Appointment of B-BBEE Commissioner; Implementation of relief programmes following 2021 unrest and recent floods, with Minister & Deputy Minister

Meeting report

The Chairperson welcomed the Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour. This Committee would be joining the meeting for the Minister’s briefing. The Minister requested their presence.

Minister’s briefing on the appointment of the Commissioner of the BBBEE 

Minister Ebrahim Patel said that the provisions of the B-BBEE Amendment Act require the Minister to appoint a Commissioner. The candidate must have suitable qualifications and experience and cannot be appointed for more than five years. Section 13C (1)(b) also requires that the Minister consults with the relevant Portfolio Committee and Select Committee. Following the expiry of the term of office of the previous Commissioner, he received a recommendation from the Department that he commences with the recruitment process. The Department advertised the post in April and the officials of the Department went through a process and made a recommendation to the Minister. The recommendation was that the Minister should consider appointing Tshediso Matona. In the letter that he sent to the Chairpersons of the Portfolio and Select Committees, he briefly recalled Mr Matona’s experience and enclosed a copy of his CV. Further, the letter drew attention to the fact that had considerable experience as a public service professional, dealing with public policy and leadership at a senior level in the state. He was Director-General of the DTIC and the Department of Public Enterprises. He served as CEO of Eskom and he was Secretary of the National Planning Commission in the Presidency. He also played a key role in both the formulation and the implementation of a range of policies and he is familiar with the policy environment. He has interacted with the private sector and with labour and civil society. He has experience with various parties that are affected by the Act. He also has a Masters Degree in Development Economics from the University of East Anglia and a Bachelors and Honours Degree in Economics and Political Studies from the University of Cape Town. He has various certificates from international universities and a list was provided in his CV. Given his experience in economic management and change strategy, the Department believes he would be an appropriate person for the Minister to consider appointing. In light of the provisions of the Act, where he is required to consult with the two Committees, he appreciates the speed with which the Chairpersons have accommodated the request.

Discussion
Mr D Macpherson (DA) said that it did not matter who is appointed. This is because B-BBEE has been, and continues to be, a “spectacular failure.” It has not moved the needle on growth or unemployment. Poverty and unemployment amongst black South Africans are at a historical number. B-BBEE has done nothing to address this. It drives elitism and a class of South Africans that use connections to government and the governing party to enrich themselves at the expense of the unemployed and poverty-stricken. This is no longer the view of the DA alone. Some members of the ANC have this view also. Barbara Hogan has this view and is a well-respected member of the ANC and a former Minister. Other members of the party share a similar view. Many commentators and analysts agree with the position that B-BBEE is no longer believable or serves use in its current state and form. The DA will be tabling a Social Impact Bill which calls to repeal B-BBEE. This is to ensure that the state, and the spending of the state, see value in those that desperately need it the most, not the rich or the elite or those who have political connections. The Minister can appoint whomever he wishes, it is not going to change the flawed fundamentals of B-BBEE. There is nothing broad, there is nothing empowering, and there is nothing economic about this legislation. He desperately hopes that at some point, the bells are going to start ringing in the Department and in Cabinet and they will begin to understand the ills of B-BBEE and how it continues to lock out those who need the empowerment the most. People cannot be rich and claim to need empowerment at the same time. If B-BBEE has been as successful as many in the ANC would claim, then why are so many black people unemployed? Why are black people continually poverty-stricken? These are questions that B-BBEE cannot solve and does not want to solve because it is not the sole objective of this legislature. When the DA tables the Bill, he looks forward to the Department’s interaction and that of society. When the Bill was published for commentary, 83% of people who interacted with it viewed it favourably. There is a desperate need and desperate desire among ordinary South Africans for legislation that empowers people, which is broad and addresses poverty, unemployment and inequality.

Mr F Mulder (FF+) said that the stance of the FF+ on B-BBEE is well-known. Eradicating poverty won’t be achieved with B-BBEE as it is. It has to be disbanded and there is no more need for a B-BBEE Commission. Time will prove them right and as long as B-BBEE is operating, there will be a continuation of fruitless expenditure. Economic growth will not be supported by B-BBEE.

