratic Alliance (DA) down to the representation of the smaller parties. A criterion of attendance in the Portfolio Committee was used, as was an indication of the longest serving members.  

Ms Mandisa Tshikwatamba, Chief Executive Officer, SEDA, submitted an apology from the board Chairperson of SEDA.

The Chairperson stated that the Department led by the Deputy Minister will lead the presentation. SEDA and SEFA are two structures reporting to the Department in this meeting. The reasons for this are that SEFA and SEDA are agencies accounting to the Department.

The Chairperson asked how the board of SEDA was structured. She also asked what the responsibility of the Deputy Chairperson was and why the Deputy Chairperson did not stand in when the Chairperson was absent.

Ms Mandisa Tshikwatamba (Chief Executive Officer of SEDA) stated that she could stand in.

The Chairperson asked what the responsibility of the Deputy Chairperson was.

Ms Mandisa Tshikwatamba responded that she could stand in.

Chairperson asked for an explanation on what the role of a Chairperson in an organisation was.

Ms Mandisa Tshikwatamba responded and said a Chairperson leads. 

The Chairperson then said that the Chief Executive Officer of SEDA cannot stand in for the Board Chairperson. The board performs the governance and you (referring to Ms Tshikwatamba) perform administration. She said this is the message that the Portfolio Committee is sending back to the board. She said that this is a message to SEDA that the Chairperson is not the only person who can fill in the governance role when the Chairperson could not make it. When the Chairperson cannot make it, the Deputy Chairperson assumed the responsibility.

Briefing by SEDA on their QUARTER 4 RESULTS FOR 2017/2018

Ms Tshikwatamba stated that the results in this presentation were the results before the SEDA was audited and they are different from the annual report. SEDA is still functioning fully according to its schedule for the year. The Ministry is playing its oversight role by selecting board meetings in which it meets with the board. She indicated that in terms of responsibilities for oversight and compliance SEDA has done everything that it was supposed to do.   

The Performance Highlights were as follows:

• 54,063 clients reached through provincial promotional and marketing actions.
• 12,827 clients supported by SEDA branch network.
• 3,605 clients supported through incubation various technology interventions.
• 1,563 new jobs created by supported incubators.
• 912 cooperatives supported through various interventions.
• Online portal developed and implemented.
• R26, 46 million worth of support leveraged from partners.
• 80.91% of SEDA budget allocated to core delivery and
• 632 clients exposed to innovation forums

SEDA has achieved an organisation performance of 84%. She said that there are areas where SEDA has done well and areas where SEDA has not done well.

Some new things were introduced including services that would be available to small enterprises. She indicated that SEDA was also completing key projects and one of the projects that were completed is the Basic Entrepreneurial Skills Development Program.

SEDA was working with a number of partners that it had secured in this financial year. Through this work and the work done with partners, SEDA has achieved 54 063 clients that have come to SEDA’s network and SEDA was doing the same through promotional advertising marketing activities. There has been an introduction of an online portal system which was completed in this financial year. Partners have been signed in terms of projects that are in line with our mandate.

Areas of concern and corrective action:

• Number of clients accessing SEDA services online
  • The underperformance was due to delays in getting the online portal ready. Now that it is fully operational, marketing efforts should result in improved performance.
• Number of informal business accessing SEDA services
  • This relates to the Basic Entrepreneurial Skills Development programme. A number of clients dropped out of the programme before its completion as they expected to receive a cash grant at the end of the programme. The programme has come to an end.
• Percentage of persons with disabilities employed
  • Assessments of current offices have revealed challenges in accommodating people with disabilities. Terms of reference for new offices being revised to incorporate disability friendliness.
• Percentage of stakeholders engaged SEDA has identified 115 stakeholders that it needs to engage with. While discussions on collaboration with many of these are underway, only 25 of these have been reduced to memoranda of agreement

SEDA has secured projects to a value of R26 million through resources.  SEDA has made sure that more money is spent on core delivery, clocking R80.1 million in terms of budget allocation towards core services. She said that SEDA has also been exposing its clients to different forums and with the innovation’s forum SEDA has managed to expose 632 clients. She indicated that SEDA has reached 64 municipalities. It has also been providing a services desk.

Briefing by the Small Enterprise Finance Agency (SEFA) on their QUARTER 4 Results for 2017/2018

Ms Reshoketswa Ralebepa, Acting Chief Executive Officer, SEFA, said that based on performance ending March 2018; there is a mix bag of performance, developmental targets, youth, women and rural areas. SEFA noted that it is lagging. She indicated that there are three main areas where the targets have not been met.  There have been approvals for tightening of criteria. She said there are high levels of maintenance. She stated that 53% of the quarter four target has been reached. 

Significant achievement for the quarter:

• SEFA has achieved 116% of the quarterly targeted approvals and 174% of the disbursement target.
• A total of 2693 enterprises were supported and have facilitated 3723 jobs into the South African economy.
• The total sefa loan approvals as at 31st March 2018 stood at R446 million against the annual target of R770 million.
• The total disbursements at 31st March 2018 were R1.3 billion against annual target of R645 million.
  • Out of the total disbursements, R902 million was to Black-owned SMMEs, R46 million to Township based SMMEs, R416 million to Women-owned SMMEs and R204 million to Youth-owned enterprises
• The low economic growth environment had a negative effect on SMMEs and Co-operatives sector and consequently on the sefa loan book performance.
• The Marketing and Communication Division continuously embarked on an awareness campaign of sefa brand through regional initiatives and advertising including community radio stations in an endeavour to improve the visibility of sefa.
• Furthermore, sefa employees were provided with training on brand Awareness as well as Fraud Awareness during this period.

