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SA small businesses will soon have access to a mixture of grants and loans from the state’s Small Enterprise Finance Agency (Sefa) — through a new blended finance model fund that aims to finance 100 000 young entrepreneurs.
Presenting her department’s budget vote (opens as a PDF) on Friday (12 July), the Minister of Small Business Development Khumbudzo Ntshavheni (pictured above) said small businesses, startups and innovators will be able to access matched grant funding with a repayable Sefa loan, through the Small Business and Innovation Fund.
The grant portion will be up to a maximum of R2.5-million per enterprise.
The fund — which is run jointly by the departments of small business development and science and technology and administered by Sefa — has a budget of R1-billion for the 2019/20 year and aims to finance at least 100 000 young entrepreneurs, targeting particularly black-owned businesses in townships and rural areas.
It’s not clear whether the target is to fund 100 000 firms in the first financial year alone, or over the duration of the fund (a more likely target).
Ntshavheni said details on how entrepreneurs, innovators and small businesses can access this funding will be announced in the first week of next month, but added that applicants must have the potential to create at least 10 jobs to tap the funding.
The department will announce more details of the Small Business and Innovation Fund next month
The National Treasury’s 2019 Budget Review (opens as a PDF) notes that R3.2-billion has been set aside over the next three years for the fund, which it will lend to small business intermediaries, such as fund managers and incubators. It is
These intermediaries will fund and support ideation and start-up companies, and small businesses focusing on innovation.
In Parliament on Friday, Ntshavheni said Sefa would collaborate with her department and other government entities and the private sector in utilising their grant or incentive offerings to develop a blended funding model that will directly benefit small businesses across its funding facilities over the next three years.
The blended finance model will be tested initially through the fund, before consideration is made to extend it to the government’s other small business financing agencies and products, or not, she said.
She added however that The Land Bank has already agreed to partner with the department, in finance aimed at small-scale farmers.
The details of the new fund were among a number of initiatives announced by Ntshavheni in her budget vote on Friday (see this story).
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Editor’s note (17 July 2019): The Minister of Small Business Development Khumbudzo Ntshavheni’s spokesperson Priscilla Monama clarified in an email, following a request from Ventureburn, that the target to fund 100,000 entrepreneurs will be expected to be met over the duration of the fund, which is three years and that the budgeted capital for the fund will be “above R1-billion”.
“The figure is our contribution to one of the goals that have been set out by our president — that of ‘two million more young people being in employment over the next 10 years’.
“The funding of the 100 000 enterprises, which are expected to generate at least 10 jobs throughout their existence, is in line with the greater commitment of creating employment and enabling a generation of job creators, as young people must take their rightful place in our economy and become owners of the means of production,” she said.
She added that the budget for the joint fund, will come from both the departments of small business development and science and technology.
“The department (of small business development) will undertake a collaborative approach with other government. departments and the private sector to enable crowding-in of investment. The budget is above R1-billion,” she added.
Featured image: Minister of Small Business Development Khumbudzo Ntshavheni (Facebook)