1. Access to Finance for Sustainable SMME Development
Thakhani Makhuvha
Chief Executive Officer
TEP Indaba Workshop
8 May 2015, Durban

2. Small Business Landscape
South Africa
Surveys: Global Enterprise Monitor (GEM) survey estimated about 5.9 million SMMEs is SA; and Finscope SA Small Business survey estimates 5.6 million SMMEs during the same period
Contribution to SA Economy: to GDP ranging from 36% to 45% with private sector employment ranging from 56% to 61%
Brazil
International benchmark: recent study tour to Brazil included BNDES and SEBRAE, Micro and Small Enterprises (MSE) in Brazil represent 99.1% of all Brazilian enterprises, 70% of creation of registered jobs; 40% of aggregate wage and 25% of GDP.
There are 400 thousand small enterprises, 4 million micro enterprises and 3.1 million individual entrepreneurs in Brazil.
SA SMME Segment
SA Number of Enterprises
Survivalist
3,348,966
Micro
1,676,053
Small
275,872
Medium
278,878
Total
5,579,769
Source: Finscope, 2010

3. Challenges for Small Businesses
The 1995 White Paper identified a number of constraints facing small enterprises. These relate to:
the legal and regulatory environment,
access to markets,
access to finance and affordable business premises,
the acquisition of skills and managerial expertise,
access to appropriate technology,
the tax burden, and
access to quality business infrastructure in poor areas or poverty nodes.

4. Vision, Mission and Values
To be the leading catalyst for the development of sustainable Small, Medium and Micro Enterprises and Co-operative Enterprises through the provision of finance
Our mission is to provide simple access to finance in an efficient and sustainable manner to SMMEs and Co-operative enterprises throughout South Africa by:
providing loan and credit facilities to SMMEs and Co-operative enterprises;
providing credit guarantees to SMMEs and Co-operative enterprises;
creating strategic partnerships with a range of institutions for sustainable SMMEs and Co-operative enterprises development and support;
developing (through partnerships) innovative finance products, tools and channels to speed up increased market participation in the provision of affordable finance.
MISSION
Kuya sheshwa!” - Speed and urgency
Passion for development: Solution-driven attitude, commitment to serve
Integrity: Dealing with clients and stakeholders in an honest and ethical manner
Transparency: Ensuring compliance with best practice on the dissemination and sharing of information with all stakeholders
Innovation: Continuously looking at new and better ways to serve our clients
VALUES

5. sefa funds in the following sectors
sefa’s Target Groups
Targeted Groups
women,
black people,
youth,
people in rural communities and townships
people living with disabilities.
services (including retail, wholesale, IT and tourism);
manufacturing (including agro-processing);
agriculture (specifically land reform beneficiaries and micro-farming activities);
construction (small construction contractors);
Mining (specifically small miners);
green industries (renewable energy, waste and recycling management).
sefa funds in the following sectors
Lending policy is informed by government’s economic policy - NGP, IPAP, NDP

6. sefa’s distribution model
sefa Funding Model
sefa WHOLESALE LENDING
sefa DIRECT LENDING
CREDIT GUARANTEE SCHEMES
Finance Intermediaries: (CFIs, MFIs, Joint Ventures & Funds, Retail Finance Intermediaries)
sefa regional offices and seda co-locations
Registered financial institutions
We conduct business through the following distribution channels:
sefa Head Office in Centurion
9 Regional Offices
3 Branch Offices
6 Retail Financial Intermediaries
8 Equity/Specialised Funds
2 Partnerships
Formal registered financial institutions (e.g. FNB, ABSA, Standard Bank, Nedbank, etc)
16 Micro-Finance Intermediaries
10 Cooperatives
25 Seda shared locations
R500 to R5m
R50k to R5m
Up to R5m
SMMEs can access sefa funding solutions through any of the above channels

7. We fund enterprises that…
are owned by South African citizens and permanent residents
are legally registered with fixed physical address
are within the required contractual capacity
Operate in South Africa
have a written proposal or business plan that meets the requirements of sefa’s loan application criteria
demonstrate the character and ability to repay the loan
have provided personal and/or credit references (if available)
have the majority shareholder as the owner manager of the business
where available, can provide relevant securities/ collateral
have a valid tax clearance certificate

8. What makes sefa different
High appetite for risk in exchange for high developmental impact
Provision of capital and/or interest moratorium (Payment Holiday) up to 12 Months
Financing SMMEs including start up businesses that are often perceived as high risk
Addressing the financing gap for loans below R500k
Provision of pre and post loan business support
Provision of funding to entrepreneurs with adverse credit records provided they can demonstrate active remedy of their indebtedness
Lending not solely based on security backing – long term sustainability potential
Specific focus on youth owned businesses

9. Businesses we do not fund
The following businesses fall outside the scope of enterprises that we fund:
Manufacturing and selling of ammunition
Tobacco, alcoholic beverages, gambling and sex trade
Political organisations
Persons under debt review
Un-rehabilitated insolvent shareholders and/or directors of applying entities
Primary agriculture (except cash crops and the applicant should have an off take agreement)
Speculative property development

