Briefing by the Department on Progress in the Implementation of the Committee’s Oversight Recommendations

Video ATC230529: Portfolio Committee on Small Business Development, Having Undertaken the Oversight Visit to the North West Province from 27 – 31 March 2023, Adopted on Wednesday, 24 May 2023 ATC241119: The Portfolio Committee on Small Business Development, Having Undertaken the Oversight Visit to the Northern Cape Province from 08 – 11 October 2024 The Portfolio Committee convened virtually to receive a briefing from the Department of Small Business Development (DSBD) and the Small Enterprise Development and Finance Agency (SEDFA) on the progress made in implementing recommendations from oversight visits to the North West in March 2023 and the Northern Cape in October 2024. The presentation highlighted progress on several key recommendations. In the North West, concerns were raised about the Spaza Shop Support Programme, where beneficiaries had not received payments over a year after disbursement. The Committee mandated an internal investigation by the SEFA Board of Directors to address missing funds, lack of notification, and issues with mobi-money wallet cards, with findings due by 30 June 2023. The Committee also called for a comprehensive investigation into wholesale lending, focusing on interest rates, policy violations, and lending to unlicensed intermediaries, with a deadline of 31 August 2023. Additionally, the Department was urged to revive the support programme due to high transportation costs in Mafikeng and Lichtenburg. In the Northern Cape, the Committee had recommended revising Memoranda of Understanding (MoUs) with Provincial Investment Promotion Agencies and transferring activities to SEDFA by 31 March 2025. The relationship between SEFA and ABSA, through the Khula Credit Guarantee (KCG), was emphasised as a means to de-risk start-ups, with a call for broader bank participation. The Committee also stressed the need for increased financial support for SMMEs and cooperatives in underserved provinces like the Free State, North West, and Northern Cape, alongside improved needs assessments and performance monitoring. The Informal Micro Enterprises Development Programme (IMEDP) was praised, but the Department was advised to focus on select beneficiaries for better growth tracking. During the discussion, Committee Members raised several concerns. One Member highlighted the absence of a geo-mapping system to track funded businesses and assess value for money. Another expressed dissatisfaction with the delayed presentation of progress reports, particularly for the 2023 oversight visit, and questioned the registration status of beneficiaries under new regulations. Issues with intermediaries charging excessive interest rates and the lack of enforcement of the National Credit Act were also raised, alongside calls for clarity on the purpose and cost of a study commissioned from Stellenbosch University. Corruption and inefficiencies in the intermediary lending model were strongly criticised, with some Members advocating for its complete abolition in favour of direct lending. Concerns were also voiced about red tape hindering business applications, the eligibility of foreign nationals for government support, and the enforcement of the R5 million investment requirement for foreign-owned businesses. The Department was pressed to provide tangible evidence of the impact of its programmes, particularly in rural areas, and to address delays in criminal investigations involving SEDFA officials. In response, the Department’s Director-General outlined steps taken to address these issues. She mentioned the launch of 'DSPD Connect' for geo-mapping beneficiaries and emphasised the importance of lifestyle audits for public officials. The Department had developed a red tape framework and register to streamline processes and investigate complaints. Regarding foreign nationals, she clarified that business visa requirements were monitored by the Departments of Home Affairs and Labour, not DSBD. Representatives from SEDFA defended the intermediary model, citing its use by international institutions, but acknowledged the need for improvements. They also clarified that the spaza shop support programme mentioned in the presentation was a COVID-era initiative, distinct from the current R500 million fund. The meeting concluded with a proposal for a strategic planning session to address unresolved issues and improve alignment between the Committee and the Department. Members requested case studies, benchmarking with other countries, and a sample list of beneficiaries to verify interest rates charged.