The National Empowerment Fund (NEF), an agency of the Department of Trade and Industry, has unveiled the Enterprise Development Fund (EDF) to invest in small, medium and micro black businesses by way of financial loans varying anywhere between R250 000 (US$37 000) and R75-million ($11-million).
The only real distinction between the EDF and various other agencies of the department is the fact that EDF raises its capital as a result of contributions by big businesses, who will shell out 3% of their annual profits in the project.
This simply means that big business is going to be assisting smaller ones get established.
The NEF has recently obtained funding of R2.3-billion ($298-million) coming from the Treasury, and is also getting excited about a prospective cash injection coming from the top 40 companies on the Johannesburg Stock Exchange. This sum of money could quite possibly meet or exceed R5.3-billion ($749-million).
Making contributions towards empowerment
Philisiwe Buthelezi, the fund’s CEO, stated: “We are thinking about creating a brand new industrial capacity by way of inputs driven by black South Africans.”
She revealed that the fund is designed to bridge the gap between advantaged and disadvantaged citizens – “not by taking from the haves, but stating the way we can partner to empower the have-nots.”
As a result of giving 3% of their profits, private establishments are going to generate points as an a assessed entity according to the Broad-based Black Economic Empowerment Act of 2003, which states that comapnies making contributions will earn a 15% weighting towards 100% compliance.
The financing is voluntary however if businesses do not comply, they have to deal with shedding their empowerment accreditation points.
Contribution will lead to specific tax benefits – firms that do conform will get a tax benefit of up to 10% off their taxable income for the reason that NEF is tax-exempt, as a result companies that commit to the fund defintely won’t be subject to a donations tax.
Lawrence Mavundla, president of the National Federated Chamber of Commerce and Industry, explained: “The legislation states that businesses need to contribute 3% when it comes to enterprise development and 2% ought to be allotted to corporate social investment.”
Mavundla depicted his expectation that big corporate will likely be prepared to contribute to the fund. “I sincerely hope the NEF will in addition provide post-funding mentorship to assist these small black companies to develop,” he added.
For the reason that a shortage of practical experience and skills can be described as risk to the success of small companies within a competitive industry – and quite a few of them do falter even after funding – post-funding mentorship can be considered as a means to fix this challenge.
Leading organizations which include Volkswagen, Chrysler, Bank of America, Merrill Lynch, Nestle and Edcon already have indicated interest in the fund, said the NEF.
“To make investments and expand the fund a business is required to sign a letter of participation, agreeing to pay out more than a minimum contribution of R5 million ($747 000),” explained Buthelezi.
Funding small business in South Africa
South Africa boasts a variety of agencies geared towards improving small businesses.
They range from the Small Enterprise Development Agency, which offers business development and support services for small enterprises; Khula Enterprise Finance, which happens to be associated with funding of small to medium enterprises; the Industrial Development Corporation, and others.
Young entrepreneurs aided
The inclusion of young entrepreneurs within the overall economy is in addition a national priority, reinforced by agencies for example, the National Youth Development Agency (NYDA).
Because of its major target group aged between 14 and 35 years, the NYDA endeavors to scale back unemployment within this age bracket, as well as boost social cohesion.
The NYDA assists young entrepreneurs to establish new businesses and even to develop established ones. It was actually introduced on Youth Day, 16 June 2009 by President Jacob Zuma and was the consequence of a merger between the Umsobomvu Youth Fund and the National Youth Commission.
Among the many NYDA accounts of success is the one about a 25-year-old Ntokozo Kenneth Ngcobo, who is the owner of Miazi CC, an electrical design and installation company. Miazi boasts a variety of big clients including Eskom and government departments.
Ngcobo said: “I believe my electrical engineering diploma and employment experience offered me a firm foundation in addition to make it possible for me to network with the relevant people.”
He explained that his objective for the next five years is to break into new markets, because he at present operates exclusively in his home town of Pietermaritzburg in KwaZulu-Natal.