In terms of loans, Ms Ralebepa said that the paying back system has been around for six years bearing in mind the whole issue around capitalisation.

Regarding the IDC LOAN it is for specific types of interventions where it is guaranteed that the loan will be paid back.

Discussion

Mr N Xaba (ANC) thanked the Chairperson and said that in the main he will be seeking clarity and evidence supporting the report. He stated that he concurs with the Chairperson’s instruction that the presentation be allowed to be led, as without leadership work is not done properly. He stated that on page 7 Ms Tshikwatamba made mention of confusion in terms of the figures mentioned, 27 against 25 and asked for clarity on this.

He mentioned the performance highlights which were located towards the middle of the presentation where SEDA was talking about women and men, but then in the breakdown in terms of motive forces and having created new jobs, youth, women and disabled persons were also mentioned. He asked for an explanation about this. He also asked about the long term and short-term jobs because some could be history and some were still not sustainable.

"In your presentation towards the middle, SEDA was talking about the involvement of women and men. However, the breakdown in terms of the motivating forces and the creation of new jobs; the youth, women and disabled persons are only mentioned. He asked for the long term and short term intentions behind these job allocations as some of these jobs given to these mentioned persons are not sustainable and one would find that some job posts were only ever created for presentation purposes, after the presentation, one would find that they do not exist."

He then referred to slide 9 which was about the implementation of informal and micro enterprise development programs and asked Ms Tshikwatamba if she had said it was 731 or 2731 beneficiaries. 

He referred to the 18 coaching sessions held in Kwa-Zulu Natal and asked whether the amount is 477 or 373.   

He referred to slide 11 which was about SEDA’s Client conversions. He asked if there are archives of the people reached during these briefing sessions, or a head count or was there perhaps some other kind of evidence that can support the figures mentioned. He said perhaps this is just about doing good reporting because it will assist at some point.

Slide 18 referred to SEDA’s delivery network. He asked if the database was in existence or if this network can be called because in the Eastern Cape he felt that the SEDA branches could now be seen. He said that he would like SEDA to give more contact information on their slides so that the Portfolio Committee would be able to call and check if these places are operational.  

He then referred to slide 20 under the Key Human Resource figures where it was mentioned that the entity is losing staff due to staff taking opportunities. He asked if these are external opportunities.  He asked if these opportunities are related to the SEDA entity or external opportunities because if the opportunities that are taken are the services the Department seeks to give the communities then it means that all the staff will be lost because the staff will be doing work for themselves and then when resigning they will have benefitted from the post in the Department. It meant the staff was developing themselves from this entity. He says that this is not bad but it was an excessive trend.

He said that the SEFA had key information in their presentation in terms of having the locations available on the presentation. One could have taken this presentation as a good example compared to the other two presentations. The presentation has revealed that even though numbers are not understood, they will be explained well and clear in the presentation.

He referred to slide 12 where it was indicated that 600 000 disbursements has not been allocated. He asked if this could be elaborated upon.  

Mr Bekwa (ANC) referred to slide 9 regarding other performance highlights where the presentation stated that there are currently 64 municipalities and partners. He said that if he can remember well the last time it was said that the collocations be extended to the rural areas. It was also mentioned that other offices could be used so that people from rural areas can also be a part of this. He wanted to find out if when referring to partners, SEDA meant the Amakosi (Chiefs).

He referred to slide 14 which had the performance and key client demographics. He asked if the percentage mentioned for people living with disabilities was really a true percentage figure. He asked if the percentage is a true reflection if one was looking at South Africa in the larger sense. He said that even looking at the black-owned percentage, this means that there have been a number of jobs created, and he asked if this is a true reflection and not just a presentation.

He said that the Portfolio Committee is looking at impact. SEDA and SEFA have achieved this but were the presentations a true reflection of what was happening on the ground.  

He said that the SEFA presentation was okay. He referred to slide 12 on the developmental impact provincial spread and stated that he is looking at the Northern Cape and Kwa-Zulu Natal figures on the number of enterprises.  He asked why the Northern Cape was having 22 and Kwa-Zulu Natal 363 enterprises.

Rev K Meshoe (ACDP) had a question for the SEDA and referred to page 8 where it stated that there are 912 cooperatives. He asked for more information regarding the kind interventions in place here. He then asked that more information be given regarding the 612 clients exposed to innovation forums. He asked how this exposure is done.

Rev Meshoe referred to slide 12: the number of informal businesses accessing SEDA services and he noted that a number of clients had dropped out of the program before its completion because people expected to accept a cash grant. He asked why they just dropped out and whether there was a promise made to them that was not kept.

He said that he had one question for SEFA under slide 11, under Development Impact. He said that the number of financial enterprises in the townships is very low. He asked for an idea why this happened when a place that needs so much help is receiving so little assistance. The township economy is one of the key elements to economic growth.

Mr Chance (DA) thanked the Chairperson and the presenters. He stated that he wants to deal with the generalities starting with the bad news that came out yesterday about South Africa’s (SA)  economy which revealed that SA was in a recession for two quarters in a row.

He indicated that obviously the period that SEDA is reporting on only includes the first quarter as the economy reflects. The economy is in a very weak state and it is certainly reflected in SEFA’s results. He stated that South Africa is facing a serious situation and the mandate of this Department is to be the prime stimulant for the small and medium enterprise sector in this economy which is expected to generate 90 % of the jobs in the future. When he looks at the impact and the fact that SEDA has facilitated a couple of thousand jobs, SEFA has facilitated 45 000 businesses and somewhere around 58 000 jobs, he thinks that South Africa is still only scratching the surface.

