Wednesday, 1 March 2017

Department of Small Business Development potentially wastes R123 million on failed coops

This morning the Department of Small Business Development Director General, Professor Edith Vries, and members of her staff were due to present a briefing on the developmental status of all 400 cooperatives funded by the DSBD since its inception.

But when asked to begin, the DG requested that the Committee allow her to postpone the briefing until such time as she felt the Department was ready for it.

This led to three hours of questions, discussion and partial responses from the DG and Chief Director of Cooperatives, Jeffrey Ndumo, the longest period so far given to consideration of a non-briefing in Committee!


The reason the DG gave was that the Department was only able to visit 169 of the coops to conduct proper post-funding assessments, resulting in incomplete information. When asked why, she said the Department was not sufficiently capacitated.

The function used to do this work was still housed in the DTI, which had offered its services as part of an MOU which ran over two years but has now expired. The Department has been unable to set up its own capacity of monitoring, evaluation and research.

Questions were raised why the 400 coops had been funded under the Cooperative Incentives Scheme to the tune of R350 000 per Coop, without proper M&E or reporting processes in place? She could not answer the question. In other words, R140 000 000 (R140 million) has been spent without any provision being made that it has been used properly.

What makes this so concerning is the DTI's own statistics showing that 88% of coops funded under the CIS while it was running it, failed, with the coops no longer functioning.

So it is likely that R123 million of taxpayer's money has just been thrown away.

Is that any way to run a department? Could this not be classified as wasteful expenditure? The Department has conducted its own research as to the efficacy of the programme but this will only report in November 2017.

I asked that Minister Zulu be called before the Committee to account for these failings.

The Committee was so incensed it has called for the DG to resign, though the Chair, the Hon Ruth Bhengu did not allow such a resolution to be passed. Instead, she agreed to write to Minister Zulu, who has political responsibility for the Department, to appear before the Committee to answer questions and explain why such practices have been allowed to continue.

It is a dereliction of duty for the Department to spend money on coops without proper follow up and support to reduce their failure rates. We look forward to hearing what Minister Zulu has to say on the matter.

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