DA calls for unified agency to support job-creating entrepreneurs

7 May 2015

The immediate merger of the Small Enterprise Finance Agency (SEFA) and the Small Enterprise Development Agency (SEDA) into one, unified and mandated agency providing support for new and existing small businesses and entrepreneurs cannot be delayed any longer. 

I will today write to the Minister of Small Business Development, Lindiwe Zulu, calling for this merger to be instituted without delay, as a necessary step towards job creation in the private sector.

This comes after yesterday’s mammoth eleven hour meeting of the Portfolio Committee on Small Business Development, in which it became clear that the department is failing in its mandate to support and promote small businesses and entrepreneurs in South Africa. 

Committee Chairperson, Ruth Bhengu, said she was “gatvol” with this state of affairs within the department, while DTI committee member, Bongani Mkonki, who sat in the meeting, said he was “very worried” about the department’s poor performance. 

The success of new small businesses is crucial to creating jobs for 36% of South Africans trapped in unemployment. At present, success is being hampered by many self-made obstacles within the department. The separate and often conflicting operation of SEFA and SEDA is one such obstacle. All the evidence shows these two must work under one roof. 

SEDA consumes 80% of the Department’s budget but by the admission of a senior official its first ten years of existence have been “indefensible.” Its flagship incubator programme is expected to create only 50 000 jobs over 3 years until 2018, a drop in the ocean when compared to the NDP’s goal of 11 million new jobs by 2015.

SEFA spends R1,60 for every rand it receives in revenue from its loan book. Its cost-to-income ratio of 160% compares very unfavourably with commercial banks whose ratios sit in the mid 50% range

Merging SEFA and SEDA to create a unified agency for small business finance and support will not only remove unnecessary red tape, but afford the minister the opportunity to rebrand the new entity with a mandate that will see it succeed in supporting small businesses. 

South Africans cannot afford a Department of Small Business Development which fails to support small businesses and entrepreneurs. Tackling our unemployment crisis depends on it. 

Statement issued by Toby Chance MP, DA Shadow Minister of Small Business Development, May 7 2015