10. Portfolio of Products DIRECT LENDING
SECTOR-SPECIFIC FINANCING PRODUCTS
MICRO-FINANCE
CO-OPERATIVE FINANCIAL INSTITUTIONS (CFIs)
CREDIT GUARANTEE SCHEME
Working Capital Facilities
Asset Finance
Term Loans
Revolving Loans
Bridging Loans
Short-term Trade Finance
Land Reform - Land Reform Empowerment Facility for emerging black farmers.
Tourism: iKwezi Tourism Facility (sefa /Tourism Enterprise Partnership (TEP))
Sugar Farming: sefa/ Hulett Sugar (THS) Facility
Mining: sefa Anglo-American Mining Fund
Youth: sefa/Awethu Youth Fund
sefa has partnered with 11 active MFIs nationally
sefa has partnered with 10 CFIs across the country
Designed to indemnify commercial banks and suppliers who extend credit to SMME.
Supplier Credit Guarantee programme is in its pilot phase.
funding from R50k up to R5 million
small scale finance – between R500 and R50k.
facilities from R500 up to R50k

11. S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S
– 10 sefa Main Offices
– 4 Strategic Partnerships
– 8 Specialised Funds/Joint Ventures
– 7 sefa colocations
– 10 Co-operative Financial Institutions
– 6 Retail Financial Intermediaries
– 11 Active Microfinance Intermediaries
S – 37 proposed new access points S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S

12. sefa’s Development Impact
YOUTH OWNED ENTERPRISES
10 291
R157 million
WOMEN OWNED BUSINESSES
44 302
R362 million
R822m disbursements
SMMEs funded
permanent and contract jobs facilitated
BLACK OWNED ENTERPRISES
43 643
R599 million
RURAL-BASED ENTERPRISES
36 729
R429 million

13. sefa / TEP Tourism Partnership

14. sefa-TEP Ikhwezi Tourism Facility
PURPOSE OF FUNDING
To fund SMMEs in the tourism sector
Access to the tourism sector
THE WHOLESALE FUNDING ALLOCATION
The funding consists of R45 million business loans to entrepreneurs;
Loan sizes of between R10 000 to R5 million offered for up to five years;
R2 million business support e.g. mentoring and training support for the entrepreneurs
R3 million Institutional strengthening support to enable TEP to set-up operational functionality for the facility.

15. Rational for the partnership
Leveraging the existing technical capacity and national footprint from TEP
Special lending rates offered to SMMEs prime plus 1.60% to prime plus 3.60%.
sefa needs to participate in different sectors and tourism is one of them.
Fill-in TEP’s funding gap to SMMEs.
sefa / TEP

16. Rational for the partnership (cont…)
Leverage existing 3500 SMMEs on its database
Leverage TEP’s Intervention Model(skills, development, couching and mentoring)
TEP has existing processes to assess the technical SMME clients and provide practical solution thereof.
Fastest growth sectors for job creation
Long-term joint partnership

17. sefa’s role in the partnership
sefa’s role will be to:
Carry the credit and financial risk of each transaction funded.
Receive the applications and verify the technical due diligence performed by TEP.
Perform the financial and credit assessment of the client.
Present the applications to sefa Credit committee for approval.
Generate loan agreements to be signed-off by the client. The contracting will be between sefa and the client.
Pay out to the SMME based on cash flow projection requirements.
Fund Business Support required by the SMME.
Collect directly from the SMME. TEP will assist with the collections through the Co-ordinator, mentors and/or consultants interacting with the clients.

18. Targets for the facility
The following targets have been set for the next five years of the facility;
Target
No. of Black SMMEs to be funded 15
% of Women funded SMME
45%
% of Youth funded SMME
30%
Rural % coverage
No. of Jobs created
500

19. Status on Funding The partnership is unique.
The current funding activity is low with only 2 approvals, with a total of R3,7 million. Reasons for these are advanced below.
Commitments of over R10m to SMMEs.
A total of R41.3 million is still available.
Current approvals are all based in Gauteng
Sectors approved include, transport, guest houses, travel agencies.

20. Implementation Challenges
Internal teething problems experienced
Loan Administration system delayed project implementation
IT configuration between the two institutions also caused some delays
Initial applications did not qualify with the sefa minimum criteria
Content of submissions remains a challenge especially the technical and marketing analysis
Delays in receiving information and fulfilling conditions for approval & disbursement

21. Going forward
Issues at resolutions stage and lessons learnt form part of the revised implementation strategy
There is greater collaboration between TEP and sefa which result in improved efficiency.
Closer scrutiny of the applications before going to sefa committees to ensure quality of applications.
sefa IT, as part of the wide IT systems configuration and modification, is creating a swifter, more streamlined information sharing platform for all parties
Loans of R to R and outside of Gauteng will be given attention.

22. Contact Details

23. Thank you