Thursday, 3 November 2016

Declaration in Parliament on the DSBD Budget Review and Recommendation Report (BRRR)

This afternoon I made a two minute declaration in the National Assembly on the Portfolio Committee's BRRR on the Department of Small Business Development. These yearly reports coincide with the Minister of Finance's medium term financial statement delivered towards the end of October.

The BRRR process is an important function of Parliamentary oversight of the Executive. Before writing the reports, each Portfolio Committee receives presentations from the Auditor General on the financial performance of the department it oversees, from the department itself and all the agencies/entities reporting to it. We then deliberate the information received and make observations and recommendations for the department to include in its budgeting and strategic planning for the following financial year, beginning April 1st.

I had to cut out quite a bit of what I wrote to stick to the 2 minute limit. Minister Zulu, who was supposed to be in the House for all the different parties' declarations, arrived late so didn't hear mine. Who knows, perhaps she will read this blog! Below is the unabridged version.

Toby Chance
BRRR declaration
Department of Small Business Development
3 November 2016
The Department of Small Business Development has produced its first annual report since it was formed in 2014. In the year ending March 2016 the department spent R1,1 billion yet only met 42% of its targets.

It received an unqualified audit opinion with findings relating to irregular expenditure of R1,8 billion on a training programme.

The department is still suffering from birth pains, trying to reconcile three organisational structures simultaneously - the one originally planned in 2014, the one approved by the DPME in 2015 and the one proposed in the programme review conducted by an independent consulting firm which reported in November 2015.

The Portfolio Committee has been unrelenting in its criticism of the department for the slow implementation of many of its programmes, as reflected in its missing over half of its KPIs. We are only due to receive the department’s response to the programme review later this month – a full year after it was completed.

One of the most glaring targets missed concerns the amendment of the National Small Business Act of 2004. Public consultations have been slow and resulted in less suggestions than the department would have liked, which reflects the minimal publicity such consultations have received.

We have been told that the amended Act will only be published for comment in the second quarter of 2017.

Meanwhile, the DA has been hard at work and my colleague Honourable Kruger has tabled his Red Tape Impact Assessment Bill which we expect to be well received by the Department and Committee.

Another matter of concern was the late appointment of a CEO at SEDA, after nearly three years of acting CEOs. This led to Seda drifting aimlessly without a leader and persisting in measuring its performance by activities rather than outcomes and impact. The new CEO was refreshingly frank in her assessment of SEDA’s performance and we are expecting a major shake-up in the coming months.

Our greatest criticism was reserved for SEFA, however, which reported a R380 million loss with impairments on its direct lending book of 67%. This is unsustainable. SEFA management has devised a rescue plan but in the Committee’s view only a wholesale restructuring and a merger with its sibling SEDA will bring relief, not just to itself by to the millions of struggling small businesses out there needing support.

It is worth noting, as reported by the DG last week, that spending on SMEs by all national government departments amounts to R15 billion. The department’s own budget is a piddling 0,1% of total government expenditure.

Unless Minister Zulu and her department get a grip on their mandate to create a positive enabling environment for SMEs, it will continue to be regarded by the business community and society at large as practically irrelevant to the country’s goal of creating 11 million jobs by 2030.

The DA supports this report. 

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