GOVERNMENT FUNDING AGENCIES IN SOUTH AFRICA
In a bid to grow entrepreneurship in South Africa, a number of government agencies provide financial and non-financial support to qualifying enterprises and individuals.
TYPES OF GOVERNMENT FUNDING AGENCIES IN SOUTH AFRICA
INDUSTRIAL DEVELOPMENT CORPORATION (IDC)
The IDC is a national development finance institution set up to promote economic growth and industrial development. They offer loan amounts of a minimum of R1-million with a maximum of R1-billion per project allowed.
Lending criteria: Startup businesses, including funding for buildings, machinery and working capital for businesses operating in South Africa. Existing businesses can also apply for expansionary purposes. Over 50 percent ownership by persons under 35 years of age. Businesses must demonstrate economic merit and have prospects of acceptable profitability to be able to service their obligation. Broad-Based Black Economic Empowerment certification from an accredited verification agency, where applicable.
Priority sectors: Green industries (renewable energy, energy efficiency and waste management and recycling), agricultural value-chain, manufacturing activities (clothing, textiles, pharmaceuticals, plastics and chemicals), strategic high-impact projects (logistics industrial infrastructure, mining value-chain, tourism and high-level services, media and motion pictures, knowledge economy – ICT, and biotechnology).
Funds:
- The Green Fund aims to improve the South African SMEs energy efficiency and the country’s green economic development.
- The Green Energy Efficiency Fund (GEEF) supports entrepreneurs and businesses that want to invest in energy efficiency and renewable energy technologies in energy intensive sectors including manufacturing, mining and agro-processing.
- The Agro-processing and Agriculture Strategic Business Unit (SBU) invests in the development of projects and businesses that either create new or expand local manufacturing capacity.
- The Technology Venture Capital Fund provides equity or debt funding to emerging technology-focused businesses to enable the conversion of technology-rich South African intellectual property into a market-ready product.
- The Automotive and Transport Equipment fund provides a minimum of R1-million (in the form of equity) to the manufacturer or the assembler of automotive and transport equipment to build global competitiveness.
- IDC’s Strategic Business Unit (SBU) for clothing and textiles offers support to a variety of businesses across the sector, ranging from creators of home decor to leather goods producers, to manufacturers of natural or synthetic fabrics.
- The Chemical Products and Pharmaceuticals Fund – provides finance to stimulate the growth of the manufacturing sector (for chemical, plastics and pharmaceutical products).
- The Machinery and Equipment Fund aims to improve the competitiveness of downstream manufacturing of machinery and capital equipment where it can be shown that the products have the potential to expand to new markets, as well as create new jobs. Funding is in the form of a minimum equity investment of R10-million.
- The Youth Pipeline Development Program – is an IDC Special Scheme business support and grant funding programme that assists potential applicants to improve the readiness of their proposal, and thereby increase their probability for IDC consideration.
SMALL ENTERPRISE FINANCE AGENCY (SEFA)
Sefa provides financial and business support to numerous SMEs and cooperatives throughout the country, furthering the development of existing enterprises or the establishment of new enterprises.
Lending criteria: Businesses must show economic and financial viability (demonstrated or potential), must operate within the borders of South Africa. The fund only offers debt financing and no equity instruments.
Priority sectors: Entrepreneurs in the following sectors: green industries, agricultural value-chain (agro-processing and primary agriculture – cash crops only), manufacturing, small mining value chain (mineral beneficiation), tourism, information technology and retail and wholesale of product.
Funds:
- The Tourism Equity Fund provides either grants or debt funding for companies owned by black women and disabled entrepreneurs, in an attempt to reignite an industry decimated by COVID-19.
- The Amavulandlela Funding Scheme is designed solely for entrepreneurs with disabilities.
- The Youth Challenge Fund (YCF) is a youth start-up support programme intended to stimulate the establishment and growth of youth-owned businesses, promote digital skills, grow the economy and foster job creation.
- Asset Finance solutions to finance a wide range of new and/or used moveable assets.
- Bridging Loans to an enterprise to finance its working capital, such as stock and/or operating overheads.
