Question NW812 to the Minister of Small Business Development

Reply:

I have been advised that:

1.(a&b) The Department of Small Business Development (DSBD) has implemented a number of programmes to support the development of SMMES in the sixth administration.

(i) To date, a total of 68 802 Township and Rural enterprises were supported financially and non-financially since 2019. A critical intervention by the DSBD is the recently designed Township Rural and Entrepreneurship Programme which by end of December 2023 had approved R 1 054 899 738 in funding to 10 148 SMMEs, facilitating 19 692 jobs; and disbursed R 930 814 096 in funding to 9 617 SMMEs, facilitating 17 708 jobs. Furthermore, by the end of quarter 3 (2023/34), the Small Enterprise Development Agency (Seda) provided 3249 SMMEs with non-financial support.

(ii) The Department has made some impact in one of its programmes, namely the Shared Economic Infrastructure Facility (SEIF) through the following supported projects proving business infrastructure to communities.

• Letsatsi Pty Ltd in partnership with Mangaung Municipality and Free State Dept of Economic Development supported eighteen SMMEs with trading facilities using the container conversion model.
• Chris Hani Co-operative Development Centre in partnership with Department of Economic Development, Environmental Affairs and Tourism (DEDEAT) and Chris Hani District Municipality supported forty to hundred emerging farmers/co-operatives that are supplying retailers like Spar through the renovation and construction of the packhouse and fertiliser blending plant, Eastern Cape.
• Wouldn’t be Cool Pty Ltd in partnership with Kgosi Maubane through the agricultural irrigation project supported sixteen beneficiaries that are small businesses based in Hammaskraal.
• Sol Plaatjie Municipality in partnership with Letselebe Pty Ltd supported thirty-three (33) informal businesses through the infrastructure using the container conversion model at Craven Street next to the taxi rank, Northern Cape.
• Seda partnership with eThekwini Municipality supported sixty informal traders with facilities at KwaMashu train station that are selling meat (intloko, mogodu and amanqina), KwaZulu-Natal.
• King Sabatha Dalindyebo Municipality supported hundred (100) informal business that are selling traditional clothes and medicine through the refurbishment of Kwa Ntozonke Market, Eastern Cape.

(iii) The Department has designated the informal business sector as a significant contributor to the country’s gross domestic product (GDP), employment creation, sustainable livelihoods and local economic development in the country. As an outcome to this, the National Informal Business Upliftment Strategy (NIBUS) was developed. The strategy is aimed at supporting informal businesses, which are mostly based in township and rural areas, to ensure that they become part of the economic mainstream of the country. This is being achieved through the implementation of various policy and programme interventions. The overall outcome of this strategy will be to gradually unleash the innovative entrepreneurial potential of informal businesses to broaden economic participation and foster inclusive growth through partnerships.

The strategy is aligned to the vision and priorities of the National Development Plan (NDP), responds to decent employment through inclusive growth, the promotion of local manufacturing and one of the key pillars of the New Growth Path (NGP), which seeks to raise employment and alleviate poverty. The strategy is also aligned to game changers (high-impact programmes/projects).

The Informal and Micro Enterprise Development Programme (IMEDP) instrument has been designed as part of the recommendations of NIBUS to pool resources to support the sector, particularly since most of the existing incentives within Government at large do not cover informal businesses. Key functions of the facility include skills development, compliance support, equipment, machinery, infrastructure and technological support for informal and micro businesses. It also supports capacity building (enhancement) to informal businesses by collaborating with business associations and municipalities as delivery partners.

During the financial year of 2023/24, over 3400 informal and micro enterprises in poor and underserved communities throughout the country have been assisted with tolls, machinery and other relevant equipment through IMEDP to grow and sustain their businesses. Extensive monitoring and evaluation are yet to be undertaken to measure the full impact of these interventions. Early indications are that the growing demand for the support is as a result of the visible effectiveness of the interventions observed in those that have received the support.

(iv) A total of 24 876 youth businesses were supported with entrepreneurship. Since the Department started implementing this target in 2021/22 financial year. DSBD is implementing the Youth Challenge Fund (YCF) a financial and non-financial support fund aimed at stimulating innovation amongst youth start-ups to enable them to acquire digital capability in order to participate fully in the digital Industrial Revolution - 4IR and beyond. Budget through the Small Enterprise Finance Agency (sefa) and the Department has disbursed R1,6 billion to enterprises owned by youth over the period.

