ATC151123: Report of the Portfolio Committee on Small Business Development on its Oversight visits to Kwazulu-Natal Undertaken on 25th and 26th November 2014 and to Eastern Cape and Gauteng on 27th January to 5th February 2015 Respectfully, dated 18 November 2015

Small Business Development

REPORT OF THE PORTFOLIO COMMITTEE ON SMALL BUSINESS DEVELOPMENT ON ITS OVERSIGHT VISITS TO KWAZULU-NATAL UNDERTAKEN ON 25TH AND 26TH NOVEMBER 2014 AND TO EASTERN CAPE AND GAUTENG ON 27TH JANUARY TO 5TH FEBRUARY 2015 RESPECTFULLY, DATED 18 NOVEMBER 2015
 

1. Introduction

The oversight report of the Portfolio Committee on Small Business Development (the Committee) covers its first oversight visit to Kwazulu-Natal that took place on the 25th and 26th  November 2014 and the second  oversight visit to KwaZulu-Natal, Eastern Cape and Gauteng that took place from the 27th January to 5th February 2015. The first oversight visit was planned to cover KwaZulu-Natal and Gauteng, and it was suspended when the Speaker of Parliament called a special sitting of the National Assembly on the 28th of November 2014 resulting with a need for the Committee to revisit KwaZulu-Natal in January and Gauteng in February.

 

The Committee decided to conduct oversight visits to provinces to assess the state of Small, Medium and Micro Enterprises (SMMEs) and Cooperatives after having engaged with the Department of Small Business Development (the Department) and organisations representing SMMES and Cooperatives as well as other role players including research institutions and the private sector. The visits focused mainly on:

1. The alignment of support services provided to SMMES and Cooperatives to the strategic plan of the Department as well as the alignment of the Strategic Plans of different spheres of government to ensure a shared vision and attainment of the National Development Plan (NDP) goals and targets on job creation, reduction of poverty and inequalities.
2. The implementation of national policies designed to enhance development of SMMEs and Cooperatives. These policies  include:

• The Preferential Procurement Policy Framework Management Act (PPPFMA).
• The 70% Local Procurement Policy.
• The 30% Procurement from SMMEs and Cooperatives Policy.
• The development of SMMEs and Cooperatives through public procurement and infrastructure spend.
• Facilitation of active community participation in the process of their own development through partnerships between government, the private sector,   Non-Governmental Organisations  (NGOs) and Community Based Organisations (CBOs).

1. Identifying possible interventions as well as small business and cooperatives development models initiated in different provinces and municipalities that could be enhanced and replicated in other areas by the Department to assist the development of SMMEs and Cooperatives.
2. Issues raised by small businesses and cooperatives such as the conflict between the Foreign Nationals  and South Africans owning Spaza Shops, Tuck Shops and Taverns in townships. The first person to formally raise this issue in a meeting with the Chairperson of the Committee was the President of the South African Tuck-shops and Taverns, Small Enterprises and Vendors Association (SATTSEVA) Mr. Thekiso Dikgale.
3. Issues raised by organisations representing SMMES and Cooperatives. These issues included:

• Lack of access to market;
• Lack of access to finance;
• Very high interest rates charged by the Development Financial Institutions (DFIs);
• Poor infrastructure for businesses to operate from;
• Lack of adequate support infrastructure such as roads, electricity, communication services, water and sanitation to enhance business operation;
• High costs of doing business due to high travelling, rental and electricity costs;
• Government Red Tape;
• Fragmented support services offered by government that are also not easily accessible;
• Duplication of support services resulting with confusion at community level and competition between different departments of government and spheres of government;
• Lack of adequate skills development and training programmes resulting with poor skills level in small businesses and cooperatives; and
• Non-payment of invoices within 30 days mainly by government departments and state owned companies.

 

It is worth noting that the Department is fairly new and had not been fully established when the Committee undertook oversight visits. The oversight report of the Committee would therefore be used by the Committee to assess the relevance of the Strategic Plan and the Annual Performance Plan of the Department. The Committee would also use the oversight report to assess the alignment of financial and non-financial support services to the strategic plan of the Department and to the felt needs of SMMEs and Cooperatives. The report would also form the basis for further engagement with both Foreign Nationals and South Africans on issues affecting their operations and coexistence as small businesses in order to find solutions to such issues.

 

The Committee would also reflect on this report during the Budget Review Recommendations Report process so as to facilitate budget allocation to programmes that would have high impact on job creation and poverty reduction with the long-term objective of achieving the NDP target of creating 9.9 million new jobs through small businesses and cooperatives by 2030, which is 90 percent of 11 million jobs.

 

1. Background

The Committee is a new Portfolio Committee that was established after the establishment of the Department of Small Business Development (the Department) which was established after the 2014 general elections. The Committee is constitutionally mandated to conduct oversight over the newly established Department. The Department is mandated to lead an integrated approach to the promotion and development of small business and cooperatives through a focus on economic and legislative drivers that stimulate entrepreneurship to contribute to radical socio –economic transformation. Before the establishment of the Department, powers and functions of developing SMMEs and Cooperatives were under the Department of Trade and Industry (the DTI) with financial support services provided through Small Enterprise Finance Agency (SEFA) falling under the Department of Economic Development (EDD). In provinces, powers and functions of developing SMMEs and Cooperatives fall under the EDD. At municipality level powers and functions of developing SMMEs and Cooperatives fall under the Local Economic Development (LED) Programmes.  

 

In executing its constitutional mandate the committee resolved to assess and understand issues and challenges encountered in the whole spectrum of SMMEs and Cooperatives development. Subsequently, the Committee held meetings with various institutions and stakeholders responsible for providing support services to SMMEs and Cooperatives. During the meetings with various institutions and stakeholders the Committee realised the need to go out and meet with the provincial departments of Economic Development and the Local Economic Development Departments and Local Government level. The purpose of this exercise was to get a clear picture and develop a better understanding of the state of SMMEs and Cooperatives including the effectiveness and impact of support services rendered both at provincial and local government as well as their alignment to the mandate of the new Department. The Committee also wanted to have a direct contact with SMMEs and Cooperatives to understand their felt needs and then assess the relevance of rendered support services to the felt needs and challenges faced by SMMEs and Cooperatives. 

1. In KwaZulu- Natal the Committee visited and engaged with the following organisations and community structures:

1. The Department of Economic Development, Tourism and Environmental Affairs (DEDTEA);
2. The Department of Basic Education (DBE);
3. The Passenger Rail Agency of South Africa (PRASA);
4. Kohwa Holdings, Inkosi Maphumulo and community members interested in the Greenhouse Agricultural Model of Kohwa;
5. The Hibiscus Coast Municipality and Potholes Repair Project; 
6. Gamalakhe tunnel farming project;
7. Ugu District Municipality LED and Ugu Fresh Produce Market
8. UGU CONTRALESA and the House of Traditional Leaders;
9. KwaNobamba Combined Primary School;
10. KwaXolo Traditional Council and the Mamzimhlophe Village Agricultural site earmarked for Top Greenhouse farming;
11. Ezinqoleni Local Municipality;
12. Ezinqoleni Street Vendors; and  
13. KwaMachi Combined Primary School Renovation and Maintenance Project.

 

1. In Eastern Cape the Committee visited and engage with the following organisations and community structures:

1. Mbizana Local Municipality
2. Street vendors
3. Ludeke Combined Primary School Renovation and Maintenance Project.

 

1. In Gauteng the Committee visited and engage with the following organisations and community structures:

1. The Johannesburg Metropolitan Municipality
2. Tuck-shops and Spaza-shops in Dobsonville and Kagiso under the South African Tuck-shops, Taverns, Small Enterprises and Vendors Association (SATTSIVA).
3. Orlando West Industrial Park.
4. Soweto Empowerment Zone.
5. Self-Help Association of Paraplegics (SHAP).
6. Leonard Cheshire Disability.
7. Emndeni Skills Development Centre.
8. Sikhulile Jersey Manufacturing Cooperative.
9. Hunger No More Packaging Cooperative.
10. Skills Village.
11. Riversands Incubator
12. Vusisizwe Holdings

 

1. Objectives of the visits

The objective of the oversight visit was drawn from the mandate of the Committee of conducting oversight over the Department of Small Business Development. Since the inception of the Committee in July 2014, it has been engaging with a number of organisations that represent SMMEs and Cooperatives as well as government support services with an objective of getting an understanding of the state of SMMEs and Cooperatives in South Africa. The objectives of the visit in KwaZulu Natal were:

1.  to engage with the KwaZulu Natal Provincial Department of Economic Development, Tourism and Environmental Affairs which leads KZN’s programmes of developing small enterprises and cooperatives;
2.  to interact with informal traders, street vendors, organisations and government institutions assisting in the development of SMMEs and Cooperatives, namely Kohwa Holdings, Ugu District Municipality, Mbizana Local Municipality, incubators and Joburg Metro;
3.  to assess the impact of both financial and non-financial services given to SMMEs and Cooperatives;
4.  to understand the state of SMMEs and Cooperatives in South Africa; and
5.  to allow the affected groups to speak for themselves.

 

1. Composition of the delegation

The delegation comprised members of the Portfolio Committee on Small Business Development, Parliamentary Officials, and officials from the Department of Small Business Development, officials from Metro Local Economic Development and officials from Gauteng Department of Economic Development.

4.1        Members of the Portfolio Committee on Small Business Development

Ms NR Bhengu, MP                   (ANC) Leader of the delegation

            Mr X Mabasa, MP                     (ANC)

            Mr SD Bekwa, MP                                 (ANC)

            Mr TRJE Ramokhoase, MP        (ANC)

            Ms N November, MP                 (ANC)

            Mr RWT Chance, MP                 (DA)

            Mr HCC Kruger, MP                               (DA)

            Mr TE Mulaudzi, MP                  (EFF)

            Mr SC Mncwabe, MP                 (NFP)

            Rev. KRJ Meshoe, MP              (ACDP)

 

4.2        Parliamentary Officials

Mr NK Kunene   Committee Secretary

            Mr X Mgxaji                  Committee Content Advisor

            Ms N Zixesha           Executive Secretary

 

4.3        Department of Small Business Development Officials

Ms Jesica Longwe                     Head in the Ministry’s Office of Small Business Development

Mr Jeffrey Ndumo                     Chief Director: Cooperatives Development, Department of Small Business Development

Mr Mzwanele Memani                 Acting Chief Director: Enterprise Development, Department of Small Business Development

Mr Mojalefa Mohote                  Acting DDG

 

1. KwaZulu Natal Oversight visits, Observations and Recommendations
   1. KwaZulu-Natal Department of Economic Development, Tourism & Environmental Affairs

On the 25th of November 2014 the Committee together with officials from the Department and the Kwazulu-Natal Department of Economic Development, Tourism and Environmental Affairs presented an overview of its focus areas and programme which include:

• Integrated Economic Development Services
• Programmes Supporting Small Enterprises
• The Department of Education National School Nutrition Programme

 

The Portfolio Committee wanted to understand the strategic approach employed by the KwaZulu-Natal Department of Education on the alignment of the School Nutrition Programme and the cooperatives development programme in KwaZulu-Natal. The ANC Lekgotla held in January 2014 had resolved that the National School Nutrition Programme (NSNP) and the supply of school furniture are set aside programmes for development of cooperatives in-line with the resolution of the 53rd Mangaung Conference of the ANC on developing SMMEs and Cooperatives through public procurement and infrastructure spend. That implied that government departments under the ANC government would implement those resolutions as government policies. Such policy positions of the ANC are also in-line with the objectives of the NDP on poverty reduction and job creation and therefore have to find their expression in the strategic plans of the Department and the Department of Basic Education at national level as well as all Provincial Departments of Education.

The NSNP is aimed at enhancing school attendance by children from poor families and improving their performance at class level and in sports while at the same time improving social and economic standards of poor families around the school. At the initial phase of implementing the NSNP, more focus was paid on enhancing the attendance of school children from poor families and improving their performance with less attention paid on reducing poverty levels at community level hence the NSNP was subjected to a pure tender system based only on lower price and 90/10 and 80/20 score point system neglecting the developmental aspect of poor families around the school and their participation on service delivery programmes.  Now that we have the NDP there is need for aligning implementation process of the NSNP to the development process of cooperatives and poverty reduction at community level.

The set aside programmes are therefore introduced in order to open a sustainable market for cooperatives and small businesses and to also create a balance between competition and poverty reduction based on inequalities.  

KwaZulu-Natal-Department of Education presented its strategic plan on National School Nutrition Programme (NSNP) and outlined that it is one of government initiatives towards addressing poverty as it targets schools in the poorest communities and benefit multitude of learners throughout the province. The NSNP has grown from serving 1 251 140 learners in 3090 public schools in 2004/05 to 2 281 188 learners currently benefiting in 5258 schools in 2014/15. This is 86 percent of the 2 637 222 learner population in public schools. The programme does not only provide nutritious meals to learners in the province of Kwazulu-Natal but is also used as a channel for economic development and creation of job opportunities for the local people through the use of cooperatives and small enterprises as service providers whilst the unemployed parents of learners are employed as food handlers in schools.

 

There are 1754 service providers currently contracted in the programme of which 279 of them are cooperatives. There are 10 113 food handlers engaged in the programme who prepare meals for learners, earning a fixed stipend of R900 per month at a ratio of 1:200 learners.

 

The total grant allocation received by the NSNP is R 1 299 705 000 inclusive of rollover of R93 000 000.00. The amount spent as at the end of March 2014 was R 1 282 522 837. The allocation per learner per day was R2.26 for primary and R3.12 for special and secondary schools.

It was reported that Economic Development, Tourism and Environmental Affairs (EDTEA) embarked on the process of cleaning up the system through:

• eradication of fraud and corruption that is in the programme;
• minimising of delays in the payments that go beyond the stipulated time frames of 30 days; and
• improvement of procurement processes.

