DSBD presentations: Localization framework and SMME market access

Date: 24 November 2020

The Portfolio Committee on Small Business Development convened on 18 November 2020 and 28 October 2020 to consider emerging policy proposals from the Department of Small Business Development in support of a strengthened SMME sector as part of a broader economic recovery policy framework. The submissions from the Department can be accessed below, with links to a summary of the meetings.

1. Localization Framework Programme

At the Portfolio Committee’s 18 November 2020 meeting, Mr Mzi Memani (Director: Enterprise Development) presented two submissions detailing the DSBD’s proposals for a localisation policy framework to support a strengthened SMME sector. He said the cabinet had decided to adopt an approach of industrialisation through localisation to rebuild the production economy, create jobs, and transform the ownership patterns of the South African economy. SMMEs were the largest category of businesses in South Africa. It was estimated that there were between 2.4 million and 3.5 million, with the largest number at the informal and micro level of business activity. There was a need to expand the participation of previously disadvantaged enterprises in the mainstream economy. The DSBD was assigned the responsibility of developing a localisation policy in the 2019 to 2024 Medium Term Strategic Framework.

Mr Memani said the programme sought to provide a framework for accelerating participation of SMMEs in the localisation programme, in particular rural and township-based manufacturing enterprises. It aimed to target specific products and services and support production or manufacturing by SMMEs. It advocated for high tariff protection and public sector procurement set-asides for such products. The programme aimed to prepare SMME-manufactured goods for the export market and improve South |Africa’s balance of trade. It aimed to foster changes in the structure of the manufacturing sector towards more high-tech manufacturing and to provide a framework for coordinating public and private sector support for SMME participation in the localisation programme.

The programme sought to implement a focused manufacturing programme to build and support SMME participation in the manufacturing value chain for purposes of localisation based on the following principles: accelerating township and rural enterprises in the manufacturing value chain; intensifying SMME participation in light and fast consumer goods manufacturing; facilitating the participation of SMMEs in minerals beneficiation; and revitalisation of dormant industrial production infrastructure. The prioritised focus areas for the manufacturing programme were:

  • The food and beverages industry including agro-processing – for purposes of food security
  • Furniture and general use products
  • Pharmaceuticals and nutraceuticals – for purposes of self dependence and health interests of the African continent
  • Clothing, leather and textile sector
  • Beauty and personal care products
  • Pulp and paper products
  • Petroleum and chemical products, and
  • Plastic and plastic products.

Mr Memani emphasised the public sector remained the largest consumer of goods and services. Therefore, the promotion of localisation through public procurement was paramount. National Treasury reported that the government spent over R800bn on goods and services alone in the 2018/ 2019 financial year and this excluded spending by states-owned entities and municipalities. Given the size of the market that was serviced by township, rural and informal micro businesses, these enterprises could serve as a critical route to market for other SMMEs.

The DSBD had started a programme to provide critical market access to emerging producers as they prepared to replace imports in South Africa and grow trade with the rest of the African continent. The DSBD listed SMME products with participating wholesalers for sale through spaza shops, general dealers, and auto spares providers. The DSBD had also commenced listing of SMME products with retailers. It was working to establish products and trade markets in townships and rural towns to serve as markets for SMME products. The first pop-up markets would be operational by December 2020.

2. Market access opportunities in response to the Covid-19 pandemic

In a virtual meeting held on 28 October 2020, the Committee was briefed by the Department of Small Business Development on market access opportunities as part of the Covid-19 lockdown economic recovery plan for the small, medium, micro economic SMME sector formulated by the Department. The aim was to stem the negative tide that came about due to the pandemic. Chief among the goals of the Plan was to identify and ensure opportunities for market access by small businesses. In her opening remarks, the Minister of Small Business Development, Ms Khumbudzo Ntshavheni, said after today’s briefing, the Department would return to the Portfolio Committee with an update after getting Cabinet approval for its localisation framework and market access opportunities arising from the localisation programme.

3. Status and implementation of Masterplans: a dtic briefing to the Trade and Industry Portfolio Committee (23 February 2021)

The briefing covered, inter alia:

  • Retail-Clothing, Textile, Leather and Footwear Master Plan
  • Poultry Master Plan
  • Sugar Master Plan
  • Automotives Master Plan
  • Furniture Master Plan
  • Steel Master Plan