W&RSETA and Shoprite on enterprise supplier development

Meeting report

Opening Remarks by the Chairperson

The Chairperson opened the virtual meeting, welcoming all Members present. There were no apologies that were received. The Chairperson moved for the adoption of the agenda. The agenda was adopted. She welcomed the guest delegates from the Wholesale and Retail Sector Education and Training Authority (W&RSETA), and the Shoprite Group.

She also noted a request from W&RSETA to present first, as the presenter had another meeting to attend at 14:00 PM. The Chairperson granted the request, and the floor was handed over to the W&RSETA for it to deliver its presentation.

Briefing by the W&RSETA

This was a presentation by Mr Sipho Shoba (CFO of W&RSETA). The presentation discussed W&RSETA’s mandate, vision and mission; the situational analysis; key achievements by W&RSETA for SMMEs through skills development and support FY2019/20 to 21/22; 5 priorities of the SME strategy to deal with challenges.

The W&RSETA provides support to SMMEs, levy-paying and exempt, in different forms. It is crucial that the impact of the support is tracked. Currently, there is no clear impact analysis that provides a picture on how the SMME’s support yields successful and sustainable SMMEs.

As part of support provided to informal traders, the SETA provides Skills Development Vouchers, which assist Informal Traders with support to grow their businesses. At this stage, there is no monitoring mechanism that tracks if the Informal Traders use the vouchers for the purpose they are intended for, and to avoid Informal Traders who benefit from the voucher system in different provinces. This requires the establishment of a monitoring and evaluation mechanism that will ensure that there is evaluation of the business improvement resulting from the W&RSETA’s support, as well as assessing the impact of the voucher system.

The number of Small and Medium Enterprises supported to participate in W&RSETA skills development interventions annually was 2 508 for FY2021/22, while the number of informal traders and micro enterprises participating in W&RSETA capacitation workshops annually was 2 401. A total of 477 people were trained in Entrepreneurship Development Programmes to enable them to start their own businesses or grow their existing businesses.

[See presentation document for more details]

Discussion

Mr H Kruger (DA) welcomed the presentation and said that his history with skills development started many years ago, with Services SETA. They had a programme in which they intended to start a programme for new venture creation. He was one of the people in the first group that put the programme together for entrepreneurs, especially those running small businesses. He was worried why Services SETA, at this point, was the only SETA that was willing to take the risk and go into new venture creation. For a very long time, there has been a debate about whether entrepreneurship is a skill or knowledge. If it is a skill, then it cannot be trained; if it is knowledge, then it can be taught or trained. In the early 2000s, he was involved in training young people to become entrepreneurs.

In the presentation, some figures indicated the amount of money W&RSETA spent on skills development per student. In the early 2000s, for the new venture creation programme, it cost R50 000 for guest employer and another R50 000 for the trainer. The learner also received a stipend of R1 800. From this, it is clear that government spent a lot of money on developing entrepreneurial skills. Unfortunately, he did not know what happened to the programme over the years as champions for new venture development, but believes that this is the way to go. He proposed that a small business SETA be established because W&RSETA is involved in big businesses and does not know the ins and outs of small businesses. There was a lot of double dipping that was going on. Looking at small-scale farmers, for example, the Department of Agriculture, the Department of Small Business Development and SETA all have programmes for small-scale farmers. And looking at the bigger picture, 70% of small businesses fail within their first year. Government spends a lot of money on small business development, but the majority of the money lands in the pockets of consultants and advisors.

Mr J De Villiers (DA) said that, as a relatively new Member of this Committee, he was unaware that education department had a SETA that operates in the wholesale and retail sector. In a country like South Africa, with an unemployment rate of 31% and possibly closer to 40%, when considering the number of those who gave up looking for employment and are unskilled, he expressed his support for any programme that seeks to teach entrepreneurs and their employees in small businesses basic skills, to make people more employable and businesses more resilient. He was impressed to see the matrix and different numbers of businesses they have worked with. He was also impressed to see that they have worked in partnership with Boxer Superstore because working with a company like Boxer ultimately gave the government departments that are not retailers the access and skills on how retailers operate and how to transfer those skills more effectively to the small retailers that need them.

