National Small Enterprise A/B: deliberations & negotiating mandate

Meeting report

Deliberations on the submissions received on the National Small Enterprise Amendment Bill

Ms Elize Koekemoer, Director: Policy and Research, Department of Small Business Development (DSBD), began by acknowledging the proposed amendments in the Bill aimed at fostering a conducive environment for small enterprises, demonstrating the Department's responsiveness to proposed changes. She emphasised the importance of local government's role in aligning with the national integrated strategy for enterprise development, stressing the need for consultations to enhance collaboration across all levels of government.

Addressing concerns about late payments faced by small enterprises, she highlighted the inclusion of a 30-day payment clause in the Bill, which was a result of consultations with small enterprises to ensure accountability and provide rights, including interest on late payments. She also mentioned ongoing initiatives to address the impact of load-shedding on small enterprises, although this was not specifically addressed in the legislation.

Ms Koekemoer discussed the importance of differential treatment within democratically acceptable bounds regarding South Africa's labour laws, and mentioned the publication of a policy on business licensing to seek feedback aligned with legislative objectives. She said there was a need for improved data availability on small, medium, and micro enterprises (SMMEs), particularly in informal sectors, to enhance targeted support initiatives.

Regarding establishing the Ombud service, she clarified its role as complementary to the advisory body, and discussed recommendations and consultations undertaken to ensure proper legislative drafting and alignment with constitutional requirements. She referred to the importance of a transparent process for board member selection, and addressed concerns about the ombud's discretionary powers.

Discussing issues related to regulation supply, she said there was a need to comply with guidelines for setting fines outlined in court documents and legislative provisions. She also addressed concerns about compliance with the Prevention of Illegal Eviction from, and Unlawful Occupation of, Land Act (PIE Act), stressing interagency coordination and collaboration to avoid duplication.

She supported the proposed provisions regarding unfair trading practices while cautioning against duplicating the jurisdiction of other entities such as the Department of Trade and Industry and the Competition Commission. She discussed the wide discretionary powers of the Minister and the need for recommendations from the board to mitigate concerns.

She explained the need to adjust the review frequency of the national review of small enterprises due to practical constraints, placing a focus on youth development and collaboration with stakeholders. Finally, Ms Koekemoer mentioned the Department's efforts to address barriers faced by SMMEs and the coordination of interventions through government agencies.

(See attached)

Discussion

Mr A van der Westhuizen (DA) expressed his gratitude towards the Chairperson and Ms Koekemoer for guiding them through the matrix. He expressed his disappointment at not receiving responses from those who had raised concerns, and expressed uncertainty about their presence in the meeting. He sought clarification on whether questions should first be addressed to Ms Koekemoer before moving on to the legal advisor's responses.

He highlighted issues such as the court case and the Department's stance, along with various legal matters raised by those who had commented on the Bill. He clarified that his queries were not directed towards Ms Koekemoer, but rather towards the legal advisor. He then proceeded to outline specific concerns, such as the applicability of the Dawood court case issue and the compatibility of alternative dispute mechanisms with adjudication.

Adv Romeo Maasdorp, WCPP Legal Adviser, respectfully acknowledged that he had not reviewed the Dawood court case in preparation for the meeting, and had found the Member's question on the matter unexpected. He expressed willingness to delve into the case and provide a response if deemed necessary by the Member and the Chairperson. He admitted to not considering the intricacies of the case significant in his meeting preparations, but gave an assurance that he could address the specific question raised.

Regarding the terms "judicate" and "adjudication," he believed the definitions and necessity of these terms were adequately covered in the responses within the matrix. However, if the Member insisted on a response from him, he was prepared to provide it, pending guidance from the Chairperson or the Committee.

The Chairperson asked Mr Van der Westhuizen whether he felt that the details of the Dawood case were necessary for the Committee to consider and proceed with the negotiating mandate that morning.

Mr Van der Westhuizen acknowledged the time pressures faced by the Committee in completing its business for the term. He suggested addressing uncertainties and questions by raising them with the Members of the Select Committee, hoping they could provide guidance. He pointed out a discrepancy between the requirement of a two-month turnaround time for financial statements and the proposed legislation's mention of three months, and pointed out the importance of consistency in legislation. Mr van der Van der Westhuizen expressed regret over the time constraints preventing thorough consideration, particularly in seeking the legal advisor's opinion to provide clear guidance to the Select Committee.

The Chairperson proposed two suggestions for the way forward. Firstly, she suggested bringing in Adv Maasdorp to provide his opinion on the matter raised by Mr van der Westhuizen. Secondly, she proposed incorporating the concerns highlighted into the section on additional specific recommendations when dealing with the negotiating mandate draft report. She sought confirmation from Advocate Maasdorp regarding this approach.