 

In December 2013, the EDTEA embarked on a new process of appointing service providers and has developed a new NSNP Policy that will regulate the implementation of the programme. NSNP Head Office will now play an oversight role which will also include grant monitoring, development of guidelines and policy review. Operational matters that include payments of service providers will be dealt with at district level. The appointment of service providers shall be based on a tender process and quotation process in accordance with SCM prescripts. Care will be taken in the appointment of cooperatives and small enterprises. The Department of Education will also facilitate support and mentorship programmes for all cooperatives in the programme. Furthermore, it will collaborate with other departments in facilitating partnership between the district and relevant enterprises. Agriculture production and agro-processing through the district enterprises shall be promoted where capacity is available. Implementation and payment of service providers shall be the responsibility of all districts in the province. The EDTEA shall register NSNP with the Expanded Public Works Programme for NSNP to benefit.

 

The KwaZulu-Natal Department of Education has committed itself in constant development of learners at school through the provision of nutritious food aimed at enhancing their cognitive and physical development. Unnecessary barriers in the inclusion of cooperatives shall be avoided.

 

5.1.1     Observations and findings

The Committee observed and found the following:

5.1.1.1 The Department of Education in KwaZulu-Natal is developing a turn-around strategy on the NSNP that seeks to align the implementation process to the NDP objectives of reducing poverty and promoting active participation of communities in their development process.

1. The current procurement system used for the NSNP in KwaZulu-Natal is based on the lower price of 90/10 and 80/20 score point system which makes it difficult to implement the set aside policy that is aimed at opening a sustainable market for cooperatives and participation of poor families around the school in the value chain of the NSNP.
2. The remuneration to food handlers who are called volunteer workers is R900.00 per Month.
3. The Committee did not engage with the suppliers to the NSNP to get their side of the story and also assess the conditions they work under as well as adherence to 30 days payment by the Department of Education.

 

1. Recommendations

5.1.2.1The NSNP is a Set Aside Programme for Cooperatives therefore the Department should play a leading role of developing a model that would enable cooperatives to participate in the entire value chain of the NSNP. Such cooperatives should be formed by poor families who depend on government social grants so that the NSNP contributes in breaking the poverty cycle at community level.

 

5.1.2.2The Department should priorities the signing of the Transversal Agreements with all government departments needed to play a complimentary role in the implementation of the NSNP in a developmental and collective manner that would make the NSNP an effective tool for poverty reduction and sustainable jobs creation in communities around the schools. Government Departments that are required to work collectively in making the NSNP an effective tool for poverty reduction and sustainable jobs creation include the following:

 

• The Department of Rural Development and Land Reform to provide land and financial resources needed to develop agricultural cooperatives that would be part of the value chain of the NSNP;
• The Department of Agriculture, Forestry and Fisheries to provide agricultural support services;
• The Department of Social Development to identify beneficiaries of the social grant that are from the most poor families around the schools who depend on social grants for their daily survival so that the Department of Small Business Development can organise such people and expose them to the concept of cooperatives in order to facilitate the establishment of cooperatives by them;  
• The Department of Public Works to provide adequate kitchens in schools needed for food storage and food preparation. Such kitchens should meet health and safety standards;
• The Department of Health to provide guidance on health issues including setting and monitoring of health and safety standards of  the nutrition value of meals provided to school children as well as premises in which food is stored and prepared;
• The Department of Water  Affairs and Sanitation to provide adequate water needed for cooking, washing hands before eating and keeping cooking and eating utensils clean;
• The Department Water Affairs and Sanitation to provide adequate sanitation to ensure that sanitation facilities in schools do not compromise food health and safety standards;
• The Department of Energy to provide adequate energy and where necessary the alternative energy mix so as to create local jobs and reduce the cost of doing business by cooperatives participating in the value chain of the NSNP;
• The Department of Transport to improve poor road infrastructure to schools especially gravel roads in rural areas and roads with potholes through the SIHAMBA SONKE Programme of the Department of Transport which was designed to mainly fund the upgrading of access roads to public facilities and repair potholes at municipality levels especially in municipalities with no revenue base;
• The Department of High Education and Training and relevant SETAs to provide the required skills training support services;
• The Department of Basic Education as the custodian of the NSNP and a sustainable market for cooperatives in the process of implementing the 53rd ANC Conference Resolution of developing Cooperatives and SMMEs through public procurement and infrastructure spend;
• The Department of Cooperative Government and Traditional Affairs to provide land and facilitate the inclusion of the programme in Integrated Development Plans of Municipalities as well as ensuring that the Poverty Reduction and Job Creation Focused Cooperatives Development Model is part of the Local Economic Development Strategy of all municipalities. To also provide infrastructure required by relocating all entities and agencies assigned to provide support services to SMMEs and Cooperatives to LED offices of municipalities in order to have a ONE STOP SHOP that would result with easy access of services to communities as well as coordination of support services; and
• The Department of Small Business Development together with the Department of Basic Education should develop a NSNP Model and a Template of the Implementation Plan that would be used to develop a NSNP value chain that would result with the alignment of SMMEs and Cooperatives as well as different service delivery programmes of government so as to enable members of Cooperatives and SMMEs participating in NSNP to become self-sufficient and exit the social grant register. 
  1. The Department of Small Business Development should facilitate an integrated planning session with all the above mentioned departments to map a coordinated way forward.
  2. As a matter of urgency the Department of Small Business should sign transversal agreements with the Department of Rural Development and Land Reform, the Department of Agriculture, Forestry and Fisheries, the Department of Social Development and the Department of Basic Education to kick start the process of developing cooperatives who would participate in the NSNP value chain.
  3. The Department of Monitoring and Evaluation should develop a monitoring and evaluation tool that speaks to the model.

5.2        Visit to Passenger Rail Association of South Africa (PRASA)

The Committee visited Passenger Rail Association of South Africa (PRASA) to assess the Cooperatives Development Partnership Programme between SANCO Development Institute (SDI) and PRASA. The programme is managed by NGinvest on behalf of PRASA.

The Cooperatives Development Partnership Programme was initiated by SDI and funded by PRASA. The programme is aimed at reducing dependency of poor families on social grants and free municipal services through partnerships between Community Based Organisations, the Private Sector, Government Departments and State Owned Companies. The programme is also aimed at facilitating active involvement of communities in their development and service delivery. The target group for participation in such projects are individuals from poor families in a community closer to the train station. Priority is given to poor families who depend on social grants and free services rendered by municipalities.

PRASA reported that the programme was initiated by SANCO Development Institute as a pilot project designed to run under PRASA for three years from 2013/ 2014 financial year and was then going be handed over to a relevant department with a mandate of developing cooperatives for the programme to be replicated in other train stations throughout the country. The Project focused on cleaning train stations and it was piloted in four provinces which are KwaZulu-Natal, Gauteng, Western Cape and Free State Province.

People who ended up participating in the project were not necessarily the initial target group due to procurement policies of the country. PRASA followed the procurement policy and advertised in newspapers calling for cooperatives to apply for cleaning of the train stations. Flowing from the adverts, 150 cooperatives tendered for the job and all of them went through a screening process to ensure that those cooperatives who would get the job were the nearest to the train stations and were formed by members of poor families.

Some of the cooperatives who tendered for the job were formed by individuals who had worked for companies that had tenders to clean train stations. Those individuals felt that they were exploited by companies who paid them less than what they wanted to earn yet company owners were not doing anything other than tendering for the job and providing workers with cleaning materials and tools, something that the workers felt they could also do with the support of government departments who are charged with a responsibility of developing cooperatives.

 

In KwaZulu-Natal, out of 18 railway stations that were intended for the programme, 28 emerged participating; in Gauteng, out of 41 stations that were intended for the programme, 20 are participating; in the Western Cape, out of 30 stations that were intended for the programme, 3 are participating and in Free State Province, only 1 is participating. PRASA will create jobs for 154 sub-contractors with whom they enter into formal contracts for a period of two years with a monthly payment of R2500.00 per person.

 

PRASA reported that their core business was not to develop cooperatives however PRASA has market opportunities for cooperatives and SMMEs and had since the implementation of the project opened up for involvement of cooperatives in its value chain. PRASA reported that other than the project on cleaning train stations, they have also created an opportunity for women owned companies and cooperatives to participate in the supply of trains under a programme called Women In Rail.

 

With regard to train stations, PRASA mentioned that there is enormous opportunities for cooperatives to maintain PRASA train stations which would include plumbing, electrification and painting. PRASA also mentioned that there are more than five hundred stations under PRASA that could be a sustainable market for cooperatives and SMMEs if there was a well-coordinated support for the programme especially from the department charged with the responsibility of developing cooperatives.

 

PRASA raised the following issues as challenges that retard further development of cooperatives and prevents PRASA from extending the programme to cover other train stations:

1. Lack of adequate support related to cooperative training to enable cooperatives that have been given an opportunity by PRASA to operate as real cooperatives. The view of PRASA was that the cooperatives were at a very initial stage and operated as groups of people working together with no clear understanding of how they should work as cooperatives. PRASA said that the only training support that was provided by SEDA was related to registration of cooperatives.
2. Lack of financial support by relevant support services which would have assisted the cooperatives to set up secondary cooperatives that were going to provide primary cooperatives involved in cleaning of train stations with other services such as supply of cleaning materials such as detergents, plastic bags, toilet papers, brooms and dust pans, buckets and mops, transport etc. That support would have helped to further develop cooperatives and enabled them to have their financial resources rotating within themselves.

 

1. Lack of monitoring and evaluation of the impact of the programme on social and economic conditions of each member.

 

1. Non alignment of the PRASA / SDI Partnership to the strategic plans of DTI then and Small Business Development now, the Provincial Departments responsible for development of cooperatives and Local Economic Development Departments of Municipalities where train stations are located.

 

1. Observations and Findings:

5.2.1.1    The partnership was initiated by an NGO with the support of PRASA and less support from other relevant government departments and SETAs.

1. The approach used by SANCO Development Institute to initiate cooperatives  links service delivery to community involvement and relates to the NDP objectives of poverty reduction and  job creation at community level .

 

1. Although SEDA had been invited to provide support to cooperatives involved in SDI and PRASA partnership, SEDA did not invite the DTI and SEFA to provide more support required to develop cooperatives and make them viable.

 

1. The absence of SDI and NGinvest to make their presentations to the Portfolio Committee denied the portfolio committee the opportunity of understanding the model better and hear what recommendations were going to be proposed by SDI and NGivest as organisations that are part of the programme and have their own experiences and observations that could be used as a learning experience for improving the implementation and replication process of the programme throughout the country.

 

1. The partnership programme between PRASA and SANCO Development Institute on maintenance of train stations is a practical example of the Poverty Reduction and Job Creation Focused Cooperatives Development Model adopted by the Portfolio Committee in 2014.

 

1. Recommendations

5.2.2.1    There is a need for both the Department of Small Business Development and the Portfolio Committee on Small Business Development to further engage with PRASA and SANCO Development Institute to broaden their understanding of the programme and identify gaps that require improvement to make the programme more effective on job creation and poverty reduction.

1. The Department of Small Business should use the PRASA and SANCO Development Institute partnership as a pilot project for implementing the Poverty Reduction and Job Creation Focused Cooperatives Development Model adopted by the Portfolio Committee on Small Business Development. The Department should use its coordination and transversal agreement mandate to bring on board other relevant stake holders such as the Department of Social Development, the Department of Transport, the Department of Public Works, SETA, SEDA and SEFA to provide adequate support to the programme.
2. The Department of Small Business Development should provide adequate support to the programme and lead the process of developing the cooperatives involved in the PRASA programme as well as the replication of the programme throughout South Africa.
3. The Department of Small Business Development together with PRASA, SDI and NGinvest should evaluate the programme and develop a detailed business plan with specific numbers of cooperatives and jobs that could be created as well as social grant beneficiaries that would exit the social grant register through the train stations maintenance programme which includes cleaning, plumbing, painting and electrification, if the programme was replicated throughout South Africa. The business plan should also reflect the value chain development that would facilitate the rotation of financial resources within the cooperative movement. That would include the training on the cooperatives concept which would lead to the establishment of secondary and tertiary cooperatives that would provide services needed by primary cooperatives involved in the train stations maintenance programme with the potential of expanding the maintenance programme to include other government facilities.
4. The Portfolio Committee and the Department of Small Business Development should hold a one day workshop with PRASA and project team which includes SANCO Development Institute and NGinvest to unpack the model used in this initiative and also assess the impact of the project on job creation and poverty reduction.
5. The Department of Small Business Development should engage PRASA and Transnet on how to extend the project to cover maintenance of railway lines and cleaning of trains as well as provision of security services as a set aside programme for cooperatives and former freedom fighters who are currently unemployed.

5.3        Visit to Kohwa Holdings Experimental Greenhouse Agricultural Project

The Committee visited a 1000 square meter greenhouse project in Umbumbulu, a rural village under Inkosi Nathi Maphumulo in Vulamehlo Local Municipality. Vulamehlo is one of the six local municipalities that form Ugu District Municipality. Ugu District Municipality is one of the 27 Poverty Nodes prioritised for development in order to reduce poverty and create jobs. The project was initiated in 2012 by Kohwa Holdings (Kohwa). Kohwa is a private company whose mission is to develop agricultural small businesses in South Africa focusing mainly on poor rural areas so as to facilitate participation of poor rural communities in mainstream economy through agricultural small businesses. Kohwa is introducing a new farming method that is based on high technology and science and is less labour intensive making agriculture an attractive career option for the youth, woman and people with disabilities. The farming system used by Kohwa increases production levels and transforms agriculture from providing seasonal low income jobs to providing permanent decent jobs. It has been operating for two years, built from start to finish by local people with the support from Kohwa’s strategic technical partners. Kohwa sourced the greenhouse and technical knowhow and support from Top Greenhouse in Israel.

