Govt's ambitious start-up fund to disburse R1bn by year-end
The South African government wants to help ambitious start-ups and entrepreneurs to grow quickly and is promising to disburse R1 billion in funding to the entities by the end of this year.
Minister of small business development Khumbudzo Ntshavheni says her department is supporting start-ups through an ambitious entrepreneurship action plan, that will see 100 000 young entrepreneurs take their businesses to new heights with funding from the Small Business and Innovation Fund (SBIF).
The minister promises fast access to networks and finance, which she says are vital for start-up scaling.
According to Ntshavheni, the Small Enterprise Finance Agency (SEFA) has started approving applications for funding and has a target to have approved R450 million on the SBIF and R560 million across the other SEFA funding instruments by December.
This, she says, will total R1 billion in approvals.
Government’s renewed support for innovation and entrepreneurship comes at a time the country is experiencing massive unemployment challenges.
SA’s youth unemployment rate rose significantly to 58.2% in the third quarter of 2019 from 56.4% in the previous period, reaching its highest level since the first quarter of 2008.
Ntshavheni yesterday announced measures to improve access to finance for small, micro and medium enterprises (SMMEs), which include promoting, facilitating funding for entrepreneurship and innovation in key industry sectors.
Furthermore, she said her department will be enhancing financial inclusion by increasing access to finance for enterprises owned by women, the youth in the townships and rural areas.
“For the early stages of the business life cycle, the SBIF will target funding for ideation, proof of concept, early stage market entry and business scale-up. A range of financial instruments will include debt, quasi-equity, mezzanine and conditional grants.
“The fund targets under-serviced SMMEs in the early stages of the business development cycle but it also includes funding for business expansion. It provides a range of financial instruments.”
The minister said to date, SBIF approvals sit at R100 million, covering the Eastern Cape, KwaZulu-Natal and Western Cape, and targeted at creating/maintaining 7 517 jobs.
“Through the total SEFA allocations – including the SBIF which will collectively amount to R11.5 billion over five years – we are planning to fund 590 000 SMMEs which we project will create/maintain 665 000 jobs.
“However, if we can leverage an additional R10 billion over the five years, we should be able to maintain or create one million jobs.”
Ntshavheni guaranteed would-be beneficiaries that SEFA has improved its turnaround time and will communicate funding decisions with speed.
“For the online applications, an applicant is guaranteed to receive feedback on the completeness of their application form within two days of submitting the application. If the form is hand-delivered at the SEFA offices, an applicant should get immediate feedback,” she said.
The minister explained that SEFA now has a turnaround time of 20 days on bridging finance and 30 days on terms loans from the date of submitting a complete application, to communicating a funding or non-funding decision to the applicant.
“Our goal is to have SEFA boost turnaround times of five days on bridging finance and 10 days on terms loans within the next three years.”
Additionally, another government agency, the Small Enterprise Development Agency (SEDA), together with SEFA, will offer services in all of the incubators of the Department of Small Business Development as well as municipal offices.
All agencies working on the project have adopted a business plan template in an effort to assist entrepreneurs who often have to pay consultants to complete applications for funding or business ideas but lack the money.
Ntshavheni explained: “The common template is ready. SEDA, SEFA and National Empowerment Fund will start to use it, while the Land Bank and Industrial Development Corporation are finalising their processes to adopt it where SMME applications are concerned.
“This is a critical measure that should significantly reduce red tape for our SMMEs in terms of time it takes to develop business plans for various development finance institutions (DFIs) but this measure will also reduce the financial cost of sourcing support from DFIs.”