- Gauteng provincial government, South Africa’s IDC and the SA SME Fund have launched a R300 million crisis partnership fund.
- The fund is aimed at reigniting small businesses based in townships.
- If successful, the partners hope the initiative can be replicated and scaled across South African townships.
Today the Gauteng provincial government, together with South Africa’s Industrial Development Council (IDC) and the SA SME Fund have launched a R300 million debt fund created in the hopes of better supporting small businesses in Gauteng’s townships and bolstering the region’s so-called ‘kasi economy’.
According to the Gauteng government, there are more than 2 million formal and informal small businesses in South Africa, the majority of which are township based. These businesses struggle to gain access or do not qualify for funding from the formal banking sector and thus are often excluded from any meaningful participation in the economy.
To remedy this, each of the aforementioned partners has contributed R100 million towards the so-named SMME Crisis Partnership Fund, with the provincial government’s share providing a first loss guarantee, meaning it will assume the first portion of any losses.
“Today’s launch of the SMME Crisis Partnership Fund is part of our deliberate approach to reignite the township economy and elevate it to respond to the current needs of society,” said Parks Tau, Gauteng MEC for Economic Development.
Changing the game for small businesses and their communities
So far the fund is already committed to six intermediaries, with a seventh expected soon. Three of the six intermediaries, namely Indlu Living, Profit Share Partners and Crede Capital, have finalised their agreements with full allocation expected to be completed by month’s end.
The provincial government says that these intermediaries make “excellent examples” of how this capital can change the game for these small businesses and their communities.
Indlu Living, for example, provides micro property and backyard developers in townships with an all-in-one rental management software, finance and property development solution.
This solution allows landowners to fund the building of beautifully designed and rentable backyard rooms, and for the loan to be paid off from the rental income. Not only does this create a pool of township-based property entrepreneurs, but it will also benefit an ecosystem of other small businesses, such as builders, electricians, and cleaning services
“For many years township property owners have struggled to get flexible and risk-free funding to build backyard rental flats. We are working in partnership with Indlu Living to provide that assistance to property owners,” Tau added.
The SMME Crisis Partnership Fund is expected to double Indlu Living’s loan book, enabling it to create between 60 and 70 new property entrepreneurs.
Igniting informal economies across SA
“For our country to be prosperous and successful, it is imperative that we ensure that entrepreneurs and small businesses, especially those in the township environment, are economically included,” chimed in Ketso Gordhan, CEO of the SA SME Fund, which has agreed to manage the SMME fund on a pro bono basis.
Gordhan added that, in addition to igniting township SMMEs, “this model facilitates the building of non-bank institutional funders, who have the requisite skills and experience to service this sector, unlike the banks who aren’t as effective in this environment.”
It is the hope of all the partners involved with the fund that its model can be replicated and scaled across other provinces around the country if it is successful, thus working towards strengthening SA’s ailing economy as a whole.
[Image – CC 0 Pixabay]