 

In their presentation Kohwa Holdings said the project had been operating for two years. It is a socio-economic development oriented project with features of food security, job creation, poverty reduction, rural development and skills development targeting people at community level who would be regarded as unemployable due to low education levels. Kohwa develops such people to Agribusinesses that would supply agricultural fresh produce to the multinational retail sector as well as the public sector market.

The experimental 1000 square meter farm produces cucumbers and tomatoes and employs four young women and one man with physical disability from the local community and one young agronomist. They work 8 hours a day and alternate 5 days in a week. The 5 ordinary workers earn R1250 per month and the agronomist earns R8 500 per month. The annual turnover of a 1000 square meter greenhouse that is in full production is R600 000.  An ideal size of a greenhouse is a one hectare which would create 13 jobs made of 12 ordinary farm workers and 1 qualified agronomist. A one hectare farm would have an annual turnover of between R3m and R6m depending on the type of crops and the topography. The profit margin per annum would be 25% to 40%. Ordinary farmworkers would earn a minimum wage of R2500 per month. They would have more spending power as a result of having no transport costs for going to work. An ideal situation would be to motivate the current workers to form their own cooperative, assist them to secure a one hectare farm and funding thereof and nurture them to become self-sufficient and self-reliant. Within two years incubated by Kohwa those six workers would have to employ seven additional workers that would earn R2500 per month. They would also earn profit dividends at the end of each year and Kohwa would then link then to other service providers that would help them to participate in savings cooperatives such as Credit Unions or Cooperative Banks for them to further develop their economic standards.

Kohwa’s key activities are to assist existing farms to scale up their produce through instilling an expansionary drive, and to assist farms with a turnaround strategy of scaling up and further assist new farmers with expertise through its Integrated Services Provider (ISP) programme.

 

The Kohwa ISP:

• provides a technical management system and offers advice on crop variations based on regional characteristics and client needs;
• sets up an off-take agreement system whereby a farmer simply plugs into the system;
• provides support for operations and administration to farmers through a consolidated approach;
• for a period of five years, the ISP provides training and education to its clients for compliance and the ability to look after their farms; and
• further assists clients with leveraging funding through investor education and a mentorship programme.

 

Moreover, Kohwa Holdings provides technical training on greenhouse technology farming and project management. Their mission is to develop agricultural cooperatives and SMMEs and make them financially viable through marketing management where Kohwa negotiates with the retail sector for off take agreements from the Agricultural Small Businesses. The experimental farm in Umbumbulu is currently supplying Spar and Fruit and Veg retailors in Pine Town. Kohwa reported that they had also approached Massmart and Pick n Pay to present the model to them with a view of influencing the retail sector to replace imported fresh produce products with locally produced products.

Kohwa had also approached SIMS a housing development company with an idea of having a partnership with SIMS to develop agri-villages to make beneficiaries of RDP houses viable communities. The idea was to include in the roll out process of RDP, a greenhouse for five families. Kohwa wants to pursue this idea with the Department of Human Settlements. The project had been visited by a number of government departments. Communities who visit the experimental farm show a huge interest of establishing similar projects in their communities.

1. Observations and Findings

5.3.1.1    The Committee was impressed by the project particularly its objectives of creating jobs and eradicating poverty in rural areas. The Committee is of the view that such an initiative could be replicated in other provinces with a purpose of creating jobs at grassroots level. If implemented with full support from government, this project would contribute immensely to the attainment of NDP goals on job creation and poverty reduction.  

5.3.1.2    The farming model introduced by Kohwa and Kohwa’s special focus on poor rural communities is a game changer in agriculture particularly in creating new businesses that creates permanent jobs that are accessible to people with lower levels of education.

1. Although the project is located at Vulamehlo Local Municipality under Ugu District Municipality,  and had been visited by a number of government departments including the office of the President and the Department of Rural Development, there had been no attempt from the side of government to adopt the project, partner with Kohwa or integrate the project in the Integrated Development Plan of Vulamehlo Local Municipality and Ugu District Municipality and treat it as a pilot project and therefore provide the required support to make South Africa realise the goals of  creating 11 million more jobs  by 2030 and reducing poverty and inequalities.
2. The gravel access road leading to the 1000 square meter experimental farm is very poor making it difficult for anyone to access the experimental farm a situation that is worse during rainy season. That gravel road also has a negative impact on the quality of fresh produce especially tomatoes supplied to the retail sector as tomatoes would be an A grade when packed and transported to the retailer, by the time of delivery the same tomatoes would have been damaged resulting with a downgrading and a less price paid by the retailer to the farmer. This situation would have been corrected by now through coordination and integrated planning.

 

1. Kohwa had not interacted at the planning stage of the project, with the Local Economic Development office of Ugu District Municipality although the focus of Kohwa relates to the National Spatial Development Perspective of Ugu District Municipality and the LED strategy of Ugu District Municipality yet Kohwa expected government to provide the required support services. Inkosi Nathi Maphumulo allocated land to Kohwa to establish the experimental farm and although amakhosi are members of local government structures, Inkosi Maphumulo did not introduce the project to the Integrated Planning Forum of Ugu District Municipality which coordinates planning horizontally and vertical. This indicates that the integrated planning approach is not being followed by the private and the public sectors.

 

1. Kohwa does not fully share its strategic plan with government officials due to lack of trust and fear of the strategy being hijacked and implemented by government officials leaving Kohwa out.

 

1. Recommendations

5.3.2.1    The Department of Small Business Development should consider a partnership working relationship around the model of Kohwa to develop Agricultural SMMEs and Cooperatives that would become sustainable suppliers who could take advantage of the 30% procurement from SMMEs and Cooperative policy commitment of the South African government as well as the R18b budget of the NSNP declared by government as a set aside programme to benefit cooperatives.  

1. The Department of Small Business Development should consider using its transversal agreement mandate to establish an Intergovernmental Task Team on development of Agricultural SMMEs and Cooperatives. That Intergovernmental Task Team would be similar to the Intergovernmental Task Team on 2010 Soccer World Cup. Such a Task Team would integrate planning, facilitate alignment of budgets and reduce duplication. Government departments would share resources and set targets that relate to complementary roles played by each department and each sphere of government in the process of developing Agricultural.

 

1. The Department of Small Business Development should sign transversal agreements with the Department of Agriculture, Forestry and Fisheries so as to facilitate coordination of resources and complement each other in the process of developing Agricultural Small Business and Cooperatives.

 

1. An inadequate road to the project, lack of power supply, lack of a communication network and water supply hinders the project to maximise its output. Therefore, Kohwa as a private and profit making initiative, seeks the buy-in of the government to ensure access to land, funding and markets for expansion of the project to South Africa as a whole and further meet supply and demand of the industry.

 

5.4        The visit to a Potholes Repair Project at Hibiscus Coast Municipality

The Committee visited the Potholes Repair and Roads Maintenance Project at Hibiscus Coast Municipality. The project is an initiative of SANCO Development Institute (SDI) in partnership with the Road Accident Fund (RAF) and the Hibiscus Coast Municipality.  In its presentation, the Hibiscus Coast Municipality indicated that the project was aimed at skilling the unemployable youth due to lack of skills and develop them into  Potholes Repair and Road Maintenance  Cooperatives who would then be allocated Road maintenance related work in future. The project trained 58 unemployed youth as labourers and seven as supervisors from poor families in 29 wards. Potholes that were repaired in three months are 6500 on 225 roads with a total amount of R 815 000.00 spent on wages.

The Municipal Manager of the Hibiscus Coast Mr. Maxwell Mbili pointed out that the PFMA is a hindrance to community development initiatives such as the SANCO Development Institute wherein the Hibiscus Coat was approached by SDI wanting to have a tripartite kind of partnership with RAF and Hibiscus Coast municipality on Potholes Repair and Road Maintenance Programme.  The SDI would organise the community to identify unemployed youth from very poor families and prioritise them (together with the ward committee chaired by the ward councillor) for skills training and negotiate a partnership with the private sector for financial support and skills transfer which is what the SDI had done on the Potholes Repair project. The Municipality would also become a partner to provide roads and part of funding.  However the PFMA in its current form does not allow such initiatives to be implemented without going on tender. That then resulted with the Hibiscus Coast Municipality being unable to contribute financially to the project and develop the unemployed youth with the intention of ring fencing Potholes Repair and Road Maintenance as a Poverty Reduction and Job Creation Programme that is set aside for the unemployed youth from poor families. 

The Municipal Manager urged the Portfolio Committee to raise this issue in Parliament and facilitate a review of the PFMA to allow for development oriented initiatives to take place. The Committee conducted a site seeing of potholes that were repaired by the youth that was trained under SANCO Development Institute and Road Accident Fund partnership in Margate and Hibberdene which are both urban areas. 

1. Observations

5.4.1.1    Potholes repaired by the youth under this programme did not differ in terms of quality from those that were repaired by big companies meaning that the skills transfer approach would in a long run produce roads maintenance cooperatives that would upgrade gravel roads to black top or paved roads especially access roads to schools and clinics to make schools and clinics easily accessible in all weather conditions.

5.4.1.2    SANCO Development Institute was not invited to the meetings to outline its training programme and how it is aligned to service delivery and leads to permanent job creation.

1. The project had no adequate funding and relied only on Road Accident Fund’s (RAF) Corporate Social Investment funding which resulted with the project running for three months and then suspended until the next financial year when it is supposed to develop project participants to become road maintenance cooperatives and create permanent jobs.

 

1. Recommendations

5.4.2.1    The Department of Small Business and Cooperatives should follow up on the Potholes Repair and Maintenance initiative of SANCO Development Institute to identify areas of collaboration and areas of improvement to perfect the model and adopt it as model that would be used by the Department of Small Business Development to develop Roads Maintenance Cooperatives and facilitate their participation in the main stream economy through government infrastructure spending.

 

5.4.2.2    The Department of Small Business Development should facilitate a process that would lead to the signing of a transversal agreement between the Department of Small Business Development and the Department of Cooperative Government and Traditional Affairs (COGTA) so as to align the Cooperatives Development Model to the Back to Basics programme of COGTA and target municipalities that have more potholes and gravel access roads.

 

5.4.2.3    The Department of Small Business Development should engage with the RAF and the Hibiscus Coast Municipality to establish a working relationship with them that is aimed at enhancing the Potholes Repair and Roads Maintenance programme which was initiated by SANCO Development Institute.

 

5.4.2.4    The Department of Small Business Development should facilitate replication of the model especially in the 27 Poverty Nodes that have poor road infrastructure and high levels of poverty.   

 

1. Second Visit to Kwazulu-Natal

 

1. The Department of KZN Department of Economic Development Tourism and Environmental Affairs.

During the second visit, the KwaZulu-Natal Department of Economic Development, Tourism and Environmental Affairs (EDTEA) presented an overview of the state of informal economy in the province. The presentation outlined strategies, programmes, interventions in the informal sector that are aimed at SMMEs and Cooperatives development. The strategies include:

• job creation;
• coordination of economic support;
• stimulation of economic competitiveness;
• provision of strategic leadership;
• building  of local capacity;
• support of Small, Medium and Macro Enterprises (SMMEs); and
• Black Economic Empowerment as well as development of partnerships.

Programmes of (EDTEA) include:

1. Administration;
2. Integrated Economic Development Services;
3. Sector Development Services and Business Governance;
4. Tourism Development; and
5. Economic Planning and Environmental Affairs.

 

The Integrated Economic Development Services (IEDS) comprises of 15 622 registered Cooperatives and SMMEs that are more than two years in operation in the whole of KwaZulu-Natal province (KZN) as per CIPC source. The Department was in the process of developing a comprehensive database of all businesses in KZN that incorporates all SMMEs, Cooperatives and Informal Businesses.

The EDTEA also reported that there exists the SMMEs Development Strategy, the Cooperatives Development Strategy, the Youth Development Strategy and a Draft KZN Women Economic Empowerment Strategy designed to provide empowerment to enterprises. The EDTEA also provides financial and non-financial support to enterprises and stakeholders.

The EDTEA also reported that it has implemented interventions related to policy, legislation, operation and programmes and support mechanisms with the integrated economic sector and as a result KZN has recorded the following progress in the development process of small enterprises and cooperatives:

• EDTEA has tabled in KZN legislature a Business  Bill that is aimed at enabling legislation for creation of collaborative regulation in KZN,
• KZN has constructed an Informal Economy Database that would be used as a tool for planning management, reporting, sector support mechanism and regulation.
• KZN has Informal Economy Strategy and Implementation Plan to mainstream informal businesses and enable them to benefit from interventions and programmes of the EDTEA and government in general. Informal businesses will also benefit from other strategic partners like Public Entities/ Agencies and the private sector, and to further strengthen the capacity of Informal Business Sector by facilitating access to information, markets, business development support services, business infrastructure and finance.

The EDTEA also highlighted the following programmes which are designed for small enterprises and cooperatives development:

• Department of Small Business Development Informal Traders Upliftment Project (DSBD-ITUP), which is at a pilot stage. The programme will benefit 100 traders, 25 informal Economy Chambers in KZN. It is an 18 months programme with an infrastructure grant of R9000 per beneficiary;

 

• Municipal Informal Economy Policy alignment programme to assist municipalities to create an enabling environment for the informal economy to grow and be supported by developing local informal economy policies;
• Establishment of Cooperative Financial Institutions (CFI) with a cooperatives sub-directorate,  providing financial muscle to the informal sector by pooling together scarce financial resources to create  savings and purchasing power;

 

• An adopt-a-trader programme aimed at pairing big players with traders. The traders ideally would be formed into cooperatives of spaza and tuck-shop owners in rural areas and townships. The goal is to attain scale and profitability as part of the Township Economy Rejuvenation Project (TERP); and

 

• AQUAPONICS for household food security as well as for income generating purposes.