Mr De Villiers said that, looking at the history of black economic empowerment in South Africa, it has been an absolute failure of a policy. Looking at the unemployment and economic growth figures, it becomes clear that BEE has failed. South Africa needs true empowerment that does not only benefit and enrich the elite few; it must be empowerment that goes down to the unemployed and unskilled people – teaching them how to run businesses. He supports what the Department is doing, as this is real empowerment – not the failed BEE policy. He asked if the small businesses voluntarily signed up and paid levies to participate in W&RSETA. If so, how much is the levy for small businesses? Secondly, he asked how one gets approval for the training if they are part of SETA. Is it as simple as joining and then qualifying for the training, or are there prerequisites to determine who qualifies for training?

Ms B Mathulelwa (EFF) said that she could see the good work done by W&RSEAT, but her concern is that they do not publish the good work they do because, when she goes out to her constituencies, people do not know about these programmes. Many hawkers and informal traders are struggling because they cannot access this information. The presentation was general, and did not share where exactly their programmes are based. Are the programmes throughout South Africa, or are there some areas where SETA does not reach? She asked for an indication of where exactly the organisations are based in each province.

The Chairperson said that this point had already been covered in the presentation background, where it was stated that the SETA programmes are in all nine provinces. However, it would be great to hear where they are located within the provinces to assist Members of the Committee when doing oversight.

Mr H April (ANC) said that it is heartwarming to hear about the work being done by SETA for small businesses. He was disappointed in Mr De Villiers, who seemed to have come to the Committee to talk about how the BEE was a failed policy, and how the black elite keeps on getting richer. He pointed out that the Member failed to mention anything about the white elites that have been in charge of the economy and still are in control of the bulk of the money that is in the economy, and are doing absolutely nothing to empower the small black businesses. Black people are the majority in South Africa. If Mr De Villiers is going to disrespect black people, he cannot do that in this Committee. He cautioned Mr De Villiers not to be racial because, when one governs, they do not do so according to racial lines.

On the collaboration, where an MOU was signed, he would like to get more information about what the MOU entails, and how it benefits small businesses. The President had announced that a thousand products are going to be produced in the townships and rural areas, and was happy that many small businesses will be taking part in this initiative. Mr April asked for clarity about the training of SMME’s and the skills development levy that is paid by small businesses. What help is W&RSETA giving to small businesses that do not meet compliance standards?

Ms K Tlhomelang (ANC) welcomed the presentation. She said that small businesses lead to job creation and play a vital role in the economy of the country. The concern is that W&RSETA is expected to teach skills to small businesses. So, how do they reach out to the public, because most of their advertisements are online? Small businesses in the rural areas are struggling to access information about the training provided by the SETA. Some offices in the various provinces may not be as visible as expected. What is W&RSETA doing to ensure that they help small businesses that may not have access to the internet or are technologically challenged? Has W&RSETA recorded its progress on the small businesses that they have capacitated? How are those small businesses doing? What is the difference between SETA's skills programme and the learnership?

Mr F Jacobs (ANC) said there cannot be a separate small business SETA. He suggested that there rather be a small business chamber in the wholesale and retail sector. He then responded to Mr De Villiers for saying that the BEE policy is a failed policy, saying that South Africa comes from a past where economic Apartheid was the order of the day, and it still is. They must ensure that BEE policy is properly applied to benefit people in townships and rural areas, including women and the youth. Without such policies, big white companies will continue to maintain white privilege. He was impressed with the presentation and the work done by W&RSETA. He wanted to hear from the beneficiaries because, in the presentation, it was mentioned that R8 000 was spent per informal trader – which is a good amount. However, there was room for improvement. It was said that, of the R8 000, about R3 000 is spent on buying stock. If more money can be invested towards informal traders, and less money in the hands of the service providers, then there could be success. Many opportunities have been raised for small businesses through collaborations. But what he wants to see is big retail companies partnering with small businesses. He wants W&RSETA to share and showcase examples where wholesale retailers are making an impact.

Responses

Mr Shoba, CFO of W&RSETA, confirmed that they are collaborating with the SASSETA (Safety and Security, Sector Education and Training Authority). SASSETA has, in the last two years, been allocated no less than 300 learners. This is how they determine the investment – by doing a head count for their payments. In April 2022, he attended the graduation of 300 learners who were women that were victims of GBV, and whom had participated in the programme. About eight provinces participated in the programme with SASSETA. Woolworths and Truworths have come on board to give these women training to produce textiles. Even though they sometimes do not meet the standards of these retailers to go on their shelves, the materials can still be sold on the market at a reasonable price, so that these women can be able to sustain themselves.