Mr Chance said that this Department had a minimal impact on the great need to grow the economy.  A while ago the Committee had advised that client performance had to be tracked over time. He said that the Committee still has not seen this. The Portfolio Committee does not know that the businesses that SEDA are supporting are the same that they were supporting in the last quarter, and the quarter before that. He said that the Committee does not know that the business SEDA and SEFA are supporting are small enterprises, whether they are starting up or closing down, nor does the Committee have any idea about the long-term impact of both entities’ work. These are the things that the Department should be researching with regard to the economy.  While SEDA and SEFA are doing their thing and reporting they are missing the big picture. The most worrying slide was the slide indicating the payment rate of loans. By his calculation 60% of SEFA’s total loan book has 180 day old loans or more. Any financial institution with a loan that is 180 days would write it off.

The Future of SEFA is a growing concern, as it is dipping into their reserves. SEFA cannot just hide all these figures. The Minister of Economic Development Ebrahim Patel, and the Minister of Small Business Development Lindiwe Zulu had to have a sit down. SEFA is wasting their time. He asked if SEFA even knew that those clients existed. How much information can SEFA give about these loans and about the 84% of loans that are 180 days and older?  He indicated that the loan book should just be written off as SEFA is just wasting their time.

A question applicable to both SEDA and SEFA refers to their BEE status which both failed to report on. He said he knew that SEFA and SEDA have been trying to get accreditation through the DTI so that they can tap into enterprise development funds. He asked for an update on this and then for SEFA to report back on the status of the township industrial parks about the transfer of ownership. More importantly he asked whether SEFA has budgeted for the appointment of the service provider to assist in the management and handover of these properties.

Mr X Mabaso (ANC) said that his first questions are running across the two entities regarding people with disabilities. How closely does the Department work with the Department of Social Development? There is supposed to be quite a fluid relationship between the two because disabilities differed in terms of degree and one may find that there are many people dealing with disabilities, but if they got support from SEDA and SEFA they would easily come out of the Department of Social Development’s register.

There are challenges like in Soweto in White City where there is a conflict between South African owned and Foreign National owned Spaza shops. He asked if SEDA, SEFA and the Department have analysed this matter and allocated their roles to this as this is something that falls very close to this Department.

He asked about the industrial parks. This was also asked by Mr Chance as to what support there is and whether it can be confidently said that industrial parks are a success. Are the entities mentioned playing a role or not?  If it happens that SEDA and SEFA are not playing a role then can it be said that these entities are aware of these challenges and are doing something about it? He said that by now, other regions, towns and villages should be spoken about that do not have industrial parks and it should be  figure out how these places are going to get industrial parks. He indicated that before this point is reached, the existing industrial parks’ success rate should be regularly monitored to see if a positive impact is being made. He said that if there is failure on the industrial park level then the same pattern will occur when it comes to small and medium enterprises.

He asked that when it comes to specifics as shown on slide 8 in the SEDA presentation that 912  cooperatives were supported through various interventions. What was the geographic spread on this? He was not asking for an exact number but just so that the Portfolio Committee could visualise the 912 figure divided across the country.

He referred to the second bullet on slide 9 and asked what was the feedback from the clients that went to exhibitions, have they gained anything and if so how was their gains measured. 

On slide 11 he noticed a big dichotomy between the first and last bar graph. He asked what accounts for this and did this mean that the people that attended the workshops were not able to be captured and converted to real economic participants. He asked for a comment here.

On Slide 13 he noted that Gauteng is the lowest there with a number of 888. He asked himself since Gauteng is industrialized and heavily populated, why is the impact not showing on the graph and what accounts for this. 

Regarding people with disabilities, he asked if there is a rapport with the people from those organisations. He remembered that there was a stage when he gave the Deputy Director-General (DDG) some leaders of organisations pertaining to people with disabilities. He connected the DDG with a National Leader and stated that there is no reason to struggle because persons in these organisations are organised. He asked if the relationship with these organisations was retained.

He indicated that looking at the number of entities financed in townships, he is worried because this number must be further divided by the number of provinces and municipalities. He said that the number at the end of this could be an embarrassing number of there were only two entities in an entire municipality.

He referred to slide 22 and asked how successful the enterprise was and if it was applied all over the country. He asked further if it could be safe to say that the model is successful.

Mr Capa (ANC) thanked the Chairperson and stated that his comments and questions regarding SEDA will be overlapping with those already asked.  He asked SEDA for clarity regarding the collocation of partners and partnerships.

He said that he is concerned with the evidence of collocations on slide 9 because he stated that at some stage the Portfolio Committee was concerned with the visibility in the townships and rural areas. The other concern was on slide 18 with branches and supported incubators where conspicuously there will be 14 branches in the Western Cape but in other branches in other provinces there will only be 4. 

He said lastly in both entities, it would be interesting for them to explain the shortcomings experienced and also indicate how the situation can be changed. He wonders why there is no indication of a relationship between SEDA and SEFA as if the entities do not belong to the same department.

Responses

Ms Mandisa Tshikwatamba thanked the Chairperson and said that the various executive managers of SEDA will also be responding on SEDA’s behalf.

She said that the explanation of slide 7 on the target numbers to the template that was received from the National Treasury gave a sense of a strategic indicative area. This was the main output area but alongside that SEDA has to give the actual APP Indicator so there have been two areas against the strategic indicative area. She said that there was more than one APP indicator that SEDA had to report against, the bigger one has 25 and SEDA has reported against 25 specific but the actual performance achieved is 21.

In terms of slide 9 the actual figure is 2137 applicants that have been approved and for that number of applications, the amount is 24,7 million that will be spent on goods for the applicants.

Regarding the delivery network she confirmed that they are existing service points. She said that SEDA is also enlisting these service points on their website and that these points are branch and core service points.

