Can a R1bn funding breakthrough negate trade challenges?

Small and medium businesses – the heartbeat of South Africa’s economy – are set to benefit from a new R1 billion financing model.

South Africa has around three million medium, small, and micro-entrepreneurs, employing around 13.4 million people, according to FinScope.

Although the sector has an estimated turnover of over R5 trillion and accounts for 80% of the workforce, companies classified as medium, small, and micro-entrepreneurs are often financially excluded, underscoring the necessity for targeted interventions, FinScope said.

Almost R1 billion has now been unlocked for SMEs through a new financing model that blends state and pension fund capital, said Miguel da Silva, group executive of Business Banking at TymeBank.

“A collaboration between National Treasury and the pension fund industry has successfully mobilised almost R1 billion for SME financing, suggesting a scalable model for addressing South Africa’s persistent funding gap,” Da Silva said.

The initiative leverages R90 million from the National Treasury's Jobs Fund to attract R900 million from pension funds through an innovative risk-mitigation structure.

National Treasury’s “10% buffer effectively transforms the risk profile of SMME lending, making it palatable for institutional investors managing R19.8 trillion in household wealth,” Da Silva said.

The money will flow to high labour-absorption sectors such as the green economy, sustainable agriculture, waste and water management, and the informal economy.

Previous Jobs Fund rounds, Da Silva noted, disbursed R7.4 billion, created more than 210,719 permanent jobs and 114,534 temporary roles, and supported over 63,000 SMEs.

But while fresh funding is flowing, structuring it properly amid global trade shifts may cut into growth.

Two years is how long it could take to help an entrepreneur get finance-ready before they can unlock government funding, seeking to reindustrialise South Africa in the face of US President Donald Trump’s punitive tariffs, said Uzenzele Holdings CEO Nadia Rawjee.

Rawjee explained that preparing a project to the point where commercial lenders and the Department of Trade, Industry and Competition will sign off on loans and incentives such as the Black Industrialist grant requires significant technical work.

Trade uncertainty is a key issue, given that South African goods exported to the US carry a 30% tariff while the African Growth and Opportunity Act (AGOA) expires in September.

“Export-oriented businesses are confronting a double challenge: the immediate uncertainty around AGOA renewal and the compounding effect of existing US tariff barriers,” Da Silva said.

Manufacturers in automotive components, agriculture, and textiles face the risk of losing duty-free access to the US, fundamentally altering trade economics.

There is at least one relief in the form of lower fuel prices.

“For logistics companies, manufacturers, and service businesses with significant fleets, these reductions translate directly into improved cash flow and margin recovery,” he said.

Da Silva said, “The timing of this relief, coinciding with the typically busy fourth-quarter trading period, should enable businesses to rebuild working capital reserves depleted by earlier cost pressures”.