Mr T Brauteseth (DA, KZN) said that he agrees fully with the comments of Mr Macpherson.

Mr M Dangor (ANC, Gauteng) questioned whether he was in the right meeting. The Committees have been requested to look at the credentials and experience of Mr Tshediso Matona. There was no agenda item about the discussion of the B-BBEE Act. He supports the Minister in the appointment of this candidate. He used to work alongside Mr Matona and he was very capable, effective and a person with capability.

Mr M Cuthbert (DA) said that this is the first that the Committee has heard of Mr Matona. He did a cursory search and found his LinkedIn profile. In the profile, he states that he’s a member of the ANC. They have seen the challenges that South Africa has faced with State Capture and the cadre deployment policy implemented by the ANC. Considering the fact that he has publicly put this on his LinkedIn profile, has this been disclosed to the Minister? Has this particular appointment been run through the Cadre Deployment Committee? This totally contradicts the comments made to the public about rooting out corruption and making sure that there are no party affiliations for any civil servants that are to be appointed. This seems to be a “kick in the face” towards those sentiments shared. He doesn’t judge his credentials and they seem to be very good. However, his membership within the party calls into question whether his loyalty is to the Department and the state, or a political party.

Mr C Malematja (ANC) said he would not be silent when faced with a candidate with such good credentials. He is a credible man that can assist the Committee should he be granted the role. B-BBEE did not come out of nowhere. It was implemented to assist with the apartheid legacy which denied certain races from participating in the economy. Those that think that B-BBEE is irrelevant must consider that during apartheid, some were privileged while others were disadvantaged. He would have been questioned regardless of which political party he belonged to.

Mr M Rayi (ANC, Eastern Cape), Chairperson of the Select Committee, said that he does not want to enter into a debate about the efficacy of B-BEE because that is not the agenda of this meeting. These views should be voiced when they are dealing with the legislation or at a debate about B-BBEE. All that they should be considering is the candidate presented by the Minister. Mr Cuthbert’s comments were more useful than those made by the other DA members or the FF+ because they actually dealt with the candidate himself. He also supports the candidate. He was on a Committee that was responsible for the oversight of an entity, and the candidate was the Director-General of this entity. He was happy with his performance and his CV gives confidence about his suitability for the role.

Perhaps the Members can propose a debate about B-BBEE. This wouldn’t be the first time. Deputy Minister Majola was part of the debate that the FF+ sponsored. The NCOP has debated the issue as well. However, today is not the right time for this discussion.

Mr S Mbuyane (ANC) said that people in the meeting were “grandstanding.” B-BBEE is the policy of the government. It seeks to change economic patterns. “These white people” are making B-BBEE a failure because they are fronting. B-BBEE seeks to free black people from the bondage of apartheid and its economic patterns. Some people want the status quo to remain because they benefit from the system. He acknowledged the process undertaken by the Department and supported this candidate being appointed because he is suitable and qualified.

Ms N Motaung (ANC) supported the candidate. He is capable of doing the work because of his experience and qualifications. She will not enter into a debate on B-BBEE and will save her energy for the appropriate time.

Mr Brauteseth said that this “entire conversation is akin to re-arranging the deck chairs on the Titanic.” The B-BBEE ship is going down regardless of who the captain is.

Minister’s response

The Minister said he would have loved an opportunity to go through matters relating to B-BBEE. However, he cannot because it is not the agenda item. He took note of Mr Macpherson’s view but he did not agree with it. He hopes that in the future, the Department would have the agenda item that would enable them to provide a report on what the Department has been doing, and that it will inspire people to transform and bring more South Africans into the mainstream economy.

While he does not agree with Mr Mulder’s comment that there is no need for a Commission, he is sure that Mr Mulder would recognise that the law requires a Commissioner and so the Minister has to make a decision. However, he does believe that the Commission can play an important role in helping achieve the fundamental promise of South Africa’s Constitution, which is that through rule of law, they can build a society with greater levels of inclusion, equity and participation.

He, respectfully, did not agree with Mr Brauteseth’s analogy or his view.