On 04 October 2022, he will be attending a meeting with the South African Traders Association in Cape Town. He had met with them earlier in the year, as part of an informal economy intervention, where they had a representation of about 5 000 informal traders from across the country. When they met, they were still working on the MOU. The MOU they entered into, with a number of strategic partners, regulates the sharing of information between them, and regulates the implementation of whatever programmes they are implementing. This is also to avoid the issue of duplications. For example, in the Eastern Cape, for the projects that they do with small-scale farmers, the Department of Agriculture might come in and perform certain functions such as funding technical training, and SETA can provide funding for training of the business-related things. Through their agencies, the economic development department and the district municipalities would also ensure that there is no double dipping for the beneficiaries. The MOU goes as far as involving traditional leaders because traditional leaders cannot be excluded in the rural development space.

Mr Shoba said that SETA does not recruit beneficiaries for its programmes. They give equal opportunities to everyone to apply for the grant. The W&RSETA offices would then ensure that each province has an equal budget. Each province has provincial provinces and offices in TVET colleges, so they can be as close as possible to the people on the ground. According to the Levies Act, only 10% of the levies go to the administration of SETA. This limits SETA from being in every municipality and township. There are also Community Education and Training institutions (CETs) that are spread across the nine provinces, with about 256 centers countrywide. They have started with funding these CETs to renovate centers, especially because some of them and old schools and dilapidated churches were donated to them. In 2021, W&RSETA started with the CET programme in 2021 and is giving them R5 million to renovate some of the centers. Some agencies apply directly in municipalities. In the Eastern Cape, there is collaboration with a Boxer franchise located in the Alfred Nzo Municipality, which works with informal traders in the district. However, because of limited resources, there were about 1 000 applicants but only 300 were approved. SETA will then collaborate with the municipality that will look at informal traders in the district.

On the matter of costs, Mr Shoba agreed with the Members that, at the beginning of SETA, there was a looting of funds. Some trainings were overpriced. As SETA, they took certain responsibilities because the cost of training was too high, as it involved the cost of learning materials, facilitating assessments, etc. To ensure that the pricing is not exorbitant, W&RSEAT has procured material for learning, and hands it out for free to the trainers that are appointed. Over the years, they have realised that they cannot do learneships and skills development programmes at the same time for informal traders, because some people do not have the luxury of time, given that the skills programme takes a minimum of four months to a maximum of six months. Thus, for street vendors, there is a one-day training that is non-credit-bearing. The learnership is only reserved for unemployed young people who will be placed in the well-established retailers because there is capacity. As part of the partnership with Boxer in Easter Cape, the recruitment was done through an agency, in collaboration with the traditional leadership of the area.

Mr Shoba said that, from the levies, they get only one percent of the total annual pay bill. That is the regulation in terms of who contributes to the Levies Act. Any company with a total turnover of above R500 000 per annum is required by the Levies Act to contribute one percent of that towards skills development. Companies with an annual pay bill of less than R500 000 per annum are exempt from the levy. As SETA, they need to set aside some funding to support those SMMEs. The levy-exempt SMMEs are supported from five percent of the levies that seek to address the national imperatives, because 80% of the levies will go to discretionary grants where they fund bursaries, artisan programmes, internships and many other programmes. With the remaining 20%, up to 10% goes to SETA administration; the other 10% is split into two – five percent going to non-levy-paying SMMEs, and the other five percent going to the National Skills Fund.

Service SETA was previously at the forefront of the new venture creation. After 2019/20, they realised that, having done new venture creation for many years, it still did not impact unemployment and poverty. They initiated a review of the programme and they started the entrepreneur development programme in the 2020/21 financial year. The entrepreneur development programme aims to build in an element of supplier access to the market. This is a more impactful programme in terms of the theory of change. SETA tries to mitigate against the barriers they are facing.

The Chairperson invited Shoprite to do its presentation.

Briefing by Shoprite

This presentation was led by Ms Maude Modise, General Manager: Enterprise & Supplier Development, Shoprite Group. This presentation discussed the background, supplier journey, application, product review, compliance, route to market and business as usual.

