Access to Finance for Sustainable SMME Development Thakhani Makhuvha Chief Executive Officer TEP...
Preview:
Citation preview
- Slide 1
- Slide 2
- Access to Finance for Sustainable SMME Development Thakhani
Makhuvha Chief Executive Officer TEP Indaba Workshop 8 May 2015,
Durban
- Slide 3
- South Africa Surveys: Global Enterprise Monitor (GEM) 2010
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. Small Business Landscape 2 SA
SMME Segment SA Number of Enterprises Survivalist3,348,966
Micro1,676,053 Small275,872 Medium278,878 Total 5,579,769 Source:
Finscope, 2010
- Slide 4
- 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. 3
- Slide 5
- 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. 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 VISION MISSION VALUES 4
- Slide 6
- sefas 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 governments economic policy -
NGP, IPAP, NDP 5
- Slide 7
- sefas distribution model R50k to R5mUp to R5m R500 to R5m sefa
DIRECT LENDING sefa WHOLESALE LENDING sefa Funding Model SMMEs can
access sefa funding solutions through any of the above channels
CREDIT GUARANTEE SCHEMES Finance Intermediaries: (CFIs, MFIs, Joint
Ventures & Funds, Retail Finance Intermediaries) Registered
financial institutions sefa regional offices and seda co-locations
6
- Slide 8
- 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 sefas 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 7
- Slide 9
- 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 8
What makes sefa different
- Slide 10
- 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 9
- Slide 11
- 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 10
- Slide 12
- 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
- Slide 13
- sefas Development Impact R822m disbursements 46 702 SMMEs
funded 46 402 permanent and contract jobs facilitated YOUTH OWNED
ENTERPRISES 10 291 R157 million WOMEN OWNED BUSINESSES 44 302 R362
million RURAL-BASED ENTERPRISES 36 729 R429 million BLACK OWNED
ENTERPRISES 43 643 R599 million 7
- Slide 14
- 13
- Slide 15
- 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.
- Slide 16
- 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 TEPs funding gap to SMMEs. sefa / TEP
- Slide 17
- Rational for the partnership (cont) Leverage existing 3500
SMMEs on its database Leverage TEPs 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
- Slide 18
- sefas 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. 17 sefas role in the partnership
- Slide 19
- 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 funded15 % of Women funded SMME45% % of Youth funded SMME30%
Rural % coverage45% No. of Jobs created500
- Slide 20
- 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. 19
- Slide 21
- 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 20
- Slide 22
- 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 R10 000 to R500 000 and outside of Gauteng will be
given attention. 21
- Slide 23
- 22 Contact Details
- Slide 24
- Thank you