Chair of the sitting,
Chair of the Portfolio Committee and Members of the Portfolio Committee Honorable Members
Deputy Minister, DG and officials from the DSBD Sefa and SEDA Board Chairpersons and CEOs Distinguished Guests and Entrepreneurs,
“Speak more about a black child to a black child to liberate a black child, in a country where scarcity of jobs is the main topic and there is no viable alternative for graduates and semi-skilled people. Use what you can to create a living. One day we will win – bantwana bomthonyama, thank you Seda” Amlulamele Mbabala (beneficiary entrepreneur ).
Honourable Chairperson, it is an honour for me to present progress on the work done by the Department and its agencies since the last Budget Vote address and to outline plans for this year which is the last year of the 6th Administration.
In the last Budget Vote, we committed to provide business finance to start-up businesses, and invest in existing businesses to give them the much-needed support for their growth. The Budget Vote we are tabling here today sets out achievements from the previous year and highlights our ambition and allocative decisions for the period ahead.
As we approach 30 years of democratic governance, it is important to remind ourselves that life today for most of our citizens is far better than it was under apartheid.
We are not alone in our economic woes. Like South Africa, the EU is also expected to grow at less than 1% and the UK is projected to have negative growth. A recent IMF report suggests that one-third of countries worldwide may fall into recession this year. The global economic context is highly constrained with the COVID after-effects, the general slowing of Chinese growth, and the Russia-Ukraine conflict. Compounding this is the energy challenge here at home.
Although slightly easing, the world remains in a tight monetary policy cycle to manage inflationary pressures. This means weaker currencies and reduced investment flows to much of the developing world. In this context, SMMEs become even more important to sustain livelihoods and drive growth and jobs. Currently our 2.5 million SMMEs employ just under 8 million people, meaning that we need to more than double the number of SMMEs and co-operatives in the country to come close to the NDP target of 11 million new jobs by 2030.
This means a step-change in how we do things and requires both a scale-up of support and more coherence in the SMME and co-operatives eco-system. This is the approach called for in our National Integrated Small Enterprise Development Strategic Framework (what we call NISED), which is the 3rd iteration SMME strategy for the country, and which was completed in the past financial year as promised in last year’s Budget Vote Address.
Honourable Chair, our approach to SMME and co-operatives development is five-fold.
The first pillar of our strategy is to cut red-tape and address regulatory impediments facing SMMEs and co-operatives. We have done much work here which the Deputy Minister will give more detail. Save to say, we have met SALGA who will pronounce on interventions post their National Members assembly in August.
Honourable Chair, the second pillar of our work is to enable access to markets. South Africa remains a very concentrated economy by international standards, a legacy of our apartheid past.
The ANC’s 55th National Conference noted that “the task of ensuring that all South Africans share in the country’s wealth is far from complete. The country’s unequal distribution of wealth and income is still largely characterised by the racial and gender demographics of our colonial and apartheid past”.
Through its market linkage programme, we will link 250 products manufactured by SMMEs and Co-operatives to domestic markets this financial year. We have a great collaborative partnership with Proudly SA, and we are currently working together on an e-commerce platform managed and run by Proudly SA. Honourable members and citizens, please support the cause by buying local.
In continuing with the implementation of the Localisation Policy Framework, we have prioritized sectors with low barriers to entry and sunrise sectors like cannabis, and will this year be setting up a cannabis/hemp cluster in the Eastern Cape. This cluster will look both at the industrial hemp value chain as well as how to mainstream small indigenous cannabis growers for lucrative markets.
Through Seda we are implementing our comprehensive Small Business Exporter Development Scheme (SBEDS) designed to build export readiness and fund emerging exporters to participate in trade shows, exhibitions (virtual and physical) and Business2Business (B2B) engagements outside of South Africa, with a special focus on African markets. This year we will allocate R25 million for this trade support. We will also be sending five SMMEs to Turkey for export readiness training in fashion design.
The African Continental Free Trade Area (ACFTA) presents great opportunities for our SMMEs. In March next year, South Africa will host GEN Africa+ which will bring leaders and entrepreneurs from across the continent to see how we can create a more effective continental SMME and start-up eco-system.
