The Sefa Innovation Fund
As per the Programme Financing Agreement (FA), signed between the South African government and the European Union, sefa was nominated as the entity to be responsible for the implementation of the Access to Finance component of the FA. This component aims to improve access to funding to the underserved high-risk Small and Medium Enterprises (SMMEs) with limited or no access to finance.
The Access to Finance component of the Programme was allocated Budget Support of EUR 30 million to be implemented through two separate funds which are:
(a) The Enterprise and Supplier Development Fund (EUR 10 million) and;
(b) The Innovation Fund (EUR 20 million).
A considerable amount of work has since gone into the implementation of the Enterprise and Supplier Development (ESD) Fund and sefa is currently in the process of finalising financial commitments with approved Financial Intermediaries.
The key strategic objective of the Innovation Fund (IF) is to create wholesale lending initiatives between sefa and different types of financial intermediaries that will be innovative in terms of being able to leverage private-sector funding to complement the IF budget. This will also be aimed at ensuring equitable risk sharing at a portfolio/transactional level with each intermediary, in order to enable access to funding for high-risk and underserved categories of SMMEs that have difficulties to access funding at an affordable price.
Work has now commenced on the development of the Innovation Fund implementation plan proposals, which upon completion will be presented to the Programme Steering Committee (PSC) for approval. sefa, together with the Ecosystem Development for Small Enterprises (EDSE) Technical Assistance Team (TAT), has scoped and is in the process of finalising proposals for the following sectors:
- Automotive Aftermarket and Spaza Schemes – which are microfinance-based schemes that will enable greater access to finance for SMMEs in these two sectors.
- Agriculture – intended to provide funding support for smallholder farmers in the Cotton and Essential Oils sectors to cover farming inputs and related items.
- Green Economy – intended to provide funding support for SMMEs in the Renewable Energy, Waste Recycling and Industrial Symbiosis sectors
- Information and Communication Technologies (ICT) – focussed on providing funding support for SMMEs in the ICT sector
- Medical Care/Healthcare Scheme – focussed on providing funding support for SMMEs that for example, supply medical devices and consumables to the sector.
It is expected that approvals for the Innovation Fund will be finalised before the end of November 2020, with implementation and operationalisation of the Fund commencing in the first quarter of 2021.