She added that she could say in some areas the SEDA branch is not quite there, as it is dominated by a main post. But currently SEDA is setting aside a budget where it could core brand.

The Chairperson said sorry and that she will keep on interjecting to simplify, clarify and explain the point of the questions.

She said that the question in relation to collocation is more related to the accessibility of SEDA to where its services are mostly. It also takes into consideration that SEDA moves in where their services are required.

The use of an existing structure in a rural area is important for example where a doctor will utilise a building of the African National Baptist Church. She said that this is the question asked by Mr Bekwa; when you are talking about these collocations do you take into consideration the lack of urban infrastructure in a rural set up and understand that there is existing infrastructure that can be utilised or provided as infrastructure?

She stated that the other infrastructures that can be used are the community halls built by this Government that are underutilised.

There is no member of the National Assembly, NCOP and Ward Councilors who do not have a constituency which can also be used as infrastructure. 

There is no community that does not have Church Buildings that are only used on Thursdays for Umanyano (Women’s church group), Sunday for church and other church services.

She said that there is no community that does not have existing infrastructure and that Mr Bekwa said that the Government should be looked at as being part of the community.

She said that the Portfolio Committee wanted responses that understand how the community is structured and what infrastructure is available in the community in order to be used. She said that in the rural areas there are no urban structures, but services can be provided in those areas as there is an alternative structure that can be utilised. 

Ms Tshikwatamba said that to a limited extent, SEDA goes to some of the areas mentioned through their mobile services. The number of mobile programs done is done through outreach teams, marketing officers and that is where one would provide the information services.

Ms Tshikwatamba made an example of when she was meeting a church community where they provided information regarding SEDA services.

Chairperson asked that Ms Tshikwatamba to use community language and explain what mobile services meant.  

Ms Tshikwatamba said that to complete that part SEDA has mobile units which are caravan type of units and that they are branded.

Chairperson said that instead of spending money for services, money is paid for caravan service. There are so many places and buildings that can be used by SEDA, but instead of spending money providing a service, money is spent on caravans. She said that in an area that has a church and a Parliament constituency, a community hall and a tribal constituency hall, SEDA pays money to brand a caravan instead of paying money to provide a service.

That is what the Portfolio Committee wants SEDA and SEFA to be, they want the entities to be explicit in stating what these mobile services do that they are providing.

Deputy Minister Cassel Mathale apologised for interjecting, he said that the Portfolio Committee should note that with SEDA this is what has been taking place with regard to outreach and going to areas that do not have offices. The Committee says there are facilities which are underutilised, and in SEDA’s response it has used a tribal office or church when available, but there are also instances where there were no facilities.

He said that the Department can note these things and how it has been providing the services, and take the comments from the Portfolio Committee on how best to expand further on what is being done.

He said that SEDA must not try to be where it is not because the intention of interaction is to report what SEDA is actually doing and to highlight its shortfalls.  The intentions of the Department is to just serve the most remote part of South Africa including the mobile truck cell phone services that can be online and that can reach any part of the country provided that there is a network in that area because technology can also help the Department reach areas that it could not reach before.

Ms Tshikwatamba said that with regard to staff losses there are actually three things here; people are leaving SEDA either to join other developmental agencies or to join other corporate development support networks. If there are people who go out and do a business of their own, it has not been a business involved in developmental interventions. People who leave SEDA do so and start their own businesses in the form of a coffee shop, or an enterprise. When this happens, the entity feels that they have contributed further.  This is what also motivated SEDA to prioritise and work with the municipalities with their training mechanisms and other services that could be supportive. She said that losing staff does not come from the money that they pay the staff but it is more about the traveling involved with SEDA that is expensive. SEDA aims to go out and reach the masses and this requires quite a bit of traveling.

She stated that the question on whether people were promised money should be cleared, they were not promised any money.

The Chairperson stated that if the Chairperson was here then SEDA’s policies would be noted as not appealing to the people in need of them because SEDA develops their own policies.

She said that there are realities of the target groups that SEDA is dealing with where for example they can’t afford to use the resources at home in order to be presentable.

The Chairperson also stated that this is not SEDA’s money; it is the tax payer’s money. 

The Deputy Minister said the SEDA is aware that another route should have been used where they give a stipend to persons taking part but that there is nothing wrong with what SEDA and SEFA were doing. SEDA can take suggestions given and use them to become wiser. He stated that if SEDA handles it that way, it will become wiser.

SEDA should take the Portfolio Committee as a mirror and look at themselves and see what it usually sees, but then it should notice the blind spot which only the mirror can reveal. She said that this is the work of the Portfolio Committee, to reveal the blind spot. The Portfolio Committee is there to assist SEDA in seeing how they address policy changes and developments within their entity.

Ms Tshikwatamba said regarding their BEE status currently SEDA has finished their 58% verification rounded score, however the categorisation gives SEDA a non-qualifying score. The current situation with SEDA is that it is trying to correct this. When SEDA listened to the breakdown it realised that it was being categorised with the financing institutions. SEDA is now embarking on a new process of verification.

On Spaza shops and what they are doing in that area, currently SEDA is servicing townships and in the work  it is doing there is also research work that is being done with the funding coming from the EU. SEDA is hoping to strengthen its rural and township enterprise strategy and to also find solutions. From what she understands they are trying to revitalise South Africa’s nationally owned enterprise ownership base. She said that these areas have suddenly found themselves dominated by foreign nationals.

In terms of influencing training institutions, SEDA is mindful of making inroads in that direction. She mentioned that currently SEDA is having joint projects as they have also started a development division or work that is done with the Department of Higher Education and Training.