- Revolving Loans facilities to be used for operating purposes and the loan amount varies from month to month, depending on the client’s current cash flow needs.
- sefa’s Term Loans offer businesses the cash they need to buy other forms of moveable assets.
- The Inyamazane Funding Scheme is targeted at small and medium-sized enterprises and co-operatives with at least 50 + 1% ownership by military veteran entrepreneurs.
SMALL ENTERPRISE DEVELOPMENT AGENCY (SEDA)
SEDA is tasked with developing, supporting and promote small enterprises throughout the country, ensuring their growth and sustainability.
Priority sectors: Green industries (renewable energy, energy efficiency and waste management and recycling), agricultural value-chain, manufacturing activities (clothing, textiles, pharmaceuticals, plastics and chemicals), strategic high-impact projects (logistics industrial infrastructure, mining value-chain, tourism and high-level services, media and motion pictures, knowledge economy – ICT, and biotechnology).
Funds: GOVERNMENT FUNDING AGENCIES IN SOUTH AFRICA
- The National Gazelles programme forms part of the government’s efforts to support the country’s SME sector and aims to produce high-growth businesses that will make a dent on the country’s rising unemployment and help grow the economy.
- Seda Technology Programme (Stp) is responsible for the provision of both financial and non-financial technology transfer, business incubation and quality support services for small enterprises in specific industries, such as in ICT, aluminium, platinum and bio-diesel
NATIONAL YOUTH DEVELOPMENT AGENCY (NYDA)
The organisation offers microfinance grants for survivalist youth entrepreneurship, and cooperative grants for greater participation of youth in the cooperatives sector.
The objective of the grant programme is to provide young entrepreneurs with an opportunity to access both the financial and non-financial business development support to establish their survivalist businesses.
Priority sectors: The types of businesses assisted through the grant programme are mainly: artisan skilled entrepreneurs.These include, but are not limited to, motor mechanics and panel beaters, electricians, plumbers, domestic appliance repair services, beauticians, hairdressers, cleaning companies, small scale recycling companies, street vendors, car washes and others.
Funds:
The NYDA grant finance starts from R1 000 to a maximum of R200 000 for any individual or youth co-operative. Young people interested in accessing the grant programme will have to commit to participating in the NYDA mentorship and voucher programme for a minimum of two years. The program consists of both pre and post-approval assistance.
NATIONAL EMPOWERMENT FUND (NEF)
The NEF is tasked with promoting and facilitating black economic participation by providing financial and non-financial support to black empowered businesses, and promoting a culture of savings and investment among black people.
Lending criteria: The NEF provides business loans from R250 000 to R75-million across all industry sectors, for startups, expansion and equity acquisition purposes.
Priority sectors: All industries, including but not limited to ICT, tourism, transportation, textile industry, services, retail, property, printing services, motor industry, mining services, media, manufacturing, agro processing, energy, financial services, food & beverages.
Funds: GOVERNMENT FUNDING AGENCIES IN SOUTH AFRICA
- The NEF Women Empowerment Fund is aimed at accelerating the provision of funding to businesses owned by black women across a range of sectors, for startups, expansions and equity acquisition purposes.
- The iMbewu Fund supports black entrepreneurs wishing to start new businesses as well as supporting existing black-owned enterprises with expansion capital.
- The uMnotho Fund that is designed to improve access to BBBEE capital.
- The Rural and Community Development Fund that supports growth and development in rural economies by financing sustainable businesses.
- The Strategic Projects Fund that is informed by government strategies and aims to support the government economic growth strategy.
- The Tourism Transformation Fund is a dedicated capital investment mechanism that will support black investors and communities to develop and expand tourism related projects.
TECHNOLOGY INNOVATION AGENCY (TIA)
The Technology Innovation Agency (TIA) was established in terms of the TIA Act 26 of 2008, with the objective of stimulating and intensifying technological innovation in order to improve economic growth and the quality of life of all South Africans.
Lending criteria: The NEF provides business loans from R250 000 to R75-million across all industry sectors, for startups, expansion and equity acquisition purposes.
