Legislation: SMME Ombudsman Services Bill to be tabled soon?

A Small, Medium and Micro Enterprise (SMME) Ombudsman Services Bill will be tabled in Parliament before the end of the 2019/20 financial year, according to Small Business Development Minister Khumbudzo Ntshavheni. However, notes Pam Saxby for Legalbrief Policy Watch, the Minister’s recent budget vote speech provided no insight into the Bill’s contents beyond confirming that its purpose will be to provide SMMEs with ‘a less costly dispute resolution mechanism’. The proposed new piece of legislation may well draw from provisions in the DA’s Small Enterprises Ombud Service Bill, which was rejected last year by the committee concerned because, according to a Parliamentary Monitoring Group report, the Department of Small Business Development was apparently already drafting something similar.

Ntshavheni also announced the phased introduction of a ‘blended financing model’ for SMMEs, beginning in 2019/20 and expected to be complete by 2021/2022. Aimed at lowering the cost of capital to facilitate ‘access’ and enhance a borrowing enterprise’s prospects of sustainability and growth, the model will mix grants with repayable loans – targeting early-stage enterprises that require ‘lower gearing and patient capital’. To be implemented jointly by the Small Enterprise Finance Agency (Sefa) and the Land Bank, the model is expected not only to impact positively on the SMME survival rate but also on that of small-scale farmers.

However, its successful implementation is likely to depend to some extent on addressing what the Minister referred to as ‘serious’ but ‘not insurmountable’ challenges at Sefa apparently related to ‘high levels of arrears’ in its ‘bridging loan/revolving credit portfolio’. Ntshavheni blamed this on the time taken by government departments – as the principal clients of many SMMEs – to pay for goods and services received. This perennial issue is expected to be mitigated by the introduction of a regulatory regime requiring all government entities to ‘accept cession agreements’. The Minister’s speech attributed ‘almost 90% of Sefa’s impairments’ to ‘debts owed by government to SMMEs’.

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