August 21, 2018

Private member’s bill proposes ombud for small businesses

A new Private Member’s Bill has been tabled by the DA’s TOBY CHANCE for the establishment of an Ombud service for small and medium enterprises. He tabled the Bill and has called for public comment in an effort to ensure that small, medium and micro enterprises (SMMEs) get the backing they need to survive.

Chance says the biggest challenge facing small-scale businesses are delays in payments, resulting in cash-flow difficulties. He says, “every effort must be made to ensure that SMMEs are given the backing and financial support they require in order to thrive and prosper”.

One of the key components in this is ensuring that SMMEs are paid swiftly and timeously. Without a regular cash flow, SMMEs will struggle and eventually collapse, he warns.

Chance says SMMEs, ranging from street hawkers to small factories, are the heartbeat of our economy and can be considered as the most accessible sector for entrepreneurs and those seeking to establish their product, brand or business. It is estimated that SMMEs generate up to half of South Africa’s gross domestic product (GDP) and create nearly 60% of employment.

Without a regular cash flow, Small, Medium and Micro Enterprises will struggle and eventually collapse.

It is also expected that 90% of all new jobs will be created by SMMEs by 2030, according to the National Development Plan. With more than 9.3 million people unemployed, supporting these SMMEs are critical, Chance believes.

SMMEs operate in a tough environment and another challenge they face are protracted disputes. They may not have the necessary financial and human resources infrastructure to sustain the protracted resolution of a dispute, which is where the proposed Ombud service could step in.

It could have jurisdiction over agreements to which SMMEs are a party, providing an alternative dispute resolution mechanism without the delays and extensive costs of formal legal processes. Furthermore, this service will allow the Minister responsible for SMMEs to provide targeted interventions.

The Small Enterprises Ombud Service will serve as a juristic person, with its own mandate, staff and Board. Its main concern will be settling disputes, include issues around the interpretation of service agreements and late- or non-payment of amounts owed.

Chance, the DA’s Shadow Minister for Small Business Development, has tabled the Private Member’s Bill in terms of section 73(2) of the Constitution and intends to introduce the Small Enterprises Ombud Service Bill in Parliament during the second or third quarter of this financial year.

Chance says an ombudsman is a recognised form of alternative dispute resolution in South Africa and other parts of the world where simpler and cheaper access to justice is required.

“Small businesses often find themselves on the wrong end of disputes with government and big business and do not have the resources to deal with them effectively. They often just give up because fighting is too much trouble. Sometimes this leads to prejudicial outcomes, including having to close their doors.”

The parliamentary Portfolio Committee for Small Business Development has been inundated with calls for assistance from small business owners “who have tried and failed to resolve disputes and come to us for help,” Chance said. “The ombudsman will be the last resort for businesses that have failed to resolve disputes between themselves and the other parties.”

His aim is to bring about a more conducive culture for the treatment of small business suppliers by government and big businesses.

“We need to deal with the bullying culture which is all too prevalent, where big business and government force suppliers to wait for months for payment, leading to severe cash flow problems and sometimes bankruptcy. The ombudsman service will include an educating function to communicate how supplier relationships can be improved for the benefit of all parties.”

This service will be accessible at provincial offices in each province as well as the roughly 80 offices around the county where the Small Enterprises Development Agency, which reports to the Department of Small Business Development, has a presence.

“In instances where a small business needs to resolve a dispute, they need it sorted out in a matter of weeks, not months or years. The ombud service will be geared up to achieve this. Legal representation of the parties will not be permitted to reduce the cost and time involved, and appeals will also not be permitted except on matters of law.”

The National Assembly’ Portfolio Committee on Small Business Development has backed the proposal along with the government department.

“President Ramaphosa indicated in his State of the Nation Address and in subsequent speeches and answers to questions in Parliament that the public expects its politicians to work together to solve the country's problems. This is a constructive solution which deserves cross-party support,” Chance said

His proposal was put to the department some time, and despite its support a draft Bill has not yet been developed. Chance says instead of waiting for the department to amend the Small Enterprises Act he decided to take the initiative “to step in and address this critical issue” by lodging a Private Member’s Bill.

Moira Levy

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  • Author: Moira Levy
Last modified on Tuesday, 05 June 2018 00:39

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