The Department is also implementing the SheTradesZA programme, which is an online platform to support South African SMMEs access international markets. Through our support, Lefakong Consultants, a NW-based Moringa production company, is exporting to Botswana and expanding production to Mauritius. House of Natural Butters, a WC-based company, became a member of SheTradesZA in 2020, and now exports to Namibia, Botswana and Zambia.
The other significant market access support we provide as the DSBD portfolio is in the area of Enterprise Supplier Development. Here we have created a Community of Practice as the basis for the creation of a Partnership Platform.
As Tony Elumelu, one of Africa’s most prominent entrepreneurs reminds us, “Companies that incorporate local value creation will be both more sustainable and profitable in Africa in the long term. By investing in local economies and creating local jobs, they are also increasing the pool of people who can afford their products and services”.
Both of our agencies, Seda and sefa are collaborating on our ESD work. Seda, for example, is partnering with SAPPI & SAFCOL in Mpumalanga, Lafarge in the North- West, Pick n’ Pay in the Western Cape, Gold One mine in the East Rand, SIOC in the Northern Cape and RMI in a number of provinces, to mention a few.
Sasol has also collaborated with Seda to rollout Pop-up markets in the various Provinces, and in Mpumalanga and Free State is providing containerised Business Hubs to support township enterprises.
Sefa has supported 51 SMMEs to gain access to corporate value chain markets. These were supported with a R201 million revolving credit facility to provide goods and services to corporates such as Tiger Brands, United Exports, Grain SA, Cotton SA, Rainbow Chicken Limited, and Mondi.
Honourable Chair, the third pillar of our strategy is access to finance. As I have suggested previously, the World Bank estimates our small enterprise credit gap in South Africa to be between R350 billion and R500 billion. This is a national crisis that we all need to work together to resolve.
For the financial year ending 31 March 2023, sefa through its development finance interventions and programmes, financed 74 762 SMMEs and Co-operatives and disbursed R2.4 billion to these enterprises.
Through these disbursements, sefa was able to reach:
- 74 486 black-owned SMMEs to the value of R2.1 billion.
- 15 535 youth-owned SMMEs to the value of R564 million,
- 72 651 women-owned SMMEs to the value of R928 million.
- 2 953 township-based SMMEs to the value of R541 million.
- 66 302 rural-based SMMEs to the value of R952 million.
Collectively, these funding interventions have created 32 665 new jobs and sustained 71 882 existing jobs.
Sefa, through this budget vote, will seek to approve loan finance to the value of R2,5 billion and disburse R2.2 billion to 93 000 small businesses and co- operatives.
The Department has also finalised the SMMEs and Co-operatives Funding Policy which will accelerate addressing the credit gap through expanded access to finance and early-stage investment.
Enabling youth entrepreneurship is a priority for the department. For the 2023/24 financial year, R122 million has been allocated to the Youth Challenge Fund.
With regards the Township and Rural Entrepreneurship Programme (TREP), for townships and rural areas to local productive business ventures. For the FY 2022/23, we set a target of supporting 20 000 enterprises, and surpassed this target providing financial and/or non-financial support to 23 344 enterprises located in townships and in rural areas. This year we have increased the target to 30 000 enterprises, and have allocated R909,42 million for the programme. It is clear that the ANC-led Government is serious about economic transformation.
Of this R909.42 million TREP allocation, R500 million goes to Seda broken down as:
- R280 million to equipment targeting SMMEs with turnover of less than R3million
- R100 million for product markets – pilot in 7 District Municipalities
- R70 million to energy support for product markets
- R50 million for general dealer support
Sefa’s allocation to TREP of R409million is broken down as follows:
- R200 million for township and rural businesses for power purchase product
- R209 million normal TREP lending
In addition, sefa will allocate R220 million for other businesses for the power purchase product.
R100 million is set aside in sefa for automotive after- market support. Businesses can get up to R1 million of which R100 000 is a grant.
R32 million for stock for spaza shop support implemented through sefa and Seda
The other financial support instruments we have as the portfolio includes the Informal and Micro Enterprise Development Programme (IMEDP) which is a 100% grant offered to informal and micro enterprises from the minimum grant amount of five hundred rand (R500) up to the maximum of R15 000 to assist them to improve their competitiveness and sustainability. To this programme we have allocated R20 million. Through this programme, the Department intends to support 1 333 informal businesses in 2023/24 financial year.
