While President Cyril Ramaphosa’s launch of the R1,3 billion investment fund for SMEs is positive news, an economist has warned that this was not a silver bullet for all small business’ problems.
Andile Ntingi told Khwebo Online said the establishment of the fund is a step in the right direction because there is a scarcity of investment capital in South Africa to support black-owned enterprises.
“This development is exciting, but I am interested in knowing how is the fund different from the Credit and Equity Funding provided by the likes of National Empowerment Fund (NEF) and the IDC? How different is it to commercial banks? Will it provide cheap funding tailor-made for start-ups and businesses in their early stages”.
President Ramaphosa launched the fund at the Discovery’s head office in Sandton on March 29.
The fund will support prominent black businesses, five black entrepreneurs, and 200 SMEs giving them amounts ranging from R19.7 million to R495 million for the next five years. This funding also comes with mentoring programmes for these SMEs
Speaking at the launching Ramaphosa said: “This initiative is beginning to pay off and is operating at a level that matters most. SMEs create the jobs we need the most. It is the SMEs you are targeting, and that is precisely where we want you to keep your focus”.
“This will obviously boost SME sector, but I hope this fund will have a risk appetite to fund black businesses than what we have currently in the market. If the fund operates like other risk-averse funds, then it will not have an impact, said Ntingi.
He added that South Africa’s SMEs challenge is access to market opportunities. “Even if we address funding, there is also another bigger challenge of helping black businesses access procurement and supply chain opportunities in both the public and the private sectors. If you don’t have customers, you don’t have a business,” said Ntingi.
Ntingi felt opening up the economy to more black businesses to access procurement and supply chain is a better way to go. He said: “There are hundreds of thousands of black owned businesses in South Africa and R1.3 billion will never be enough to cater for all of them, some of these companies do not need capital, they just need contracts that get them to the next level”.
He added: “I hope the government also prioritises expanding the preferential procurement policy to ensure that it truly opens up the economy to black suppliers. This could be the most important thing that helps black businesses get to the next level”.