EDTEA provides support mechanisms, including:

• A Memorandum of Understanding (MoU) between EDTEA, Department of Cooperative Governance and Traditional Affairs (CoGTA) and South African Local Government Association (SALGA) that will synergize and streamline service delivery while simplifying service offerings in Local Economic Development (LED) space including IEs;
• An MoU with the Department of Home Affairs to assist municipalities with policy formulation on issues of foreign nationals trading within municipal spaces;
• An MoU with W&R Seta to assist in forging  sustainable support for traders within the sector; and
• Established Municipal/Metro Informal Economy Chambers (MIECs) in all 51 municipalities, including Metros, to support the sector; 10 District Informal Economy Chambers (DIECs) and Provincial Informal Economy Chambers (PIECs) which are regarded as an official voice of the Informal Economy Actors in KZN.

6.2        Ugu Fresh Produce Market

Ugu Fresh Produce Market in Ugu District Municipality was established to stimulate the development of agricultural cooperatives, emerging farmers and the private agricultural sector within the district. This initiative collapsed due to lack of development of agricultural cooperatives, and adequate support to emerging famers resulting with Ugu District Municipality deciding to lease out Ugu Fresh Produce to an Isuzu car dealer for R 1.3 million per annum to partially offset annual operating costs of R3.5.  The facilities currently under lease are a pack-house, ripening facility, market floor and a warehouse. The District Municipality currently uses the office space of the market for a Fleet Unit and storage space for Auxiliary, Finance, Disaster Management, Treasury and Communications Units.

 

Future plans for the market are to reuse the facility as a Fresh Produce Market through an uptake agreement partnership between Ugu District Municipality, the private sector and emerging farmers. Through a confirmed uptake agreement from the retail industry that will be brought by the Private Sector, Emerging Farmers and Private Partners will earn a share in the business. Ugu Fresh Produce Market will also be supplied with produce form Horse Shoe Farm and other Emerging Farmers for packaging and supply of Chain Stores. These future plans are underway through a feasibility study, of which the first draft has been presented to the Economic Development Portfolio Committee.

6.2.1     Observations and Findings:

 

• The existence of Ugu Fresh Produce Market presents an opportunity for development of agricultural cooperatives and improving the performance of emerging farmers in around Ugu District Municipality;
• There is a lack of capacity in the LED of Ugu to develop and coordinate and integrated plan with the Department of Small Business Development, the Provincial Department of Agriculture and the National Department of Rural Development for the purpose of developing agricultural cooperatives and improving the performance of emerging farmers to a level where they would be able to channel their produce to the retail sector through Ugu Fresh Produce Market;
• Although Ugu District Municipality is aware of its National Spatial Development Perspective which is Agriculture, Tourism, Manufacturing and Mining of stone, sand and lime there is very little that is done to develop underdeveloped rural areas, there is more concentration on the Horse Shoe farm and areas within the Hibiscus Coast Local Municipality;   
• The LED of Ugu District Municipality was not aware of the Greenhouse pilot project of Kohwa although the pilot project is in Vulamehlo Local Municipality which is part of Ugu District Municipality, instead the LED of Ugu wanted to visit Ilembe District Municipality to learn from;
• Ugu Fresh Produce Market collapsed due to lack of development and an integrated approach, mentoring, monitoring and evaluation in the development of small and medium enterprises by Local Economic Development of Ugu District Municipality;

• There is acute shortage of funding, lack of relevant expertise among the target market to handle complexities associated with large scale commercial projects that is required in order to satisfy the retail market;
• The lack of entrepreneurship and understanding of the needs of the retail sector is a huge impediment for proper functioning of Ugu Fresh Produce Market and performance of agricultural cooperatives and emerging farmers in balancing the supply and demand of the retail sector; and
• Ugu Fresh Produce Market remains a strategic facility for development of agricultural cooperatives and emerging farmers around Ugu District Municipality.

 

6.2.1.2 Recommendations

 

1. It is recommended that the use of public Private Partnership (PPP) be considered in operation of this fresh produce market in order to extract necessary resources (such as relevant personnel with relevant expertise) required to run this fresh produce market in an efficient and effective manner.

2.  The Department of Small Business Development should consider signing a transversal agreement with Ugu District Municipality to adopt and facilitate development of an integrated plan that would result with a value chain starting with the proper training of agricultural cooperatives, adequate funding, mentorship, adequate use of Ugu Fresh Produce Market and supply of vegetables to the retail sector.

3.  The Department of Small Business Development should consider establishing a project team to focus on Ugu District Municipality as one of the Presidential Poverty Nodes and use Ugu Fresh Produce Market and Kohwa Experiment as a pilot project for development of agricultural cooperatives and facilitating access to the retail sector market.

1. The Department of Small Business Development should consider signing transversal agreements around the revival of Ugu Fresh Produce Market and  facilitation of access to market with the following departments:
   • The Department of Agriculture and Rural Development in KZN.
   • The National Department of Agriculture, Forestry and Fisheries,
   • The National Department of Rural Development,
   • The Department of Social Development.
   • The Department of Public Works.

 

6.3        Gamalakhe Tunnel Farming Project

 

6.3.1     Observations and Findings

 

 The Gamalakhe Tunnel Farming Project is located at the Hibiscus Coast Local Municipality in Ugu District Municipality. There was an eight tunnel farming agricultural project for a cooperative producing vegetables. This initiative had collapsed, there is nothing happening and the tunnels are dilapidated. The Gamalakhe Tunnel Farming Project was initiated to channel its produce to the retail sector through Ugu Fresh Produce market.

• The Committee was told by Ugu LED officials that the collapse of the project was due to lack of government support on training, development, monitoring and adequate funding. It was also reported that there had been no adequate training on the concept of cooperatives and technical skills as a result the project relied on the passionate of one member.  As soon as that member left the project collapse. The said member is reportedly doing well in her farm which she established after leaving the project. Lack of entrepreneurship was also cited as reasons for the collapse of the Gamalakhe Tunnel Farming Project.

 

6.3.1.1 Observations

 

• There was a lack of expertise in handling complexities associated with professional farming to channel its produce to the retail sector through Ugu Fresh Produce Market.
• There was a lack of adequate financial and non-financial support rendered to the Gamalakhe Tunnel Farming Project.
• There was a lack of adequate training on the concept of cooperatives as well as how the Gamalakhe Tunnel Farming Project related to the Ugu Fresh Produce Market.

 

Additional factors were lack of funding, support for training, development, monitoring and evaluation.

 

6.3.1.2 Recommendation

 

The Department should consider facilitating an integrated development approach with a view of resuscitating this project through the signing of a transversal agreement with Ugu District Municipality and the Hibiscus Coast Municipality and link the project to Ugu Fresh Produce Market and the retail sector.

 

6.4        Nobamba Secondary School

 

6.4.1     Observations and Findings:

 

Nobamba Secondary School is a High School located at Hibiscus Coast Local Municipality. The school has a high pass rate percentage in Mathematics and Physical Science in the circuit. It is an old school with broken windows and doors, cracked walls and floors, poor sanitary infrastructure and is without educators’ staff rooms and a lack of an administration block. The surroundings of the yard have tall untrimmed grass and stagnant water from water taps. There is no adequate fencing. The school resembles most of the old schools in rural areas. It is one of the NSNP beneficiary schools with no adequate facilities for providing the NSNP in a safe and healthy environment. The classroom that is used for preparing food does not have windows yet gas is used as a form of energy for cooking. One of the classrooms had pieces of broken school furniture.

 

The whole environment of the school offers vast job opportunities for Cooperatives development. Opportunities presented by the poor condition of the school include:

• Repairs and Maintenance which would include fixing cracked walls and holes on the floors, repairs of windows, doors;
•  Painting and fencing of the school;
• Paving of the access road to the school and the school yard used as the assembly area;
• Grass cutting and using the grass to produce compost that could be supplied to agricultural cooperatives; and
• Growing vegetables in the school yard and using vegetables in the NSNP in the school.

 

6.4.1.1 Recommendations

 

1. There is a need for the Department of Small Business Development to enter into transversal agreements with the Department of Basic Education, the Department of Social Development and the Department of Public Works with the intention of implementing the Cooperatives Development Model approved by the Portfolio Committee on Small Business Development.

2. There is a need for the Department of Small Business to facilitate the use of schools with similar conditions as Nobamba Secondary School as anchor facilities for community development through cooperatives.

3.  The Department in partnership with LEDs at local government level should align skills training to cooperatives development and service delivery and target poor families around the schools who depend on social grants, organise them into cooperatives and facilitate their involvement in economic opportunities presented by schools such as Nobamba Secondary School.

 

6.5        A 9.4 hectares Agricultural Site at KwaXolo Traditional Council

 

The Portfolio Committee visited KwaXolo Traditional Council to view a 9.4 hectares site that was identified by KwaXolo Traditional Council as a site on which an Agricultural Project in partnership with Kohwa Holdings would be developed in phases starting with a one hectare Top Green House and a one hectare open filed farming with a fertigation system. The project is driven by Inkosi Xolo and will be used as a pilot project to create farming interest in a community with a high rate of youth unemployment. KwaXolo Traditional Council is under Ezinqoleni Local Municipality which has no revenue base. Kohwa had done soil tests through the laboratory of the KZN Department of Agriculture in Cedara Pietermaritzburg to determine the type of crops suitable for production on the site. Kohwa had also assessed the underground water supply for irrigation purposes and discovered that there was plenty underground water to sustain the project. An agreement had been reached between Kohwa Holdings and KwaXolo Traditional Council to develop what they call a mother farm which would be used as a pilot project. Funding for the project had not been secured. The first phase of the project would provide a maximum of 16 jobs. The proposal from Kohwa Holdings is that projects of this nature would feed fresh produce into Ugu Fresh Produce Market for packing and distribution to the retail sector.

 

1. Observations and Findings:
2. This site offers opportunities for job creation and poverty eradication in the area.
3. The Department of Small Business Development could adopt the project as a pilot project for a partnership kind of an initiate between a private company such as Kohwa Holdings and a Traditional Council and then bring other Departments on board through transversal agreements in order to ensure adequate support and guidance required to make the project a learning experiment.
4. Agricultural initiatives within Ugu District Municipality are in-line with the National Spatial Development Perspective of Ugu District Municipality.
5. The establishment of agricultural projects such as KwaXolo Agricultural Project focusing on vegetable production would help in resuscitating Ugu Fresh Produce Market as well as enabling rural communities to supplier the retail sector such as Massmart and Pick n Pay to name a few.

 

1.  The leadership role played by Inkosi Xolo paves a way for traditional leaders and Ingonyama Trust to support rural communities by providing them with long term lease agreements and permits for economic development land use purposes thereby enabling rural communities to participate in the mainstream economy and create sustainable jobs in rural areas which would result with less poverty.

6.5.2 Recommendation

1. 1 The Department through its transversal agreement with Department of Cooperative Governance and Traditional Affairs (COGTA) should engage with traditional leaders to earmark and make land available for development of similar projects in rural areas.

1. 2 The Department of Small Business Development should consider adopting this project as a pilot project where a private company like Kohwa Holdings establishes a partnership relationship with a Traditional Council with the intention of facilitating development at community level.

1. 3 The Department, SEDA and SEFA should consider using lessons learnt in implementing the Kohwa Holdings Model to assess how services provided by the Department, SEDA and SEFA are geared to address the felt needs by SMMES and Cooperatives who want to team up on their own with companies like Kohwa Holdings.

1.4 The Department should through transversal agreements assemble a team that would focus on this project to make it a successful model. These would include officials from other national departments and provincial departments such as the Department of Social Development, the Department of Rural Development and Land Reform, The Department of Agriculture, COGTA, EDTEA and Ugu District Municipality and facilitate the inclusion of this and other similar initiatives in the Integrated Development Plan of Ugu District Municipality as part of efforts to resuscitate Ugu Fresh Produce Market and building the supply base needed to implement  the 30% procurement policy.   

6.6        Ezinqoleni Local Municipality Informal Traders and Street Vendors

 

The Committee had an interesting interaction with informal Traders and Street Vendors at Ezinqoleni Local Municipality. Members of the Committee spoke to informal traders including a Mr Dlamini, who sells airtime, prepaid electricity vouchers, sweets and snacks at the taxi rank. The Committee found that Mr Dlamini is disabled as he got ill in 2006 from his previous job, which he left and started his informal business in 2008. He operates his business in a 1m2 corrugated shack where he also look after his infant to allow his wife to go to work. Mr. Dlamini financed his business through his pension money. He makes a profit of R200.00 per month during schools holidays as his target market are school children. When schools are opened, he gets a little more profit which he could not divulge except to say that he lives from hand to mouth which makes it difficult for him to see how much his business makes. He had neither received training in business nor in financial management, hence could he not really tell how much income is made by the business and how much he pays himself from the business.

 

On the same vicinity just on the opposite side of Mr Dlamini’s shop is a Spaza shop owned by a foreign national trader, trading in a decent electrified container with a full stock of various products. The Committee held an impromptu meeting with the informal traders who had gathered together upon seeing members of the committee interacting Mr. Dlamini and the foreign national. The informal traders who are South Africans complained that foreign nationals are squeezing them out of business buy selling goods at much lower prices than even the cost price paid by South Africans to the wholesalers. They also suspect that the Spaza shops of foreign national are actually owned by the wholesalers or foreign nationals have some ownership in the wholesale sector which would explain what makes their selling prizes lower that the cost prizes paid by South Africans. Responding to questions of the Committee the informal traders admitted that they don’t buy collectively in bulk and they have never been trained in basic business skills hence most of them cannot make a difference between the income made by their businesses and what they are paid as salaries by their businesses.

 

The Committee also learned that these and the other traders are organised into an association with a leadership team. The Chairperson is Nonhlanhla Zindela and Sibusiso Makhanya is Deputy Chairperson. On engagement, the Committee learned that the only support provided by the municipality was infrastructure in the form of built shelters. The income that they are making is in the average of R 800.00 per month. The local traders allege that they are subject to unfair competition from foreign traders who they say operate without legal permits and get land and space for trading from traditional leaders in exchange of money. Local traders also reported that spaza shops owned by foreign are selling goods at prices that are even lower than the cost price charged by wholesalers making it very difficult for local street vendors and spaza shops owners to compete with them.  They also reported that wholesalers are also operating as spaza shops owners creating unfair completion for local street vendors and spaza shop owners who buy their good from the very same wholesaler.

