South African President Cyril Ramaphosa has given the SA SME Fund, set up to fund small- and medium-sized enterprises, the thumbs-up for raising R1.4 billion to support small business in a way that has not been done before.
Speaking last week at a presentation of the fund’s first progress report since its launch by the CEO Initiative in August, Ramaphosa commended the fund for finding a unique way to uplift small businesses, the Johannesburg-based City Press reported.
“When it started we knew it would be successful, but now it is proving to be much more impactful than we thought. This is where it truly matters,” he told those attending the event at Discovery’s head office in Sandton.
“You are operating where it matters most because it is in the SME sector that jobs will be created most. It is not the big, mega companies that will create the jobs we need,” he told the packed venue.
Ramaphosa said the fund complemented the presidency’s own investment fundraising drive, and the innovative design of its operation would assist government’s Black Industrialist Programme.
“What I like about the fund is its mixture of funding, incubation as well as mentoring,” Ramaphosa said. “That is the right approach to growing black businesses.”
He went on to advise the fund’s operators to focus on women-owned businesses.
Ketso Gordhan, the fund’s CEO, told City Press that although R1.4 billion was raised, only R1.24 billion was investable.
So far, R720 million had been committed and a further R520 million was still to be committed for spending before August, he said.
“One of the three things we do is venture capital; about R500 million will go there,” Gordhan said. “That will make us the biggest institutional investor in venture capital in the country.”
“The other two areas are growth capital and impact, which are a combination of a number of things — including putting R100 million into Spartan, a small, medium and micro enterprise debt provider. Spartan will gear it up fivefold by borrowing more money against our money, so it will be lending out a total of R600 million.”
Gordhan said business incubation was not done by the fund directly, but by third parties with the fund’s money. So far, almost 20 companies were earmarked for the program, with probably only five being funded directly.
The fund’s investors are the Public Investment Corporation, which contributed R500 million, as well as 50 local companies who together added R900 million.
The investments are long-term and should bear returns only after a decade.
The event was coupled with the launch of Business Leadership SA (BLSA) Connect, a unique SME development and supply chain platform for BLSA member companies.
Heading the platform is Dumisani Mpafa, former deputy president of the Black Management Forum.
Mpafa said the initiative aimed to integrate black-owned suppliers in the value chain of major corporates. “We want black suppliers to have a coordinated approach to access market opportunities in the private sector.
“BLSA Connect will not only bring opportunities to innovate new inventions but also increase competitiveness.”