R737m for South Africa's small firms
19 April 2013
South Africa's Small Enterprise Finance Agency (Sefa) plans to disburse over R737-
million to more than 15 000 small firms – most of these micro enterprises – by the
end of the 2013/14 financial year, says Sefa chief executive Thakani Makhuvha.
Briefing the National Assembly's portfolio committee on economic development on its
corporate plan for 2013/14 on Wednesday, Makhuvha - who was seconded from the
Industrial Development Corporation (IDC) in November last year to head the agency -
said the targeted funding will help create over 18 000 jobs.
In five years, the agency aims to have more than doubled lending and the number of
business owners financed – with disbursements reaching almost R1.6-billion to over
34 000 small firms.
Sefa lends between R500 and R5-million to small, micro and medium enterprises by
way of three means – directly to business owners, via retail finance intermediaries
and thirdly via banks
through its using credit guarantee scheme.
Sefa's forerunner, the Khula guarantee scheme, ground to a virtual halt following the
2008 Global Financial Crisis, when the number of defaults spiralled, leading banks to
steer away from the scheme.
Sefa also aims to complete the development of its direct lending product – currently
still being piloted at a number of sites around the country – by the end of November
Among Sefa's other plans, the agency aims to:
- Investigate the possibility of partnering with retail chain stores as well as
government feeding schemes to expand its reach further into rural areas.
- Improve a pre-loan support programme in partnership with the Small
Enterprise Development Agency (Seda) and improve the uptake of its poorly
performing credit guarantee scheme by July.
- Partner with more provincial development finance agencies to add to the current
partnership with the
Gauteng Enterprise Propeller.
- Expand the pilot project it has with the SA Institute of Chartered Accountants in
a programme which takes young graduates and trains them in how to assist small
businesses, from Gauteng to KwaZulu-Natal and Mpumalanga.
- Roll out a further nine branches or satellite offices per year, which would be co-
located within Seda or IDC branch offices, to add to the 11 regional offices the
agency already has.
Makhuvha said the cost of Sefa lending finance to business owners is also expected
to fall – from 44c for every rand disbursed in 2013/14 to 25c for every year lent out
Sefa will run awareness road shows with financial intermediaries – starting with
Alexandra and Sandton in Johannesburg this month and running to February next
year, with two road shows to be held in the North West.
The IDC has committed over R987-million as a shareholder's loan to the agency until
end of 2014/15, with an option of a further R400-million capital injection in two
IDC chief executive Geoffrey Qhena said the transaction had been structured as a
loan and not a grant because there had to be a chance for the IDC to recoup the
loan to ensure that Sefa funds sustainable businesses.
Committee members questioned the use of retail finance intermediaries, pointing out
that they were concerned that using intermediaries resulted in driving up the costs
of lending for business owners.
Committee chair Elsie Mmathulare Coleman said Economic Development Minister
Ebrahim Patel had asked the committee to look more into the costs of lending