SEDA has also been seeing universities, where there are Vice Chancellors. SEDA has also presented its agenda there in the hope that it reaches the entrepreneurial level it is aiming for. Here engagements started 2 months ago and SEDA is hopeful that the universities will take SEDA somewhere.

Ms Ntokozo Majola, Executive Manager: Enterprise Development Division  thanked the Chairperson and touched on the work done with the SETA. This year a proposal was handed in especially for cooperatives.

The Chairperson stated that in the SETA report it is mentioned that people drop out and the question was why people would drop out when programs of SETA’s include a stipend so the response in terms of the working relationship must state the services provided by SETA in terms of that relationship with the SETA’s.

The Chairperson stated that it is SEDA’s presentation that states that people are dropping out and the Portfolio Committee is stating that SETA’s package had terms that included a stipend.  

Ms Majola stated that for that particular program the stipend was excluded because SEDA did not want to take the participants away from their jobs.

The Chairperson asked why the stipend was excluded. 

Ms Majola stated that just like the Deputy Minister had noted, SEDA can learn from these suggestions for next time. She added that the program here is a different kind of program.

Ms Majola stated that SEDA can learn from those other programs.

The Chairperson stated that SEDA should really work on servicing the needs of the people especially in the field because there are instances where people working in the field do not have bathroom facilities.  The guidelines have been developed by the Department.

 Ms Majola wanted to speak to the question on conversions. The graph with 17 000 is from outreach events and briefing sessions. These sometimes took place in communities out there.

She stated that the people that attend SEDA’s events are not only people who want to start a business. The main people that attended these events are for information, dissemination and creating awareness for SEDA services.

The people who go through the registration process for example can be someone coming from a Non-Governmental Organisation that needs assistance. She said that SEDA needs to keep statistics of what was called walk-ins. This may not include someone receiving an intervention by SEDA, but may be referring to another stake holder for example social services.

The last graph speaks to people SEDA ended up working with and perhaps also ended up receiving business plans and other services relevant to their businesses.

Mr Xaba  stated that then it means that people who come generally, their numbers can be inflated. It may be that some people who do come and attend are just there to ask for direction, so the content of the core business of the entity was key because that facilitated delivery.

Ms Majola said she doesn’t think that SEDA captures people that need directions. She indicated that SEDA uses attendance registers for example for outreach programs so there was a means of verification. 

The Chairperson explained that the input is providing guidance about the context, and that SEDA must contextualise their figures.

Ms  Majola acknowledged the point and said that SEDA does work with people with disabilities. SEDA is also currently working with the counsel for the blind. SEDA also does work through social services. This happens when there are provincial visits to some of the centers.

The Chairperson said that there is a department that deals with women, children and disabilities. These are the types of organisations SEDA should be interacting with. The Chairperson said that she has interacted with an organisation in Soweto called Iphelegeng and also the National Association for the Blind. She knows these organisations because she used to work with them. There were outreach programs that stretched as far as Limpopo. She said that these organisations have creative persons who for example are blind but produce incredible work. There are government policies to open sustainable markets for persons involved in the disabled outreach programs

The Chairperson then spoke about the replacement policy in Government where 70% of imported goods could be replaced with locally produced goods. She mentioned the 30 % procurement that is taken from small and medium enterprises and emphasised that this has to be taken advantage of too. SEDA should be working with organisations that are already experienced.

The non-governmental organisations played a very important role during the apartheid era and they have ample experience with these outreach programs. Again, SEDA should be building relationships with these persons.

Ms Majola acknowledged the points from the Chairperson and noted that they will be taken as input from the Portfolio Committee.

Ms Majola said that in terms of measurements, SEDA in its standard operating coordination of business goes back to its clients every 6 months to measure the impact of their intervention and to also check if there is a need for a follow-up intervention. She added that the figure mentioned on job creation and turnover is based on information gathered through the improvement assessments. Their business adversaries included new and existing clients as a way to make sure clients go back.

Mr Chance asked why SEDA does not report on it. In its presentation this is critical information needs to be detailed so that overtime their long term impact can be recorded.

Ms Majola noted this request. She mentioned that SEDA runs pre-exhibition workshops to get their clients ready for real exhibitions so that the clients know how to be active and how to conduct themselves and how to market their businesses. When the clients are done they get taken through post exhibition process to get information on what they learned and whether they have any leads on the exhibition they participated in. She wanted to mention that participation in more than one workshop is needed from the client in order to help them develop and grow into other global markets. Clients may sell on the spot, but in order for a client to secure an export order; constant participation in the exhibitions is needed.

On cooperatives, the clients do get trained on how to understand cooperatives as well as business management. 

On the question of the Provincial breakdown on the 912 cooperatives, the total number was just indicated but SEDA does have the breakdown. The breakdown is as follows; Eastern Cape has 158, Free State has 58, and Gauteng has 32, Limpopo has 126 and Mpumalanga is sitting on 110 and so on, so if the information is required then SEDA can submit that information.

The Chairperson stated that everyone here was aware that the failure rate of cooperatives in South Africa is sitting at 88%, based on a report by the Department of Trade and Industry in 2009. It is proposing a change of approach which was meant to be implemented in 2012 – 2022. The proposed strategy was the promotion of an integrated strategy in South Africa. This means that services need to be dealt with for example potholes, management of graveyards, and the maintenance of schools. There is youth cueing to give birth and to obtain social grants. Some of them are sourced by criminal activity and some are not. SEDA should be asking who the target group is for the intervention; it is those young people being killed by drugs and drug addicts.

SEDA is linked to the Department of Small Business Development and its mandate is skills development. What skills are being provided to these people?