 

6.6.1     Observations and Findings:

 

• Ezinqoleni Local Municipality had tried to provide  some of the street vendors with ordinary stalls to trade from although the actual location of the stalls is away from where taxi commuters walk, as a result street vendor trade where their market is, and use the stalls as storage facilities;
• There is a lack of adequate business skills training support for street vendors and spaza shop owners to make them run successful businesses;
• There is a lack of access to funding;
• Although the local street vendors and spaza shops owners belong to an association, they do not used the association for bulk buying purposes to reduce the costs of goods and transport, they operate as individuals whereas foreign national are organised and buy in bulk; and
• Foreign nationals have a better relationship with wholesalers than local street vendors and spaza shop owners.

 

6.6.2 Recommendations

 

1. There is a need for the Department to pay a special attention to the needs of the local spaza shop owners and street vendors so as to address the unfair competition posed by foreign national and wholesalers to local street vendors and spaza shops. The response to this challenge should include development of a value chain for street vendor and spaza shops and regulation of the sector to prevent wholesalers from entering the trading space of street vendors and spaza shops.

2. There is a need for the Department to organise both foreign national and local people operating as street vendors and spaza shops under one association with the intention of reducing conflict as well coordination of support services.

3. There is a need for the Department to provide the street vendor and spaza shop owners with business management skills training such as cost management accounting, financial management and general business management to enable street vendors and spaza shop owners run successful businesses.

4. There is a need to regulate the establishment of foreign businesses, particularly in townships and rural areas.

5. There is a need for the Department to ensure that any development directed to benefit small businesses and cooperatives considered their felt needs as opposed to perceived needs. This assurance can be derived from the implementation of transversal agreements with not only national departments but with other spheres of government to address issues like the location of stalls by municipalities away from the market of the street vendors.

 

6.7        The visit to Machi Primary School and Ludeke Primary School

The Committee visited Machi Primary School in Umziwabantu Local Municipality to see a Schools Maintenance Community-Public-Private Partnership (CPPP) initiative. The Schools Maintenance Community-Public-Private Partnership was initiated by the SANCO Development Institute to facilitate community involvement in service delivery and job creation in partnership with the private sector and local municipalities.  The private sector uses its Corporate Social Responsibility budget towards skills training of unemployed people from poor families who depend on social grants for their daily survival. The training is conducted at community level where a public facility that needs to be repaired or upgraded is identified by the ward committee and the Youth Desk of a municipality. SANCO Development Institute plays a project facilitation role by bringing the relevant role players together to play different complimentary roles. The unemployed youth from poor families is identified by the ward committee and the tribal council.  

 

SANCO Development Institute had identified the lack of infrastructure maintenance as a challenge that provides an opportunity for local skills training of the unemployable youth with the aim of making them employable as well as organising them to form their own cooperatives. In the case of Machi Primary School, SANCO Development Institute had approached uMziwabantu local Municipality and proposed a partnership with the Youth Desk of the municipality. SANCO Development Institute then organised a Mandela Day at Machi Primary School to which Beta Fence, SANRAL, PRASA, ACSA and SAMSA were invited to participate. They all pledged to support the initiative through their Corporate Social Responsibility budgets. Machi Primary School was at that time experiencing a decline in enrolment of students due to the poor state of the school with broken windows and doors, poor sanitation, cracked walls, floors with big holes, no electricity, no ceilings and no fencing. Teachers were demoralised.    

 

The business sector contributed in the following:

• Beta Fence donated the fence and trained local people on fencing including producing some of the fencing materials;
• SAMSA funded the upgrade of the ablution block for teachers and students of Machi Primary School;
• ACSA funded the repairs of cracked walls, floors and windows and the tilling of the floors;
• SANRAL funded the upgrading of the gravel road that cuts across one clinic, five schools and a Tribal Council; and
• PRASA funded the repairs to the school which included installation of the ceilings and electrification of the school.

 

 The Committee also visited Ludeke Primary School in Mbizana Local Municipality in Eastern Cape Province. This project is similar to Machi Primary School project and it was also initiated by SANCO Development Institute and ACSA who then formed a Community-Public Private Partnership with Mbizana Local Municipality. The project involves renovation of an old school which the former President of the African National Congress, Oliver Tambo attended. ACSA wanted to create a link between O.R.Tambo airport which is named after the former President of the ANC President Oliver Tambo and the school that he attended as a young a person. ACSA pledged to rebuild the whole school and make it a symbol of appreciation for having produced a great leader such as President Oliver Tambo. The project has three phases, the first phase is the building of a new ablution block for teachers and students. The second phase would be the demolition of old classrooms and building of new classrooms. The third phase would be the renaming of the school. When the committee visited the project, the ablution block had been completed and was due for official opening on the following week. The project was managed by a young person with civil engineering and project management qualifications and the rest of the team that built the ablution bock were drawn from the local unemployed youth.

 

6.7.1     Observations and Findings:

 

• Machi Primary School is now in an acceptable condition and the project provided unemployed youth and women from women headed households with an opportunity of skills training and employment;
• The new ablution block of Ludeke Primary school is of good quality and meets health a safety standards as well as the enrolment numbers of the school;
• The approach used by SANCO Development Institute promoted community participation in service delivery processes and partnership between the business sector, the public sector and the community;
• The project demonstrated that it is possible for communities to address service delivery issues in a constructive manner by mobilising other sectors of the society instead of protesting against government all the time;
• The project demonstrated that the business sector can use its Corporate Social Responsibility in a developmental manner that addresses skills development, services delivery and unemployment especially in rural areas where levels of unemployment of poverty are high; and
• The approach used by SANCO Development Institute is in-line with the NDP objective of active participation of communities in the process of building a developmental state.

 

6.7.2 Recommendations

1.   The Department should look at the approach used by SANCO in organising different role players and resources and assess how the approach could help in the process of developing SMMEs and Cooperatives and facilitating communities to active participation in services delivery processes and job creation at local level.

2. The Department should consider forging good relations with Non-Governmental Organisations (NGOs) such as SANCO Development Institute and work with them in mobilising communities as well as resources that are required in the process of developing small businesses and cooperatives like in the case of Machi Primary, Ludeke Primary School and the Potholes project of the Hibiscus Coast Municipality.

3. The Department should consider pushing for maintenance and repairs of public facilities such as schools, potholes, grave yards etc to be set aside work for local unemployed youth and women from poor families that the Department would work to develop as small businesses and cooperatives.

 

1. Visit in the Eastern Cape
   1.  Mbizana Local Municipality

 

Mbizana Local Municipality is one of four municipalities within Alfred Nzo District Municipality and is regarded as a gateway to the Eastern Cape Province as it borders Kwazulu-Natal and Eastern Cape Province. The municipality made a presentation on Local Economic Development (LED) Strategy which is responding to challenges of poverty and unemployment facing South Africa in general. The strategy depicted the LED Department’s vision of improved quality of life through vibrant and sustainable local economic development driven by service-focused partnerships where resources are fully exploited. Key economic drivers for the municipality are in agriculture, tourism, retail and manufacturing industries, mining and forestry and marine culture. Enablers identified for economic development are arable land fertility, mineral resources that are attractive for development and sustainable exploitation, geographical location that is internationally exclusive and acclaimed, natural heritage characterised by petrified forests, pristine coastal belt, political and cultural heritage and Small, Medium and Macro Enterprises (SMMEs) support base.

 

The presentation outlined key projects for economic development, namely North Pondoland Sugar cane and bio-fuel, Coastal Development, Art and Craft Development, Fishery Development, Xolobeni Mining, Quarries and the N2 toll road. To some of these intended development projects feasibility studies are being conducted and to some studies have been completed.

 

Although the intentions for development have been identified and pursued, challenges of inadequate infrastructure development to attract investment, capital flight, a land tenure system does not support economic realities, insufficient financial resources and brain drainage were cited and raised as challenges.  Possible interventions were also identified, namely financial resource mobilization, infrastructure development especially roads and electricity networks, lack of an integrated approach, bankable and credible studies, capacity development, business retention and investment strategy. A lack of systems including Municipality By-laws was also cited as a challenge

 

With regard to Cooperatives, the municipality has 84 Cooperatives in its database with the majority being in agriculture. The report stated that although there were some achievements with the development and operation of Cooperatives (as per the presentation) challenges were also raised. Amongst these are illiteracy, dependency on grants, laziness, and lack of self-driven approach and lack of youth participation. In the Municipality Strategy, SMMEs are catered in the Engineering Services Strategy and an adopted policy is to ring fence operation and maintenance of gravel access roads to SMMEs.  

 

The Municipality has 977 hawkers registered in its database trading in the CBD. Although stalls were erected and allocated to hawkers, the large number of hawkers creates a challenge of overcrowding within the CBD. Non-renewal of hawkers trading permits also creates a challenge of overcrowding.

 

The Municipality has implemented SMME developments such as the launch of a Contractor Development Program (CDP) for 40 SMMEs contractors in the construction sector. In manufacturing, the Municipality assisted bricks and blocks manufactures to ensure that they have South African Bureau of Standards (SABS) approval through partnership with Small Enterprise Development Agency (SEDA) which resulted into the appointment of 2 mentors. Moreover SEDA was also requested to conduct basic trainings on business skills and financial management to hawkers and arts and crafters.

 

7.1.1     Observations and findings

 

The Mbizana Municipality has an LED department that has developed an LED strategy which relates to the National Spatial Development Perspective of Mbizana, This is a strength which would make the development process of SMMEs and Cooperatives in the Municipality part of their Integrated Development Plan. The implementation of their IDP especially the LED strategy is negatively affected by the unresolved land claim that Mbizana small town is located on.

 

1. Recommendations

 

1. It is recommended that the Department should consider a one stop shop that would be situated in Local Economic Development offices of municipalities for easy access to small businesses and cooperatives as well as coordination of work related to the development of SMMEs and Cooperatives.
2. The Department should consider profiling of all the 84 cooperatives that are registered in the Data Base of the Mbizana Municipality to assess their state of readiness to supply the market, link those who are ready to the market and develop those who are not ready. Profiling of Cooperatives should simultaneously be done with the process of implementing the policy of the National School Nutrition Programme and School Furniture supply as set aside programmes for Cooperatives.
3. The Department should consider developing a strategy for development of Street Hawkers including their value chain.

 

1. Visit in Gauteng

 

1.  Visit to a Tuck shop in Dobsonville, Gauteng

The Committee visited the tuck-shops in Dobsonville and interacted with Ms Ntombi Phahlane a local tuck-shop owner. She informed the Committee that she has operated her tuck shop since 2005 after the death of her mother who started the Tuck-shop. After she took over, she expanded and developed the tuck-shop by adding other business activities such as a pre-school in her yard. She continues to run the tuck-shop because it is her form of employment which provides her with an income. During deliberations with the Committee, she complained about the lack of assistance and information that can enable tuck-shop owners to access small business support programmes available from government. She urged the Committee to ensure that the Department reaches out to tuck-shop owners and give them information and the necessary support. She then made it clear that her key challenge is access to finance and some business skills she can use to effectively run her business.

She told the Committee that she does not have a problem with foreigners trading in townships as long as they also pay tax and comply with all government regulations regulating this sector. She also expressed her frustration on the manner in which the foreign-owned shops outpace them in business through very low prices and unfair competition. She said that most of the tuck- shops in her township had closed down due to an inability to withstand the competition from the foreign-owned shops.

8.2        Thulani Tuck-Shop in Dobsonville

The Committee visited another, tuck-shop owner, Thulani, who had just occupied the tuck-shop after the violence against foreign-owned shops had started. He reported that his tuck-shop had been owned by the foreign business owners before the violence broke out. Thulani told the Committee that the original owners of the tuck-shop were his parents who later in 2008 had leased the tuck-shop to a foreign national after being outperformed by the surrounding foreign owned shop competitors. His parents unintentionally entered in a long binding contract that gave foreigners a very long term lease. Thus, after the breaking out of the violence against foreign owned shops, the foreigners that were operating the tuck shops fled for their life and left the tuck shop unoccupied, consequently, he got money from his parents and re-opened it. The question that Thulani did not answer was what happened to the stock that belonged to the foreign nationals. The tuck-shop was fully stocked with goods.  Thulani also mention that he was assisted by the President of the South African Tuck-shops, Taverns, Small Enterprises and Vendors Association (SATTSEVA), Mr Thekiso Dikgale. He however did not specify how Mr. Dikgale assisted him with and what kind of support he received from the organisation.

The Committee was also informed that there is a cabal of high connected Pakistanis and Somalians who operate as wholesalers and Distributors that supply the foreign owned tuck-shops with cheap goods which then makes it possible for foreign nationals to sell to the local consumers at far lesser prices than the selling prices of tuck-shops owned by South Africans.

8.3        Visit to a shop in Kagiso

Mr Bushy Joko, the owner of small shop in Kagiso, firstly refused to engage with the Committee. But after persuasion from both Chairperson of the Committee and the Minister (who had just joined the Committee), the owner engaged with them. Mr. Joko complained to the Committee about the unregulated industry whereby foreign shop owners had successfully pushed local business owners out of the market. He mentioned that he sells an Albany loaf of brown bread for R11 but the foreign owned tuck-shop sell the very same loaf of brown bread for R6. His concern was, where did they purchase their stock that makes them charge such a low price?

Mr. Joko complained that the foreign shop owners do not comply with regulations, for example health requirements. He alleged that foreign shop owners sleep in the same tuck shop that they sell food and groceries to their customers, predominantly South Africans and as such it is a health hazardous and they have to be regulated and there are no inspectors from government who conduct random checks to ensure compliance with health and safety standards.