Sefa has also partnered with the European Union (EU) in 2019 to implement the Employment Promotion through SMMEs Support Programme (EPSSP). The programme seeks to facilitate access for SMMEs in corporate value chains via corporate enterprise and supplier development programmes. Through the Innovation Fund, sefa has partnered with five partner financial institutions, which include three commercial banks, and two non-banking institutions to facilitate access to finance to the value of R253 million. During the year ahead, we will extend the guarantee facilities to SMMEs to the value of R93 million targeting Deciduous Fruits, Green Economy transactions, ICT, Healthcare and essential oils.
Finally, we have the Cooperatives Development Support Programme, to which we are R73 million. The Deputy Minister will speak to what we have done here, including to turnaround our performance through redesigning our co-operative development strategy.
The fourth pillar of our strategy as DSBD is access to business development services. Our core work here is in the space of incubation and entrepreneurship support. For this 6th Administration, we set a target of establishing 100 incubators. Through Seda, we have thus far established 110 Incubators nationally aligned to government’s priority sectors. These 110 incubators are further broken down into 73 Technology Business Incubators; 31 Centres for Entrepreneurship and Rapid Incubation; and six Township and Digital Hubs.
For the 2022/23 financial year, a total of 2507 SMMEs were supported via the incubation programme, 1607 jobs created, and 6995 jobs sustained. A total of R148 million has been put aside for incubation for the 2023/24 financial year. Of this, a total of R44million has been put aside to implement the approved 11 incubators in rural and township areas.
Our Limpopo Jewellery Business Incubator has recently seen two of its SMMEs taking bold steps towards expanding their horizons in the international market. Come Again Holdings (PTY) LTD and South African Swiss (PTY) LTD, represented the incubator in the international 2023 APLF Dubai Exhibition and the Platinum Guild International India Show, respectively. The importance of such representation and exposure cannot be overstated as it provides SMMEs with the opportunity to showcase their products and services, network with potential clients and investors, and gain valuable exposure in new global markets.
We have also just launched the Nelson Mandela Ihub and recruited 40 new incubatees who will participate in a 3- year incubation programme. The centre also showcased the new tech equipment it bought including virtual reality headsets and controls. The new recruits have been enrolled in various programmes such as data analytics, robotics, and automation.
Our Mafikeng Digital Innovation Hub recently partnered with Telkom to host the Future Makers’ Hackathon for high school learners specifically between grade 10 and11, as part of our broader efforts to assist the youth to gain skills such as Coding, Robotics, AI, Machine Learning, and IoT. These 51 learners are now much better prepared for economic participation in the future economy.
The fifth pillar of our strategy as DSBD is to build our capacity and capabilities to do these things.
Digitalization will also improve transparency and reduce scope for fraudulent and unsavoury practices, besides also improving the turnaround time of applications.
We are also busy with the establishment of a one-stop shop agency for small businesses and co-operatives that will this year finalise the incorporation of the Small Enterprise Finance Agency and Co-operative Banks Development Agency into the Small Enterprise Development Agency as approved by Cabinet. Cabinet has approved the business case for this merger, and we will this year bring to the National Assembly proposed legislative changes to the National Small Enterprise Act that will give effect to this new entity. We are also moving on digital platforms which will improve access to our products, as well as the turnaround time to process applications.
We are also appointing and assigning DDM champions to strengthen the DDM One- Plans and mobilize the three spheres behind the work of DSBD on the ground. We are building co-location points in different District and Local municipalities, and during the past year appointed 15 DDM Champions. During this Budget Year will appoint another 5 to reach our target of 20 champions. Our work as DSBD must support the implementation of each DDM delivery plan, and exchange project, opportunity and SMME activity data and information with DDM structures. This will allow us to roll our digital SMME license application systems (for example building on the experience of KZN), including systems integration and inter-operability. It will also ensure that we spend with more impact if LED offices assist with the development of the SMME pipeline for the take up of TREP and other DSBD instruments. Municipalities played a pivotal role in ensuring uptake of social relief during COVID, and we see them playing this support role to broaden our reach and strengthen delivery of TREP and other instruments in our SMME and co-operatives policy toolbox.
