1. Department of Small Business Development Presentation to the Select Committee on Economic and Business Development 14 October 2014 1

2. Content Purpose Government intervention in the small business sector Initial Small Business Policy Respective Acts Small Business Development Act Financial support for small business Technology Platforms 2

3. Purpose To appraise the Select Committee for Economic and Business Development on the existing policy perspective on small business development and financing to support economic growth, innovation and employment. 3

4. In March 1995 the new government released a policy on small business promotion, the country’s first as the initial realisation of the importance of the small business sector. The initial policy was reviewed in 2005 and culminated with the Integrated Strategy on the Promotion of Entrepreneurship and Small Enterprises, which led to the establishment of Seda The Cooperatives Development Strategy was also adopted in 2005 and led to the transfer of cooperatives Act from the Department of Agriculture Policy Environment

5. Respective Acts Primary legislation – Small business Development Act (Act 112 of 1981) – National Small Business Act 1996, amended 2004 – Companies Act, 2008 – Cooperatives Act, 2013 – Industrial Development Corporation Act 1940 – Financial Advisory and Intermediary Services Act (37 of 2002) Supplementary legislation & other policy measures – BBBEE Act – National Empowerment Act, – Preferential Procurement Policy Framework Act – Youth strategy – Women Development empowerment strategy – Coops strategy – Innovation and technology Strategy 5

6. Seda as a non financial support programme SEDA’s mandate is to provide non-financial business development and support services for small enterprise in partnership with other role players. Strategic Objective 1: Enhance competitiveness and capabilities of small enterprises through coordinated services, programmes and projects. Strategic Objective 2: Ensure equitable access to business support services. Strategic Objective 3: Strengthen the organization to deliver on its mission. 6

7. For survivalist and micro enterprises Entrepreneurship awareness Franchise awareness Business start-up training Business planning Business registrations Business start-up advice For small and medium enterprises Access to local markets Access to export opportunities Incubation Access to technology Quality and standards testing, advice and implementation Hotline to assist with late payment of SMMEs Business mentoring Facilitation of access to finance For collectively owned enterprises Social facilitation and mobilisationCooperatives development and registration Access to local marketsAll other relevant products and services still apply For people with disabilities Programmes with MODE, DeafSA and SANCBAll other relevant products and services still apply 5 Seda as a non financial support programme Cont.

8. 8 ProvinceSeda Branches Seda Satellite Offices Seda Supported Incubators Co- location Points Mobile Units Info Kiosks EC 607 436 FS 521 053 GT 3012 006 KZN 6011 421 LP 502 431 MPU 505 7014 NC 501 523 NW 501 546 WC 3123 0010 TOTAL 431443 291950 Seda as a non financial support programme Cont.

9. Financial support for small business SEFA's mandate is to foster the establishment, survival and growth of SMMEs and contribute towards poverty alleviation and job creation. The Small Enterprise Finance Agency provides funding through: Delivering Wholesale and Direct Lending credit facilities or products; Providing credit guarantees to SMMEs; Supporting the institutional strengthening of Financial Intermediaries so that they can effectively assist SMMEs; Creating strategic partnerships with a range of institutions for sustainable SMME development and support; Monitoring the effectiveness and impact of our financing, credit guarantee and capacity development activities; and Developing (through partnerships) innovative finance products, tools and channels to speed up increased market participation in the provision of affordable finance. 9

10. Financial support for small business 10 The Direct Lending channel:Wholesale lending Channel Working Capital Facilities Business Loans – (RFIs, Joint Venture Funds Asset FinanceMicrofinance; Term LoansFinancing of Co-operatively owned enterprises Term LoansCredit Guarantee Scheme; Revolving Loans Bridging Loans Land Reform Empowerment Fund. Short-term Trade Finance.