Mr. Joko also complained that tuck-shop, general dealers and supermarkets are a neglected sector by government and most of the tuck-shops owned by locals had closed down. The Chairperson of the Committee responded by informing the shop owner that the establishment of the Department of Small Business was a direct response by the government to the needs of small businesses and cooperatives. She told Mr. Joko that the oversight visit was a response by the Portfolio Committee to issues raised by SMMEs and Cooperatives so that solutions could be found. Furthermore, the Chairperson of the Committee informed the shop owner that the President of SATTSEVA had written to the Committee complaining that the mushrooming of rural and township malls was affecting their businesses, pushing them out of the market instead of involving them as partners. The President of SATTSEVA had also complained that tuck-shop owners do not have access to funding.

 

8.3.1 Observations and findings

• It became very clear to members of the Portfolio Committee that in the past, local owners of tuck-shops, spaza-shops and general dealers operated in the township economy without any competition and assistance from government. The entrance of foreign nationals in this space has created a very highly unfair competitive environment for locals which demands for a better way of organising themselves as well as development of tailor made support services by the Department of Small Business Development.

8.3.2 Recommendations

• The Department should pay a special attention to the needs of this sector and develop programmes that are aimed at responding to the felt needs of the sector. These should include regulating the sector as well assisting the locals to develop their value chain including bulk buying and collective saving; and
• Health inspection of all spaza shops, tuck shops and general dealers should be conducted as it is alleged that foreign owners sleep in the shops and sell expired goods thereby compromising health standards.

 

8.4        Orlando West Industrial Park (the Park)

The industrial park is situated in Orlando West next to Orlando Station along the main road to Orlando. The Park was built during the 1980’s and it accommodates different kinds of business operations, but predominantly, engineering, spray painting, panel beating and repairs. On behalf of the Park, the Board made a presentation to the Committee. In their presentation they urged the Committee to assist in the provision of adequate infrastructure since it was singled out as the critical challenge that hampered the proper operations of the Park. The Board informed the Committee that they experience frequent electricity cuts due to dilapidated electricity infrastructure that has not been maintained by Eskom since 1980’s. Also, they are experiencing challenges in proper supply of water which again is due to dilapidated water infrastructure (pipes that reticulates water to the Park) and overcrowded due to influx of foreigners. Their presentation indicated that it is rare for the Park to have an uninterrupted water supply for a full week. Sometimes the water is off for more than three days in a row. This handicapped the proper running of their businesses.

Lack of a legitimate park management structure bears negative results in terms of allocation of units, development, training, implementation and monitoring. There is a lack of advanced technology and manufacturing equipment. The park management allocates most of units to foreigners who only employ themselves and not South Africans.

Furthermore, they indicated that their clients and workers are struggling to access the Park because there is no place to stop for public transport to offload a person that comes to the Park. If a taxi forces its way and offloads, it gets traffic fines from the Johannesburg Metro Traffic Police. So, in order to access their place, a person even from Soweto, has to go via town to properly access their place. This impacts their businesses negatively because if a person has to go to town and come back to the Park he will not see any need to come back to the Park and rather use the services of the panel beaters that operate in town. Thus, they lose the potential clients due to difficulty in accessing the Park

Lastly, due to high costs of doing business brought about the afore-said challenges, they are unable to get contracts from the insurance companies to panel beat cars. This is due to the fact that when they apply to get contracts from the insurance companies, they fail because they do not meet the requirements set by insurance companies, mainly due to the place that they are operating from.

8.4.1 Observations and findings

• The Orlando West Industrial Park is a strategic facility for small businesses and local employment and therefore needs proper support and effective management;
• The Industrial Park is neglected in terms of maintenance of the infrastructure such as water supply, electricity, access road and repairs and maintenance of units from which small businesses operate;
• There is overcrowding due allocation of units to foreign nationals which needs to be addressed; and
• Small businesses involved in panel beating and motor mechanics are producing quality work which should qualify them to a 30% share of government and insurance companies’ panel beating and repair work.

8.4.2 Recommendations

• The Department should facilitate the improvement of infrastructure by relevant government departments and spheres of government through transversal agreements;
• The Department and SEFA should sort out the rental issue and the issue of ownership of Orlando West Industrial Park;
• The allocation of units to businesses owned by foreign national should be regulated; and
• Businesses operating in the Industrial park should be given the necessary support by the Department.

8.5        Soweto Empowerment Zone - SEDA Incubator

 The committee visited the Soweto Empowerment Zone - SEDA Incubator situated near Chris Hani Baragwaneth Hospital in Soweto in the Johannesburg Metro.  This incubator centre is an initiative of the Department of Trade and Industry and was officially opened by the then Deputy Minister of Trade and industry, Honourable Elizabeth Thabethe in 2007. The incubation centre hosts different business activities including manufacturers of school uniforms, shoes, police shoes and shoes for correctional officers. In addition, this incubation centre boasts a lot of innovative products such as roof tiles made out of recycled plastic and different fashion clothing. The owner of the roof tiles business, informed the Committee of the advantages of his roof tiles compared to normal ones. The major advantage is the life span and endurance they have in different weather conditions compared to the normal roof tiles.

8.5.1 Observations and findings

• Businesses who are incubated by the Soweto Empowerment Zone- SEDA Incubator are producing quality goods that should do well in the market; and
• All businesses operating in the Empowerment Zone are not in full production except for the enterprise that produces school uniforms. That raises a question of their access to the market and capacity to supply to meet market demands.

8.5.2 Recommendation

• The Department should focus on making the incubators to facilitate access to the market for small businesses;
• The Department should measure the impact of the incubator programme through the number of jobs created by enterprises who are assisted by the incubators as opposed to assessing the impact only through the number of jobs created at incubator level;
• The Department should facilitate the provision of adequate infrastructure by other departments through transversal agreements; and
• The Department should facilitate allocation to small businesses the 30% market share of panel beating and motor repairs from government and insurance companies.

 

8.6        Briefing by Johannesburg Metro Local Economic Development Office.

8.6.1     Johannesburg Metro Local Economic Development (LED) office on Township Economy, Agribusiness Development Plan and support services for informal traders, street vendors, Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency (SEFA)

Mr Ravi Naidoo, Executive Director: Economic Development made a presentation on their key intervention strategies aimed at small business development programmes. He re-emphasised the importance and relevance of the City of Johannesburg (COJ) in addressing South Africa’s 25 percent unemployment rate and undoing apartheid economic relations. Subsequently, he maintained that COJ’s Economic Development strategy is premised on the delivery of economic transformation. He voiced his opinion that transformation requires engaging with the political economy, or, the society-wide system of power that influences patterns of production, distribution and consumption.

In light of the above the COJ has developed an accommodative and inclusive enterprise development model which focuses on job seekers, community based enterprises, SMME Hubs (commercial market) and enterprises on the threshold of international competitiveness. For job seekers, the COJ used Expanded Public Works Programmes (EPWP)  for job creation on COJ projects; and up to now about 55 000 jobs have been created. The COJ has a programme that focuses on community based enterprises known as Jozi@Work. This programme assists these enterprises through its Special Procurement Mechanism and Capacity Support Programmes. Furthermore, its Hubs/Incubators programme aims to create a commercial market for enterprises through the COJ Supply Chain and the wider economy. Lastly, COJ has catered for enterprises that are at an advanced stage in terms of development, some of them ready to compete at international markets. For such enterprises, COJ has developed a Strategic Procurement Competitive Supplier Development Programme.

In his conclusion, he mentioned that COJ has achieved some strides as far as SMME development is concerned. However, there are challenges that the City is encountering. He outlined the achievements as follows:

• COJ annual support for more than 4000 formal SMMEs is significant by international comparison;
• Progress on integration of formal SMMEs into COJ’s supply chain (Jozi@Work) and private sector supply chain;
• Informal street trading plans include designated streets, facilities, and training and improved (shared) management; and
• Extended Public Works Programme (EPWP) - Joburg has generated best results of all SA’s metros.

He further stated that in most cases their endeavours in SMMEs’ development are cut short by challenges such as low economic growth (nationally) and 25 % unemployment which places immense pressure on the city; and the demand for support for SMMEs far outstrips supply of such services. However, the COJ is looking forward to also tap on the SMME programmes of the state to promote economic growth and development, skills development and other labour absorbing strategies; and strengthen inter-governmental partnership through sharing of funds/technical resources with the City.

 

8.6.1.1 Observations and Findings

• The Johannesburg Metro Local Economic Development Office has developed a strategic plan that relates well to the National Spatial Development Perspective of Johannesburg and they are focusing on the development of the Township Economy; and
• The Committee noted that the strategy is focussing more on SMMEs and does not prioritise cooperatives which are one of the pillars of the mixed economy that the South African government wants to build. Cooperatives are an important pillar for community economic development yet the Jozi@work is silent on cooperatives development.

 

8.6.1.2 Recommendations

• The Department should engage with the Johannesburg Metro Local Economic Development and share with them the cooperatives development model that the Department wants to implement to develop cooperatives with the aim of creating a permanent exit of poor families from the Social Grant Register and the Indigent Registers of municipalities. The cooperatives development modes also aimed at broadening the revenue base of municipalities which is in the interest of all municipalities; and
• The Department should consider adopting the Jozi@work model and use it as part of the strategy for development and revival of Township and Rural Economy in South Africa.

 

8.6.2     Briefing by the Gauteng Department of Economic Development on their strategic plan for Cooperatives and SMMEs, support programme for street vendors, informal traders as well as support services of SEDA and SEFA.

On behalf of Gauteng Department of Economic Development (GDED), Chief Director: Economic Development made a presentation whereby she highlighted seven pillars of SMMEs and Cooperatives’ development strategy in Gauteng. The seven pillars include: economic infrastructure, resourcing or funding, entrepreneurship development, market access and competitiveness, innovation and development of indigenous knowledge systems, manufacturing and production and policy and regulation review

She emphasised that all the afore-said pillars depend on the existence of partnership with other relevant institutions and monitoring and evaluation of their implementation. For instance, she stated that her department will work hard to forge partnership with all potential funders, which will result in Gauteng Enterprise Propeller disbursing the partner’s funding. Thus, GDED plans to engage with relevant partners to support all pillars to ensure that it is a success.

In her conclusion, she maintained that this development strategy seeks to bring together all the partners that can play a critical role in the development of SMMEs and Cooperatives in order to realise its objectives of radically transforming the economy of the townships and create jobs, thus, reducing poverty.

 

8.7   Overall observation and Findings on the approach of Gauteng in developing SMMEs and Cooperatives.

Flowing from all the visits the Committee undertaken from this day and the presentations that were made, the Committee made the following observations and findings:

8.7.1     Lack of adequate infrastructure in the industrial park concurs with what the Committee has been hearing from other small business people and it also confirms what has been highlighted in the NDP.  Furthermore, this shows the lack of understanding of the integrated development approach and hence therefore, calls for the implementation of an integrated approach in the same way when the country was organising the FIFA 2010 Soccer World Cup. The Chair of the Committee believes the Department should play a leading role in such an approach.

8.7.2     There is still a challenge in marketing the support institutions to the small business owners. Emanating from the tuck-shop owner in Dobsonville, Ms Ntombi Phahlane that she needs support such as training in marketing, access to finance, business management skills to mention a few but she does not know where to go and get such support. This clearly implies that the offices of SEDA and SEFA are not placed close to where the need is.

8.7.3     There is an urgent need to educate or assist the South African small business owners on the issue of contracting. It has been reported that the foreigners are taking advantage of the South African business owners when they enter into lease agreement with them. They end up signing a lease agreement which gives tenants (Foreign business people) a long lease periods. Such lease agreements are reached without proper understanding by the landlord (South African small business owners)

8.7.4     There is an urgent need for the investigation of the anomaly of charging a far cheaper price for the same quantity and quality of goods supplied by the foreign small business owners. It is difficult to make sense and reach logical conclusion on how the foreign shops charge the price which is even less than that charged by the supplier to its clients. For instance in the issue of a brown loaf of bread from Albany Bakery , Albany sells it for about R9 for its clients hence they put a mark-up cost and sell at R11. However, it is not understandable why this business application does not apply to foreign owned shop who end up selling the very same of brown bread at R6. Rules and regulations must be enforced appropriately. This is due to the Committee’s finding that the foreign shop owner also use their shops to sleep. This violates health requirements because the majority of products they sell are food-related products.

8.7.5     Emanating from the presentation from COJ on its enterprise model, it is clear that when the enterprise development strategy is formulated, it should be informed by the realities on the ground; for example, the understanding that enterprises will need different support based on their levels or stages of development.

8.7.6     Lastly, in order to achieve the goals set out in the NDP, that is, job creation, poverty reduction and fairer distribution of income, through the development of SMMEs and cooperatives, there is a need for working partnerships between government and the private sector. This is because government alone cannot succeed in developing SMMEs and cooperatives such that they can create 90 percent of the 11 million jobs by 2030 as envisaged in the NDP. This supported the Committee’s view that it is on the right track because it has already started to engage with the private sector and they show a willingness to support this view

8.8        Self Help Association for Paraplegics (SHAP)

SHAP is run by the people living with disabilities. This centre was created in the early 80’s through the inspiration of the late Friday Mavuso. The centre organises people living with disabilities to become economically active through participating in economic activities such as production of furniture and reflectors, amongst other things, agricultural activities such as planting of vegetables.

The centre is run by a Board of Directors who are also disabled. According to the Chairperson of the Board, Mr Kekana, they imposed themselves as the Board members. This came about after they met and decided to revive the centre after it has been closed for some years. Subsequently, they organised a meeting so that a legitimate Board could be elected. Their role was to re-establish the centre.

The Chairperson of the Committee thereafter briefed the Board Members about the purpose of the visit, that is, it was a fact-finding mission and engagements with SMMEs and cooperatives including those that are run by women, youth and people living with disabilities. The Committee initiated these engagements with other stakeholders since its inception. The purpose of these engagements was to get a first-hand information by engaging directly with people that operate in the SMMEs and cooperatives space.

