Gauteng’s MEC for finance and economic development, Lebogang Maile, has requested a “rehabilitative intervention” from the governor of the Reserve Bank, Lesetja Kganyago, for The Drip Group (Pty) Ltd, which is having difficulties complying with domestic tax laws.
In a letter to the Bank, Maile reaffirmed his “unwavering commitment to upholding the law” and his respect for the Bank’s investigation process regarding the company being investigated for violating exchange control regulations.
He believes the Gauteng government has an obligation to help businesses in the province in material and non-material ways.
“We cannot sit back and watch The Drip Group, a company founded in the township of Ivory Park by a young black man who had the odds stacked against him, be liquidated. The company provides employment to hundreds of people, many from historically disadvantaged groups including women and youth. As a government, we must do everything possible to provide the necessary support to this and other small businesses that are facing challenges, particularly when such challenges arise from failures of compliance with legislation, which is not the same as blatant and intentional criminality.”
Early this year, reports of Drip Footwear facing liquidation circulated on the web. According to a report in Sunday World newspaper, a Johannesburg-based company called WideOpen Platform had applied for the liquidation of Drip Footwear for failing to pay it more than R20m.
The company filed papers in the high court in Johannesburg, seeking an order to wind up Drip. It said the company was insolvent and unable to service its debts. The company also intended to file a lawsuit against Drip owner Lekau Sehoana for failing to pay the debt after signing a surety agreement.
Castro Ngobese, spokesperson for Maile, said the investigation, instituted by the Bank’s financial surveillance department, had been running for just over two years.
“The MEC has communicated that in respecting the rule of law and wanting to maintain the very crucial principle of the separation of powers, it’s important that the law should never be punitive but rather rehabilitative.
“When the law is rehabilitative, it makes allowance for business owners, particularly of SMMEs, to understand the depths of tax laws and other laws, which most are not exposed to and, as a result, place their complete faith in third parties who, unfortunately, can take advantage of this limited understanding. This, sadly, has happened to many SMMEs, including The Drip Group. Many SMMEs do not survive such challenges, and this is a contributing factor for why 70%-80% fail within the first five years,” Ngobese said.
He said Maile’s intervention was guided by a commitment to the Township Economy Development Act (TEDA).
“The act, which came into law in 2022, seeks to facilitate and promote inclusive economic growth along a transformative paradigm to build a cohesive and more equal society which is underpinned by a growing and inclusive economy that harnesses the potential of all people in the republic who reside in Gauteng.
“Among other things, it places the assistance of enterprises established in townships as one of its key priorities. It recognises the significant challenges that such enterprises face, including but not limited to inadequate tax education on the part of township business founders,” Ngobese said.
Maile said they must equip such businesses with the necessary skills and ask that the government, the private sector and civil society all play their part in helping these businesses succeed.
“Part of what that demands is that institutions such as the Bank also assist us in equipping these businesses with the requisite knowledge and skills rather than applying a punitive approach.
“In this way, we can ensure the sustainability and survival of township businesses and SMMEs broadly, thereby growing and developing the provincial economy to the benefit of all the people of Gauteng.”
TimesLIVE
Shonisani Tshikalange
www.timeslive.co.za