Adv Maasdorp offered his assistance in drafting a concern that would encompass the nuances and undertones of the issue Mr Van der Westhuizen raised.

Mr I Sileku (DA) raised two points for clarity. Firstly, he welcomed the mention of the 30-day period for SMMEs to be paid, but expressed concern about enforcement if businesses failed to comply. He sought clarification on measures within the Bill to ensure prompt payment within the stipulated timeframe. Secondly, he voiced frustration over the lack of consultation with the Western Cape regarding the Bill. He requested the Department to explain why there was insufficient time for consultation with the Western Cape, highlighting the recurring issue of time constraints during deliberations on the Bill.

The Chairperson expressed additional concerns regarding the mention of interest being paid to the private sector within the 30-day payment period. She highlighted her uncertainty about the availability of funding for such interest payments, particularly given the existing budget cuts and pressures to allocate funds for various priorities such as disaster relief. She acknowledged the severe time pressures faced by the Committee, which she believed had jeopardised meaningful public participation despite their efforts. She suggested listing this as a procedural concern in the draft report of the negotiating mandate. She then directed Mr Sileku's question to the Department for their response.

Responses

Ms Koekemoer said that the Department supported the 30-day payment provision for SMMEs and advised reviewing the documentation, particularly the responses from the Portfolio Committee and parliamentary legal advisors, as they had highlighted pertinent areas. The Department would ensure compliance by seeking input from their legal team and the representative from the Office of the Chief State Law Advisor (OCSLA) who had worked on the Bill.

Regarding the 30-day payments, Ms Koekemoer explained that the Public Finance Management Act (PMFA) regulations held accounting authorities accountable for non-payment, but enforcement was lacking. The proposed legislation empowered the ombud to make determinations on late payments, ensuring small and medium enterprises (SMEs) the right to timely payment. She clarified that interest payments would be made by the party at fault, not the SMMEs, aiming to incentivise prompt payment by large enterprises.

Ms Koekemoer addressed the issue of consultation with the Western Cape, stating that efforts had been made to coordinate meetings with the Department of Economic Development, but suitable dates could not be found. However, she gave an assurance that consultation with the Western Cape would occur in due course.

Further discussion

The Chairperson expressed a concern on behalf of the Committee regarding potential confusion regarding the Department's role in providing presentations. She clarified that the Committee's role was to deliberate on the submissions made by the Department, and that there should be no confusion or overlapping of roles. It was important to establish clear roles for future reference, ensuring the Department understood its role in the process. She invited Members and officials to raise any similar concerns they might have regarding this matter.

Adv Maasdorp expressed his desire to hear the Department's response to her question regarding the perceived confusion. He commented that he was familiar with the lead-up to the briefing, and suggested that there might not necessarily be confusion. However, he awaited the Department's clarification on the matter. If necessary, he would express certain views, with the Chairperson's permission, during his speaking opportunity.

Ms Qinisile Delwa, Deputy Director-General: Enterprise Development, Innovation, and Entrepreneurship, DSBD, said that the Department understood the delineation of roles clearly. However, she acknowledged confusion among officials arising from certain comments that had led to misunderstandings during engagements with the Select Committee. It had been pointed out that the Department may have exceeded its mandate in the process, as it was reminded that the process remained parliamentary, and the Department's role was primarily to provide information and brief different committees. She clarified that any misunderstanding stemmed from this aspect, rather than a lack of understanding of the Department's role. She sincerely apologised for any confusion caused, and expressed a commitment to handling the situation better in the future.

Adv Maasdorp remarked that after 30 years of democracy, it was unacceptable to still face such issues. He emphasised that as a legitimate, constitutionally mandated legislative platform, they were obligated to pursue all opportunities to ensure that submissions received responses from the relevant executive bodies. He stressed the importance of clarity and transparency in such matters, expressing concern over the reluctance to address the Committee. He questioned the source of such arrogance and misplaced chauvinism. He commended Ms Delwa for her mature approach, and contrasted it with the earlier demeanour, especially towards his procedural office colleague. He reiterated the Committee's commitment to obtaining input from officials responsible for providing it, underscoring the Committee's role as a legitimate law-making entity.

The Chairperson agreed that the response offered regarding the situation had been mature. She expressed appreciation for the lessons learned, and emphasised the importance of continuing to provide best practices and serving residents who depended on them for law-making. Concluding, she thanked the attendees for their efforts thus far, and excused them from the remainder of the meeting.

Negotiating mandate

The Chairperson expressed satisfaction with the discussion, and then requested indications from the Committee Members regarding their stance on confirming authority of the Western Cape delegate to the National Council of Provinces (NCOP) to support or oppose the Bill. She asked for reasons supporting their decision, which could be based on the metrics and discussions held.

