SMD

Annual Report 2023/2024

Matters raised by the Portfolio Committee Department’s response The only reason that sefa showed a profit after tax in the prior year (2022) was due to the reversal of a tax provision that was raised in 2021. This provision had to be raised in 2021 due to the grants that sefa received not being exempt at the time that the annual financial statements were approved in 2021. On 19 January 2022 Act No. 20 of 2021: Taxation Laws Amendment Act was issued by the Presidency. Section 47 of the Taxation Laws Amendment Act replaced the current Eleventh Schedule (Government Grants Exempt from Normal Tax, Section 12P) with a new list of Government Grants now exempted, which includes the various programs under which sefa received grant funding from the DSBD. This also allowed retrospective application and therefore the provision raised in 2021 was reversed in 2022, resulting in a profit after tax. However, as presented above, sefa did incur a loss before tax in both 2022 and 2023. sefa has been grappling with the issues of increasing impairments which is driving the operational losses, as

well as the interest on loans and advances not growing as budgeted due to these impairments, charging concessionary interest rates on some programmes and low collections. The Board and management are driving strategies to improve collections and lower impairments. These will be outlined in the 2024/25 corporate plan. The Department appreciates the Committee’s acknowledge of the good work done and will continue to actively manage cash in line with planned activities and recommending reprioritisations as and when the need arises.

By the end of December 2023, ninety-two (92) employees were appointed / transferred. However, only forty eight (48) of these appointments impacted the vacancy rate. The remaining forty-four (44) appointments are employed additional to the establishment to assist in areas where a temporary increase in workload is experienced or the functions are not provided for on the structure. Over the same period, eighteen (18) terminations that impacted the vacancy rate were processed. The response handling service provider has been appointed. The recruitment plan is presented at EXCO, on a monthly basis, to ensure that EXCO members are aware of challenges being experienced in relation to the various stages of recruitment and also have periodic meeting with ADG, to escalate matters that require her intervention.

The Department’s performance on financial spending is improving, it utilised 99.3 percent of its final

appropriation. Underspending was around R19 million, or 0.7 percent of the total budget. In percentage

terms, the underspending is insignificant, and falls well within the target of less than 5 percent variance. This is commendable.

The Committee further observes that the majority of underspending on financial indicators is due to

employee compensation as well as goods and services. All four programmes of the Department underutilised their funding allocations mostly as a result of unfilled funded posts.

Part C • GOVERNANCE • Department of Small Business Development

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