Priority sectors: Focus areas include health, agriculture, bio-economy, natural resources, energy, ICT and manufacturing.
Funds:
- The Seed Fund grant is non-repayable and is provided to support projects run within a higher education institution (a level of outsourcing to third-party suppliers is permitted) or to spin-off companies that are based on IP emanating from this institution.
- The Technology Development Fund provides funding to advance technologies from proof of concept to technology demonstration.
- The Pre-Commercialisation Support Fund assists existing or potential individual entrepreneurs and Small Micro Medium Enterprises to obtain funding to support pre-commercialisation activities including the development of production/service capacity to levels that will support operational sustainability.
DEPARTMENT OF TRADE, INDUSTRY AND COMPETITION (DTIC)
The dtic and its subsidiary agencies are involved in promoting economic development, black economic empowerment, implementing commercial law, promoting and regulating international trade, and consumer protection.
Lending criteria: The dtic supports the development of sustainable, competitive enterprises through the provision of incentive programmes that support national priorities. All incentive schemes on offer by the Department of Trade, Industry and Competition (the dtic) have their own specific guidelines and qualifying criteria.
dtic Incentives schemes:
- Black Industrialists Scheme (BIS) aims to fast-track the participation of black industrialists in the South African economy.
- The Tourism Support Programme (TSP) is a targeted incentive scheme to support the development of tourism enterprises that stimulate job creation, and encourage a geographic spread of tourism investment, and black economic empowerment.
- The Agro processing Scheme aims to increase capacity, create employment, boost competitiveness and contribute to transformation in the food and beverage value addition and processing (including black winemakers), furniture manufacturing, fibre processing, feed production, and fertiliser production sectors.
- The Export Marketing Investment Assistance Scheme works to export markets for South African products and services.
- The Capital Projects Feasibility Scheme is a cost-sharing scheme, providing a contribution to the cost of feasibility studies aimed at increasing local exports.
- The Critical Infrastructure Scheme aims to leverage investment by supporting infrastructure.
- The Co-operative Incentive Scheme promotes cooperatives through the provision of a matching grant, and assisting them to improve the viability and competitiveness of their enterprises by lowering the cost of doing business.
- The Spaza shops and General Dealers Support Scheme was launched in partnership with Nedbank in April 2020 to offer financial and business support to general dealers or traditional grocery stores that are based in townships and villages.
- The South African Emerging Black Filmmakers Incentive aims to assist local emerging black filmmakers, to nurture and empower them to take on big productions and thus contribute towards the creation of employment.
- The South African Film and Television Production and Co-Production incentive assists local film producers in the production of local content.
- The Foreign Film and Television Production and Post-Production incentive seeks to attract foreign-based film productions to shoot on locations in South Africa and conduct post-production activities. Co-productions with international companies result in the direct investment of millions of rands into the economy.
- The Automotive Investment Scheme (AIS) is an incentive designed to grow and develop the automotive sector through investment in new and/or replacement models and components that will increase plant production volumes, sustain employment and/ or strengthen the automotive value chain.
- The Aquaculture Development Enhancement Programme (ADEP) is an incentive programme available to South-African-registered entities engaged in primary, secondary and ancillary aquaculture activities in both marine and freshwater
- The Sector-Specific Assistance Scheme (SSAS) is an upfront and reimbursable cost-sharing incentive, which grants financial support to registered sector coordinators that are recognised by the dtic, supporting the development of industry sectors and contributing to the growth of South African exports.
- The Capital Projects Feasibility Programme (CPFP) is a reimbursable cost-sharing grant that contributes to the cost of feasibility studies likely to lead to projects that will increase local exports and stimulate the market for South African capital goods and services.
- The Global Business Services (GBS) incentive programme was designed to ensure that South Africa offers a globally competitive business case to investors.
- Special Economic Zone (Sez) Programme. SEZs are geographically designated areas of a country set aside for specifically targeted economic activities, and supported through special arrangements (that may include laws) and systems that are often different from those that apply in the rest of the country.