The Chairperson mentioned the role of cooperatives in the transformation of ownership of the economy. This is looked at but the bigger picture is not looked at, the mixed system is not looked at, SEDA had make communities work out their own enterprises and handle their own enterprises.  

Ms Majola said that she hears the Chairperson and hopes that everyone will understand that access to cooperatives requires a political ground. She said SEDA tries to do whatever it can.

The Chairperson asked her leave that matter as there are policies on the Intergovernmental Framework Act and Integrated Development Planning. These are two government policies that are meant to assist SEDA achieve what the Chairperson is talking about. She said that it is failure to understand and apply the Intergovernmental Framework Act and to apply the integrated process that is available at local government level. It is also failure to execute the mandate or coordination and transversal agreements. She stated that the above does not require any political whim, these policies have been placed by politicians, it is the failure to understand and execute the policies already in place that is the matter. It requires officials to understand what politicians meant with these policies. 

Ms Majola stated she has noted the Chairperson’s comment.

The Chairperson stated that the point that the Portfolio Committee is making here is that SEDA and SEFA will not achieve these goals themselves if the Department is not also overseeing these processes. Transversal agreements and coordinates are mandates of the Department of Small Business Development. If the Department is not providing leaderships and does not consider that at local level there is an integrated policy that takes place which requires the Department together with the entities to talk to the municipality, this will not be achieved.

The Deputy Minister stated that the Department hears the Chairperson and fully notes her suggestions.

Ms Nosipho Khonkwane, Executive Manager of SEDA Technology Programme answered the question on page 8 about the innovation forums where technologies that are available are showcased. The innovation forums take two forms, namely the workshop and clinic forum. SMME’s are exposed to new technology and new innovation opportunities. In these workshops the science council and universities are brought in as well as the private sector. New technology is showcased because sometimes SMME’s do not have the financial resources to go all the way but there is current innovation sitting with the science council that is not commercialised.  There is also matchmaking that takes place between the entities.

The Chairperson interjected and said that this is a good approach.

Ms Khonkwane thanked the Chairperson.

Mr Chance asked for an update of the Memorandum of Understanding (MOU) signed by the TIA at the last incubation process.

Ms Khonkwane stated that the MOU has allowed the incubators that are have partnerships.

She said that market realities when dealing with disabled persons are that they be paired with an abled body because of the limitations.

Mr Xaba stated that this could be a short term approach to pair abled and disabled. He said that if SEDA wants to leave them trained and advised and independent then an ideal solution is needed.  He mentioned that to disabled persons this process may be undermining because in Parliament or anywhere else, what is strived for is an expensive process. In the long-term ideally they will want to work independently.

Mr Mabaso said that it should not be a matter of principle when it comes to approach. The fact of the matter is that they are disabled persons. The Department should not make itself come across as a messiah who is helping disabled persons.

A very important point is that disabled persons do not see themselves as disabled; they see themselves as abled person with a disability. So the idea of pairing them with abled bodies should be toned down. Disabled persons also want to be seen as complete persons who can do things for themselves.

The Chairperson then stated that there are two things that she would like to raise. That SEFA has been coming here talking about high repayment rates and that SEFA is part of the Department of Small Business Enterprise that is tasked with developing cooperatives. Cooperative banks are cooperatives. Corporative financial institutions are phase one of the corporative bank, and policies of corporative banks are that SEFA only provide loans to members and not to strangers. The stokvels are a classic example of what the difference is between a corporative and commercial bank. Commercial banks lends to a stranger who has to ensure that they have the capacity to pay, but with corporative banks, the person making a loan has to be a member and if that member cannot stand then another member is asked to stand as a guarantor and not borrow until the initial member has paid back. This means that the impairment rate in cooperatives should be far less. This advantage of making money in rotation encourages people to govern themselves and transforming the structure and ownership of the economy.

SEFA has to understand that they are part of an instrument that is the Department of Small Business Enterprise which is tasked with the responsibility of developing small and medium businesses. The mandate of developing these entities in this forum is actually saying that SEFA is looked at to transform the ownership of the economy. Cooperatives are there to change the structure and ownership of the economy away from individual ownership to community ownerships.

She asked why agriculture played such a small role, because agriculture is actually the backbone of the economy. Agriculture is the backbone of the economy and this is what the ANC believes. She said that this is not what the DA believes; it is what the ANC believes.

The Chairperson asked Mr Mabaso to chair the meeting as she has another meeting at 1pm.

Mr Mabaso said that the responses may continue.

Ms Ralebepa said that there was a question asked by Mr Chance on payments. The Board is mindful of this matter and they are aware of the fact that there are prescribed conditions and regulations. There is a process for writing off loans that is in place.

Mr Chance said that this was exactly the same answer that was given the last time when the question was asked. He accepts that there are processes to be followed, but there must have been some movement since the last quarter report when this question was asked. SEFA cannot just have this sitting on the balance sheet like dead weight. He wanted to know what the provisions of the PFMA (Public Finance Management Act) are that are preventing SEFA from taking action.

Ms Ralebepa said that there have been write-offs that have been approved by the Audit Committee in the last quarter, but they will only fall away in the new financial year in quarter 2 and not in quarter 1 as it has just been approved. In terms of the PFMA, there is a long list but the policy really does state for example that SEFA has to have confirmed that the recovery of the debt is really uneconomical, so the cost benefit situation has to be looked at. An example of this are questions like: ‘will the recovery of the cost do undue hardship to the debtor, is the client traceable or untraceable’ and so on. She said that it is not an easy thing when you just go and write off a debt. For SEFA to write-off the debt certain legal processes have to be followed. This is a problem as SEFA wants to follow the required processes. The main thing is that all steps have to be taken when recovering debt in order to show that collections have been done. Legal processes are also linked to how to obtain a summary judgement for the particular client. The process that the courts take to get onto the court roll is sometimes over an 18th month period so this is another delay.

