R300 million SMME Crisis Partnership Fund to ‘Revive Township Economy’

The Gauteng Provincial Government, the Industrial Development Corporation (IDC) and the SA SME Fund have joined forces to launch a R300 million debt fund, the SMME Crisis Partnership Fund, targeting small businesses based in Gauteng townships.

The entities contributed R100 million each to the loan-based fund, which will be managed by the SA SME Fund on a pro bono basis. The trio say the Gauteng provincial government’s share will absorb the first part of any losses.

At the launch of the fund at the Kaalfontein Corner shopping center in Tembisa on Wednesday, Parks Tau (Gauteng MEC for Economic Development, Agriculture, Environment and Rural Development) said the fund intends to enable township-based businesses to access finance , which is crucial for business growth and job creation. He says the fund will help with the integration of informal SMEs into the formal economy.

“Today’s launch of the SMME Crisis Partnership Fund is part of our deliberate approach to revitalizing the township economy and lifting it to respond to the current needs of the community.

“For many years, township owners have struggled to obtain flexible and risk-free financing to build backyard rental apartments. We are working in partnership with Indlu Living to provide this assistance to property owners.”

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Working capital, asset financing

The partners note that the fund is already committed to six intermediaries, with a seventh in the pipeline, which will facilitate the provision of working capital and equity financing to hundreds of small businesses and entrepreneurs.

“Three intermediaries – Indlu Living, Profit Share Partners and Crede Capital Partners – have already finalized their agreements and the entire allocation process is expected to be completed by the end of this month,” says Tau.

The partners note that Indlu Living provides micro-property and township backyard developers with an all-in-one rental software, financing and property development solution – which they say will allow landowners to finance the building of aesthetically designed and rentable backyard spaces with loans expected to be disbursed from rental income.

“Not only will this create a pool of township-based real estate entrepreneurs, but it will also benefit an ecosystem of other small businesses, such as builders, electricians and janitorial services.”

The fund will double Indlu Living’s loan book and enable it to create between 60 and 70 new property entrepreneurs.

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Financial inclusion

“For our country to be prosperous and successful, it is imperative that we ensure that entrepreneurs and small businesses, especially those in the township environment, are financially included,” says SA SME Fund CEO Ketso Gordhan.

“In addition to igniting township SMMEs, this model facilitates the building of non-banking institutions that have the necessary skills and experience to service this sector, unlike the banks that are not as efficient in this environment.”

IDC CEO Tshokolo Nchocho says the partnership reflects a collective intent to support the growth of township economies and SMEs.

“IDC will use the lessons learned from this and other funds and investments to replicate the approach and impact in other provinces.”

Saki Zamxaka, Gauteng Enterprise Propeller CEO, says the partnership will play an instrumental role in realizing the goals of the Township Economy Development Act.

“This partnership will expand access to funding for township-based SMEs, particularly as we will work with implementing partners who already have a pipeline of applicants in the township economy.”

Listen as Fifi Peters discusses the Township Economic Development Act with Bulelani Balabala of the Township Entrepreneur Alliance (or read the transcript here):

Nondumiso Death is a Moneyweb intern.

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