Spartan SME Finance secures R100m from SA SME Fund for R600m fund

SA small business financier Spartan SME Finance has secured a R100-million investment from The SA SME Fund to anchor its R600-million debt financing fund, with half of the investment or R50-million, to be channelled to black African owned businesses.

The funding will be immediately available to Spartan SME Finance to boost its lending to SMEs. The debt fund is expected to finance at least 100 small and medium sized enterprises every year.

Earlier this month the SA SME Fund announced that it had committed R110-million to Cape Town based hardware tech incubator Savant, with 50% of this amount earmarked for black African owned firms (see this story).

Spartan SME Finance has secured a R100-million investment from The SA SME Fund to anchor its R600-million debt financing fund

Spartan SME Finance CEO Kumaran Padayachee (pictured above, right signing the deal agreement with SA SME Fund CEO Ketso Gordhan) confirmed the transaction in a statement today.

“Making finance available to this sector of the economy is critical to the sustainability and growth of small and medium sized South African businesses and their ability to create much needed jobs,” said
Padayachee.

The R1.4-billion SA SME Fund, which is capitalised by 48 JSE-listed firms, was launched in 2016 by Discovery CEO Adrian Gore and former Bidvest chair Brian Joffe under the CEO Initiative, in which the government aimed to get the private sector to resuscitate the economy.

The fund is co-investing in various South African private sector funds that lend to or invest in small businesses and startups.

R50m to black African firms

SA SME Fund CEO Ketso Gordhan said in the same statement that Spartan is a regulated SME funder with a 37-year track record. It is envisaged that at least half of The SA SME Fund’s R100-million investment will be loaned to black African owned businesses.

Padayachee said banks are reluctant to lend to SMEs, and their traditional funding mechanisms take too long which means small enterprise owners often miss out on good business opportunities.

About 24 months ago, Spartan SME Finance launched its Growth Finance and Working Capital finance products and has already seen half of their advances going into funding these two categories.

“We have an immediate pipeline of transactions to place into the fund – so the fund is good to go. The benefit of this fund is immediate – allowing Spartan SME Finance to create greater impact on funding the SME sector,” says Padayachee.

Spartan said The SA SME Fund’s investment facilitates an additional R500-million of institutional funding which will be contributed by a combination of Spartan’s current funders and new local and international institutions.

Spartan claims it can mobilise transactions quickly and often once first-time applicants have been through a rigorous but agile vetting process. It claims the average turnaround time is 10 days.

R455-million committed so far

So far the SA SME Fund has committed R455-million in five funds, namely:

• A R20-million investment in venture capital (VC) firm Knife Capital’s R100-million growth equity fund KNF Ventures.
• A R100-million investment in a R500-million pan-African private equity fund (Gordhan in November last year did not disclose the name of the fund)
• An investment of R125-million to capitalise a venture fund run by Edge Growth, which Gordhan added intended to make five deals, all of which are “basically” ready for the fund to invest in (Gordhan did not provide any further details of this, in November last year).
• A contribution of R100-million in Spartan’s R600-milion debt fund that aims to offer loans to small and medium-sized enterprises (SMEs)
• A R110-million investment in hardware technology incubator Savant which will supports the commercialisation local hardware inventions. Half of the funding will go to black African owned firms.

In November last year Gordhan also said the fund would incubate a woman-managed investment fund that offers growth capital to existing businesses. He has yet to provide more details.

Read more: SA SME Fund commits R110m to hardware tech incubator Savant
Read more: It’s official: Cape Town healthtech startup is SA SME Fund’s first investment
Read more: SA SME Fund in new mandate to invest over R1bn in black small firms, startups
Read more: Former PPC Cement head announced as new SA SME Fund CEO [Updated]
Read more: SA SME Fund CEO’s stepping down was ‘amicable’ says fund official
Read more: Over a year on, when will big companies’ SA SME Fund get going? [Opinion]
Read more: SA SME Fund will commence with due diligence in July says CEO
Read more: SA SME Fund is not aimed at venture capital sector, says CEO
Read more: Exclusive: ‘Government won’t match private sector in R1.5bn SME fund’

Featured image: SA SME Fund CEO Ketso Gordhan and Spartan SME Finance CEO Kumaran Padayachee pictured during the signing of the deal agreement (Supplied)