Sefa plans to lend over R737m to 15 000 small businesses

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The Small Enterprise Finance Agency (Sefa) plans to disburse over R737 million to more than 15 000 small firms – most of these micro enterprises – by the end of the 2013/14 financial year, Sefa chief executive Thakhani Makhuvha said today.

Briefing the National Assembly’s portfolio committee on economic development on its corporate plan for 2013/14, Makhuvha, who was seconded from the Industrial Development Corporation (IDC) in November last year to head the agency, said the targeted funding will help create over 18 000 jobs.

In five years, the agency aims to have more than doubled lending and the number of business owners financed – with disbursements reaching almost R1.6 billion to over 34 000 small firms.

Sefa lends between R500 and R5 million to small, micro and medium enterprises by way of three means – directly to business owners, via retail finance intermediaries and thirdly via banks through its using credit guarantee scheme.

Makhuvha said the agency is expected to tomorrow meet with banks to hold a roundtable discussion on what the challenges are to expanding the scheme.

Retail finance intermediaries are also expected to attend the meeting.

The Khula guarantee scheme ground to a virtual halt following the 2008 Global Financial Crisis, when the number of defaults spiralled, leading banks to steer away from the scheme.

Added to this, the scheme has never topped 800 guarantees since its launch under Sefa’s forerunner Khula in 1996 – this while South Africa’s emerging market peers like Chile, Malaysia, India and Brazil lend out thousands of loans a year using credit guarantees.

Sefa also aims to complete the development of its direct lending product – which is currently still being piloted at a number of sites around the country – by the end of November this year.

Among Sefa’s other plans, the agency aims to:

  • Investigate the possibility of partnering with retail chain stores as well as government feeding schemes, as a way to expand its reach further into rural areas.
  • Improve a pre-loan support programme in partnership with the Small Enterprise Development Agency (Seda) and improve the uptake of its poorly performing credit guarantee scheme by July.
  • Partner with more provincial development finance agencies to add to the current partnership with the Gauteng Enterprise Propeller.
    • Expand the pilot project it has with the SA Institute of Chartered Accountants (Saica) in a programme which takes young graduates and trains them in how to assist small businesses, from Gauteng to KwaZulu-Natal and Mpumalanga.
    • Roll out a further nine branches or satellite offices per year, which would be co-located within Seda or IDC branch offices, to add to the 11 regional offices the agency already has.

Makhuvha said the cost of Sefa lending finance to business owners is also expected to fall – from 44c for every rand disbursed in 2013/14 to 25c for every year lent out in 2017/18.

Sefa will run awareness road shows with financial intermediaries – starting with Alexandra and Sandton in Gauteng this month and running to February next year with two road shows to be held in North West.

IDC chief executive Geoffrey Qhena said though all the structures for Sefa had been set up there were still hiccups in the merger that formed agency last year– that between Khula and the SA Microfinance Apex Fund (Samaf).

The IDC has committed over R987 million as a shareholder’s loan to the agency’s until the end of the 2014/15 year, with an option of a further R400 million capital injection in two years’ time.

Qhena stressed that the transaction had been structured as a loan and not a grant because there had to be a chance for the IDC of recouping the loan to ensure that Sefa funds sustainable businesses.

“What we are not planning on doing is that we give funding to Sefa and that they then become reckless,” he added.

Committee members today questioned the use of retail finance intermediaries, pointing out that they were concerned that using intermediaries results in driving up the costs of lending for business owners.

Committee chair Elsie Mmathulare Coleman said the Minister of Economic Development Ebrahim Patel had asked that the committee look more into the costs of lending through intermediaries.