The Minister of Small Business Development Khumbudzo Ntshavheni has announced a string of new initiatives, in what could be a major step to improving the government’s up till now lack lustre small business support.
Since it was set up in 2014, the Department of Small Business Development has faced criticism that it has done little to support small businesses.
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But presenting her department’s budget vote (opens as a PDF) on Friday (12 July), Ntshavheni (pictured above) said her department would set up an index “within six months” to track the health of firms and measure the impact of the government’s small business support.
Alongside the index, the department will among other things also set up a database of firms and a one-stop platform which small businesses can use to better access government support. It will also reconstitute the long-delayed third Small Business Advisory Council and table the DA originated SMME Ombudsman Services Bill.
The department will set up the small business index within six months
“We cannot continue to spend resources without measuring and directing their impact. In the current conditions, SMMEs (small businesses) are the cornerstone of our economy and therefore our support programmes can no longer be left to their own devices,” Ntshavheni told MPs in Parliament.
The new measures come as Ntshavheni also announced that small businesses, startups and innovators will be able to access matched grant funding with a repayable Sefa loan, through the Small Business and Innovation Fund. The grant portion will be up to a maximum of R2.5-million per enterprise (see this story).
Small Enterprise Development Agency (Seda) — which currently has an network of 58 incubators (see the list here) — will set up eight more incubation centres.
Database to also be set up
The small business and co-operatives database that the department plans to set up will categorise firms by sector, geographic location, size and product or service.
Ntshavheni said her department plans to work with The National Treasury to ensure that other existing government databases on firms are integrated into the planned small business one.
“At a minimum, this database must access information about any payment made by government to an SMME or co-operatives,” she said.
One-stop platform planned
The department also wants to set up a one-stop platform for businesses to access both financial and non-financial support. This will include a walk-in option and online access.
The platform will link to the department’s planned small business database, to allow the department to track the performance of small firms that receives government support.
Small businesses in South Africa will soon have access to a mixture of grants and loans from the government’s Small Enterprise Finance Agency (Sefa) — through a new blended finance model fund that aims to finance 100 000 young entrepreneurs.
SMME Ombudsman Services Bill to be tabled
Meanwhile Ntshavheni said the department would also table the SMME Ombudsman Services Bill. The bill aims to provide a less costly dispute resolution mechanism.
Last year former DA member Toby Chance tabled the Small Enterprises Ombud Service Bill, which was never adopted by the government.
In a LinkedIn post a week ago small business researcher Septi Bukula from Osiba Research revealed that he’d been tasked by the department to design an alternative dispute resolution mechanism for small businesses funded by the EU.
Furthermore, Ntshavheni said her department would, in consultation with SA Local Government Association (Salga) and the Department of Co-operative Governance and Traditional Affairs, review and develop a list of generic bylaws applicable to small businesses in municipalities.
The department also plans to engage National Treasury on the cost of tender documents that have become prohibitive for small firms and will begin registering informal businesses to ensure that they can be offered more co-ordinated support, including bulk buying opportunities.
The department is also in the process of establishing a new Small Business Advisory Council — which was supposed to have been chosen under under Zulu after the second council lapsed in 2012.
The council will report to the minister and is dedicated towards providing critical information on the sector and advice on the interventions that need to be introduced to support small businesses.
Move to allow cessions
Ntshavheni noted in her budget vote that Sefa is struggling to obtain cession agreements, with the different spheres of government due to provisions within the Treasury and regulations relating to the payment of suppliers by contracting departments.
If granted, cession agreements will allow the agency to advance funding to small businesses that have government contracts and then collect the payment on their behalf.
She said the inability to grant cession agreements places Sefa’s bridging loan and revolving credit portfolio at a “serious risk”.
“Sefa is experiencing high levels of arrears in this portion of its book, with almost 90% of Sefa’s impairments due to debts owed by government to small firms,” she pointed out.
She said the department is facilitating through The National Treasury a process which all government entities are directed to accept cession agreements to Sefa through a regulatory regime by the Minister of Finance.
Over R2.5bn for 2019/20
The Department of Small Business Development has been allocated R8.15-billion over the next three years
Of the department’s R2.57-billion budget for the 2019/20 financial year, Seda has been allocated R867.8-million, Sefa R1-billion, while R458-million has been allocated to four incentive schemes and the Blended Finance Facility (allocated R100-million).
Included in Sefa’s R867.8-million allocation, R152-million will go to the Seda Technology Programme which supports incubators, with R57-million allocated to the Enterprise Incubation Programme and R35-million to its Gazelles Programme.
Read more: Sefa’s Small Business and Innovation Fund to finance 100,000 startups, SMEs
Read more: Meet SA’s new small business minister Khumbudzo Ntshavheni [Updated]
Featured image: Small Business Development Khumbudzo Ntshavheni (Facebook)