(v) The Seda Technology Programme (STP) assists through its Technology Transfer Assistance (TTA) in funding and acquiring manufacturing and processing technology. With the manufacturing and processing equipment, many businesses are able to produce on a much larger scale and at a reduced production cost. Also, the quality of products manufactured improved tremendously. Large orders produced were sold at various retail outlets and digital platforms. The following businesses were supported by TTA programme:

Name of business (location)

• • Sinotho Electrical (KwaZulu Natal)
  • Mmutle Mining Projects (Mpumalanga)
  • Guduza Engineering (Mpumalanga)
  • Chads Power Engineering and Suppliers (KwaZulu Natal)
  • S Mach Engineering (KwaZulu Natal)
  • Ngaraga Properties (Pty) Ltd T/A Lindiwe Sanitary Pads (Johannesburg)

The TTA in partnership with the Export Credit Insurance Company (ECIC), assisted a business with acquisition of processing and packaging technology machines to a value of R1 098 000. This enabled the business to meet and exceeded the customer’s expectations for quality, on time delivery, and high demand volumes. The packaging technology, successfully acquired through the TTA/ECIC fund, included an automated industrial sealing machine and foot sealer, date coding and barcoding machines at different pack sizes, box printing, sealing connected to a conveyor belt, a pallet wrapper, a heat tunnel and a semi-automatic L-sealer (to seal packs into sizes required by the customer).

The business is now listed with Kit Kat Wholesalers and Devland Cash and Carry, amongst others, and has started deliveries to five (5) Kit Kat Wholesales and two (2) Devland Cash and Carry outlets. The business is also listed with Clicks for their private labels (house brands) and has already started deliveries. Turnover increased by 344% and the number of jobs increased from fourteen (14) part-time staff to twenty (20). Two (2) permanent jobs were retained. The systems were developed and implemented successfully. The client is certified in accordance with ISO9001:2015 and is enjoying the benefits of being one of the few black companies in their field that are fully compliant and certified.

Furthermore, Seda has supported women-owned businesses with several interventions which included incubation, business management training, productivity and quality improvement interventions. Of the 61 739 businesses supported, 35% were women owned.

(vi) Seda supports a number of incubators in different sectors of the economy. An amount of R 147.2 million was spent to support SMMEs via the various Seda supported incubators and a total number of 2 507 businesses received support through this incubation network. Furthermore, an additional eleven (11) sector focused incubators were approved for establishment during the 2022/23 financial year.

(vii) The Seda Success Stories documenting the support provided to SMMEs is attached as Annexure A.

(viii) Seda supports struggling communities primarily by promoting entrepreneurship and small business development. Here are some ways in which Seda supports these communities:

Business Development Support: Seda's business development support services are comprehensive, aiming to address the diverse needs of entrepreneurs and small businesses in struggling communities. One key service is business planning, where Seda assists entrepreneurs in developing clear and actionable business plans. These plans outline their business goals, strategies, and financial projections, providing a roadmap for success.

Financial management is another critical area of support provided by Seda. Many entrepreneurs in struggling communities face challenges in managing their finances effectively. Seda helps them develop financial literacy skills, understand financial statements, and access financing options such as loans and grants. This support is crucial for ensuring the long-term viability and sustainability of their businesses.

Marketing support is also a key focus for Seda. They help entrepreneurs develop marketing strategies that are tailored to their target markets and budgets. This includes guidance on branding, advertising, and digital marketing. By helping entrepreneurs effectively market their products or services, Seda increases their visibility and competitiveness in the market.

Access to markets is a major challenge for many entrepreneurs in struggling communities, and Seda addresses this by facilitating access to market channels. This includes helping entrepreneurs identify potential buyers, distributors, and partners, as well as providing information on market trends and opportunities. By helping entrepreneurs navigate the complexities of the market, Seda increases their chances of success and contributes to the economic development of struggling communities.

Access to Finance: Seda helps entrepreneurs in struggling communities access finance through various means, such as facilitating access to loans, grants, and venture capital. These funding instruments are blended finance from Development Financial Institutions (sefa, IDC, etc.) as well as from commercial banks and philanthropists mandated to assist SMMEs with grants.