With regard to the question on BEE status, Ms Ralebepa stated that SEFA is waiting for the Department of Trade and Industry (DTI) response on this matter. This issue was gazetted for public opinion and SEFA is aware that the DTI is busy processing this matter. There is a meeting that is to take place within the next two weeks to inform SEFA of where DTI is with this process.

About the properties and the transfer of ownership Ms Ralebepa replied that the last time SEFA had a meeting with the Portfolio Committee this question was asked and at the time there was no Board resolution that was reached on the matter because of the backlog reached with the Tenant Association. Subsequent to this there has been a revised property ownership model that has been approved. In addition to this the Board has resolved that a service provider be appointed to assist in terms of negotiations. This process has also begun and it is now at the stage of confirming and verifying so tenants themselves have to figure out if they really are legal tenants because SEFA has had previous encounters of a similar nature. The tenants will also be informed and educated in terms of the applicable forms of ownership for example, sectional-title, share block and scheme. They will also be helped to form a company as well as making a decision in terms of what is the preferred legal route the tenants want to take. She stated that in this matter SEFA is quite advanced.

Ms Ralebepa said that on the success of the industrial parks she will be answering this from SEFA’s point of view and not generally. There are some industrial parks that are successful but others have been riddled with ownership issues which have been discussed and have led to rental boycotts. Most of the industrial parks that have been handed over to SEFA were unfortunately in a state of disrepair and they have not been maintained for many years some even prior to 1994. However, where there are success stories, these success stories are good.

She said that unfortunately more than half of their properties are riddled with ownership issues, either ownership disputes or rental association disputes, and it is very expensive for SEFA because it has to absorb the entire rate’s cost that had to be made to the municipalities as payments have not been made. All costs go to SEFA including cleaning, and so there are no costs left when it comes to major refurbishments that SEFA can do. The lesson learned here is that the properties do need regular upkeep and that it is a historical issue.

Mr Mabaso asked what the way forward is.

Ms Ralebepa responded that there is a firm Board resolution to sell. At first SEFA opted to sell at market value but because of the backlogs with the Tenants Association the amount has been reduced. The amount reached now is fairly reasonable and SEFA is obtaining an external negotiator to assist with the matter. Once these properties are dealt with, then SEFA can place its efforts on the properties that are successful and viable. This will then lead to the profit making process with the properties.

SEFA is also in discussions with the Department of Public Enterprises and other government departments to see if properties will be best suited and managed elsewhere because SEFA is not in the business of managing properties.

Mr Chance asked regarding the service provider SEFA will be appointing, when this will occur and how long the process thereafter will take once the service provider has been appointed. He also asked for the terms of office of the service provider.

MsRalebepa stated that there has been a tender process but she is not sure how long it has been running or whether it is now closed. Obviously once the appointment is done, it will be a success.

Mr Chance asked her to send all the documents relating to the tender process to the Portfolio Committee to study it.

Ms Ralebepa agreed and stated that Mr Alroy Dirks, Head of Strategy, SEFA will be answering the other questions that have been directed to SEFA about the business track supporters and the financial sustainability around this. The questions he will be answering include SEFA’s efforts made to turnaround the number of enterprises it is financing in townships.

On why the amount of enterprises financed in Kwa-Zulu Natal and the Northern Cape are so low Ms Ralebepa replied that the reason why SEFA is doing well in Limpopo, Mpumalanga, Eastern Cape and North West is mostly because of the use of intermediaries in those regions. The numbers that are also received from these regions are mostly from micro-lenders. SEFA is still intensifying efforts in the Northern Cape to try and open similar kinds of micro lenders and expand the MFI’s (Micro Finance Institution) that are in place in those areas especially in the solar power and mining programs. SEFA is hoping that in the next two to three years progress will be seen.

Mr Chance stated that he thinks that one of the MFI’s being referred to is the Small Enterprise Foundation. He went to see this foundation and saw that it was still battling to increase a loan with SEFA as there was a limit that SEFA placed on one beneficiary which stood for all other beneficiaries. This was increased but this showed a very successful model impairment rate of less than one percent so he would imagine that SEFA is doing all that it can to scale up that model. He asked how SEFA is going about this.

Ms Ralebepa said that SEFA will replicate the model that has been successful in Limpopo, Mpumalanga, Eastern Cape and the North West regions. She said that in the Northern Cape, SEFA has already started with the mining programs, solar programs as well as micro lenders. The only issue here is the fact that results will not be seen over night and that operations need to be put in place. Results may only be seen in the next year or this new financial year. Mr Chance is correct though, SEFA will not be recreating the wheel, and they will only be using the same model that is already in place in more successful areas.

Mr Dirks said that the matter of the township and foreign owned businesses in the townships needs one to understand the underlying business structure that actually propels the success of foreign businesses in the townships. It is fundamentally due to the bulk buying principle, the deficiency logistics and the sharing of finances as well as the low costs that allow those businesses to operate. The principle then effectively means that they out-price local operators in the market. Any response that needs to support South African entrepreneurs needs to be linked to an overall package that cannot just be financed. The Deputy Minister spoke earlier about mobile inter-mediations and I think he was lifting up his smartphone to emphasise the point. The key issue or key characteristic here for the South African economy is actually the penetration of smartphones in terms of the population of people that own smartphones compared to the world at large.

South Africa is unique in this regard. What SEFA is trying to conceptualise also speaks to the cost of inter mediations. While the success of group lending has been accepted for example in rural areas, in urban and peri-urban areas group lending is not as successful. He said that this is because young people cannot be pushed to go to group meetings and group centres. He said that this is not the nature of how urban and peri-urban areas work.

