Overview

Sedfa provides facilities to micro-finance intermediaries (MFI) to on-lend to micro and survivalist businesses requiring funding of up to R50 000 for the purpose of growing their income and asset base. Under special circumstances, and based on proper credit vetting and investment policy procedures, the amount may be up to R100 000 per single business/owner(s). These transactions occur in exceptional cases and are determined and assessed at the time of application. Prior approval will be required through the appropriate credit processes.

The business loans will be flexible and structured to meet the financing needs of MFI. Various equity instruments will be considered as part of the investment strategy into the MFI.

Eligibility criteria

To qualify for sefa funding, the MFI must be/have:

• A minimum of two years in operation, with the demonstration of microfinance lending 
• Early growth and established intermediary (start-up by exception) who display the potential to meet microenterprise needs and expectations in line with sefa’s mandate
• The institution’s ability to meet basic criteria and the extent of risk sharing with sefa. 
• Alignment of the institution’s operations to Sedfa developmental objectives 
• Must be registered and operate within South Africa and comply with all the laws that apply to legal entities in the Republic 
• Must comply with relevant statutory and regulatory requirements in terms of governance and compliance including a board, regulatory compliance, risk management policies, reviewers and all other governance requirements as per Companies Act. Institutional strengthening support will be provided where gaps have been identified 
• Lending to be in line with the National Credit Act with relevant and up-to-date registration.
• Key personnel – (eg. senior and executive management) must have the relevant investment and development finance credentials and no less than five years proven working experience as SMME investment analysts and/or microfinance specialists
• Loan methodology including policies and systems to be able to assess, disburse, monitor and collect on loans.
• Financial systems ability and appropriateness.
• A 5% to 10% own contribution as a percentage of the loan amount or capital commitment may be required.
• Must comply with B-BBEE codes of good practice
• Must be prepared to accept sefa interventions and business institutional support services.

Partners

• Small Enterprise Foundation | Mr Charl van Vuuren | 015 307 5835 | Charlie.vanvuuren@sef.co.za 
• Phakamani Foundation | Mr Eric Crawford | 013 750 0415 | Eric.crawford@phakamanifoundation.org
• Cede Capital | Mr Tshepo Mete | 012 991 3776 | Tshepo@cedecapital.co.za
• Agri Seed Capital (PTY) LTD | Mr Mpho Mathithibane | 073 135 9496 | mpho@agriseedcaptial.co.za
• Ezemali Afrika (PTY) LTD | Mr Chris Harito | 083 611 1839 | chris@financeafrica.co.za
• Sunrise Woman Development | Mr Happy Masuku | 072 612 4119 | happy.masuku78@gmail.com

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Overview

Sedfa engages with retail financial intermediaries (RFIs) who provide financing solutions to small- and medium-sized businesses within specific markets and/ or sectors that are not serviced by sefa’s direct lending activities.

The business loans are flexible and structured to meet the financing needs of the RFI. Various equity instruments, including self-liquidating, may be considered as part of the investment strategy into the RFI.

The transactional limit for first-time borrowers will be dependent on need up to R100-million or in line with sefa’s counterparty limit. This may be increased with approval from the shareholder.

Securities for the loan may include first cession of the loan book, power of attorney over bank accounts, mortgage bond over property, guarantees from third parties, personal suretyships etc.

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Overview

These joint ventures/partnerships are the basis for Sedfa’s wholesale proposition. The synergistic partnerships of cooperation, coordination and collaboration will not only reduce the risks associated with the market, but more importantly will allow both the government and the private sector to take responsibility for addressing the challenges of enterprise development.

Godisa Supplier Development Fund

The Godisa Supplier Development Fund is an enterprise development fund created in partnership with Sedfa and Transnet. The fund focuses on promoting sustainable enterprise development; business growth and job creation among black-owned Transnet suppliers in rail manufacturing, freight logistics and related services, with a specific focus on developing women, the youth and people with disabilities.

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Overview

The scheme issues a range of credit guarantee products to lenders (commercial banks and other financial institutions) for SMME borrowers whose access to finance is impeded by the fact that they do not have collateral required by the lenders.

SMMEs would normally require finance in order to establish, expand or purchase existing businesses. The three broad categories of indemnities available are individual, portfolio and institutional indemnities.

