Business Opportunities in the Energy Sector Workshop - Mpumalanga Bundu Lodge 28 th August 2014 Name of the presenter: Sabelo Mamba – Regional Manager
Overview and Background Challenges that led to the establishment of sefa • Limited success in fostering a strong and large SMME sector • Weak small business performance • Poor uptake of Khula and Samaf products • Poor visibility among small businesses • Duplication of services amongst government agencies • High cost of delivering financial services to SMMEs 2
Overview and Background (Cont) Establishment of sefa • Cabinet support for an integrated approach • sefa was established on 1 st April 2012 as a wholly owned subsidiary of IDC (merger of Samaf, Khula and the small business activities of the IDC) • Established in terms of IDC Act • Shareholder compact between IDC and EDD incorporates sefa • sefa ’s Corporate Plan informed and guided by a number of Legislative and Policy Prescripts (eg New Growth Path, Outcome 4 and other National Imperatives and legislation) 3
Organisational Framework Board of Directors, sefa Management, Risk & Compliance, Credit Controls, Audit & fraud Human Capital Management, IT Systems, Stakeholder Relations & Communications, Customers SMMEs and Co-operatives R500 R5m Distribution sefa’s Regional Offices, RFIs, MFIs, FSCs, Commercial Banks, Specialised Funds, Channels Provincial Development Corporations (PDCs), Post Office, & Post Bank Direct Lending Products Wholesale Financing Capacity Building Services Working Capital loan, Finance and Procurement Business Loans – Product Portfolio Corporate Governance (RFIs/MFIs/FSCs/FIs), prevention and Legal (RFIs/MFIs/FSCs/FI’s) - Enabling/Support Asset finance, Institutional Joint Ventures/Equity Strengthening, Term loans, Funds, Pre Post loan Revolving loan, Credit Guarantee mentoring, Scheme, Bridging loan, Land Reform Short-term trade Empowerment Fund finance sefa’s values: Kuyasheshwa, Passion for development, Integrity, Transparency, Innovation Mission : to provide simple access to finance in an efficient and sustainable manner to survivalist, micro, small and medium enterprises throughout South Africa. Vision: To be the leading catalyst for the development of sustainable Survivalist, Micro, Small and Medium enterprises through the provision of finance. 4
Mandate Overarching Mandate To promote the establishment, survival and growth of SMMEs and thus contribute towards poverty alleviation and job creation. Legislative Mandate “To foster the development of Small and Medium Enterprises and Cooperatives;” as stipulated by the IDC Act s(3)(d). 5
Target Market sefa ’s target market consists of small businesses that have been failed by the existing formal banking and finance sector. These include: • Survivalists and microenterprises – those requiring loans of anything between R500 and R50 000 • Small enterprises – loans between R50 000 and R1 000 000 • Medium enterprises – loan between R1 000 000 and R5 000 000 6
Targeted Group Funding • 30% of funding disbursed targeted towards youth-owned enterprises. • 45% of funding disbursed targeted towards priority rural provinces. • 40% of funding disbursed targeted towards women-owned businesses, progressively increasing in subsequent years. • 70% of funding disbursed targeted towards black-owned businesses. 7
Overall Strategic Objectives The strategic objectives of sefa are to: 1. Increase access and provision of finance to small businesses and thereby contribute towards job creation. 2. Develop and implement a national footprint for effective product and service delivery. 3. Build an effective and efficient sefa that is a sustainable performance driven organisation. 4. Build a learning organisation . 5. Build a sefa that meets all legislative, regulatory and good governance requirements. 6. Build a strong and effective sefa brand emphasizing accessibility to 8 SMMEs
Products & Services - Wholesale Lending Product Description Business Loans Partnership with Non Bank Financial Intermediaries for on-lending to SMMEs (eg sefa provides loan to SEF, who lends money to micro enterprises) Funds/ Joint Ventures Partnership with mainly private sector entities for on-lending to SMMEs (e.g. sefa’s partnership with Anglo to provide finance to small mining contractors) Credit Indemnity Scheme sefa provides guarantees to banks, enabling loans to small businesses that do not otherwise have sufficient collateral/security to support facilities. Land Reform Facility through which sefa lends money to Empowerment Fund commercial banks and other reputable (LREF) agricultural lenders for on-lending to land reform beneficiaries 9
Products & Services - Direct Lending Product Description Revolving/Bridging Loans To facilitate short term capital requirements or bridging finance for delivery of contracts or orders (eg a small business gets a contract to supply stationery, but needs finance to buy the stock) Asset Finance For acquisition of fixed assets (eg a small business needs a new machine. sefa provides a loan, repayable over 5 years) Term Loans To finance longer term business expansion requirements and specific capital acquisitions (similar to asset finance, but not necessarily linked to a specific machine) Working Capital To finance purchase of stock, overheads, etc (eg sefa provides a shorter term loan (3 years) to a small shop to buy stock needed to expand) 10
Products and Services - Non Financial Services Product Description Post-loan Business This service is only provided to SMMEs that have Support Programme benefitted from facilities provided by sefa and its financing partners as a risk mitigating intervention (e.g. sefa provides a mentor to a small business to assist with specific aspects of running the business) Institutional Aimed at providing institutional strengthening and Strengthening Grants technical assistance to Financial Intermediaries (eg grant funding provided to an intermediary to assist it in improving its systems) 11
Wholesale Lending Short Term Initiatives • Partner with stronger financial intermediaries and recapitalise • Sign agreements with financial institutions and increase utilization of the Credit Indemnity Scheme • Continue with the review of the wholesale lending portfolio, including the consolidation of intermediaries • Expand wholesale offering through partnerships targeting specific sectors and/or markets • Introduce new products that are aligned to intermediary needs that meets sefa ’s developmental objectives • Influence interest rate charged by intermediaries to SMMEs to meet sefa’s developmental objectives • Institutional strengthening of intermediaries through targeted capacity building grants and technical support • Target specific co-operative markets • Finalise the wholesale lending division’s structure and placements • Review the financial modeling for the wholesale lending division 12
Funding and pricing strategy • sefa ’s pricing strategy will be developmental in nature. • The pricing will be affordable to small businesses, incorporating an appropriate discount for developmental impact, whilst ensuring the sustainability of the institution. • Continued support via grant funding is required to offer some of the products (e.g. Credit Indemnity) 13
Delivery Network Existing sefa offices Existing Retail Financial Intermediaries Existing Micro- finance intermediaries Planned sefa branch/ satellite offices (branch office is a small staffed office. Satellite office is a desk in eg. seda/Post Office, manned at specific times.) Cities/towns 14
THANK YOU NELCITY BUILDING – OFFICE U5 (First Floor) Cnr Samora Machel Drive and Paul Kruger St - Nelspruit, Tel: 013 755 3923 / 013 755 2370 / 013 755 2648 Cell: +27 83 452 3439 sabelom@sefa.org.za www.sefa.org.za
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