Picture: iStock.
Small businesses in Gauteng townships have been thrown a life raft in the form of a R300 million debt fund called the SMME Crisis Partnership Fund – an initiative by the Gauteng Provincial Government, the Industrial Development Corporation (IDC) and the SA SME Fund
According to the Gauteng Provincial Government, there are more than two million formal and informal small businesses in South Africa, the majority of which are township-based.
Most are unable to access or do not qualify for funding from the formal banking sector.
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“Without this funding, they are unable to grow their businesses, create jobs or participate meaningfully in the economy,” a statement from the Gauteng government said.
It explained that the SMME Crisis Partnership Fund seeks to remedy this. Each of the partners have contributed R100 million towards the Fund.
The Gauteng provincial government’s share provides a first loss guarantee, meaning it will assume the first portion of any losses.
The partners believe this model, which leverages government’s underused first loss capital to attract private sector funding, is a game-changer in two respects.
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Firstly, it addresses the economic inclusion of township businesses in Gauteng, and secondly, it provides a blueprint which can be replicated and scaled in other provinces and nationally.
It is an effective way of leveraging different skills sets and pools of capital to support entrepreneurs and help SMMEs grow.
The fund is already committed to six intermediaries, with a seventh in the pipeline.
Three intermediaries – Indlu Living, Profit Share Partners and Crede Capital Partners – have already finalised their agreements, and the full allocation process is expected to be completed by the end of this month.
These intermediaries will facilitate the provision of working capital and asset finance to hundreds of small businesses and entrepreneurs.
One of the intermediaries, Indlu Living, is an excellent example of how capital can be used to fundamentally change the lives, livelihoods and landscape of townships across the country, and address the housing crisis head on.
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Indlu Living provides micro property and backyard developers in townships, with an all-in-one rental management software, finance and property development solution.
This 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.
The SMME Crisis Partnership Fund will double Indlu Living’s loan book, enabling it to create between 60 and 70 new property entrepreneurs.
Parks Tau, Gauteng MEC for Economic Development said: “[The] 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.
“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.”
The Gauteng Provincial Government’s SMME development entity, the Gauteng Enterprise Propeller, will be working hand in hand with SA SME and IDC in ensuring success of the fund.
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