Small Business Development Minister Khumbudzo Ntshavheni announced during her budget vote on Friday morning that the Small Enterprise Finance Agency would adjust its funding mechanisms for small and medium enterprises to make much-needed funding more accessible.
Like many emerging economies, South Africa considers SMMEs to be critical to economic growth and job creation, highlighting them as the leading catalyst for the ideal scenario of 5% annual economic growth by 2030 in the National Development Plan.
However, between lack of financial support, barriers to entry and late payment for goods and services by customers that include government, small businesses in South Africa face an uphill battle to stay afloat, let alone create jobs and drive economic growth.
Ntshavheni said because SMMEs must have access to strategic resources and finance to realise their innovative visions, her department would blend SEFA’s finance model to mix grants and loans. She said this would allow ease of access to finance through SEFA.
“SEFA will cooperate with other agents of the state to facilitate this. This will be available in the 2019-20 financial year. Grant portion will be up to R2.5m per enterprise. The first beneficiaries will be 100 000 young entrepreneurs who will be funded in the current financial year,” said Ntshavheni.
Ntshavheni said the mix of grants and loans would be made available to entrepreneurs in all nine provinces, but that preference would be given to young entrepreneurs based in townships and rural areas who already displayed a propensity to provide jobs.
“Beneficiaries will come from all provinces, and township and rural entrepreneurs will be prioritised. The first beneficiaries will be announced in August but to qualify, they must be demonstrably able to provide a minimum of ten jobs each,” Ntshavheni said.
She said the Department of Small Business Development would develop an index to track the health of SMMEs nationally. She said the Small Enterprise Development Agency would increase the number of incubators in townships and rural areas.
“We will have eight more incubation centres in Mpumalanga, the Northern Cape, the Free State and Limpopo Province. The incubation period will be increased to five years,” she said.
Ntshavheni said deputy minister of small business development Rosemary Capa would work to develop mechanisms to address late payment to SMMEs by government.