R300m SMME Crisis Partnership Fund to ‘reignite township economy’

The Gauteng provincial government, the Industrial Development Corporation (IDC) and the SA SME Fund have banded together to launch a R300 million debt fund, the SMME Crisis Partnership Fund, targeted at small businesses based in Gauteng townships.

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

Speaking at the launch of the fund at Kaalfontein Corner shopping centre 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 funding that is essential to business growth and job creation. He says the fund will aid 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 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.”

Read: It’s time to flip the housing delivery model on its head

Working capital, asset finance

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

“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,” says Tau.

The partners note that Indlu Living provides micro property and backyard developers in townships with an all-in-one rental management software, finance and property development solution – which they say will allow landowners to fund the building of aesthetically designed and rentable backyard rooms with loans expected to be paid off from 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 fund will double Indlu Living’s loan book and enable it to create between 60 and 70 new property entrepreneurs.

Read: Diepsloot business owners take on Gauteng Premier

Economic 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 economically included,” says SA SME Fund CEO Ketso Gordhan.

“In addition to igniting township SMMEs, this model facilitates the building of non-bank institutional funders, who have requisite skills and experience to service this sector, unlike the banks who aren’t as effective in this environmen.”

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

“The IDC will use the learnings 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 towards realising the objectives of the Township Economy Development Act.

“This partnership will broaden access to funding for township-based SMMEs, particularly as we will be working 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 Lehutso is a Moneyweb intern.