Mr Van der Westhuizen expressed his views, stating that it was now the Committee's opportunity to debate their position on the Bill. He began by acknowledging that, on the whole, there were more positives than negatives in the Bill. However, he criticised the Department for not capitalising on the Bill's potential. He stressed the importance of small enterprises in the economy, noting their significant role in job creation with minimal capital investment. He was disappointed that the legislation did not make significant strides to stimulate and protect smaller enterprises, which he believed could have had a substantial impact, especially in a country like South Africa with its high unemployment rate, particularly among the youth.

He reluctantly proposed supporting the Bill, but suggested that their comments to the Select Committee should highlight their disappointment, particularly regarding the lack of representation for small enterprises in policy-making councils and the absence of incentives for employment and growth. There was a need for exemptions and incentives for small enterprises, which he felt were crucial for their development. He was concerned about the rush to pass legislation in the parliamentary session, and suggested that the Bill should be revisited in the future to address these issues. In conclusion, he proposed supporting the Bill with reservations and urged that its provisions be reconsidered in the next term.

The Chairperson agreed that her concern should be included as a substantive issue in the Bill. She requested assistance from Adv Maasdorp to ensure its incorporation into the negotiating mandate during the drafting break.

Mr Sileku raised concerns regarding public participation, noting that Adv Maasdorp and the Chairperson would be familiar with their stance on the matter. He highlighted the absence of a socio-economic impact assessment system (SEIAS) integration check, a concern the Department of Finance raised regarding its sharing with stakeholders. Additionally, he suggested addressing the need to enhance public participation in future legislative processes, emphasising the importance of involving the affected individuals and ensuring their comprehension of the proceedings. There was a need to move beyond mere compliance and focus on meaningful engagement to ensure value for money and understanding among participants.

The Chairperson responded that concerns regarding insufficient time for the legislative process should be noted under procedural concerns. She expressed agreement with supporting the Bill, but stressed the need for certain amendments. Moving on to specific concerns, she highlighted issues with language and drafting, outdated wording, and vague provisions within the Bill. Concerns were also raised about the SEIAS document, particularly regarding incomplete risk assessments and the lack of a comprehensive evaluation of external economic factors. She also noted worries about the Bill's financial sustainability and the short turnaround time for stakeholder engagement during the legislative process.

Regarding governance and oversight, she called for clarity in the process of appointing board members for the Small Enterprises Development Finance Agency. She also raised concerns about the criteria for appointing directors and the establishment of regional offices, advocating limits on interim ombud leader appointments.

Moving on to substantive concerns, she highlighted themes such as governance, legal framework coherence, institutional integrity and efficiency, economic inclusion and support, regulatory clarity, compliance and reporting, dispute resolution, stakeholder engagement, transparency, accountability, and documentation.

Under each theme, specific issues and recommendations were addressed. For example, under economic inclusion and support, she emphasised the importance of promoting economic inclusion, ensuring fair remuneration for ombuds, and setting clear service standards for the agency.

Concerns were also raised about the Bill's impact on interagency and provincial collaboration, stakeholder engagement, transparency, and accountability. Additionally, recommendations were made to improve documentation and record-keeping practices, and to address challenges faced by small businesses.

Mr Van der Westhuizen expressed gratitude to the Chairperson for thoroughly addressing the issues and reading them into the record. He proposed supporting all the points raised by her, and suggested that the procedural officer consider other issues raised by himself and other Members, including those related to legal matters. He also recommended seeking advice from Adv Maasdorp regarding the phrasing of certain issues in legal language. He expressed support for the detailed input provided and thanked the Chairperson for compiling it. He expressed the hope that the Select Committee would thoroughly examine the Bill and make the necessary amendments.

In response, the Chairperson thanked Mr Van der Westhuizen and acknowledged the hard work involved, crediting the capable assistance of the Committee support staff.

Adv Maasdorp expressed appreciation for the concern raised by Mr Van der Westhuizen regarding the Dawood case, and explained that he had briefly reviewed it to understand the issues at hand. He provided background information about the case, which involved the refusal of temporary residence permits to South African citizens with foreign spouses. The case highlighted the importance of providing guidance when exercising discretion to ensure consistency, prevent arbitrariness, and avoid abuse of office. He elaborated on the court's stance, emphasising the need for guidelines to moderate discretion, particularly when it impacted people's rights and constitutional interests. He stressed the responsibility of the legislature to identify policy considerations that justified the refusal of permits, thereby assisting in moderating discretion.

In relation to clause 17 of the Bill, Adv Maasdorp acknowledged three instances where the ombud exercised discretion. He recommended revising the Bill to provide guidance to decision-makers to ensure the rational and lawful exercise of discretion. He suggested incorporating principles to guide discretion in the respective clauses to protect citizens, maintain consistency, and align with court cases.

He concluded by suggesting that the mandate should include recording the guidance of discretion in the relevant clauses to ensure rationality, lawfulness, and alignment with court precedents.

