In a move stated to be one which is expected to grow the South African economy, President Cyril Ramaphosa has unveiled a fund which exists as a result of concerted efforts by some of the Southern African nation’s businesspersons, to invest in Small and Medium Scale Enterprises and startups operation in the country.
Designated as the SA SME Fund, the initiative stemmed from the CEO Initiative, which was set up by the heads of major firms to find solutions to some of the most significant bottlenecks bedevilling the country’s economic growth, particularly in the SME sector.
Per Ramaphosa’s launch speech in Johannesburg: “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.”
The fund which is equivalent to SAR 1.4 Bn comprises pledged from South African businesses, with SAR 725 Mn (USD 50 Mn already committed. According to the CEO of SA SME Fund, Ketso Gordhan, the fund will be the largest institutional investor in venture capital in South Africa by August.
The scheme has plans to pump funds into SMEs with turnover between USD 1.40 Mn and USD 35.23 and will support ten prominent black businesses, 200 SMEs, and five black entrepreneurs over the next five years. In semblance to all VC funding initiatives, this initiative will as well help in the mentoring of the said enterprises to be invested in.
Ramaphosa said: “the ecosystem is broader than just funders — funders that will create the impact process that is required. What we are seeking to do is address the challenge our country faces of unemployment, which is huge. There are certain initiatives we can embark on to address the unemployment challenge”.
The funding which comes at a time when unemployment in South Africa is at 27.7 percent and its economy set to grow under 2 percent, is under the leadership of the country’s top-echelon business leaders, with Discovery CEO Adrian Gore as its chairperson, and celebrity banker Michael Jordaan as it fund’s investment committee head.
In a world where the small businesses regarded as the lifeline for the economy, the World Bank has seconded the position by saying that: SMEs play a significant role in most economies, particularly in developing countries. Formal SMEs contribute up to 60% of total employment and up to 40% of national income (GDP) in emerging economies. These numbers are significantly higher when informal SMEs are included.
At the launch, Gore said: “With this fund, small and medium enterprises with growth potential would be identified and put through partnerships with our members, who would offer them support and access to new markets. The fund is about creating the growth for black businesses and building them into companies that would contribute to employment, which is the biggest problem facing the country.”