In light of our eco-system approach, we will have a number of strategic partnerships, including:
- With the Department of Higher Education in which
- SEDA together with NSF will train 1500 graduates of which 750 will be trained on business management training and coaching in 2023/24 F/Y. These graduates will be offered job opportunities for a maximum period of 18 months working with informal businesses including Spaza Shops and General Dealers. In addition, through this partnership, 12500 Spaza shops and General Dealers will receive business development support training. This program will be rolled out to all provinces but with bias to rural provinces.
- In partnership with Wholesale and Retail Seta, we are targeting 3000 spaza shops and General Dealers who will be receiving stock of up to R6000 and training on stock Management. This partnership will so result in 200 graduates being employed for a period of 12 months to assist in providing BDS services.
- Seda's partnership with Merseta will result in recognition of prior learning where 600 employees of SMMEs in the Automative industry will be trained and be given an opportunity to obtain Trade certificates over a period of 2 years. In addition, 300 SMMES within the Automator sector will receive business development support training. The qualifying businesses will be linked to KCG automotive after market support scheme
- With SAB through which its Foundation is investing an average of R100 million a year in small business development in South Africa focusing in rural, youth, women and people living with disability and the Department is a key partner in that regards. The Department is currently finalizing a strategic partnership to solidify public private partnerships. SAB is committed to committed to contributing to township economic revitalization through investing in small retailers offering then training and infrastructure. Lastly, SAB is also supporting emerging farmers towards becoming commercially viable.
- With Tiger Brands who will enter into a funding partnership agreement with Sefa to provide access to finance for SMMEs who either existing or prospective suppliers of Tiger Brands. An additional focus will be on funding agriculture value chain and food distribution projects. A further partnership between Tiger Brands and Seda will support micro and small enterprises within South Africa’s township economy and that are part of the Tiger Brands distribution chain. The focus of this partnership will be on prepared food outlets.
- With the JSE in which DBSD and Seda will provide the JSE Accelerator programme (the custom solution designed to develop SA-registered medium sized companies with over R10 million-rand revenue) with a pipeline of companies that require scaling and acceleration support to a minimum of 10 companies. They will also provide funding readiness training and support up these businesses. The JSE will also work with sefa to assist companies that require access to capital beyond the scope of the capital that sefa is able to provide.
In conclusion, Honourable Chair, I table before you the budget vote of the Department of Small Business Development for the year 2023/2024. The budget is an indication of government’s commitment to promote the development of small businesses and co-operatives. The Department is allocated a budget of R2,574.78 billion for the 2023/24 finincial year (an increase of just under 0.5%). Transfers and subsidies amount to R2,226.36 billion, compensation of employees R225,12 million, goods and services R118,36 million, and capital expenditure R4,94 million.
This Budget Vote shows the unwavering commitment of the ANC-led government to SMMEs and Co-operatives development. We are a resilient nation and will get through the tough times we face and continue our march towards a more just and equal society. Besides meeting most of our MTSF targets for the 6th Administration, which the Deputy Minister will talk to, our work is being affirmed by the SMMEs themselves, While the Business Partners SME confidence index for last quarter of 2022 fell 13%, the belief that government was doing enough to foster SMME development rose 17% YoY from the 4th quarter of 2021. We must build on this confidence, continue with our efforts to root out fraud and corruption, and working together with all role-players, build a more supportive SMME and co-operatives eco-system.
As I wrap up, Honourable Chair of the House, let me extend my sincere gratitude to the portfolio committee for guidance as well as to stakeholders and all SMMEs, Co- operatives and informal businesses for the continued support to this Ministry. I would also like to thank the Deputy Minister Ms Dipua Peters, the rest of my Ministry team, the DG Mr Lindokuhle Mkhumane and the department, as well as the Boards and officials in sefa and Seda, for their contribution and support. I would also like to thank the President and Cabinet colleagues for their leadership and support they provide.
Despite the challenges we face as a country, the people know that the ANC remains the leading force for change in the country and carries the hopes and aspirations of our people. Unlike main opposition parties, and I quote directly from the resolutions of the ANC’s 55th National Conference, we are committed “to build an economy which is inclusive and in which new businesses are able to emerge and flourish; where black people, women and young South Africans are able to advance at all levels and in all areas of the economy; and where township and rural economies are able to grow”.
I thank you.