The financial institution will assess the business plan and loan application in terms of its lending criteria. Sedfa will set certain guidelines for the assessing and monitoring of the loan process on which the indemnity will be enforced. Once the application has been approved, the financial institution will approach Sedfa for indemnity cover and a mentor may be appointed to help with the implementation of the business plan, setting up of operational systems and general business management. The financial institution manages the loan and collects payments for the duration of the loan. The full repayment of the loan remains the responsibility of the applicant.

Eligibility criteria for the Banks and Financial Sector (BFS)

To qualify for Sedfa funding, BFSs must:

• Be commercial banks, which are automatically eligible to participate in the scheme by virtue of being professional money lenders, registered, regulated and monitored by the Financial Sector Conduct Authority (FSCA) and overseen by the South African Reserve Bank. Other lenders will be incorporated into the scheme provided they meet the legislative conditions
• Agree to the terms and conditions of the scheme, as they would appear in the Indemnity Agreement, and thereafter sign the agreement
• Sedfa will have the right to review their credit lending policies and procedures to the SMME market

Eligibility criteria for non-bank financial intermediaries

• The RFI/SF must meet the minimum criteria as set out in 2.1
• The prospective intermediary’s objectives must be in line with the Sedfa developmental mandate
• The prospective intermediary’s business must be financially sound enough to support its objectives
• The prospective intermediary must have sufficient human resource capacity and experience to implement its objectives to the satisfaction of Sedfa
• The prospective intermediary is required to submit a viable, convincing business plan to Sedfa before it can be accredited to the scheme

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Overview

The Land Reform Empowerment Facility (LREF) is a Broad-Based Black Economic Empowerment Fund capitalised by the Department of Rural Development and Land Reform and supported by the European Union.

The LREF is a wholesale financing facility through which sefa lends money to commercial banks and other reputable agricultural lenders for on-lending to land reform beneficiaries.

The aim of LREF is therefore to broaden the control, management and ownership by black South African citizens in land-based, high-value, income-generating assets in the agricultural sector.

To increase the commercial success of LREF-funded projects, Sedfa assists these projects with training and skills development interventions by means of a training grant.

Financing facilities under LREF

To qualify for Sedfa funding, BFSs must:

• Mortgage Loan Facility – this is a financing facility which enables the target market to buy and own land for agricultural production purposes, under the following criteria:
  • Maximum loan value of R15-million per project
  • Maximum loan of R1-million per Black person participating in the project
  • Loan repayment period must not exceed 12 years
• Equity Share Scheme – an equity share scheme is a business arrangement in which both land reform beneficiaries and private sector partners buy equity in the form of shares in a land-based agricultural enterprise:
  • Maximum loan of R1-million per person participating in the venture
  • Loan repayment period must not exceed 12 years
• Production loans – for the purchase of agricultural inputs such as fertiliser, seeds for land reform projects:
  • To be available for both crop and livestock enterprises
  • To be repayable within 12 to 18 months (depending on length of production cycle)
  • Maximum loan amount of R500 000 per enterprise production cycle
  • Own contribution of 10% (of total funding) may be required
• Agricultural asset finance – for the purchase of agricultural machinery and equipment:
  • Lending threshold is R800 000 per farmer
  • Repayment period is within the useful lifespan of the financed asset to a max of 5 years
  • Security is a notarial bond over financed asset

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Overview

The purpose of the post-loan business support and institutional strengthening is to provide non-financial support to SMME businesses via the RFI/BFS/SF and also directly to the intermediaries.

Post-loan business support for SMMEs

The post-loan business support programme is designed to provide business support services to enterprises during the life cycle of the business from early stage (growth/development/compliance mentorship), as well as the decline phase (turnaround specialists). This service is only provided to small businesses that have benefitted from loan facilities provided by Sedfa and its financing partners.

The programme is facilitated through the Direct Lending Division and will allow the Wholesale Lending Division to access such support as and when needed.

Institutional strengthening support

The main objective of this programme is to strengthen and support the following needs of Sedfa funded MFI/RFI/SF:

• The strategic and organisational needs of the organisation, focusing specifically on key business processes
• Open architecture: processes and systems of the organisation, focusing specifically on areas such as back office management, asset and liability management, enterprise-wide risk management, accounting and internal audit and HR systems and IT systems
• Management and leadership training and upskilling, focusing specifically on core-competency gaps and weaknesses, such as (but not limited to) management and leadership skills, investment appraisal and risk analysis, project finance and computer literacy.