11. Financial support for small business 11 The Direct Lending channel:Wholesale lending Channel Sefa Wholesale Lending is through: Finance IntermediariesR500-R5m Sefa Direct Lending :Regional officesR50k-R5m Credit Guarantee Schemes:Formal registered financial institutions R5m

12. Financial support for small business BREAKDOWN OF THE 46 407 SMMEs FUNDED AND THE R822 MILLION DISBURSED SINCE INCEPTION 10, 291 were youth owned enterprises with loan funding support to the value of R157 million; 44, 302 were women owned businesses with funding support to the value of R362 million; 36, 729 were rural-based enterprises with a total funding of R429 million; and 43, 643 were black owned enterprises funded to the value of R599 million. 12

13. Financial support for small business NEF Mandate Established by the National Empowerment Fund Act No 105 of 1998, the NEF is a driver and a thought-leader in promoting and facilitating Black economic participation through the provision of financial and non-financial support to Black empowered businesses, as well as by promoting a culture of savings and investment among Black people 13

14. NEF Mandate 14 Over the years the NEF has implemented this mandate through two core divisions, namely Fund Management and Asset Management, whose respective functions and outputs are outlined below: Fund ManagementAsset Management Facilitates financial and non-financial support for black enterprises requiring start-up, expansion and equity acquisition finance ranging from R250 000 to R75 million Promotes a culture of savings and investments and the universal understanding of equity ownership among black people Pre-Investment – business development, entrepreneurship development, including training & incubation support, product advisory services, administration of applications and deal-sourcing Develop and support public-share offers aimed at facilitating black equity ownership in State-Owned Commercial Enterprises and the private sector, eg Asonge and Sasol Inzalo iMbewu Fund – SME Fund supporting Entrepreneurship, Procurement & Franchise Finance Provide Investor Education and promote financial literacy and understanding of the equities markets among black people uMnotho Fund – supports funding of New Ventures, Acquisition, Project Finance, Expansion, Capital Markets, Liquidity & Warehousing needs Champion Enterprise Development by enabling measured entities to contribute 3% of Net Profit After Tax (NPAT) to the growth of black SMEs countrywide Rural & Community Development Fund - supports rural economic development through New Ventures, Acquisition and Expansion Finance Strategic Projects Fund – supports early-stage investment in manufacturing transactions with export- earning potential Post Investment – monitor the performance of NEF investees and provide ongoing mentorship support Promote entrepreneurship and contribute to the creation of sustainable employment and the overall growth of an inclusive South African economy.

15. The IDC Risk Capital Capacity The Department of Trade and Industry (the dti) and The Independent Development Corporation(IDC) entered into a Memorandum of Agreement dated on or about the 11 December 2006 (the MoA) pursuant to which the dti mandated the IDC to manage the budget support amount of 46 300 000 Euros (forty six million three hundred thousand euros) (“Risk Capital Facility 2, RCF2) on its behalf 15

16. The IDC Risk Capital Capacity Cont. The Risk Capital Facility (RCF) objectives were/are to support the development of HDP controlled small and medium size enterprises (SMEs) with a significant HDP job creation impact, including female employment. 16

17. Risk Capital facility funding Channels 17 The Direct Lending channel: Niche Channel lending Value of investments approved R299 million Value of investments approved: R155 million Value of disbursements to date R277 million Total value of disbursements to date R78 million Average deal sizeR4.3 million - - Total value of investments facilitated R1.5 billion - -

18. RCF2 PORTFOLIO Geographic Spread  Gauteng: R123 million(27)  Western Cape: R 72 million(24)  Northern Cape: R 47 million ( 5)  Eastern Cape: R 41 million ( 7)  North West: R 8 million ( 5)  KwaZulu Natal: R 18 million ( 8)  Free State: R 11 million ( 3)  Mpumalanga: R 10 million ( 4)  Limpopo: R 2 million ( 1) Priority Areas Value : 41% Number: 39%

