Development Finance

A major goal of government at all levels in South Africa is to integrate the so-called ‘second economy’ with the first economy. To this end, developmental financial institutions are looking for creative and effective ways to lend money to best effect and small, medium and micro enterprises (SMMEs) are being encouraged.

Cape Gateway, the website of the Western Cape government, lists 50 SMME-support organisations in the province. These range from the provincial trade and investment promotion agency, Wesgro, to smaller community institutions and business initiatives. Several industry bodies also exist to assist SMMEs in sectors such as clothing and textiles, arts and crafts, and boatbuilding, as well as training centres in areas identified as having high unemployment and skills shortages. The iKapa Fund is a government initiative that has dispersed R23-million to assist SMEs and black businesses that would otherwise have struggled to find financial support.

RED Door
The Real Enterprise Development (RED Door) project is an initiative of the Western Cape Department of Economic Development and Tourism that provides a one-stop-shop for new and existing businesses, from writing a business plan to specific import and export intelligence. There are 12 RED Door Small Business Advice Centres, as well as six mobile RED Doors.

Training is critical in assisting SMMEs. Various Special Purpose Vehicles (SPVs) put in place by the Western Cape provincial administration are involved in training. For example, in 2009 there were 90 students enrolled at the Boat Building Academy, and the Oil and Gas Skills Hub trained more than 300 artisans, with 90% of trainees later finding employment in the sector.

National development finance institutions (DFIs)
National DFIs have customised their product offering to better suit the changing needs of previously disadvantaged communities in South Africa. The country’s various national institutions now offer a wide range of products across all levels and sectors. In recent years, South Africa’s economy has shown positive signs of SMME growth and economic activity. An important factor in this growth has been the role played by the following national DFIs.

Development Bank of Southern Africa (DBSA)
The DBSA was established in 1983 to accelerate sustainable socioeconomic development by funding physical, social and economic infrastructure in South and Southern Africa, and since its inception has approved loans of R29.8-billion. The bank plays the role of financier, advisor, partner, implementer and integrator to mobilise finance and expertise for development projects that it deems to be valuable towards socioeconomic growth. In 2006, the DBSA was involved in 21 projects in the Western Cape alone, in sectors such as alternative energy, education and tourism. The DBSA intends extending its loan book by more than R100-billion between 2010 and 2015. A key objective will be to facilitate funding to poorer municipalities.

Land and Agricultural Development Bank of South Africa
The Land Bank has been the leading agricultural financier in South Africa since 1912, offering tailor-made development finance to established and emerging farmers.

National Empowerment Fund (NEF)
A new initiative in 2009 saw the launch of an online business planner in five languages. Small businesses often have trouble developing anything approaching a business plan so it is hoped that this tool will help budding entrepreneurs in planning and presentation. A nine-step process takes the small-business owner through a series of items such as cashflow projections, managing financial statements, capital expenditure and balance sheets. A simplified accounting process is also included, which complies with international standards. While the online business planner will not in itself guarantee that the small business gets the required funding, it will greatly assist in the compilation of supporting documents.

Industrial Development Corporation (IDC)
In 2008/09, the IDC approved funding in the amount of R10-billion, a new record value. Most of this money was set aside for expansions and new businesses. It is estimated that 2 500 jobs were saved via IDC interventions to the value of R500-million. As much as R6.1‑billion will be spent to help distressed businesses between 2009 and 2011. This funding programme is expected to create 24 200 direct new jobs in South Africa. A R1-billion fund has been established specifically to support transformation and entrepreneurial development. Recently the IDC has been involved in two of the oldest and most important sectors in the Western Cape – agriculture and fishing – by providing finance for a new pilchards-canning facility in Mossel Bay and by supporting skills development in fruit farming across the country. Other projects involve satellite launch technology, fruit-juice production, cold-rolled steel production and canola-oil extraction.

Khula Enterprise Finance
This financing agency will lend about R3-billion to SMMEs between 2009 and 2013 via a subsidiary called Khula Direct. Khula is also looking for private investors to partner with the agency in supporting smaller enterprises. A mentorship programme involving 400 experienced businessmen and businesswomen will be rolled out at first in the three most urban provinces. After being launched in Gauteng, KwaZulu-Natal and the Western Cape, the programme will be taken to the other six provinces.

National Youth Development Agency (NYDA)
This entity was launched on Youth Day, 16 June, in 2009, out of a merger of the Umsobomvu Youth Fund and the National Youth Commission. As a statutory body, the NYDA will be closely monitored in the way that it disburses its R1-billion, three-year mandate.

ONLINE RESOURCES
Cape Gateway: www.capegateway.gov.za
Development Bank of Southern Africa: www.dbsa.org
Industrial Development Corporation: www.idc.co.za
Khula Enterprise Finance Ltd: www.khula.org.za
Land Bank: www.landbank.co.za
National Department of Trade and Industry: www.thedti.gov.za
National Empowerment Fund: www.nefcorp.co.za
South African Wine Industry Trust: www.sawit.co.za