Small Enterprise Finance Agency (sefa)

Funding a future for SMMEs


For many small businesses operating in a challenging economy, access to finance may often seem unattainable due to either a lack of collateral or security required by most financial institutions to reduce their risk profile.

Addressing this market gap, the Small Enterprise Finance Agency (sefa) strives to be a catalyst for the development of these sustainable small-,
micro- and medium-sized businesses with the provision of finance, capacity building and the necessary business support needed to enhance their growth.

As a subsidiary of the Industrial Development Corporation (IDC), sefa was established in April 2012 in terms of Section 3(d) of the Industrial
Development Corporation (IDC) Act of 1940. sefa was formed from a merger of Khula Enterprise Finance Agency and the South African Micro-Finance Apex and consolidation of small business activities of the IDC. sefa has a primary mandate to foster the establishment, development and growth of SMMEs and cooperatives, and contribute towards poverty alleviation, job creation and economic oversight.

“sefa targets population groups that experience high levels of unemployment and are often not funded by private sector financial institutions due to high levels of risk. These groups comprise mainly of black women and youth-owned SMMEs and cooperatives, particularly those operating in rural areas including rural towns and peri-urban townships,” explains Vuyelwa Matsiliza, Executive Manager for the Wholesale Lending Division at sefa.

“During the 2015/16 financial year, disbursements to SMMEs and cooperatives through wholesale lending channels amounted to R770.7 million. Of that total, 74% benefitted black-owned businesses, 47% went to businesses owned by women and close to half was Funding a future for SMMEs
disbursed to businesses operating in priority rural provinces and about 21% to youth-owned businesses.”

Operating under the authority of the Department of Small Business Development (DSBD), sefa works to form strategic partnerships in order to allow for both government and the private sector to assist with the challenges faced in enterprise development. According to Matsiliza, the DSBD is expected to play a major role in facilitating collaborated efforts for small business and cooperatives development and financing between sefa, the Small Enterprise Development Agency (Seda), the public sector, the private sector as well as other international organisations to enhance the overall impact and contribution of SMMEs and cooperatives in the economy.

“We do, however, have to consider constraints on both human capital and our budget, hence our partnerships with those who can provide financing and address the challenges that SMMEs face. You often see, from reading the papers, the high failure rate of SMMEs, which is why we need partners who can assist in addressing the shortcomings so many businesses face,” she says.

A department within sefa’s Wholesale Lending division, Micro-Enterprise Finance, provides enterprise loans through intermediaries and other strategic partners, which range from R500 to R50 000. The SME Wholesale Lending and Cooperatives department caters for larger operations, providing funding to SMEs and cooperatives through partnerships in the form of loans and equity investment up to the value R5 million.

Emerging miners or farmers can also borrow up to R15 million/R20 million from the Anglo American sefa Mining Fund or the Land Reform
Empowerment Fund respectively.

“We also have Khula Credit Guarantee SOC Limited, a subsidiary of sefa, which is responsible for offering credit indemnity to commercial banks and other financial institutions for loans extended to SMEs. It is used as a collateral cover for SMEs that qualify for commercial banks loans, but cannot present adequate security. The credit guarantee to these institutions per individual SME transaction is up to R5 million,” Matsiliza explains.

sefa has partnered with a number of private sector players to develop innovative new products in an effort to expand their reach and intensify their impact. These partnerships include a recent collaboration with Coca Cola Beverages South Africa to fund its new logistics and distribution partners (MLPs) and introducing containerised small retail outlets, which target young people in rural and peri-urban areas with the aim of establishing townshipbased soft drink networks.

“We are collaborating with the Dr Kenneth Kaunda District Municipality to fund a waste recycling plant. In addition, partnership with Super Grand will channel funding towards the expansion of poultry production by primary cooperatives. We have also recently started to pilot a sefa credit system for direct lending to the informal sector through our fresh produce market partnerships in Mangaung in the Free State and Durban. The intention is to roll out the sefa credit system to other markets and retail outlets, following the successful completion of this pilot,” she says.

sefa is also investigating alternative channels for micro-enterprise finance alongside private sector partners to serve the information technology
and communications industry as well as the retail sector.

“In conjunction with the DBSA, we have also created the sefa Botala Facility, which caters specifically for the needs of green businesses. By providing funding to SMEs who operate in the green economy, we hope to accelerate the greening of the economy as well as provide social benefits through the creation of an ecosystem that allows small-scale installers, technology providers and integrators to thrive,” says Matsiliza.

Another successful partnership for sefa is the Godisa Supplier Development Fund, an enterprise development fund created in partnership with Transnet and Anglo American in order to promote sustainable enterprise development and business growth as well as job creation amongst black-owned Transnet suppliers in rail manufacturing, freight logistics and related services, with a specific focus on developing women, the youth and people with disabilities.

“These partnerships are formed in order to develop and support the sustainability of small businesses, addressing high levels of unemployment,
poverty and inequality. The benefits derived from sefa partnerships include the certainty that our loans to SMMEs are appropriately used and repaid, partly thanks to the strong relationship that these intermediaries have with the end users.

“Furthermore, these partnerships provide sefa with sustainable deal flow and sectorspecific technical knowledge."

“We are also afforded a deeper understanding of the specific needs of SMMEs and cooperatives, and we are able to extend our reach to outlying areas."

“We have also embarked on a programme with the Absa Bank to harness the opportunities presented by the B-BBEE codes. In addition, an in-house Enterprise and Supplier Development Fund is being established to leverage on the private and public sector capital for the future benefit of SMMEs and co-operatives,” she says.

Responsible for the broader performance of the Wholesale Lending Division, and tasked with ensuring that annual targets are met, Matsiliza started her career as a teacher for five years before going back to university where she completed her Honours in Economics—Cum Laude.

“I have also undertaken a number of extensive training programmes over the years, aimed at developing some of the critical skills needed in my industry. These include reserves management, treasury management, asset and liability management, project and corporate finance, social investing, monitoring and evaluation and SME financing. I have learnt a great deal about leadership and treasuries from positions held at the South African Reserve Bank, the Development Bank of Southern Africa and the Public Investment Corporation.

“I have always set very high goals for myself and I do my best to achieve them. Being selfmotivated, honest and determined has also helped me tremendously in achieving my objectives,” she concludes. 

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