The Department does not ask prospective commissioners which political party they support. His support of the ANC has not come up. However, this question has come up before about candidates. The ANC has played an important role in the lives of black South Africans, and South Africans generally, during the struggle, the transition and formulating ideas around South Africa’s Constitution. Many, many black South African professionals have been active in the ANC, both during and after apartheid. They comprise of doctors, lawyers, engineers, scientists, accountants, economists and many others. South Africa would be a poorer society if the government had to exclude so many talented South Africans, black and white, because of their ANC membership. That would be impoverishing South Africa. The political position of Tshediso Matona is not relevant to his professionalism and very clear professional credentials. He appreciates that Mr Cuthbert acknowledged his good credentials and he has no doubt that Mr Matona would be completely respectful of South Africa’s constitution and carry out his duties subject to the law. During the period that he worked for the National Planning Commission on matters relating to the implementation of the National Development Plan, he showed professionalism and the DA itself endorsed the Plan.

He concurred with Mr Dangor about the agenda item. He took note of Mr Malematja’s comments and the support that he has pledged, alongside the comments of the rest of the members.

An issue that has been raised is whether the Commission can deal with all the challenges South Africa faces. These challenges include poverty, unemployment and to growth. In the period that Mr Matona worked in the National Planning Commission, he had to grapple with the question of how to increase South Africa’s growth rate, and how to make that growth more inclusive and ensure that it creates more jobs and opportunities for small and medium enterprises. There is no question in his mind that B-BBEE is a well-structured and well-implemented programme that seeks to bring many more South Africans into the economy and reduce unemployment, poverty and inequality. It is therefore important that the Commissioner is very familiar with issues around growth and transformation. Mr Matona was also Director-General of the DTIC when various pieces of legislation, such as the B-BBEE Act, were implemented. They are looking for ways in which broad-based transformation and empowerment can have an even bigger impact on the economy and job creation. Mr Matona has the necessary experience and qualifications, and from the comments that the Members have made, it is clear that they too believe his experience makes him suitable for the role.

Mr Cuthbert said that there was a question that remained unanswered. Has this appointment ever been sent to the ANC’s Cadre Deployment Committee to get the party’s clearance before this person was appointed? This is a matter of public interest. There have been several revelations and the ANC has had to make these documents public.

The Minister said that he had not referred this appointment to any party political structure. In light of this, he is looking forward to Mr Cuthbert also supporting this candidate so that he can take that into account when making a final decision.

DTIC briefing on the 2021 unrest Economic Recovery Programme

Introductory remarks
The Minister said that the Deputy Ministers had been involved in the rollout of the measures they announced under the Economic Reconstruction and Recovery Plan. They visited affected sites and had engagements with business people. The presentation will give the Members a succinct sense of what the Department planned and the outcome. During their work, some of the resources that had been originally set aside were also used for flood relief. The presentation will also point to how the National Empowerment Fund (NEF) and the Industrial Development Corporation (IDC) were involved in rolling out these programmes at a local level. The national government did not seek to do everything. Instead, it built partnerships and worked collaboratively with the KZN and Gauteng provinces. It also worked with a number of intermediaries. These included the KZN agency of government that deals with investment and trade matters, NGOs like Gift of the Givers and organisations that represent different participants in the community like the Stokvel Association. This was done to ensure that the support being rendered was targeted and delivered as quickly as possible. It is a model where, instead of the state doing everything, the state provides the framework, does some rollout through the IDC and NEF, and uses partnerships with other organisations. They were particularly focused on moving much faster than the state normally moves while at the same time taking every step that they could to avoid corruption and mismanagement of funds. They made use of real-time audits. They worked with the Auditor General of South Africa (AGSA) and it was the first time the Department requested that a real-time audit be conducted. As they were rolling out the programme, the AG would be entitled to scrutinise all information and provide a report on whether there were any irregularities. They did this so that if any irregularities were found, they could be attended to immediately. Their focus was on reaching as many small businesses as possible, across different sectors of the economy. There were many township businesses and it was important to ensure that those least utilised to use their own resources or the resources of their insurers were given the most significant support.

They used a very hands-on approach. They didn’t just make an announcement, there were weekly meetings where they went through the programme to ensure that both the IDC and the NEF were aware of the pressing need. They needed to speed up all of their processes so that the necessary support was supplied quickly.