[See presentation document for more details]

Discussion

Mr G Hendricks (Al Jama-ah) said that one of the focuses of Shoprite needs to be relooked at. He recommended that they look more at assisting township people with their programme. Shoprite should complement the work of the Small Business Development Department and this Portfolio Committee. The problem with township entrepreneurs is the issue of compliance. When it comes to SMMEs, nearly 70-80% get application forms but do not return them because they cannot comply. He suggested that there be a much simpler way in which Shoprite can engage with applications, and that the company should recognise certificates from the Small Enterprise Development Agency (SEDA). Anyone who needs finance to start a business becomes a client of SEDA and has to fill in basic documents. SEDA does not issue registration certificates.

He recounted that the President announced that there would be 1 000 products manufactured in the townships and rural areas. Some of the products on Shoprite’s shelves are from international manufacturers, but it is incumbent upon Shoprite and other supermarkets to replace them with locally-produced products. For a producer to get their products on Shoprite shelves, one needs to put up R1 million. However, many small businesses do not have this amount of money. He asked if Shoprite can take a more proactive role in getting some of the products that were identified by the President on their shelves. He would like to interest Shoprite in a peanut butter manufacturer. The Chief Albert Luthuli peanut butter is a township manufacturer that can potentially land on Shoprite’s shelves. The President also spoke about roadside traders; he said that some people who receive the R350 grant use that money to buy items and resell them on the roadside. Is it possible for these people to use Shoprite as a wholesaler to stock their products for resale?

Ms Mathulelwa said that Shoprite must give specific products to informal traders or SMMEs to produce for them. She wanted Shoprite to tell the Portfolio Committee what they are doing in the respective areas where they have established their stores. Is there anything they have done for the small businesses in the communities where their stores operate?

Mr Jacobs said that he is disappointed with Shoprite and its presentation because the company is one of the biggest retailers on the African continent. This presentation was just compliance with what they need to do. There is no innovation or commitment by Shoprite to actually grow and create business for small businesses. Shoprite is just taking money from the townships but not plowing back into those townships they take from. He asked what the company’s plan for emerging small businesses is. In what sectors are they? How many contracts do they have with small businesses? What is the value of small business development in Shoprite? Shoprite has a track record of poorly treating small businesses. An example is a micro business called Majit Flowers(sp), based in Cape Town. The Shoprite Group has decimated the business. It used to distribute flowers to Checkers in the Western Cape and had 20 years of experience, but it has now been taken out by big business. This is an example of bullying and how the Shoprite Group is not proactively looking at nurturing and building small businesses.

Mr Jacobs asked what Shoprite has done and is going to do. They must come up with facts and figures, showing concrete examples. The video shown before the presentation looks like a marketing ploy. He asked Shoprite to go back to the drawing board and come up with a detailed, comprehensive supplier development plan for small businesses. The Committee wants a commitment to transformation because Shoprite is benefiting from communities. The experience of Majit Flowers (sp) suggests a lack of integration of small business development.

Mr V Zungula (ATM) sent his question through the chat of the meeting, as he had to leave to attend another committee meeting. He asked what strategy Shoprite is using to increase the 13% rate of SMMEs that come back, doubling this number. Secondly, what does the company need the Committee to do to alleviate its challenges?

Mr April said that it is clear that Shoprite has no intention to work with small enterprises, specifically in the townships where they are getting their biggest customer from. The presentation was like a box-ticking exercise for Shoprite to come before the Committee and present without any intent to develop township entrepreneurs. Nothing tangible can be pointed to as an indication of Shoprite’s involvement in uplifting the communities economically. It is saddening to see that they perpetuate a white monopoly capital culture. He was disturbed by the presentation, and he did not welcome it.

Ms Mathulelwa said that she missed an important point. She said that Shoprite is the worst capitalist that deliberately created a strategy to destroy small businesses by opening up stores at every corner of the country. It is saddening that they have presented this kind of presentation before the Committee. What is Shoprite Group really doing? Are they destroying small businesses or helping them?

Mr D Mthenjane (EFF) said that Checkers is one of the worst groups in society. Many cases have been received from constituents about Checkers’ treatment of its employees. Many workers reported that they were treated like dogs – harassed, hired and fired without good reason, all while earning very little money. In one of the Checkers stores in Nelspruit, there was a time when the staff was searched when they knocked-off from work because they were suspected of stealing. This would sometimes make them work beyond working hours, and the company would not arrange transport for them to go home. He asked Checkers to explain to the Committee what criteria it uses to train its employees. 

