Funding for Black Entrepreneurs from Government Grants & Funds
Government funding has been created to extend finances to previously disadvantaged South African’s in order to develop black economic development. Your much needed capital investment could come from government funding opportunities. Financing a small business, whether you’re starting-up or trying to expand, is a challenge all entrepreneurs go through. Here are a few examples of government funding that focuses on black entrepreneurs:
National Empowerment Fund (NEF)
The NEF is, a part of the government’s development mandate to encourage black participation in business and entrepreneurship. It helps to assist black entrepreneurs in achieving funding. This fund aims to assist black youth, women and men, communities and businesses to achieve sustainable success.
Types of NEF Funding
The NEF has four main channels of funding that consist of subdivisions. These are:
A. iMbewu Fund:
- This consists of subdivision is entrepreneur finance, procurement finance and franchise finance.
- This fund supports black entrepreneurs who are starting up a new business or expanding an existing one.
- This contribution takes the form of offering debt counselling, quasi-equity and equity finance products.
- The funds contribution ranges from R250 000 to a maximum of R10 million
B. uMnotho Fund:
- This NEF funding has subdivisions in finance, new venture finance, expansion capital, capital markets, and liquidity and warehousing.
- This fund is available to black entrepreneurs who manage or own businesses, new ventures, expanding existing business. It is also available to black entrepreneurs who want to buy a share of equity in black and white owned businesses.
- The contributions from this fund range from R2 million to R75 million.
C. Rural and Community Development Fund:
- This NEF fund has subdivisions in acquisition, new venture capital, expansion capital and start-up/green categories.
- The creation of this government fund is to promote sustainable change in social and economic relations along with supporting and developing the rural economy by financing sustainable enterprises and co-operatives.
- This NEF funding ranges from R1 million to R50 million.
D. Strategic Projects:
- This NEF fund has subdivisions of empowerment objectives.
- The aim of the government fund is to increase black participation in early-stage projects.
- These projects need to have economic merit and the ability to deliver on the government’s development mandate.
Industrial Development Corporation (IDC) Funding
IDC funding is available to those who have an existing business or wish to start a new one; those that have the visions of job creation along with serving previously disadvantaged communities.
The IDC achieves its goals by providing finance for industrial projects, promoting partnerships between and across industries within SA and internationally. It focuses on projects that finance and facilitate, that lead to the creation and innovation of new industries. It also focuses on diverse expertise to drive growth in priority sectors and to take on higher-risk funding projects.
The IDC supports B-BBEE and actively boosts and promotes black-owned and managed business along with those with employment equity. It aims at developing the skills of black employees and business owners, by supporting local, regional, provincial and national government projects.
The Different Types of IDC Funding
1. Development Funds.
- These funds aim at supporting projects that will have high long-term impacts on the economy through growth.
- Its aim is to bring projects out of the informal sector and into the economic mainstream.
2. Agro-Processing Competitiveness Fund
- This government fund provides support and helps businesses to achieve increased competitiveness, business growth, job creation and development in the agro-processing and beverages industries.
3. Product Process Development Scheme (PPD)
- The aim of this fund is to provide financial support to micro and small enterprises where the total assets are below R5 million, annual turnover is less than R13 million, and the business employs less than 50 people.
- The fund intends to promote innovation and technology development with financial support.
4. Risk Capital Facility Programme
- IDC Funding aimed at providing risk finance to businesses owned by previously disadvantaged individuals that offer substantial job creation potential.
This programme provides three channels of funding:
1. Direct channel operating alongside IDC’s mainstream business
2. Through a niche fund channel
3. Third party channel.
5. Transformation and Entrepreneurship Scheme
- This fund finances marginalised groups of South Africans such as women and the disabled.
- The aim of the fund is to gain access to finance that will help to develop and grow your business as a start-up or through expansions or acquisitions.
- This IDC funding also offers mentorship and non-financial support including business planning, training and mentorship.
6. Green Energy Efficiency Fund
- The fund aims at improving energy efficiency and helping South Africa become a low-carbon economy.
- It aims to drive down energy related costs, improve production capacity, operational effectiveness and competitiveness, which would aid in job creation.
Small Enterprise Finance Agency (SEFA)
Do you have an existing small business or want to start one? SEFA are piloting direct finance to entrepreneurs wanting to start or grow a business.
Types of SEFA Funding
SEFA provides direct funding to business in loans between R50 000 and R3 million in three different ways: Directly to business owners, via retail finance intermediaries, and through banks using credit guarantee schemes including Khula.
1. Bridging loans
- These are short-term loans, which provide working capital.
- The types of working capital offered by this government fund include stock purchases and operating overheads. This loan is offered for only one year.
2. Term loans
- This government fund is a loan of a specific amount and has a specified repayment schedule, amount and interest rate.
- This type of SEFA funding is normally used to finance your assets that have a medium to long-term lifespan, for example machinery, vehicles, office equipment.
- Term loans can be used to expand your business or for acquisitions.
- This loan has a repayment range of one to five years.
3. Structured finance
- Use this SEFA facility for funding that falls outside the parameters of the term and bridge loans.
- Provided by a debt facility, it can be repaid over a period of five years and tailored to your unique requirements.
- The following businesses can’t apply from the benefits of this fund: Liquor, tobacco, gambling, sex trade, armaments, speculative real estate, leveraged buy-out funds, and illegal trade.
- This includes any business activity that would tarnish SEFA’s reputation, political organisation, entrepreneurs under debt review, insolvent business owners and business.
The Isivande Women’s Fund (IWF)
This government fund aims at accelerating women’s economic empowerment by supplying cost effective, user friendly and responsive, available finance. The IWF offers support services to improve the success of your business.
It targets a business that is starting up, expanding, rehabilitating, franchising and those that need bridging finance. The aim of the fund is to create self-sustaining black and women owned businesses by offering you primary financial and non-financial support.
Khula SME Fund
Offered by Khula Enterprise Finance Ltd, this government funds aim is to grow and increase sustainability of small businesses.
The purpose of the fund is to:
- Offers SME’s early-stage and expansion capital.
- Offer early-stage debt funding to business that meet the criteria.
- Support SME’s in rural and peri-urban areas.
- Improve the business owners’ access to finance.
- Grow businesses so they can create new jobs.
- Encourage meaningful economic involvement of black South Africans.
- Foster entrepreneurship for men and women within the SME sector.
Black Business Supplier Development Programme (BBSDP)
The Black Business Supplier Development Programme (BBSDP) is a cost-sharing grant that offers black-owned businesses improve their competitiveness and sustainability.
This government grant does not support start-ups, only the expansions of existing business.
The aim of this government grant is to fast-track small and micro-enterprises encourage links between black-owned businesses, corporates and public sector as well as to complement affirmative procurement and outsourcing. It provides black entrepreneurs with a grant to a maximum of R1 million.