Presentation
Deputy Minister Fikile Majola and the Acting Director-General of the DTIC, Shabeer Khan, gave the presentation.

In July 2021, unrest in KZN and Gauteng caused devastating economic consequences. An Economic Support Package of R3.75 billion was developed by the dtic and its entities to assist companies affected. 2400 enterprises were supported by the DTIC group. The value of approvals of applications made was R3 billion. R 2.4 billion is the value of disbursements made by the dtic-group in the period to date. The total number of jobs supported by this funding is 45 000.

Ministerial weekly meetings were held to monitor implementation to address the risk of slow rollout and unnecessary bureaucracy. The dtic requested the AGSA to conduct real-time audits on the economic support package. This is different to the normal annual audit, as it provides feedback while programmes are being implemented, so that any findings can immediately be addressed, without waiting for the end of the financial year. There are no negative findings as per the preliminary AGSA report. Fraud hotlines were set up by the dtic, IDC and NEF to report fraudulent activities. The hotlines were communicated publicly. To date, zero cases have been reported.

The support given had the following impacts:
Increased GDP at market prices by R1.5 billion, with significant contribution coming from 5 industries with high value-add, namely: financial intermediation, real estate activities amongst others.
Increased overall manufacturing industry output by R797 million.
R654 million additional household consumption.

(See the presentation for more detail).

Closing remarks
The Deputy Minister said that the impact of the unrest was very wide and deep and caused a lot of damage to the economy. It affected not only KZN and Gauteng but the wider economy of South Africa. As a result, their intervention was never going to be adequate to respond to the entirety of the impact. It is important to look at the government’s wider response to the devastation and the unrest. This presentation only looked at interventions confined to the trade portfolio. It is also important to look at the entirety of the government response. The Department is proud of the introduction of the real-time audit. Since the pandemic, every time interventions are put into place, there is a concern among the public about where the funds are actually going. They are happy with where the funds went for these interventions. The initial audit has shown that the funds have reached the intended beneficiaries. If they discover that corruption has occurred in the future, the Committee can rest assured that the necessary action will be taken.

Discussion
Mr Macpherson said that the damage occurred across many businesses, regardless of racial ownership. Why did the government make funding available through entities that prioritise one race over another, instead of making funds available based on need? The looters did not specifically go around targeting businesses based on demographic ownership. Where did this policy directive come from that public funds are used based on assisting one demographic over another? Especially if one considers the Court pronouncing on this exact same issue? During Covid, the Department of Tourism had allocated funds based on demographics. What is the policy position on this? Why is funding by the government being made available on this basis through an entity like the NEF, which has a misguided mandate to assist one demographic over another?

Ms Motaung welcomed the support given to sugar cane farmers. What was the turnaround time for support applications, and how was it different from normal turnaround time? What was the approved funding amount and what was not dispersed, if any? If there are funds that have not been dispersed, why is this the case?

Mr Faiez Jacobs, visiting MP of the Portfolio Committee on Small Business Development, said that his Committee was part of the team that performed oversight on these measures. The government’s response to this issue shows that they are responsive. The Deputy Minister made a good point that they cannot reach the need of everyone but a good effort was made. What lessons did the Department learn about being more responsive to tragedies and causes? Can they apply these lessons and systems to regular government operations? Was there a lot of goodwill from the private sector about working with the government on this issue? He applauded government's support and broad sectors it covered. They must be very careful not to “ignite racial divisions” and promote a “them and us” mentality. Everyone suffered from the unrest and the government must ensure that they bring harmony and build a non-racial society. However, it is also important to address the legacies of apartheid. They must remain committed to addressing economic exclusion for all, the majority of which are black South Africans. Thus they need to remain committed to the principles of B-BBEE.

Mr Khan replied that the DTIC and its entities' support was based on a survey. It was conducted through a number of channels such as the DTIC and other state agencies like SASRIA and sought to understand the extent of the damage. These included various firms in Gauteng and KZN. The support given was purely based on the responses that they received. The survey that was conducted did not discriminate between any races. The support provided through this particular economic recovery measure was focused on supporting all damaged companies. The NEF has a very specific mandate, which is to provide support to black-owned businesses. However, the support given by the IDC and the NEF was much broader than just black-owned businesses. The support was also given to shops in various shopping malls that were destroyed and the support did not discriminate against anyone.