Mr Sileku expressed his gratitude for the extensive work done by the Chairperson and the procedural officers behind the scenes to compile the comprehensive input for the Bill. He also thanked Adv Maasdorp for the legal advice provided, and said it would be insensitive of him not to convey his sincere gratitude to all three individuals for their contributions. He concluded by expressing his support for the mandate.

The Chairperson said that none of the work achieved to date would have been possible by working in isolation. She thanked all the officials who had contributed to the progress, expressing gratitude for their insights and dedication to their work, which had been instrumental in reaching this point. She asked the Procedural Officer for advice on taking a break and drafting the negotiating mandate report.

Adoption of negotiating mandate

After the break, the Chairperson resumed by reading the introduction, the highlighted sections, and the conclusion of the negotiating mandate stage draft report on the National Small Enterprises Amendment Bill [B16B- 2023] NCOP s76. She said the Standing Committee on Finance, Economic Opportunities, and Tourism had considered the Bill and conferred the authority to support it, subject to the consideration of concerns and the implementation of proposed amendments.

The introduction highlighted the importance of small enterprises in the economy, and emphasised the need for legislation to stimulate their growth and protect their interests.

The Chairperson then invited Members to indicate if anything was missing or needed to be added before concluding the report.

Mr Van der Westhuizen expressed gratitude for highlighting the importance of small enterprises, and requested an amendment to change "backbone of the country " to "backbone of the economy" in the report. The Chairperson acknowledged the request and confirmed that the change would be made.

She then addressed the next addition, which fell under procedural concerns related to language and drafting. She suggested creating a sub-heading for public participation to avoid confusion with other recommendations.

The Procedural Officer clarified that the concern was primarily about language, and suggested keeping it under the language section.

The Chairperson read out the additions to the report concerning substantive concerns. Regarding language concerns during the public participation process, it was noted that the Bill should be presented in a language understandable to the public. Additionally, it was added that the national government should enhance public participation and respect the legislative process to ensure proper consultation with affected members of the public.

Moving on to substantive concerns, the report highlighted the lack of representation and incentives for small enterprises. It was noted that small enterprises were not represented in bargaining councils but were bound by agreements reached at the national level. The Bill was criticised for not addressing incentives for small enterprises to provide employment opportunities.

Another substantive concern addressed the issue of discretionary powers in the Bill. It was pointed out that the Bill granted wide discretionary powers without substantive guidance on their exercise. Recommendations were made to revise the Bill to provide guidance for decision-makers and to mitigate the risk of abuse of power.

The Chairperson sought clarification on the wording regarding the exercise of discretion, seeking input from Adv Maasdorp for possible adjustments.

Adv Maasdorp clarified that the term "exercise of the discretion" accurately referred to the discretion exercised by the ombud. However, to enhance accuracy, he suggested using "exercise of that discretion" to emphasise the moderation of discretion in general.

The Chairperson suggested modifying the conclusion to state that the negotiating mandate supported the National Small Enterprises Amendment Bill if the amendments proposed in the negotiating mandate were made, rather than specifying categories such as transparency, governance, and clear definitions of unfair trading practices. This modification aimed to emphasise the importance of incorporating the Committee's proposed amendments.

Adv Maasdorp suggested that if amendments were to be listed in the conclusion, they should be all-inclusive to cover other recommendations as well, such as the issue of discretion moderation.

The Chairperson agreed with this suggestion, and proposed adding the phrase "if the amendments in the negotiating mandate proposed by the negotiating mandate are made" to the conclusion. She also recommended that in the next term, the national Parliament should seriously consider the legislation and address any omissions found in the Bill as soon as possible.

She noted that there was no minority view, and asked for a proposer for the draft report.

Mr Van der Westhuizen proposed that they adopt the motion, and Mr Sileku seconded the proposal.

The Chairperson responded positively, commenting on the ease of the process and expressing appreciation for everyone's contributions.

Committee matters

The Chairperson checked for any further resolutions before adjourning the meeting.

Mr Van der Westhuizen inquired about the next meeting schedule.

The Chairperson responded that they were likely meeting again on Friday, with the Procedural Officer potentially providing updates on any developments.

The Procedural Officer confirmed the schedule, stating that they would convene virtually from 08h00 until 13:00 on Friday. The meeting would focus on the negotiating mandate concerning the Public Procurement Bill, along with two final mandates on the Upstream Petroleum Bill and the National Small Enterprise Amendment Bill.

Mr Van der Westhuizen conveyed his discontent with the hurried pace of proceedings, noting it to be beyond their control. He affirmed his commitment to comply, despite what he considered unreasonable time pressures.

The Chairperson empathised with his sentiments, acknowledging the stress caused by backlogs and delays. She emphasised the importance of maintaining open communication, and thanked the officials for their support and contributions.

The meeting was adjourned.