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Small Enterprise Ombudsman Services Bill on Track

July 29, 2020

Department of Small Business Development

The small business development department remains committed to table the Draft Small Enterprise Ombudsman Services Bill to provide a less costly dispute resolution mechanism.

The deputy minister of small business development, Nokuzola Capa, revealed this during the Small Business Development Department Budget Vote 2020/21 in parliament.

According to the deputy minister, South African small enterprises lose billions of Rands annually due to late and non-payment by both the public and private sectors.

This has caused some small enterprises to close down because they have no appropriate mechanism to use to resolve disputes.

“Going to court is still a prohibitive proposition for small enterprises, even where there are large amounts involved. The process is cumbersome, time consuming and, of course, expensive.”

The setting up of the Small Enterprise Ombuds Service aims to “provide a less costly dispute resolution mechanism to consider and dispose of complaints by small enterprises”.

The deputy minister also announced that township and rural entrepreneurship programmes were recently launched including the:

• Spaza Shop Support Programme – a cash flow facility in the form of credit guarantee administered via the commercial banks that enabled SA’s spaza shop owners with a valid operating permit to buy stock at accredited wholesalers with a R175 million budget;
• Clothing & Textiles Support Programme – an initiative focusing on skills enhancements and upgrading machinery and equipment of informal clothing and textile manufacturers with R105 million budget;
• Bakeries & Confectionaries Support Programme – provide access to markets through spaza shops, school nutrition schemes, hospitals, military & other social relief programmes. This will be in the form of working capital investment that includes bulk buying facility on pre-approved products through pre-selected wholesalers, which would be leveraged on the Spaza & General Dealers Support Facility with R100 million budget;
• Automotive Aftermarket Support Programme – a credit guarantee facility in the form of supplier guarantee to informal autobody repairers and mechanics to purchase stock and other relevant equipment in execution of their business activities with R225 million budget.

The deputy minister also indicated that, in an attempt to integrate and provide seamless services to SMMEs and cooperatives, the “department has adopted and approved a One Stop Model which is also aligned to the District Model and also facilitates revitalisation of township and rural economies”.

The model, also called Co-location, is defined as follows:

A process of bringing into a single property- under one roof of services intended for business development and support by various entities. A Co-location point is a single access facility to information and business support services for small and medium enterprises and co-operatives in
a certain geographical area. A co-location process and the establishment of a co-location point will lead to an ideal one stop shop.

The minister confirmed that the high SMMEs mortality rate in South Africa in relative terms is expected to deteriorate further due to the prevailing difficult economic conditions brought about by the COVID-19 pandemic.

Consequently, the majority of the SMMEs and cooperatives are expected to experience business challenges that will lead to the reduction in business volume.

“This could mean job losses and closure of businesses on the part of these entrepreneurs as they do not have adequate cash reserves to sustain their businesses.”

Meanwhile, in a statement, the trade, industry and competition department recently revealed that government is concerned by the troubling reality that many Small and Medium Enterprises may not survive the COVID-19 pandemic.

The deputy minister of trade, industry and competition, Nomalungelo Gina, declared that the “full-scale effects of the COVID-19 on black businesses will be felt through the numbers of retrenchments that have already began due to the loss of trade”.

“Black-owned companies will face challenges because they are mostly fragile in their balance sheets with no collateral to assist them in accessing credit even in times when government had cut the base for lending rate. There is also a real danger of liquidity challenges, some of the B-BBEE Level 1 companies may face closure and be forced to sell their larger percentages to non-black companies thereby losing their B-BBEE 100% ownership. We are undoubtedly concerned about this as these realities represent reversal of the very foundations for the B-BBEE and transformation of our economy,” added Gina.

The department called for the local economy to adapt and embrace innovation and technology solutions and for government and business to work together on the recovery interventions.