BIG WINS FOR
SMALL BUSINESS GOVERNMENT GRANTS, INCENTIVES AND FUNDING F O R E N T R E P R E N E U R S ccording to a recent report
Donna Rachelson, CEO of Seed Engine,
by Global Entrepreneurship
the ICT accelerator that runs Seed
Monitor, South Africa’s
Academy, says: “Some entrepreneurs
entrepreneurial activity is at the highest
indicated that they simply don’t know
level since 2013. This can be partially
where to go for funding especially in
attributed to the high unemployment rate
light of the fact that most early-stage
and new opportunities that have become
business funding requirements are
available to small business owners.
below the R100 000 threshold.
Bolstering these factors are the Department
“There is certainly a case to be made
of Trade and Industry’s (dti’s) Preferential Procurement Regulations, which require government procurement departments to favour historically disadvantaged individuals, with a particular focus on youth-
for funding providers to revise certain requirements to better accommodate the unique needs of small and early-stage businesses. Of course, one unfortunate implication of self-funding is that growth
and woman-owned businesses.
potential is limited to the owner’s own
“Those who work in procurement
small business to increase capacity, hire
departments within government must see themselves as enablers to achieve service delivery promises,” says eThekwini Deputy Mayor, Fawzia Peer. “Under the Preferential Procurement Regulations, one of the new requirements is that at least 30% of the value of contracts above R30-million must be sub-contracted to assist in the development of emerging suppliers. We would actually like to see all suppliers subcontracting to SMMEs, cooperatives, as well as township and rural enterprises, irrespective of project value.” A survey of more than 1 200 entrepreneurs conducted by Seed
pocket and diminishes the ability for a more staff and make a more meaningful
finance) provide development finance on a national level. Regional and smaller development finance agencies, Agency (MEGA), the Gauteng Growth and Development Agency (GGDA), Wesgro in the Western Cape and the KZN Growth Fund, focus on particular provinces. Other institutions are sectorspecific, for instance, the Technology Innovation Agency (TIA), which aims to stimulate technological innovation in South Africa. Incentives and grants are provided by Seda, the Department of Small Business Development (DSDB) and the dti. Such funding helps to catapult small businesses into the mainstream economy by subsidising their investment into core business activities such as machinery, business support services and software. DEVELOPMENT FINANCE AGENCIES The Small Enterprise Finance
FOCUSED ON FUNDING
to development finance in the
The South African government has created several departments and agencies focused on business development by providing assistance in the form of either finance or grants. Loans, which must be serviced and repaid in full, fall under the umbrella of finance. Incentives or grants, on the other hand, are non-repayable contributions to a business and are typically disbursed as a percentage of the overall cost of an intervention. By way of example, if an abattoir owner
respondents have attempted to secure
purchased a new meat processing plant
funding from banks or development
at a cost of R10-million, government
funding institutions like the Industrial
would provide a percentage of the
Development Corporation (IDC) or dti.
investment amount as funding
Top Performing 17 th Edition
and the Land Bank (for agricultural
impact on the South African economy.”
Academy revealed that only 18% of
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Development Agency (Seda), the IDC
like the Mpumalanga Economic Growth
BY RISHAD AHMED
A
Agencies such as the Small Enterprise
Agency (SEFA) provides access form of loans. While interest rates vary depending on the applicant’s risk profile, rates are higher than commercial banks. Loan sizes vary from R50 000 to R5-million and borrowers should expect to pay between 2% and 5% above the prime lending rate in interest. Entrepreneurs seeking loans exceeding R5-million need to approach the IDC. Focusing on key industries driving our economy, the institute funds startups and existing businesses with minimum funding requirements of R1-million to R1-billion. The IDC provides a variety of funding instruments such as debt, equity,