Gauteng Enterprise Propeller: Funding Flows Despite Ongoing Investigation

Gauteng Enterprise Propeller

In August 2015, a moratorium, pending the outcome of a forensic investigation, was placed on all funding by the Gauteng Enterprise Propeller (GEP) as it was revealed that R100 million in loans – which had effectivity bankrupted the entity,  had been unpaid over a period of 10 years.

While the investigation is still ongoing, GEP at a portfolio committee meeting held in Reiger Park last week, made an about turn and announced that it will now resume with its current funding model which is clearly unsustainable.

Forensic Investigation

While GEP has a critical role to play in assisting start-up businesses and empowering entrepreneurs, it cannot conduct business as usual.

It is imperative that public funds are safeguarded from misuse and malpractice.

GEP must wait for the outcome of the forensic investigation to assess what it is that is causing it to bleed money and not recoup loans.

I will write to the MEC for Economic Development, Lebogang Maile, and request that he either instruct GEP to reinstate the moratorium on funding until the results of the forensic investigation are made public or reveal where the new stream of revenue is coming from.

 

Media enquiries:

Janet Semple MPL

DA Gauteng Shadow MEC for Economic Development

082 462 8239

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Gauteng Enterprise Propeller Must Diversify To Stay Viable

Gauteng Enterprise Propeller – GEP

The DA notes the move by Gauteng Economic Development MEC, Lebogang Maile, to root out corruption in the Gauteng Enterprise Propeller (GEP) which has nearly bankrupted the entity, but recommends a re-evaluation of its entrepreneur programme.

According to MEC Maile, GEP has only R30 million left for this financial year, which it still has to use to run operations and pay employees.

The entity, which has been in existence since 2005, is owed R100 million in unpaid loans.

Effective Use of Loans

What is becoming increasingly apparent is that the laissez-faire approach to providing loans to entrepreneurs is no longer viable.

The DA recommends that tight controls be put in place before loans are given and that tight credit control is exercised over repayments.

However, what emerging entrepreneurs mostly need is mentorship from industry experts, for without practical application and knowledgeable insight, these loans will not be utilised effectively.

 

Media enquiries
Janet Semple MPL
DA Gauteng Shadow MEC for Economic Development
082 462 8239

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SPEECH BY MRS JANET SEMPLE, MPL IN THE BUDGET DEBATE ON ECONOMIC DEVELOPMENT DELIVERED IN THE GAUTENG PROVINCIAL LEGISLATURE ON TUESDAY, 23 JUNE 2015

Focused Intervention and Less Fluff to Stimulate Gauteng job growth

Note to Editors: This address was made in the Gauteng Provincial Legislature during the 2015/16 Annual Budget Debate on the Department of Economic Development Budget Vote

 

The current rate of unemployment particularly amongst the youth should be the number one focus and concern of everyone who cares about the future of our country. Gauteng is home to the most unemployed and out-of education labour force in the country at a shocking rate of 49.9% according to recent labour force statistics. It has increased year on year by 9% or 282 000 since the previous financial year. This figure is a clear indicator that Gauteng is sitting on a ticking time bomb!

It is also an indictment on an administration that has entities such as the Gauteng Enterprise Propellor (GEP), Gauteng Funding Agency (GFA) and the Gauteng Growth and Development Agency at its disposal to stimulate economic and job growth.

A person with a job is a person with dignity, a person who can hold his or her up head high before their family, a person who can put bread on the table.

We have to work together to break the vicious cycle of low growth, high inflation and high unemployment.

The DA understands this cannot be done by one sector of South Africa on its own: it needs a joint effort from the government, state-owned enterprises, labour, business, educational and research institutions as well as individuals who must all play their part.

Nothing more clearly illustrates the deep divide between the “haves” and the “have-nots” than the contrast between the 15.5 million South Africans who are working as compared to the 3.2 million South Africans who have given up looking for work together with the 5.5 million who are not able to find employment.

The biggest sector of the unemployed is the youth which make up 70% of the total unemployed population in South Africa. According to the Daily Vox this mean there are more jobless young people today than ever before. The reasons for this, amongst others are:  the skills mismatch; the education system; training that occurs in a vacuum; poor networks i.e. not what you know but who you know; government programs that don’t understand the youth; and discouraging the spirit of entrepreneurship.

The budget of the Department of Economic Development has increased by R205 119 000 or 8.25 %.

The main focus of the Department should be to facilitate conditions for increased job creation. This would mean cutting red tape and unnecessary regulations that make it difficult for small businesses to start up and thrive; it would mean encouraging local government structures to make the life of hawkers easier; it would mean setting up special economic zones where some regulations are relaxed; it would mean fast tracking applications for business and liquor licences; it would mean reducing the burden of paying for E-Tolls; it would mean exempting small businesses from onerous labour legislation and it would mean creating markets with better access for small businesses.

All this would lead to increased economic growth.

The proposed budget by the Department of Economic Development for 2015/16 makes little mention of actual job targets.  The official unemployment rate in Gauteng is slightly higher than the national unemployment rate in South Africa. Trade, community and social services (government) and finance are the biggest employers of the province’s work force.

Gauteng is the heart of the financial services sector (business, banking, finance and IT) in the country with many head offices based in the province.  We should take advantage of this employment opportunity, but our education system needs to provide learners with the skills to take up positions in these industries.

Sadly the manufacturing sector in the province is declining mainly due to the lack of reliable water and electricity resources and an inflexible labour system prompting many to take their factories and prospects of employment to our neighbours like Lesotho and Botswana. General Electric one of the US’s great industrial companies has decided to locate its Africa headquarters in Nairobi rather than Sandton.  This move is apparently driven just as much by easy access to a huge market of people as it is by the infrastructure challenges faced in South Africa.

