DEPARTMENT OF TRADE AND INDUSTRY

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DEPARTMENT OF TRADE AND INDUSTRY

• INCREASING ACCESS TO FINANCE

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Table of contents

• Strategic approach
• SME support since 1994
• SMME contribution to GDP
• SME finance initiatives
• Finance products for SMEs
• Finance needs of SMEs
• SME growth strategy
• Conclusion

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Strategic approach

• Create an enabling legal framework
• Streamlining of regulatory conditions
• Facilitating access to information and advice
• Facilitating access to marketing and procurement
• Facilitating access to finance
• Providing training in entrepreneurship
  management skills and
• Facilitating access to appropriate technology.

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Strategic approach

• Strategy covers both pre and post start up phases
  and is based on the following pillars

• Strategic Actions

Strategic Pillar 1 Increase in supply
for financial and non-financial support services

Strategic Pillar 2 Creating demand for
small enterprise products and services
Strategic Pillar 3 Reduce small enterprise
regulator constraints
Collaborative Approaches Streamline
resources form the public sector and crowd in
private sector resources
New Policy Directives Public sector
procurement strategy and BEE codes of good
practice as a lever increased demand
Enabling Environment Establish a
regulatory impact assessment framework and
Business Environments monitoring mechanism
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SME support since 1994

• Easing the regulatory compliance burden on SMEs
• Access to finance
• Business development services
• Youth enterprise development
• Support for women owned enterprises
• Incubation and technology acquisition and
  transfer of services
• Productivity enhancement measures and support
• Sector-focused support measures and
• Skills development measures.

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SMME contribution to GDP

• 65 of all jobs created in the economy can be
  attributed to the SMME sector
• Small business contributes between 35 to 50
  to the South African GDP

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SME finance initiatives

• SA Micro Finance Apex Fund provides micro loans
  and support to the social capital mobilisation
• Khula Enterprise Finance provides general
  funding to SME market
• National Empowerment Fund offers a wide range
  of start-up, business growth and rural and
  community upliftment financing products
• Industrial Development Corporation provides
  sector focused funding ranging from 10K upwards
• Youth Fund Agency dedicated to youth development

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Finance products for SMEs

• Credit indemnity product partnerships between
  Khula and countrys major banks wherein Khula
  provided indemnity cover to Banks on behalf of
  qualifying SMEs
• Portfolio indemnity product partnership between
  Khula, Dept of Agriculture and major banks
  wherein banks are covered for providing
  production inputs and equipment finance to
  qualifying SME in the agriculture sector
• Business Loans Khula provides wholesale funding
  to RFIs for on-lending to qualifying SMEs. Loans
  range from 1K to 300K.
• Micro loans Samaf provides micro loans from
  100 to 1K

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Finance products for SMEs

• Land Reform Empowerment Facility - wholesale
  financing facility via Banks and other RFIs
  targeted at supporting black emerging
  agricultural entrepreneurs from historically
  disadvantaged communities. Loan size up to 1
  million
• Local Enterprise Funds Partnership between
  Khula and Local Development Corporations to
  stimulate economic activity in priority provinces
  Loans up to 10K
• Youth Fund Government Fund dedicated for youth
  and women development. Funds projects up to
  3000K

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Finance products for SMEs

• Public Private Partnerships Funds
• - Mining Fund (20m) with Anglo American to fund
  junior mining
• projects (up to 200K per project)
• - Start-Up Fund with Business Partners
  (15m). This fund focuses
• mainly on start ups and early
  expansion (up to 30K per project)
• - Agriculture Fund (10m) with second
  major sugar mill in the
• country. (up to 50K per project).
  Off take agreements in place.

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Finance products for SMEs

• - Enablis Network Funds (5m) partnership
  between Khula and
• Enablis Foundation. Two Funds, one
  focused whilst the other is a
• general fund. Entrepreneur to belong to
  the network and achieve
• certain rating before funds can be
  disbursed.
• - Womens Fund (20m) partnership
  between Old Mutual Asset
• Managers and youth fund to finance women
  owned businesses (up to
• 5000K per project).

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Finance products for SMEs

• Reverse Factoring Product
• Partnership between Khula and Regent Factors
  (10m) in terms of which Regent provides
  reverse factoring product to qualifying SMEs.
• Leasing Product
• MOU entered into between Khula and private
  sector entity (10m) in terms of which
  computer and office equipment will be leased to
  qualifying SMEs.

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Financial needs of SMEs

• Access to finance
• the ability to make transactions - suitable
  transactional banking products
• Making of investments
• Insurance and assurance products
• Brokerage services and
• Financial advisory services.
• These can be made possible by technology

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Growth strategy

• Grow small businesses by addressing access to
  finance constraints
• Pursuing innovative ways to increase lending to
  small businesses
• Deploying best practice innovation
• Partnering with local and provincial government,
  as well as private enterprise and
• Incubator funding schemes, particularly targeting
  business development in priority growth sectors.

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Growth strategy

• Create business development opportunities
• Working with government and the private sector,
  establish a one-stop shop solution for small
  businesses that supports
• the linking of institutional demand to small
  business supply
• assistance for SMEs with tenders and business
  acquisition processes regulatory services
• skills development (mentoring)

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Growth strategy

• affordable finance provision
• Invest in rural infrastructure such as
  information communication technology, energy and
  and transport which would attract funders to
  locate and provide financial services to these
  remote areas and
• efficient and convenient basic banking services,
  especially in non-urban areas or mobile contexts.

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Conclusion

• Prospects for SME development and growth are
  good
• Renewed focus on SMEs by both public and private
  sector
• Scale up of interventions by the DFIs and
  commercial banks
• Better cooperation amongst DFIs and
• Increased awareness of official programmes by
  SMEs, banks, DFIs, and other stakeholders.