The Deputy Minister said that if a tragedy occurred in any part of the country and occurred to many South Africans across racial groups, government would not only provide support to certain racial groups. If they did so they would be challenged. It would be unconstitutional and government cannot adopt a policy position like this. In response to the unrest, there was no policy directive given that only black businesses should be supported. During the survey, it may have been that the businesses that needed the most support were black-owned businesses, or that the majority of those that responded were black business owners. Government simply responded to those who could help who filled out the survey. The mandate of the NEF was not applied to unrest support. If there are different views on the appropriateness of the mandate, that can be discussed at another time. There was no policy directive to only support black-owned businesses because they would not have had a legal standing for this.

Mr Khan said that the Department works closely with the different DFIs and SASRIA, which was largely responsible for a number of damaged businesses that were insured with it. The dispersal of funds largely relied on SASRIA and other insurers assessing the extent of the damage. The DTIC provided support until the insurance companies had finished their assessments. The Minister held weekly meetings with the heads of the NEF and IDC, as well as DTIC teams, to ensure that support was provided quickly. Here one can see the shortened timeframes. The NEF met at least twice weekly to ensure that approvals were done within two weeks of receiving applications. They met daily to go through the applications. This process has provided insight into how they can simplify and reengineer their processes to provide support timeously. Out of R3 billion approved funding, R2.4 billion has been dispersed so far. Funds will continue to be dispersed in the upcoming financial year so that various targets and milestones can be met in terms of the conditions of approval.

One of the methods that ensured that their support was broad and that they learnt from and will embrace going forward, was predominantly the number of intermediaries that ensured that their support reached townships and rural communities. This meant that small and informal traders could also be supported. They also addressed issues of red tape and improved systems and processes in the DTIC, the IDC and the NEF. This has taught them a number of lessons on how they can improve their work systems going forward. The IDC’s leadership realised that their typical approach would fall short in providing speedy support and this required them to rethink their approach. They looked at in-house collaboration within various teams and adopted a much more structured approach with clear roles and responsibilities and clear assessment parameters. In cases where companies’ records were destroyed, they were able to tap into the information held by the Companies and Intellectual Property Commission (CIPC) to help companies build financial information that the various credit committees could consider. This partnership with a number of private sector companies has brought about a new way of working and this is something that will be looked at in terms of the support approach going forward.

They did provide support to a number of companies that were owned by white people. This includes Pillar, which employed 269 employees, and received funding to the value of R15 million. Power Stores Bridge City Pty Ltd employed 158 people and received funding to R25.8 million. SA received funding of R16 million. Fashion X received R8.5 million. Tradestar Ikhwezi employed 92 employees and received R29.3 million. The support did not differentiate between any races. It was based on those who responded to the survey.

The Deputy Minister hoped Mr Macpherson would take to heart what Mr Jacobs said. It is a very sensitive matter in South Africa and it ought to be treated with the care it deserves. Government will give support and care to all of South Africa’s people, depending on their needs. They would have no legal basis to discriminate when it comes to support. The President has called on the Executive to try and ensure that, in addition to working in an integrated manner, they introduce quicker responses to government processes and systems. They are learning through these tragedies that things can be done differently. The DTIC, IDC and NEF worked in ways that were extraordinary and ways that would not have been done in the past. They should not work in these ways during periods of crisis alone. These methods should be introduced to all government work. The Department is currently discussing with the IDC how to respond to the challenges of both township and rural economies. They are looking at how they can bring the lessons they learned with this unrest support, such as faster support and shorter timeframes for processing loans and dispersing funds. This is something that they want to implement in their day-to-day work. They need to be able to work faster because the needs of South Africa’s people are big. If they continue in their old ways, they will not be able to respond to the many challenges that citizens face. Covid-19 and the KZN floods have taught them that there are different ways to work.

The Chairperson thanked the Deputy Minister and his team.

The meeting was adjourned.