The various entities that are funded by the Department have grand plans but little action or measurable targets. The Gauteng Enterprise Propellor (GEP) is proud to report on having financially supported 643 existing SMMEs, 673 new SMMEs and 95 existing Cooperatives but we have no idea whether these are one man bands or exactly how many people benefitted. The Department claims to have created 4006 direct jobs which comes at a cost of R276 000 per job taking into consideration the annual budget of the Department.  This money could have been far better spent on training young, unemployed residents of Gauteng and giving them the skills to participate in the financial sector. More effort should be made to ensure the sustainability of the SMME sector beyond just incubation and then abandonment.

This could be done by creating greater market access for SMMEs.

The ANC seems to think that it is only through state contracts and procurement by the state that it can grow black businesses and black employment. This is borne out of the announcement that the Gauteng Provincial Government will ensure 30% of its procurement is from small black owned businesses.  This is a fallacy, as businesses dependant on state contracts and tenders are not increasing competition and competing in the market – which in turn lowers the price of goods and services, without stimulating demand and creating jobs.

There are no programmes in place to assist small businesses to have greater market access so to supply goods and services to other businesses and to consumers directly rather than just to the State. MEC Maile keeps speaking about the ‘white monopoly capital’ value chain but doesn’t have any programmes to ensure market access for new entrants. Furthermore, there is no programme around red tape reduction or any assessment of business processes to see where the state is creating bottlenecks and barriers to entry for SMMEs.

A DA led Gauteng Department of Economic Development should do the following;

  • Open a red tape reduction programme and dedicated support centre to assist SMMEs to deal with red tape
  • Use the broadband capacity of the Gauteng Broadband Network to provide every start up business and SMME with (1) a basic website, (2) e-mail and(3) search engine optimisation (so they appear on google searches) as part of a market access programme;
  • Set up a portal with comparative pricing for businesses and consumers to be able to source goods and services from SMMEs as part of a market access programme – this will force them to compete with each other for business and not only for state tenders; and
  • Encourage larger small enterprises to provide goods and services (particularly high value goods and scare skills based services such as ICT) to all SADC countries as opportunities for growth and access to new markets. The department should facilitate where necessary

The Gauteng Enterprise Propeller (GEP) is receiving a marginal increase in budget, from R129 291 000 to R129 838 000. It would make more sense for GEP to absorb, manage and run all of the department’s SMME support programmes, turning it into a one stop shop for small business incubation and support. It has had a difficult history, but under its new CEO has had quite a turnaround (the CEO is a former Standard Bank executive if I remember correctly). However, GEPs continued financing of small businesses is money that could be used elsewhere if part of its mandate was to ensure start-ups are viable and in a position to access capital from the private sector, making GEP a lender of last resort. It makes no sense when many private sector financial institutions have the programmes and capital for start-ups to run identical programmes.

My colleague, Janho Engelbrecht and I last week visited the Gauteng Investment Centre (GIC) in Sandton. This place and the friendly, informative people who work there actually changed my perception of government entities forever. My main criticism of the GIC has always been why is it in Sandton?

Yes I understand the rationale that it is close to the Gautrain and a short train ride from O R Tambo for foreign investors. This sets the bar high for all such facilities in your Department and we should try and mirror this set up all over Gauteng.

I got the feeling that the people who work in the GIC are passionate about what they do and really want to help. How refreshing!

My suggestion would be that we transform all GEP offices throughout the Province into similar type operations. Obviously not as luxurious but bright, modern and with a “we aim to please” attitude. The one stop shop concept of having Home Affairs, VSP and SARS on the same premises to speed up visa applications and tax clearance is a winner and grouping similar type services in offices such as GEP would make the whole process of doing business in Gauteng so much easier. This would lead to more investment and greater employment and the opportunity of a more prosperous life for all.

Departmental Bungling Could Shut Down SMMEs

At least five SMMEs participating in the Mohlakeng Hub on the West Rand face closure if the Gauteng Enterprise Propeller (GEP) fails to sign a memorandum of understanding (MoU) with the Randfontein Local Municipality to inject R6 million in to this project over the next three years.Janet Semple DA Gauteng Shadow MEC for Economic Development

GEP has until 31 March 2015 to sign this agreement.

Aim of the Hub

Coupled with this cash injection, the Gauteng Department of Economic Development and its entity, GEP, have agreed to foot the bill for participants’ municipal bills, but cannot do so until the MoU is signed.

The aim of the hub is to incubate SMMEs in the following sectors:

  • Carpentry;
  • Furniture manufacturing;
  • Welding and steel works;
  • Embroidery and clothing manufacturing.

Not Functional

At a presentation to the Gauteng Economic Development Portfolio, it was revealed that despite service provider WESTCOL facilitating training, the hub is currently not functional.

What is of even more concern is that there are no partnerships in place with experienced incubators or hubs to increase the knowledge capacity of participants.

The hub also requires an intensive incubation programme to assist participants in growing their businesses and understanding the market environment.

The Importance of SMMEs

Gauteng Premier, David Makhura, in his State of the Province Address emphasised the importance of SMME stimulation and growth to aid in the re industrialisation of the province.

However, Mohlakeng is one of many examples where the administration jeopardises the future of small and medium sized business by not creating an environment conducive to sustainable market access or competitiveness.

Rather, for many it is like starting on the back foot.

Gauteng Economic Development MEC, Lebogang Maile, must ensure that this MOU is signed before five more SMMEs in the province fail as a result of bureaucratic bungling.

The DA will monitor this situation closely to ensure the sustainability of this project.

 

Media enquiries
Janet Semple MPL
DA Gauteng Shadow MEC for Economic Development
082 462 8239

[Image source]