The Chairperson said that she heard Mr Hendricks posing a good question about whether it would be possible for Shoprite to assist those getting grants to buy goods and go to the street and make a profit. Can Shoprite respond to such, because what is important is to make sure that jobs are created to alleviate poverty in society?

Responses

Ms Modise said that, regarding the certificate from SEDA, they are willing to look at it and see what it entails to facilitate more of this access to market. She will speak to her colleagues at SEDA and ask for an example to see how they can work around it. The 1 000 products announced by the President to be manufactured in the townships will also be looked into. Shoprite will do its own research and ensure to know where those products are manufactured and what can be done to assist and facilitate market access for those products.

On the peanut butter example mentioned, she said that Shoprite is currently working with a peanut butter supplier that SEDA supports. The company is procuring ground nuts from women in White River, who received land as part of an initiative they were the beneficiaries of. These are the type of initiatives that they have worked on in collaboration with SEDA. She said they would look into how they could work with the peanut butter supplier. She will request more information about them from SEDA.

On assisting roadside traders, Shoprite is working on a specific rural development project to address this type of entrepreneur. She asked the Committee to allow her some time to get the project going and ensure that it is vetted and approved internally, so that she can come back and report on that. From a CSI point of view, they have previously worked with hawkers selling fresh produce and other goods outside their stores. She was unable to provide more insight on that because she was not a part of the project, but she would be able to report back to the Committee via the secretariat as to how the initiative was and what it was about in terms of assisting roadside traders.

Regarding small businesses and what they are doing to help them, she said that Shoprite is working on a new brand that will be launched soon, targeting SMMEs. At the moment, the company is targeting five specific SMMEs that will be working on that project. She would be able to report to the Committee once the project has launched.

Regarding the issue of workers that are not treated well, she said that she would refer the matter to their HR department so that they can get feedback and insight about the Nelspruit Checkers incident that was mentioned. She noted this point and will provide insight on the matter via the secretariat of the Committee.

She acknowledged that the Members were disappointed with the presentation. She explained that the brief given to her by the secretariat instructed the company to speak to what challenges SMMEs were experiencing and how the company could help or how they could facilitate conversations to help. This presentation was by no means a box-ticking exercise, but it was her sticking to the brief she received. If the Portfolio Committee wants her to make a presentation on their strategy and what exactly they are doing, she is more than happy to return and do that. Shoprite wants to be able to partner with small businesses and be able to create public awareness about what they are doing with small businesses.

Concerning the Majit Flowers (sp) incident, she said that she would get in contact with the procurement department to find out the context of what exactly happened. She could not comment on the matter, as she did not have the relevant information on it.

Regarding shortfalls, she mentioned in the presentation that Shoprite was partnering with incubation hubs that will assist with the necessary documents such as paperwork from the business perspective or food safety compliance, so that they can be able to fall back into the system. This could be from the application phase, where they fall back and get a bit of learning to improve what they need to improve. The incubation hubs are to take the entrepreneur that does not meet the requirements and actually take them through a process, vet them and let them come back into the system. Whether they come back to them or go to another retailer, the goal is to give SMMEs a leg up and have their products retail-ready.

On the legal development, Ms Modise said that she would be able to respond thoroughly when she comes back to present to the Committee, about the initiatives done with small farm owners with small businesses to give more context to the rural development issue. She hopes that they will have finalised the plan by then. The procurement from small businesses in the previous financial year was R8.5 billion.

The Chairperson agreed that, based on what Ms Modise had compiled in her presentation, it was everything that was requested of her. She will be given another opportunity to come before the Committee because Members want to hear what Shoprite has been doing for the communities and how the people have benefitted from these programmes.

She then thanked the guest delegates for appearing before the Committee. She released them from the platform.

Committee matters

Mr King Kunene, Committee Secretary, went through the last meeting’s minutes. He recounted that the meeting was a briefing on the progress and outcomes on the petition from Independent Field Technicians regarding a contractual dispute with Openserve and the resolution on legislation.

The minutes were adopted.

The Chairperson thanked Members and cautioned them to ensure that while deliberating, they should stick to the report so that even the presenters do not lose focus.

The meeting was adjourned.