R300m fund a game changer for township property businesses
|Published
Johannesburg – In South Africa, there are more than two million formal and informal small businesses. The majority of these businesses are township based.
This network of business and consumer ecosystem is known as the Kasi Economy. The sheer number of these entrepreneurial enterprises presents a real opportunity to transform the battered South African economy and provide much-needed unemployment.
One of the obstacles preventing these businesses from thriving is their inability to access funding from the formal banking sector.
Without this funding, it becomes difficult for entrepreneurs to grow their businesses, create jobs or participate meaningfully in the economy.
The Gauteng Provincial Government, the Industrial Development Corporation (IDC) and the SA SME Fund have partnered to try and address this by launching the SMME Crisis Partnership Fund, in the form of an R300 million debt fund for small businesses based in Gauteng townships.
Mr Parks Tau, Gauteng MEC for Economic Development, said: “Today’s launch of the SMME Crisis Partnership Fund is part of our deliberate approach to reignite the township economy and elevate it to respond to the current needs of society.”
Today we launched the R300 Million SMME Partnership Fund, as part of our efforts to derisk township based SMMEs to allow them to fully become players in the market. We have practicalised the fund through Indlu Living with the Backyard Real Estate; as depicted in the last picture pic.twitter.com/d1xBRo8bLz
— Parks Tau (@TauParks) October 5, 2022
Each of the partners has contributed R100 million towards the Fund. The Gauteng Provincial Government’s share provides the first-loss guarantee, meaning it will assume the first portion of any losses.
The model leverages Government’s underused first loss capital to attract private sector funding and is seen be a possible game changer by all the partners involved.
It is expected to address the economic inclusion of township businesses in Gauteng, and secondly, it provides a blueprint which can be replicated and scaled in other provinces and nationally.
It is an effective way of leveraging different skill sets and pools of capital to support entrepreneurs and help SMMEs grow.
The Fund is already committed to six intermediaries, with a seventh in the pipeline. Three intermediaries, Indlu Living, Profit Share Partners and Crede Capital Partners, have already finalised their agreements.
These intermediaries will facilitate the provision of working capital and asset finance to hundreds of small businesses and entrepreneurs.
One of the intermediaries, Indlu Living, is an excellent example of how capital can be used to fundamentally change the lives, livelihoods and landscape of townships countrywide. It will also address the housing crisis head-on.
Indlu Living provides micro property and backyard developers in townships with an all-encompassing rental management software, finance and property development solution.
This partnership allows landowners to fund the building of beautifully designed and rental backyard rooms. The businesses can then use the rental income that is generated to service the loans.
Tau believes that the partnership with Indlu Living will go a long way in developing property businesses in Gauteng.
“For many years, township property owners have struggled to get flexible and risk-free funding to build backyard rental flats. We are working in partnership with Indlu Living to provide that assistance to property owners,” he said.
This will create a larger pool of township-based property entrepreneurs.
Additionally, it will also benefit an ecosystem of other small businesses, Service providers, such as builders, electricians, and cleaning services, providing further work and income for other entrepreneurs.
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