In response to the Chairperson, Mr Kekana informed the Committee that the centre has not received financial support from any government institution. The only support that they received was non-financial support from the Department of Social Development who organised them a contract to produce reflector clothing for a well-established company based in Cape Town. In addition, the centre produces art work and chairs. Importantly, Mr Kekana told the Committee that from the work of producing reflector clothes, each worker earns a stipend of R900 per month. This company only provides the centre with raw material that is used to produce the reflector clothing. The centre incurs the operational costs such as water, electricity and repairs of equipment used to produce the reflector clothing. This means that the company that is contracted by the state to supply these reflectors just passes all the costs of doing its business to the centre which is operated by the poor people. The abnormal profits that this company is presumably generating are the result of exploitation of poor people who are also living with disabilities.

8.8.1     Observations and findings

         The Committee observed that there is a perpetuation of exploitation of people living with disabilities as well as manipulation of the BBE score card system by white owned companies. In the case of SHAP the white owned company outsources to SHAP cut make and trim work at a rate that only covers salaries of the workers.  The said company then gets high points for outsourcing manufacturing of the reflector jackets to SHAP a manufacturing enterprise that is 100% owned by disabled people with disabilities. The sad part is that operational costs such as the sewing machines, electricity, water, maintenance of the centre are a responsibility of SHAP. This means that the white owned company which has a contract with a number of municipalities and state owned companies, does not have any operational costs. This is extreme exploitation of people living with disabilities.

            SHAP members reside in the Centre to reduce travelling costs. Their houses are shacks made of corrugated iron and have bucket system toilets. They are highly organised and they have a formidable production process similar to any established factory. All that they lack is adequate support from a number of government departments.

            If SHAP was given the necessary support to address their living conditions and their business needs, their project would have been a shining example of how People Living with Disabilities can become self-sufficient and contribute to the economy.

 

8.8.2 Recommendations

• The Department of Small Business Development through transversal agreements should establish a project team that is made of official from the Department of Small Business Development, The Department of Social Development, The Department of Human Settlement and the City of Johannesburg to focus on providing adequate support for SHAP;
• The Department should facilitate access to the market for SHAP through 30% procurement from SMMEs and Cooperatives policy implementation;
• The Department should use SHAP as a pilot project that could be replicated in other parts of the country to create decent jobs for people with disabilities; and
• The Department should in collaboration with the Department of Social Development consider an awareness campaign aimed at addressing the exploitation of People with Disabilities by scrupulous companies which manipulate the BEE score card at the expense of People with Disabilities. 

8.9        Emndeni Skills Development Centre

 The Committee visited Emndeni Skills Development Centre situated in Emndeni, Zola in Soweto Township in the Johannesburg Metro Municipality. The Skills Development Centre is run by a Church known as United Reformed Church of Southern Africa (URCSA). It is structured in such a way as to give a Ward Councillor an automatic Board membership. The Skills Development Centre boasts different sections of skills training ranging from agriculture to business management training and catering. This centre also has a library for its students.

The Committee was introduced to the well-maintained garden that grows different types of vegetables. There were four women responsible for the garden. Those women were trained on how to plant and grow appropriate vegetables. They have been given all the necessary skills such as horticulture although they did not have a basic education. They earn money through selling the vegetables on the street and they also sell to small shops nearby. This contributed to improving their lives because, before they joined the Skills Development Centre, they were unemployed and did not have the necessary skills to produce such high quality vegetables.

The Skills Development Centre also trains people in catering. It has trained a number of dedicated young and old people. They were prepared to become caterers or get a job in the hospitality industry as chefs. Lastly, the Skills Development Centre also trains young and old people in different functional areas of business management for different industries.

8.9.1     Observation and findings

The committee observed commitment and dedication by the church in the development of the community in which it operates. This demonstrated that NGOs, in particular churches, are committed to assist government to solve its triple challenges of unemployment, poverty and inequality.  It should be noted that it is not a new thing that churches play a role in the development of our society they were also vocal proponents of equality during the apartheid era. There is a need for the Department to form partnerships with NGOs and Church Based Organisation to develop SMMEs and cooperatives.

 

8.9.2 Recommendations

The Department should consider establishing a unit in the Department that would work with NGOs and Community and Church Based Organisations who are organising communities and providing training to them with the aim of assisting poor families to improve their social and economic conditions. 

 

8.10      Sikhulile Jersey Cooperative

The Committee visited Sikhulile Jersey Cooperative situated in Zuurbakom, on the Gauteng West Rand. It produces jerseys for the surrounding schools. The cooperative is not supported by any government funds and it markets itself to the nearest schools. This cooperative employs about 8 people who are jointly responsible for production processing of the school jerseys. The current workers earn an average of R2 000 per month. They are now able to support their families since they were unemployed before the establishment of the Sikhulile Jersey Cooperative.

According to the explanation by Ayanda Malope, the Manager of the Sikhulile Jersey Cooperative, they sometimes struggle to get raw material used to produce these school jerseys and school bags. The reason was that they have to queue in long queues in order to get the raw materials. In some instances, they have to wait longer days and hours to get their order from the suppliers of raw materials. This is an element that impacts negatively in their business operations because they cannot deliver to their clients on time.

In light of the above, the Manager indicated that it could be easier for them if they can have a control of raw materials. For that they have a proposal of procuring the machinery which is used to produce the raw material they use to produce school jerseys. However, the only challenge in implementing such a plan is lack of finance. It is estimated that the required knitting machine costs about R250 000. If Sikhulile could have the knitting machinery the cooperative would produce its own knitted sheets of raw materials which would then be cut into different sizes to produce school jerseys. That would result with increased weekly and monthly production which would translate to increased incomes for the employed workers with a possibility of additional jobs. 

8.10.1   Observations and findings

•  The Sikhulile Jersey Cooperative is owned by women who were unemployed and were able to organise themselves to form cooperatives without any assistance from government which is a good initiative;
• The layout of their factory is similar to any other factory and the workers are working in a disciplined manner like in any other factory; and
• Sikhulile Jersey Cooperative has identified a sustainable market from local schools and they produce good quality school jerseys.  This is a type of a cooperative that could be replicated throughout the country to provide local employment. A value chain could also be developed starting from sheep farming cooperative to wool production cooperative to feed raw material to jersey manufacturing cooperatives.

 

8.10.2 Recommendations

• The Department’s Cooperative Programme should visit Sikhulile Jersey Cooperative and assist the cooperative to get the knitting machine needed by the cooperative to produce the knitted sheets required to manufacture the school jerseys;
• The Department should look at the replication of Sikhulile in other parts of the country especially areas with high rate of unemployment;
• The Department should assist Sikhulile to further develop and grow its business to a level where workers would earn more than R2000 per month and possible exit the indigent register thereby broadening the revenue base of a municipality;
• The Department should look at how they would assist in value chain development of cooperatives such as Sikhulile and relate that to poverty reduction and job creation objectives of the NDP; and
• The Department should engage with the Department of Basic Education to facilitate a common understanding for the need to open schools as a sustainable market for cooperatives producing school uniforms in order to create local jobs and reduce poverty at community level. 

 

8.11      Hunger No More Packaging Cooperative

The committee visited Hunger No More Packaging Cooperative which packages the Dignity Packs supplied to schools by the Department of Social Development. Each Dignity Pack provides a teenage girl with a roll on deodorant, a bar of soap, a tube of toothpaste, a toilet paper and a packet of sanitary pads. The Dignity Pack service is a response to the findings by the Department of Social Development that a significant number of teenage girls that come from poor families do not go to schools during their menstruation period and as a result they lose up to five school days in each month. The Department of Social Development then introduced this programme to assist teenage girls to be at the same level as their male counterparts in terms of school attendance.

Hunger No More Packaging Cooperative has a contract to package Dignity Packs which are then delivered to the needy teenage girls in their schools. Members of this Cooperative informed the Committee that all these products they are packaging come from different suppliers whom they believe that they are contracted by Gauteng Provincial Department of Social Development to supply.  The roll on liquid comes from Sasol, the tooth paste is a Colgate brand and the soap is Sunlight soap brand which are all products manufactured by well established companies.  They further informed the Committee that they were given the price at which they have to charge for each pack to the Provincial Department of Social Development. Subsequently, the price they charge for each pack it too low to cover the bare minimum overhead costs as a result they are drawing a monthly salary of R850. This monthly salary is only for members of the Cooperative not the employees who earn a lower salary than members. All members of the cooperative and employees come from poor families and were all unemployed before the establishment of the Hunger No More Packaging Cooperative.

8.11.1   Observations and Findings

• The Committee observed that the supply of Dignity Packs to schools provides an opportunity for development of cooperatives with the aim of reducing poverty and creating jobs to the very poor families who depend on government hand-outs;
• The supply of products by well-established companies defeats the objective of poverty reduction and job creation at community level;
•   Most of the products supplied in the Dignity Packs could be manufactured by cooperatives through the implementation of the Cooperatives Development Model adopted by the Portfolio Committee; and
• The approach used by the Department of Social Development in this programme is not developmental and as a result would not assist in reducing the dependency of poor families on government hand-outs.

 

8.11.2 Recommendations

• The Cooperatives Development Programme of the Department should engage with the National Department of Social Development and the Gauteng Department of Social Development to come up with a developmental intervention on the supply of Dignity Packs which would have an impact on poverty reduction and job creation at community level;
• These Departments should visit Hunger No More Packaging Cooperative and assess the potential of the cooperative to produce and package its own products which would be distributed to schools. The aim should be to provide Dignity Packs in a developmental manner that is linked to the establishment of cooperatives in order to create a permanent exit of some of poor people from the social grant and indigent registers;    
• The Department of Small Business Development with SEFA and SEDA should assess the needs for further development of Hunger No More Packaging Cooperatives to make this cooperative a financially viable entity that would provide decent jobs to both members and workers resulting with them exiting both the social grant and the  indigent register of a municipality;
• The provision of Dignity Packs to schools provides a huge opportunity for the Department of Small Business to implement the Cooperatives Development Model adopted by the Portfolio Committee. For this to happen the Department would need to sign a transversal agreement with the Department of Social Development and identify social grant beneficiaries that would be organised to form cooperatives which would participate in the value chain of supplying the Dignity Packs; and
• The Dignity Packs manufacturing and supply cooperatives could be established in each municipality resulting with more than 273 cooperatives focusing only on this market. A market research would need to be done by the Department of Small Business Development to determine the size of the market and the number of cooperatives that would be developed to supply Dignity Packs to schools.

 

8.12      Skills Village 2030

The Committee visited the Skills Village 2030, a Skills Development Centre close to Ellis Park in Johannesburg. It was founded and is run by Janet Landy in a large industrial building complex. The Skills Development Centre is divided into various hubs which specialise in Décor Operations, Marketing, Media,-IT, Imagination, Printing, Creative art and Food supply. The Skills Village also hosts various cooperatives which include The Institute of Event Management Cooperative, Ishishini Business Association Secondary Co-operative, Rural South Africa Tertiary Co-operative, On the Rooftop Primary Co-operative, Sinamandla Protection Services, Arapaleng Sports Primary Co-op and Ukukhanya Primary Co-op Trainers.

Out of the cooperatives listed above, there were some exciting ones that should be distinguished and highlighted. One is the Skills Village Training Centre which trains ex-convicts in different areas such as plumbing and electrification. At the t time of the Committee’s visit, the Centre was providing training to about ten ex-convicts. They had been convicted of serious crimes ranging from robbery, cash in transit heist to car-hijacking. The Centre is doing a sterling job to change the lives of these ex-convicts so that they can be able to live normal lives after their release from prison so that they can be integrated back to the community and be prevented from going back to jail. The facilitator in the Centre urged the Committee to liaise with other government institutions and relevant Committees to deal with the contradictory Acts, for example, some legislation and regulations provide for convicts to be trained so when they are reintegrated into society. They acquire technical skills that are needed in the market. However, their criminal records prevent them from getting employed which defeats the purpose of skilling ex-convicts because they would not be employed although they would be qualified for certain jobs. This results with them getting involved in criminal activities and going back to jail.

Another interesting hub the Committee visited was the Design Hub where it T-shirts produced out of polyester that came from recycled plastic bottles. This means that recycling of plastic bottles and other plastic waste could be used to generate income from.

 

8.12.1   Observations and Findings

• There is a need to work with other Committees of Parliament such as Correctional Services and Labour to weed out contradictory policies that retard progress in cooperatives development, for instance policies that on the one hand provide for training the convicts and on the other hand prevent them from getting jobs due to their criminal records;
• The Skills Village had operated with no assistance from the Department of Small Business and the Department of Trade and Industry when the function of developing SMMEs and Cooperatives was under the Department of Trade and Industry.
• The training provided in the Skills Village is targeted to adults and the youth that does not necessarily have matric certificates and is tailor made to produce certain skills through short courses. Adults with low literacy levels are more comfortable in being trained in centres like the Skills Village than being trained in formal education centres such as TVETS and FETS.

 

8.12.2 Recommendations  

• The Department of Small Business should consider having a transversal agreement with the Department of Correctional Services on the development of ex-convicts into Small Businesses or Cooperatives as part of their rehabilitation and integration process back into their communities thereby assisting them not to go back to prison;
• The Department should consider establishing partnerships with Skills Development Centres and NGOs that provide technical skills training programmes targeting adults and people with low literacy levels and work with such Skills Development Centres to develop cooperatives and small businesses; and
• The Department should visit the Skills Village and assess how it could collaborate with Skills Village in the process of developing cooperatives and SMMEs particularly in Gauteng.

8.13      Riversands Incubator

The Committee visited the Riversands Incubation hub located in Riversands Commercial Park on William Nicol Drive near Diepsloot, North West of Johannesburg. The Riversands Incubator will be the first fully integrated mixed-use development catering for all sizes of businesses. It will provide vital business support and job creation to the marginalised residential node of Diepsloot. It will also create sustainable small and micro enterprises that will be incubated into large-scale businesses, creating sustainable development for South Africa. The infrastructure and initial operating capital was provided through a partnership between Century Property Development and The Jobs Fund. Each contributed R1billion towards the establishment of this Incubation Hub.