19. RCF2 PORTFOLIO Sector Exposure  Agro: R113 million(15)  Chemicals: R 46 million(13)  ICT: R 7 million ( 3)  Textiles: R 18 million ( 4)  Construction: R 28 million ( 9)  Franchising: R 11 million (13)  Green Industries: R 21 million ( 7)  Wood & Paper: R 9 million ( 3)  Media: R 34 million ( 4)  Transportation: R 7 million ( 2)  Metals: R 40 million (13) Jobs – 2,953 – 600 – 139 – 700 – 391 – 409 – 1,891 – 189 – 221 – 193 – 640 Total Jobs - 8 326

20. The dti Incentive Schemes The dti manages an array of incentives schemes which are grant funding in nature Amongst these incentives are those tailor made to support small businesses: - Black Business Supplier development programme - Inceptive schemes for BPO programme -Incentives scheme related to Creative industries i.e film 20

21. Black Business Supplier Development Pprogramme 2012- Septemmber 2014 3 Years Historical Performance Financial Year No of Projects Approve d Approved Amounts Disbursements 2011/12306R96mR 52m 2012/131212R450m R129m 2013/141066R430m R291m 2585 R976mR472m

22. Subprojects under BBSDP Cooperatives Incentive Scheme

23. Total approval as at 30 September 2014  53 Applications Approved  Qualifying South African Spend (QSAPE) = R 1,5 billion (R 1, 558, 258 048)  Incentive payable = R 409million (R 409, 246 880)  Payments as of 30 Sep = R164million (R 164, 125 101)

24. Small business Technology Platforms Over the years technology platforms have been established for small businesses. Among these are Technology for Women in Business, Technology For Human Resource and Industrial Innovation, Special Project for Industrial Innovation, Seda Technology Programme (STP) and Technology Venture Capital the latter being funded through RCF reflows The aim of these platforms is to create a conducive environment and fund innovation and new inventions. 24

25. Technology and Human Resource for Industry Programme The aim of THRIP is to facilitate Enhanced industry competitiveness and broadened collaborations generating skills and technologies Leveraging collaborative partnerships on a cost- sharing basis, for research and development in science, engineering and technology, to produce highly skilled human resources and technology solutions, for improved industry competitiveness 25

26. Seda Technology Programme The mission of the Seda Technology Programme is to develop innovative technology – based platforms that result in the creation of sustainable, globally competitive SMMEs that contribute towards the accelerated growth of our economy. 26

27. Support Programme for Industrial Innovation (SPII) The Aim of SPII is promoting technology development and commercialization in South Africa Provides financial assistance for the development of commercially viable, innovative products and/or processes and facilitate commercialization of such technologies 27

28. Incubation Support Programme Implemented parallel to the Seda Technology Programme (Stp) is the Incubation Support Programme (ISP). ISP was launched in September 2012 to encourage private sector partnerships with government to foster collaboration between small and big businesses; whereby big businesses assist SMMEs with skills and technology transfer; supplier development and market opportunities for SMMEs 42 applications have been approved with an approximate value of over R681 million. The value of claims paid is over R52 million. The number of claims paid is 24. Most approvals have been in the manufacturing and agriculture sectors 28

29. Seda Technology Programme Q1 2014/15 performance The STP supported 2 349 clients compared to a targeted 1710 43 incubators were supported 344 jobs were created during the quarter under review 20 clients supported under the Technology transfer programme 139 clients trained on national and international standards

30. Incubation Support Programme ProvinceApprovalsSectors Eastern Cape4ICT, films, agriculture Free State3Multi-sectoral; jewellery, manufacturing Gauteng12ICT, Automotive, energy, agriculture, manufacturing KwaZulu-Natal1Clothing Limpopo3Manufacturing Mpumalanga5Mining, chemicals, agriculture Northern Cape3Agriculture North West1Construction Western Cape10ICT, manufacturing, energy, clothing, agro-farming 30

31. Technology Venture Capital (TVC) This is a new programme created with the aim of providing a platform for technology innovations that are at the level of prototype development and commercialisation The programme is funded through RCF Reflows 31

32. THANK YOU 32