Is South Africa’s Department of Small Business Development about to be axed?
The department – which has long come under fire for doing too little to support small business (see this post), was set up in 2014 by Jacob Zuma, who last month stepped down as president.
Cyril Ramaphosa, who took over as head of state, has vowed to down size the cabinet. In his State of the Nation Address last month he said a review would be carried out on the number and size of government departments.
Following the speech, Small Business Minister Lindiwe Zulu survived a cabinet reshuffle Ramaphosa carried out last month.
But a report by City Press earlier this month quoted an unnamed insider as saying the department is likely to be dissolved and allocated a director-general in the trade and industry department.
At present the Department of Small Business Development is struck with having to carry out a R1 million forensic audit into a poultry co-operatives project in the Mpumalanga.
This, after the Small Enterprise Finance Agency (Sefa) released the findings of a forensic investigation into a R20-million loan deal, in which instances of embezzlement, fraud and theft were uncovered.
In addition it has struggled to get a Sefa enterprise development fund off the ground that intends to take private-sector commitments from businesses which can then score Black Economic Empowerment (BEE) points by capitalising the fund.
Last month Parliament was told that the fund has been held up for over two years, because the Department of Trade and Industry has not given Sefa the go ahead to allow those firms that make commitments, to score BEE points.
Adding to a long list of promises it has yet to fulfil, the department has yet to set up a promised Co-operatives Development Agency to support co-operatives.
More than two years after a review of its programmes (see this post), the department is only now finalising its new approach to assisting small businesses, in what it calls the “portfolio for architecture” project.
The department outlined in Parliament last month that the approach would see the department tailor-make support programmes depending on the phase a business was in – whether this be pre-start-up, start-up, growth or decline (see the presentation here).
But DA member Toby Chance asked why since a review conducted by the department in 2015, it had taken over two years to develop a portfolio architecture that had merit.
He noted too that the presentation did not recognise what was happening in the private sector in the business life cycle.
Zulu responded by saying that the department is still fairly new and that it would take time for things to be developed. She said the that the department is still deciding on what aspects should be dealt by Sefa and Seda.
This doesn't do much to justify the continuing funding of a separate department - to the tune of almost R1.5 billion ($130m) in the 2018/19 financial year. This will climb to almost R2.6bn as the first tranche of a R2.1bn fund for start-ups is allocated to the department.
Keep minister, cut department?
Better perhaps would be to do away with a separate department, but to perhaps keep the role of a minister - which is what Canada and New Zealand do, where the small business minister is part of the trade or economic department.
South Africa could benefit from the co-ordinating role a minister could play, But this might work better if the minister were to be placed in the presidency - such as Brazil did in 2013 when it selected a small business minister, Guilherme Afif Domingos.
The position was cut in 2015 as part of a downsizing of ministries carried out by then president, Dilma Rousseff. Domingos now heads the state's small business agency Sebrae.
The department’s Lindokuhle Mkhumane last month told Parliament that it had established a national interdepartmental coordinating committee made up of representatives from 24 government departments which meets once a quarter.
Mkhumane said the committee has for example engaged with the Construction Industry Development Board (CIDB) about aligning its Contractor Incubator Programme (CIP) with Small Enterprise Development Agency (Seda) incubators.
This could play a valuable role -- similar as that played by Malaysia's SME Development Council. Perhaps Ramaphosa - a former businessman himself - needs to head the South African one up, to ensure its effectiveness.
This, together with keeping a small business minister close to Ramaphosa in the presidency could just be what the country needs. What it surely can do without - is more of the same poorly performing bloat.
Only a few countries have small business ministers - here they are:
Democratic Republic of Congo
Timm is a South African who writes on small business. He was briefly on holiday in February. Follow Small Business Insight on Twitter at @Smallbinsight.
Stephen Timm is a