SME Fund slowly starts coming to life

On Friday I had my first meeting with Quinton Dicks, newly appointed CEO of the SME Fund established as part of the CEOs Initiative. This initiative came into being early last year, shortly after Pravin Gordhan's reappointment as Finance Minister and was an attempt by business and government to avert the ratings downgrade which was hanging over the country like the proverbial axe.

Discovery's Adrian Gore and Bidvest's Brian Joffe were put in charge of the entrepreneur fund workstream, charged with raising R1,5 billion to be invested in high-growth potential SMEs. In May my colleagues Geordin Hill-Lewis (Trade and Industry shadow minister) and Michael Cardo (Economic Development shadow minister) met with Gore, Joffe and Lisa Klein, the fund's interim CEO, to find out more about it and get a progress report. In preparation for the meeting I sent them a briefing note which I reproduce below.

In the intervening months the Fund has created a website and appointed Dicks as CEO. Importantly, it has not received the R1,5 billion matching funding promised by government when the fund was announced. There was no mention of it in the budget tabled last month, and I have sent a written question to Minister Gordhan asking why not.

Mail & Guardian article on Department of Small Business Development underspending

Today's Mail & Guardian published an article on page 17 claiming the Department of Small Business Development will underspend its 2016/17 budget by R140 million, more than 10% of its budget.

M&G journalist Dineo Bendile called me on Tuesday requesting comments on the story, which I willingly provided. The article quotes a short segment of what I sent her and there is an unexplained discrepancy between the actual and claimed year-to-date under-spending. She did not reveal her source for the under-spending claim, only referring to them as "Treasury officials".

Minister Zulu wants her budget substantially increased, so it seems these un-named Treasury officials are waging a behind-the-scenes battle with her based on the Department's inability to spend what it's already been allocated. The issue is not just the spending, but how it's spent. Does it produce results?

Letter in today's Business Day: Spazas have buying power

Sir

Matthew Govender's highlighting of the need to tackle the skills deficit in township economies coincides with the publication of recent research showing that township economies are mostly disconnected from supply chains in the formal sector (Township economy plan needs to tackle skills deficit, 2 March).

Results of a survey by the Gauteng City-Region Observatory reveal that 8% of respondents own a business, of which 35% are in the formal sector and 65% are in the informal sector. A map unsurprisingly shows informal businesses to be primarily township-based while formal businesses are in established industrial and commercial hubs such as those north of Johannesburg's CBD.

Relevant to Mr Govender's point is that informal, township businesses tend to buy locally whereas formal township businesses buy from outside suppliers. This illustrates that most township businesses are not taking advantage of opportunities to expand by buying from suppliers who themselves are connected to formal and often shorter supply chains, leading to better quality products, improved logistics and lower prices. 

Both Mr Govender and the GCRO have missed a key dynamic in township economies, which is that foreign-owned spaza shops have been able to reduce their prices and so out-compete locally owned informal spazas by amassing greater purchasing power through bulk buying networks which source from formal sector suppliers. 

Much could come from the form of training Mr Govender calls for focusing on the township retail sector, which in combination has enormous buying power, if they could work together. Moves are afoot to address this key factor in revitalising the biggest sector in the township economy. Expect to see real transformation sooner rather than later.

Toby Chance
DA Shadow Minister Small Business Development

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!

Notice of motion in the National Assembly

This afternoon I read a notice of motion in the House:

                                                      NATIONAL ASSEMBLY

NOTICE OF MOTION

_________________________________________________________________________

Internal Ref Number:	011	-	2017
Date:	28.02.2017
Member:	Toby Chance
Motion:
I hereby move on behalf of the Democratic Alliance that at its next sitting this House debates why, when 90% of jobs are expected to be created by small and medium enterprises, the Department of Small Business Development receives only 0,1% of government spending. What happens next is that every week the programming committee decide on which party's motion will be debated. When the DA's turn comes, in rotation, our leadership decide on which motion to choose. If mine is chosen we will have 70-80 minutes to debate the motion and typically the proposer of the motion opens or closes the debate.  Watch this space!

Speaking to Redi Tlhabi and Kieno Kammies on radio on the same day - a first!

Today I drove from Cape Town to Johannesburg and had the unusual experience of phoning in to Cape Talk and Talk Radio 702 at either ends of my journey and going on air on both stations!

I tuned in as Kieno was speaking to Keet van Zyl from Knife Capital, one of SA's leading venture capital and business accelerator firms. They were discussing the budget and why the Department of Small Business Development did not seem to be getting any traction from its R3,9 billion budget. I pointed out to Kieno that this was its three year budget but did not have time to mention it represents only 0,1% of total government spending, which says a lot about government's commitment - or lack of - to small businesses.

Budget speech a damp squib for SMEs

Finance Minister Pravin Gordhan resisted calls from Minister of Small Business Development Lindiwe Zulu for more money in his budget speech delivered in the National Assembly today.

What some media outlets described as a "windfall" budget of R3,9 billion over three years is in fact a near exact repeat of what he announced in the Medium Term Budget Policy Statement in October last year.