Parliament’s Portfolio Committee on Small Business Development has undertaken to hold the Department of Small Business Development to account following an investigation into its finances, which has revealed a string of irregularities regarding payments made to beneficiaries. These include approving payments to beneficiaries without confirming whether they exist, approving payments exceeding R1 million to entities without a valid VAT number, and instances where directors of multiple companies applied for grants exceeding the R1 million threshold between 2015 and 2017.
These findings were revealed during a Parliamentary meeting on Tuesday between the committee and the Auditor-General’s office on the financial performances of the department and its entities, the Small Enterprise Development Agency and the Small Enterprise Finance Agency during the 2021/22 financial year period. The probe into the department’s 2015/16 and 2016/17 financial years, which took seven years, was to determine whether the department complied with the guidelines and procedures for the Black Business Supplier Development Programme (BBSDP) and the Cooperative Incentive Scheme (CIS).
BBSDP is a cost-sharing grant offered to small black-owned enterprises to assist them to improve their competitiveness and sustainability. CIS is an incentive scheme that offers grant payments to registered cooperatives. The findings showed that the department was non-compliant and did not adhere to BBDSP guidelines. The Auditor-General’s office revealed that application files contained no evidence that inspections were performed before applications to confirm whether the applicants actually existed.
It also revealed that the applications were accepted and approved despite the application amounts exceeding 30% of the applicants’ previous year’s turnover, which is one of the requisites for receiving the grant. The investigation also called into question the validity of awarding the BBSDP incentives. The AG noted that grant applicants with a turnover of R1 million were not registered for VAT.
“We noted multiple instances where preferred service providers that quoted above R1,000,000 did not include VAT in their quotations,” the Auditor-General’s office said in its presentation. “They also failed to provide their VAT registration number on their quotations, (and) during the investigation we identified that directors of multiple companies applied for and received grants exceeding the R1-million threshold.”
The AG also reported that the department failed to confirm the existence of some of the applicants or some of the assets for which the grant funding was provided. “One instance was noted where a grant applicant applied for and was paid an incentive for equipment amounting to R800,000. “The inspection report contained photos of a digital packing machine reflecting the serial number of the equipment. During the AGSA (Auditor-General South Africa) inspection an old analogue machine was found on site, with a serial number that corresponded to the pictures on file. However, the equipment differed,” the AG noted.
The office also noted that disciplinary processes were scheduled to take place beginning of 2020 but were halted due to the Covid-19 pandemic. However, they were finalised in November of the same year. The AG’s Aletta van Tromp informed the committee that the report had recommended that the department institutes criminal proceedings against those allegedly involved in the dodgy dealings. She was asked by committee members why the document, which was handed to them, had not been made public.
“The reason why we don’t wish to issue a public report is that there are individual names and entities (implicated) and this could impact the actual criminal investigation (currently underway),” she said. Committee chairperson Sizani Siwela said that the committee would follow up with the department to ensure that the report’s recommendations were adhered to. Siwela also said that the committee would pressure the department to provide regular feedback on the criminal proceedings. “The department must update us on these matters because it would show that both Parliament and the department are serious about tackling corruption,” she said