Training and Skills Development: Seda offers training and skills development programs to help entrepreneurs and small business owners in struggling communities improve their business skills and knowledge. Some of these programmes are implemented by partnering with like-minded institutions such as the Wholesale and Retail Sector Education and Training Authority (W&R Seta), the Manufacturing, Engineering and Related Services Seta (MERSETA) as well as the National Skills Fund (NSF).

Networking and Partnerships: Seda facilitates networking and partnerships between entrepreneurs, small businesses, government agencies, and other stakeholders to promote collaboration and business growth. Women entrepreneurship is very high on its agenda and through the SheTrades Programme and the Cherie Blair Foundation, female entrepreneurs in impoverished communities are assisted.

Market Access: Seda's approach to assisting entrepreneurs in struggling communities involves a multifaceted strategy to ensure they have the best possible chance of accessing markets successfully. One key aspect of this strategy is providing entrepreneurs with up-to-date information on market trends, consumer behavior, and emerging opportunities. This information equips them with the knowledge they need to make informed decisions about their businesses and adapt to changing market conditions.

Moreover, Seda goes beyond just providing information by actively facilitating access to market channels. This includes helping entrepreneurs establish relationships with buyers, distributors, and other key players in the market. Seda's network of contacts and partnerships allows them to open doors for entrepreneurs that may have otherwise been closed, giving them access to a wider range of potential customers and markets.

Another crucial element of Seda's approach is supporting entrepreneurs in building their brands and marketing their products effectively. This includes providing guidance on branding, packaging, and promotion, as well as helping entrepreneurs develop marketing strategies that resonate with their target audiences. By doing so, Seda helps entrepreneurs stand out in crowded markets and increase their chances of success.

Technology and Innovation Support: Seda supports entrepreneurs in struggling communities to adopt technology and innovate in their businesses through training, mentoring, and access to resources. By focusing on these key areas, Seda aims to empower entrepreneurs with the skills and tools they need to thrive in today's competitive business landscape. This support not only helps individual businesses succeed but also contributes to the overall economic growth and development of these communities.

Overall, Seda plays a crucial role in supporting struggling communities in South Africa by promoting entrepreneurship, fostering business growth, and creating economic opportunities.

2. The incorporation of sefa and the Co-operatives Bank Development Agency (CBDA) into the Seda is underway. It will result in the merged entity Small Enterprise Development and Finance agency – SEDFA which will provide both financial and non-financial support as well as initiatives to support the development of a broader SMME / Co-operative ecosystem. The main rationale for a new entity is to create a single integrated institution that can facilitate access to the full spectrum of financial and non-financial support needed by SMMEs across their lifecycles, accessible in all parts of the country. It will aim to leverage the financial and non-financial resources of all eco-system partners and also aim to develop new eco-system partner organisations and businesses. (e.g., emerging Township network organisations etc.). This will improve efficiency, develop products that are responsive and ensure a higher impact of the government programmes on the SMME ecosystem.

Furthermore, sefa has positively impacted the small business sector in the South African economy over the years. Since its inception in 2012 to 31 March 2023, sefa disbursed R14.5 billion into the South African economy enabling access to finance to over 629 000 SMMEs, who in turn facilitated over 830 000 jobs over this period.

sefa serves as the lender of last resort for SMMEs that generally cannot get funding from other financiers in the economy, and this also means the organisation most often than not spends considerable amount of time processing these applications, which at times are not complete in terms of all information required (compliance and others). Through the efforts of the organisation, sefa has enabled businesses to develop and grow. sefa continues to enable access to finance to small business and these businesses contribute both income (in the form of taxes) and jobs to the South African economy.

Through its insurance business, Khula Credit Guarantee, (KCG), sefa partners with financial and non-financial institutions that extend credit to small businesses and KCG provides credit cover in case these businesses default on their loan repayments. KCG also partners with Corporates who through their ESD programmes support small businesses and KCG provides credit cover in case these small businesses default on their agreements.

Seda supports entrepreneurs and SMMEs with non-financial assistance. Seda does not fund small businesses with capital or cash but offers grant funding through its TTA Programme as well as the Co-operative Development Support Programme. Both these Programmes have been successfully implemented and there is a need for additional funding as the demand far outweighs the supply. The backlog within the system TTA has been cleared and there are no outstanding applications from previous years.

Seda, through its Executive Committee, makes every effort to streamline processes, improve resource allocation, and enhance capacity within the Organisation so that it could help address these challenges and support the timely funding of credible applicants, thereby facilitating the development of small businesses.