Development finance and SMME support

The SA SME Fund has launched a venture capital fund.

The Industrial Development Corporation loaned R7.6-billion to black industrialists.

Among the IDC’s other focus areas are black industrialists (to whom R7.6-billion was loaned in 2022), black-empowered and black-owned companies (R6.5billion) and women-owned businesses (R1.1-billion).

One the country’s biggest institutional investors is the Industrial Development Corporation (IDC). Apart from taking stakes in large companies in sectors like steel and agriculture that have strategic significance, the IDC has a product called SME Connect. A collaborative model sees the IDC provide funding and business support while a corporate might guarantee to buy goods or services from the small business operator.

Most big companies in South Africa have two main programmes to support SMMES: enterprise development (ED) and local supplier development (or procurement). Sometimes they are combined as enterprise supplier development (ESD). Venetia Mine in northern Limpopo, a De Beers Group mine, has more than 50 SMMEs enrolled in incubation programmes and 34 locally-owned companies are doing business with the mine.

Another Limpopo initiative has led to the growth of Moeding Transport, a company that has been supplying services to Glencore Ferroalloys’ Lion Smelter for several years. The contract has enabled the company to grow, and it was recently further boosted by the donation by Glencore of two 65-seater buses.

In Rustenburg, Impala Rustenburg has invested R8.6-million in the development of a Economic Inclusion Centre that serves as a small business hub for SMMEs in and around the mining community. Apart from the physical facilities on offer, advice on market access and funding is also available.

The increased number and scope of the Business Day Supplier Development Awards gives an indication of how developed this aspect of support for small enterprise has become in the South African business community. The process of helping small businesses become bigger businesses has sparked creativity across sectors such as retail and mining and collaboration with other companies has become the norm in promoting supplier development.

Through the Spar Rural Hub, the retail group supports small-scale farmers and creates markets for their products. The Spar Group has established The Spar Academy of Learning where learnerships and skills programmes are offered. This is to support the business owners who take up the ownership model offered by Spar, which, unlike the franchise model, means that independent retailers have more independence when it comes to decisions within the store and in terms of who to buy from. Spar’s independent retailers in Southern Africa grew from 2 440 in 2021 to 2 508 in 2022.

Woolworths reports that it spent R450-million in 2022 on procurement from 34 SMME beneficiaries of its ESD programme. Examples include a security company (Comet Security), a manufacturer of babywear and underwear (Davis Clothing) and pet food (K9 Pet Food), all of which have expanded their businesses on the programme and started employing more staff as a result. Altogether, the company contributed R2.9-billion towards the revenue of 917 SMMEs in its value chain up to end of the financial year in June 2022.

Funds and schemes

In 2023 the SA SME Fund set up its third fund, a dedicated venture capital fund. In August first close was reached with a figure of R700-million, achieved with some support from the pension fund sector.

The SA SME Fund is a fund of funds, investing in fund managers who will support startups and new ventures, rather than itself investing in projects. It was established with the support of 50 of South Africa’s biggest companies and its first fund had a fairly broad remit, which included fintech, biotech and supporting universities in turning research into business ventures. The focus of the second fund was debt funding. As Hilary Joffe pointed out in Business Day, South Africa “ranks only fourth in Africa” in venture capital, despite a strong private equity industry. Joffe cited the SA Venture Capital Association, which reported that in 2021, the venture capital industry invested R1.3-billion in 129 startups.

Online Resources

Business Day Supplier Development Awards: www.sdawards.co.za

National Department of Small Business Development: www.dsbd.gov.za

Small Business Institute: www.smallbusinessinstitute.co.za

Small Enterprise Development Agency: www.seda.co.za

In the North West, the Provincial Government is investing in digital infrastructure. SMMEs will be able to use the newly-established Mafikeng Digital Innovation Hub as a co-working environment and to get support in using digital tools.

The South African National Roads Agency Limited (SANRAL) actively supports small businesses wherever it works in South Africa. Subcontracts are routinely awarded for maintenance such as the patching of potholes, fencing and the cutting of grass verges.

Part of the rationale behind a national programme to revive industrial parks is to benefit SMMEs. The National Department of Trade, Industry and Competition (the dtic) has invested R40-million in the Nkowankowa Industrial Park in Limpopo, an initiative which has helped to create 174 direct jobs. In the northern reaches of the province, more than 300 jobs have been created with the revitalisation of the Thohoyandou Industrial Park, which has achieved a 91% occupancy rate.

The dtic is trying to stimulate township and rural economies through programmes such as the Enterprise Investment Programme (EIP).

The National Department of Small Business Development (DSBD) has several programmes to assist SMMEs and co-operatives. The Small Enterprise Development Agency (Seda), a subsidiary of the DSBD, has 42 incubation centres under its Seda Technology Programme (STP). In Mpumalanga, Seda supports several incubators: Furntech, furniture manufacturing, White River; Mobile AgroSkills Development & Training, agricultural training, Nelspruit;Mpumalanga Stainless Initiative (MSI), stainless-steel processing, Middelburg (with Columbus Stainless); Timbali floriculture, Nelspruit; Ehlanzeni TVET College Rapid Incubator Renewable Technologies, Nelspruit. ■