The Riversands Incubation Hub is aimed at nurturing the majority of black-owned small and micro enterprises (SMEs) especially those which bring economic opportunities to the surrounding area. The Hub would provide mentorship and support SMEs to become fully-fledged formal businesses. Emphasis is on SMEs which fulfil a real corporate or business demand. The goal is to attract SMEs that will provide quality goods and services at prices that make them an asset to any company. Subsequently established companies which support these SMEs will earn supplier development points through the BBBEE scorecard.

The Incubation Hub has a range of offerings to meet the needs of entrepreneurs and small businesses at all stages of their development. Existing and aspiring entrepreneurs would apply for support services from the Incubation Hub that best suits their needs.  These include: full on-campus incubation and acceleration, premises and facilities, training and workshop, individual business coaching, group business coaching, industry mentors, access to on-site funders, business support services, market access and distributed manufacturing. The Hub further offers a Grow Your Business Programme which offers training and workshops, group business coaching, networking, sector-specific business support services, selected business support services, access to on-site funders and events. Lastly, it renders a service known as the Future Enterprise Programme which offers, training and workshops, tools for the business world, build a business plan, market yourself and your business, register and start a business and skills development.

 

8.13.1   Observation and findings

• The establishment of the Riversands Incubation Hub is a good initiative which brings SMMEs in Diepsloot closer to established businesses for the purpose of enterprise and supplier development;
•  The Hub aims to take the existing and newly-created SMEs from small struggling businesses and incubate them through various programmes allowing them to develop into large scale businesses and this is in-line with the NEDLAC accord on enterprise development which work s for both established business in terms of BEE score card and well as Small Businesses in term of business supports and sustainability; and
• The issues of affordability in terms of rent should be looked at to see whether there could be incentives designed to assist SMMEs and Cooperatives to enter this space. Otherwise, this Hub could end up being utilised by the well-resourced small businesses situated in developed areas,

 

8.13.2 Recommendations

• The Department should closely look at the model and fill in the gaps where necessary and also look at how the same could be replicated in other areas to further develop SMMEs and Cooperatives; and  
• The Department should closely monitor the development process of SMMEs that would be incubated in the Hub to identify those who would need incentives to make them viable.

 

8.14      Vusisizwe Holdings

The Committee visited Vusisizwe Holdings a 100 % black owned company founded in 2010 to design, manage and run a successful enterprise development programme with the aim of reducing the costs of doing business for SMMEs and Cooperatives by supplying them with renewable energy driven mobile business containers  to reduce rental and energy costs. Vusisizwe supplies small businesses with mobile infrastructure such as:

• Solar Energy Driven Mobile Butchery;
• Solar  and Gas Energy Driven Mobile Kitchen;
• Solar Driven Mobile Internet Café;
• Solar and Gas Energy Driven Mobile Hair Saloon; and
• Solar Energy Driven Mini  Sewing Factory

Vusisizwe is also involved in agriculture and textile production training and they also manufacture solar energy geysers and solar street lights. They subcontract installation and maintenance of solar products to women and youth owned small enterprises and cooperatives. The aim of Vusisizwe Holdings is to equip previously disadvantaged people with the skills needed to become successful small business owners or skilled workers. Vusisizwe is developing enterprises in the Renewable Energy, Mobile Business Solutions and Agriculture.

In renewable energy, Vusisizwe Holding is in partnership with Solar Academy of Sub-Saharan Africa (SASSA) to provide renewable energy solutions (solar energy) to stimulate the national economy by empowering communities and effectively reducing the number of indigents and people who depend on social grants for their survival.

Vusisizwe Holdings assists small businesses to be involved in research and development, design, manufacturing, distribution, installation and maintenance of the solar products. In addition, it assists previously disadvantaged communities to gain access to low cost and sustainable energy for domestic use. Vusisizwe is currently working with Avedia Energy to develop the value chain of LP Gas used mainly by cooperatives involved in National School Nutrition Programme (NSNP) this is done to reduce the cost of doing business for cooperatives in NSNP. The value chain will result with manufacturing of Gas Bottles and the establishment of   Gas Bottling Plants and Gas Distribution Centres in townships and rural areas owned by black people who had no opportunities of participating in this value chain in the past. 

In Agriculture, Vusisizwe Holdings equips and empowers small-scale farmers and co-operatives with skills training and mentorship through the Centre of Excellence (COE). It also assists land reform beneficiaries and other black emerging farmers to optimally utilise the agricultural land allocated to them, thus securing the financial investments made in land reform and contributing towards food.

In its mobile business solutions, Vusisizwe Holdings supplies green containerised and mobile business units within the village, such as Smart Spaza Shop, Mobile Butchery, Mobile Cold Chain, Mobile Hair salon, Mobile Pizzeria, Mzansi Shisa, Mobile Water Purification and Mzansi Juice Bottling and mobile gaming for children.

The Managing Director of Vusisizwe informed the Committee that out of approximately 4000 Wards, approximately 80 percent are previously disadvantaged communities. Thus, if all these initiatives could be implemented, a million jobs could be created in the next 5 years. This would certainly make a meaningful contribution to the realisation of the NDP 2030 vision.

 

8.14.1   Observation and Findings

• Mobile business solutions can be cost effective because they reduce operating costs such as energy/electricity and rent. Considering the current volatility of our energy supply, mobile business solutions can play a vital role in saving electricity and lead to the smooth running of the business without disturbances from load shedding;
• The mobile business solution can be used as an effective way of operating businesses such a small restaurants and hair salons which operate near taxi ranks. The mobile business solution could also assist such small business to comply with the Department of Health on safety and Health regulations especially those small businesses which sell cooked food at taxi ranks and street vendors. For instance, in Langa township taxi rank, a group of small businesses sell food and chicken  on open tables exposed to dust and sun heat creating a health risk to consumers. Mobile business solutions could help improve this situation;
• Most hair salons struggle to operate their business due to issues such as lack of proper space and high rental costs.  They normally rent a space that only fits a chair to seat a client, thus making it impossible to properly service a growing numbers of clients.  The costs of running a business would be reduced by introducing the solar and gas energy driven mobile hair salon; and  
• Mobile business solutions would also enable small business owners to move their mobile business around targeting areas with more clients on different days of the week e.g. next to churches on Sundays and next to sports facilities when there are sports events.

 

8.14.2 Recommendations

• The Department should consider having a small business exhibition to expose business solutions such as the products of Vusisizwe Holding to other small businesses which are in need of such solutions and have no knowledge of how to get them;
• The Department should also consider assisting small businesses such as Vusisizwe with marketing; and
• The Department should also consider facilitating study tours or business promotion events for small businesses such as street vendors in Langa to visit Vusisizwe Holdings for small businesses to see business solutions with a potential of reducing their costs of doing business.

 

9.         Meeting with stakeholders at Southern Sun Kathrine Street Hotel (Sandton) 

9.1        Presentation by Fish and Chips Franchisees

The Committee got a written communique from the entrepreneurs complaining about the way they lost their money when they acquired a Fish and Chips Franchise. The Committee created an opportunity to meet with them when it conducted its oversight visit in Gauteng. Four of them made presentations to the Committee. In simple terms they were defrauded by the company that advertised itself as a Fish and Chips Franchisor. They realised later that the so-called company gave a bank account that was not traceable. Afterwards, some of them hired a private investigator, which found that this company was insolvent and had been liquidated. Some of them got some of their money back, but only a small proportion of what they had invested. They informed the Committee that the white lady they communicated with is undermining them and used some derogatory words towards them. They therefore appealed to the Committee for assistance because they do not want to take the law into their own hands.

9.1.1 Observations and findings

• There is an abuse of franchising business approach by fraudsters who advertise lucrative businesses on internet only to rob aspirant entrepreneurs who pay huge deposits for businesses that do not even exist.
• There is no control on the franchising industry by government resulting with many people losing their life time investments when purchasing non-viable franchises.

9.1.2 Recommendations

• The Department of Small Business should engage with the Department of Trade and Industry with the aim of finding means for protecting aspirant franchisees from being exploited by scrupulous so called franchisors.
• Both the Department of Small Business Development and the Department of Trade and Industry should consider introducing legislation aimed at controlling the franchising industry and protecting franchisees.

 

9.2        Presentation by South African Tuck-Shops, Taverns, Small Enterprises and Vendors Association (SATTSEVA)

The President of the SATTSEVA made a presentation to the Committee about his organisation. In his presentation, he informed the Committee that the-long term objectives of this organisation include ensuring a quality, efficiency, well governed and controlled small business enterprises in South Africa; improving the integrity of small business owners; and ensuring that quality services are rendered to communities. He further informed the Committee that his organisation’s primary objectives include amongst others, legislating and governing its constituency, broadening their understanding of business, opening a dialogue amongst the community members and the business owners to create a good working relationship, acknowledging the problem and achieving collaborations that come up with workable solutions to the afore-mentioned challenges, and motivating community cohesion.

The ultimate expected outcomes that SATTSEVA wishes to achieve are curbing xenophobic attacks, promoting legitimate business trading whilst combating illegal trading, improving the quality and integrity of small business enterprise in South Africa, improving cohesive relationship between business owners and the customers, and a recognition of small business enterprise as one of the contributing factors to growing the economy of the country.

In his conclusion, he urged the Committee to recognise SATTSEVA as one of its stakeholders and associations that can create solutions to the current challenges, including xenophobic attacks.  They can play a vital role in bringing social cohesion between the business owners and the community and also curb illegal trading which will in turn ensure compliance with the relevant legislations and by-laws.

 

9.3        Observations and findings

The Committee resolved to take up the matter of the entrepreneurs that were defrauded with the other relevant Parliament Committees such as the Portfolio Committee on Justice. Furthermore, with regard to the presentation from the SATTSEVA, the Committee appreciated the presentation and also the aims of the organisation since it represents marginalised business owners. However, it cautioned the organisation not to be in the forefront of inciting violence against foreign shop owners. Instead the Committee expects them to neutralise the situation.

 

10.        Summary of Key Findings/observations

10.1      There is a lack of understanding about the importance of Cooperatives and the role that they can play in particular in community economic development and facilitating participation of communities in the mainstream economy. This lack of understanding results in a situation where more attention is given to SMMEs neglecting cooperatives which have more potential of enabling communities to actively participate in their own development thereby reducing dependency of poor families on government hand-outs.

10.2      There is a lack of understanding of an integrated development approach by those that are in charge in the government departments. If consideration is given to the situation highlighted above (in particular the SHAP visit) that although the workers that worked in this centre are organised and skilful, they live in places that erode their dignity and subject them to exploitation. They lack proper housing structures, have poor accessibility (as per their disability needs and requirements) to those filthy corrugated iron shacks. The places they live in do not even have sanitation and electricity.  The Orlando West Industrial Park is an example of how lack of infrastructure, including a reliable supply of running water and an access road, shows that the needs of struggling small businesses are being ignored.

10.3      There is a tendency to think that those tasked with the development of SMMEs and cooperatives, particularly those run by people with disabilities, are doing a favour to develop such businesses.

10.4      The government has to open itself up as a market for SMMEs and cooperatives. Furthermore, government must exploit all possible opportunities as far as SMME and Cooperative development are concerned.

10.5      There is a need to forge partnerships with other relevant stakeholders such as the private sector and NGOs in order to achieve the goals set out in the NDP, including job creation, poverty reduction and fairer distribution of income.

10.6      The idea of locating centres aiming to assist small businesses is very good but it should be done in such way that assists struggling small businesses in particular those that are situated in underdeveloped areas. These centres can end up being utilised by well-resourced small businesses situated in developed areas only, which escape paying higher rentals and consultation fees that they are currently paying in other areas.

10.7      Mobile business solutions can be cost effective for small businesses because they reduce operating costs such rent, energy/electricity and help mitigate the volatility of our energy supply.

10.8      The one-size-fits-all approach to enterprise development does not work. There is a need to tailor-make enterprise development according to the size, geographic allocation, type, industry and the specific needs of the enterprises.

10.9      There is a need to investigate the business strategy used by the foreign business owners to charge far cheaper prices for the same quantity and quality of goods compared to the small businesses operated by South Africans.

10.10 Most of the areas SMMEs and Cooperatives visited by the Portfolio Committee had not been visited by government officials charged with the responsibility of developing SMMEs and Cooperatives. One wonders then how government officials would understand the needs of SMMEs and Cooperatives by interacting with them through emails and application forms.

10.11 There seems to be no hands on approach and monitoring process in the Department to assess development process of SMMEs and Cooperatives and nurture them to maturity stage.

10.12 There is a lack of focus by the Department on Street Vendors and Spaza Shops support resulting with locals being marginalised by foreign nationals who are more experienced in business management and are more organised in terms of value chain development than locals.

11.        Recommendations

Based on the summary of key findings /observations, the Committee offers the following recommendations:

11.1      The Department of Small Business Development should conduct advocacy on the importance of cooperatives to other government departments and society at large. This can be done by developing a marketing drive to increase awareness of Cooperatives. Thus, there is a need to create a Marketing Unit which will be responsible for this marketing drive.

11.2      The Department should coordinate the development of SMMEs and cooperatives so that all other relevant departments, including the infrastructure departments are properly guided so that their support to the Development of SMMEs and cooperatives is integrated.

11.3      The development strategy aiming at growth and development of SMMEs and Cooperatives should show how the SMMEs run by youth, women and people with disabilities can benefit.

11.4      The Department should sign transversal agreements that include SMMEs and cooperatives in the procurement processes of all spheres of government and state institutions.

11.5      Consideration should be given to relocate some offices of SEDA and SEFA in underdeveloped areas, where there is a greater need to develop SMMEs and cooperatives.

11.6      The department should ensure that both SEDA and SEFA embark on a more vibrant marketing awareness drive to highlight their existence and the products they offer.

 

Report to be considered.