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Presentation on theme: "DEPARTMENT OF TRADE AND INDUSTRY INCREASING ACCESS TO FINANCE."— Presentation transcript:


2 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 2

3 3 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.

4 Strategic approach Strategic Actions 4 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 Strategy covers both pre and post start up phases and is based on the following pillars: 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

5 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. 5

6 SMME contribution to GDP 6 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

7 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 7

8 Finance products for SMEs Credit indemnity product – partnerships between Khula and country’s 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 8

9 Finance products for SMEs 9 Land Reform Empowerment Facility - wholesale financing facility via Banks and other RFI’s 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

10 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. 10

11 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. - Women’s Fund ($20m) – partnership between Old Mutual Asset Managers and youth fund to finance women owned businesses (up to $5000K per project). 11

12 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. 12

13 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 13

14 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. 14

15 Growth strategy 15 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);

16 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. 16

17 Conclusion 17 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.


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