He said that what SEFA is trying to conceptualise now is an inter-mediation model that effectively will use the cell-phone model as the inter-mediation model. He made an example where a person will want to go and buy fresh produce at the market and will need R1 000. The R1 000 will be used as input with an additional 20/40% mark-up being made on that. One cannot go and service such a person with regard to loan inter-mediations so alternative ways need to be found. What SEFA is trying to do now is to see if the mobile device can be used as the new form of inter-mediation but then at the same time go back into the value chain. If SEFA takes a bulk buying view and that is distributed into the market, then this may work. On average, a spaza shop owner will spend about R300 a week on buying goods. Instead of this these owners should be grouped. A new form of inter mediation needs to be introduced.

Mr Dirks mentioned that currently in the market there are about 1.7 million micro-financing entities in the economy.  With so few institutions the percentage of penetrating these entities into the market is currently sitting at 2% with the majority of them running their families and often receiving their money from friends and family and not from financial institutions. SEFA is also trying to see how they are going to increase the penetration rate of access to finance to these entrepreneurs. This cannot be seen as a separate aspect.

On the question of how SEFA tracks the businesses, the first principle is that SEFA has an intermediary and an IT online system that says that every quarter after the 25th of the month, the people has to upload the amount of money that they dispersed to clients. The client’s identity document is associated with this and it is the unique identifier in this process. This process acts as a tracker as it also identifies repeat clients on all the loan micro-financing cycles. The data can tell you how any client will run on each cycle and how often these clients run. He said that what SEFA also does with post micro-financing lending is just four things; firstly 30 days after the approval and disbursements , an officer has to go out to that business to confirm the disbursements in line with what has been approved. Secondly, as part of the monthly post investment activity, there is a monthly monitoring committee where the officials provide SEFA with a report of the activity of all funded businesses. This is how SEFA tracks if a business has gone into difficulty.

Mr Dirks said that SEFA has found that some of the clients it has been funding display improper behaviour. At times SEFA also has to take legal action against these clients. He is also doing impact assessments for SEFA. He is happy to give the Portfolio Committee this report.

Mr Chance stated that Mr Dirks definitely has the most interesting job in SEFA. He asked if there has been interaction with Ben Radebe and Peter Oukaap in Soweto because they are doing the same thing that Mr Dirks has described. They are trying to achieve exactly what the foreign store owners have done but just using technology.

Mr Chance said that the information being given by Mr Dirks is very interesting and asked why the Acting CEO did not to report on it. When SEFA comes back to the Portfolio Committee it should take this information that Mr Dirks presented and present it to the Portfolio Committee. This is very important information. If SEFA can trade, track and evaluate then the Portfolio Committee knows that SEFA does not just have disaster impairments.

He referred to the impact assessment on creditors and noted that the moral hazard this displays is very important. The question he has around this is the amendment of the National Credit Act. This must be a nightmare for SEFA because it is essentially the writing off of loans of up to R50 000 for people that earned a specific amount. How is SEFA dealing with this and has a submission been made to the Competition Commission to enquire about the impact this has made on micro-loans?

Mr Mabaso asked if there are other questions so that the meeting can move to a close after the Department answers all questions holistically.

Mr Capa asked if the order in which questions are asked could perhaps be directed through the CEO and whether the questions asked are based on the presentation or just questions in general.

Mr Mabaso said that strictly speaking, questions should only be on the presentations but if a matter has made a member stray a little bit this is okay. He reminded Members to always try to stick to the presentation.

Mr Xaba asked for a reason for the main existence of SEFA in the Western Cape or if maybe there is an incentive in place.

Professor Edith Vries, Director-General, Department of Small Business Development stated that it should be noted that this was mentioned in the presentation. There are historical reasons as to why there are so many offices in the Western Cape. This will always make a difference as these offices also preceded the establishment of SEDA. This was revealed in the presentation.

Ms Majola stated that the Western Cape used to have this Red Door system where there would be offices all over the province. A few years after SEDA’s establishment there were questions in the DTI about SEDA being under the DTI network. There was then an agreement that they be integrated into SEDA. There were five branches in the Western Cape.

Professor Vries said that she wanted to say something briefly about the longitudinal studies as there was a question about this. There are various interventions that are in place. Colleagues did go back into the field to visit the cooperatives. Last year 400 or more cooperatives were visited. An annual review on SMME’s has been done. One of the most successful longitudinal studies included the Kwa-Zulu Natal Generational Poverty study that was done over a period of 10 - 15 years with the same families. There was evidence that academic research was costly and a financial commitment was needed so that it could be funded over a period of 10 years or however long it ran. 

Regarding the relationship with academic institutions, Professor Vries said that last year there was a conversation in October and it was around entrepreneurship and education. Last week she was invited to a conference around business management and it involved all of the technology bases in the Western Cape, as well as from Namibia and elsewhere. There is a huge interest in entrepreneurship. She reported on the SEDA launch of a technology hub at a University in Pretoria. She also mentioned that in July there was a graduation of the people that went through the year long course of the Incubator Management and Development program.

In answer to the question if universities knew the Department, she replied that they did. She referred Members to all the comments on impact and said that therefore each of the entities do have a success story behind them but the Department requires more information when it comes to each individual client. It would be difficult to give the personal information of all clients in such a presentation. In closing Professor Vries said that when one sits in such a presentation, one is humbled.

Ms Majola stated that there was a question about collocations in rural areas. In answer to this she said SEDA has 47 access points in the rural areas and this includes collocations and branches.

The meeting was adjourned.