27 Mar Support for SME development
A memorandum of understanding between the IDC and its Russian counterpart, signed on the sidelines of the Brics summit, will lead to greater co-operation between the two nations.
The signing of a memorandum of understanding between the Industrial Development Corporation and the Russian Bank for Development and Foreign Economic Affairs (Vnesheconombank) is expected to help South African small and medium enterprises develop their businesses.
It was signed on the first day of the fifth Brics (Brazil, Russia, India, China and South Africa) summit, taking takes place in the port city of Durban at the International Convention Centre from 26 to 27 March.
The agreement paves the way for the OJSC Russian Bank for Small and Medium Enterprises Support (SME Bank), a subsidiary of Vnesheconombank; and South Africa’s Small Enterprise Finance Agency Limited (Sefa), a subsidiary of the IDC, to co-operate on SME development.
Specifically, this will take the form of exchanging information and Support for SME developmentworking together in the provision of training, delegation visits and business forums. The memorandum will serve as the basis for further negotiation and agreement.
Commenting on this and another deal signed with Brazil, Minister of Economic Development Ebrahim Patel said South Africa was ready to partner with investors from Brics countries to expand the development of small businesses.
“We are expanding our support to small businesses and the agreement with state financial institutions from Brazil and Russia will allow us to learn from each other.”
The IDC and Vnesheconombank will co-operate in the following areas to develop SMEs:
- Capacity-building: exchange of technical expertise through placement of personnel; and, creation and realisation of shared capacity-building initiatives. Study and training programmes for each other’s employees will be included.
- Strategic initiatives: involvement in any strategic initiatives that have potential to benefit the respective countries, the parties and/or SMEs. The four groups will work with each other’s branches and representative offices, and will also introduce each other to clients who have an interest in investing in the respective countries.
- Industry research and development: they will also partner in commissioning research to benefit the SME sector, as well as set up a long-term, comprehensive relationship in servicing trade, economic and technical co-operation between Russia and South Africa.
In addition, under the agreement, the parties will seek to extend financial operations, especially with a view to support export financing programmes.
They will also strengthen co-operation on supporting SMEs, and expand structured and trade finance business, including export-import financing and business transactions.
To ease funding constraints on SMEs, Patel launched the Sefa in April 2012. Sefa is the product of the consolidation of Khula, the South African Micro Finance Apex Fund, and small business activities previously housed within the IDC.
It services small businesses in need of funding up to R3-million. Its lending instruments include direct lending to small businesses, wholesale loans to financial intermediaries and credit guarantees for businesses requiring bank finance.
As part of initiatives in the New Growth Path to create employment opportunities, the government is looking at growing the SME sector but challenges, including funding, have been a constraint in this sector.
Sefa’s financial product range is specifically tailored to address this issue.
Through it, SMEs across the country are able to access much-needed and affordable financing products and services.
About Vnesheconombank and SME Bank
Vnesheconombank is a state-owned corporation set up to diversify the Russian economy, boost its competitive edge and encourage the inflow of investment.
The bank is responsible for providing investment, foreign economic, insurance and consultative support for projects in Russia and abroad aimed at developing infrastructure, innovations, special economic zones, environment protection, providing support for exports of Russian products, works and services as well as supporting small- and medium-sized enterprises.
It has a subsidiary entity, the Russian Bank for Small and Medium Enterprises Support (SME Bank), 100 percent owned by Vnesheconombank.