26 Apr New SMME Finance entity to plug funding gap
In a development aimed at addressing fundingconstraints for Small, Microand MediumEnterprises (SMMEs), the Minister of Economic Development Ebrahim Patel today launched a new entity called the Small Enterprise Finance Agency (SEFA).
SEFA is the product of the consolidation of Khula, the South African Micro Finance Apex Fund (SAMAF) and small business activities previously housed within the Industrial Development Corporation (IDC). SEFA will service small businesses in need of funding up to R3million. Its lending instruments include direct lending to small businesses, wholesale loans to financial intermediaries and credit guarantees for businesses requiring bank finance.
Acknowledging the lack of finance as one of the biggest challenges stifling growth of small businesses,Patel says;“the launch of SEFA which is a 100% IDC owned subsidiaryis likely to herald a new era in provision of funding to SMMEs. SEFA’s mission is to bring affordable finance to SMMEs and the fact that this new entity is working towards establishing a national branch network, bolsters this objective.”
The Minister adds that the advent of the recession and slow recovery in South Africa has seen a massive contraction in the extension of credit facilitiesto local businesses in general – a factor he cites for inhibiting the growth of small businesses. Says Patel: “The tighter lending criteria adopted by main stream lenders in the wake of therecession has had a negative impact on SMMEs. In a very short space of time, lendinghas dropped from near all-time highs to record lows.For example, growth in credit extension last year was the lowest in over 50 years.”
As part of initiatives in the New Growth Path to create employment opportunities, government is looking at amongst other things to grow the SMME sector; but challenges including funding have constrained this ambitious drive. According to Patel, SEFA’s financial product range is specifically tailored to address these barriers.“We have learnt from pitfalls of Khula whose approach to small business financing was exclusively through intermediaries.We have reviewed the funding model for small businesses and this new entity is tailored towards expandingthe funding scope and reach.”
With SEFA drawing on the expertise of its parent company, the IDC, which has good risk management and a strong balance sheet, Patel is confident that SMMEs across the country will be able to access much needed and affordable financing products and services. “With the IDC on board, our long-term view is to create a financial solution that caters for needs of large and small scale businesses and creates synergies in our economy. For example, if the IDC approves funding for a large scale industrial project, SEFA would be on hand to assist with funding for the small scale businesses that are strategically positioned to exploit potential spin-offs in that value chain,” says Patel.
Acting MD: Small Enterprise Finance Agency
Tel: +27 12 394 5932
Tel: +27 12 394 1807
For SEFA funding enquiries, please contact our call centre on 08600 54 852.