Ebrahim Patel, SA minister of Economic Development
Sizeka Rensburg, chairperson of SEFA

The government has launched a new agency to fund small businesses.

Minister for economic development, Ebrahim Patel said the Small Enterprises Finance Agency (SEFA) would tap into the resources of the Industrial Development Bank (IDC) in order to provide better services to SMEs.

SEFA, which is a merger between Khula Enterprises, Small Micro-Apex Fund and IDC’s small business book, would be a wholly-owned entity of the IDC. The new agency would make R2-billion available for small business financing over the next three years.

“It is important that public policy promotes SMEs and entrepreneurship because small businesses, which are the backbone of the economy, need to be competitive,” said Patel during the launch in Cape Town, adding that SEFA would tap into IDC resources to provide better services to SMEs.

The new agency will focus on services in infrastructure development, mining services, small-scale manufacturing, agri-processing, tourism and the green economy. The goal is to find opportunities for small businesses in the mega projects that the IDC funds.

The minister also said that there is break the high-levels of concentration and exclusion found in particular sectors of the economy. This would be achieved through diversifying the activities of small businesses from traditional sectors such as retail by actively finding opportunities in other industries.

SEFA will save R20-million a year in operational costs caused by duplication of services by government organisations. The savings would be used to finance entrepreneurs, said Patel.

The agency will find innovative solutions by forming partnerships with the public and private sectors, and use channels including commercial banks, retail financial institutions and direct lending.

“The overall objective is to facilitate the creation of competitive and sustainable SME sector, support entrepreneurship, and create employment,” said Patel.

Many small business fold within the first three years of being formed due to various reasons like lack of capital, managerial skills, and technical support. SMEs often do not meet the necessary requirements needed by banks and commercial financing institutions in order to advance loans.

“There is need to deepen access to financing by small business, and to provide training on skills such as business management in order for SMEs to be successful. SEFA aims to fill the gaps that are existing in the market,” said SEFA chairperson, Sizeka Rensburg.