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New fund set up to help small firms

Jun 19 2011 11:48 Mpho Sibanyoni

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Johannesburg - Big business is to be asked to contribute 3% of annual net profits to establish yet another fund for loans to small, medium and micro black enterprises.

Called the Enterprise Development Fund (EDF), the new fund will operate like other funds under the National Empowerment Fund (NEF) and will dish out loans ranging between R250 000 and R75m.

It will be launched in July.

Zomzi Mensah, the EDF coordinator, said the only difference between the fund and other products offered by NEF will be on how her division collects money to finance it.

The NEF will invite big businesses to contribute 3% of their annual net profit to the EDF.

Mensah said the money contributed by big businesses will count towards their Black Economic Empowerment Codes of Good Practice enterprise development, one of the code's seven elements.

“The fund aims to ensure that big businesses impact directly on small businesses,” she said.

“The NEF will use the money from big businesses to help SMMEs (small, medium and micro enterprises) to be well-developed and sustainable, operationally and financially independent,” said Mensah.

South African Chamber of Commerce and Industry chief executive Neren Rau welcomed the fund.

“Any initiative that supports SMMEs is welcomed,” said Rau.

“But we have to note that the BEE (black economic empowerment) framework has not been successful and needs to be overhauled,” said Rau.

“The fund should not be an attempt to fix pieces of the BEE framework,” he said.

He said the EDF will only be successful if the NEF ensures that the funds reach needy SMMEs.

“The problem with these development finance institutions is that they get a lot of money from the government, but the money is used on SMME support programmes while small businesses struggle to get funding,” said Rau.

“This money should not just sit there and be spent on support programmes. It needs to go straight to SMMEs and help them to grow their operations,” he said.

Michael Spicer, CEO of Business Leadership SA, an association of chief executives and chairpersons of big businesses, said he could not comment as he had not read the details of the EDF.

National Federated Chamber of Commerce and Industry president Lawrence Mavundla welcomed the new fund.

“According to the law companies should contribute 3% towards enterprise development, and 2% should be allocated to corporate social investment,” said Mavundla.

“We hope that big companies will contribute faithfully to the fund as it is being controlled by the government.

"I hope the NEF will also provide post-funding mentorship to help black SMMEs to grow,” he said.

Johannesburg Chamber of Commerce and Industry chief executive Keith Brebnor also praised the fund, adding that his organisation launched a similar project a year ago.

“The challenge for the NEF will be to fund viable enterprises that will not go under,” said Brebnor.

“Many SMMEs in South Africa have a problem of closing shop months after they were formed,” he said.

Brebnor also advised the NEF to beef up its SMME-mentoring capacity.

“After they have been funded, SMMEs need experienced entrepreneurs who will give them tips on how to survive and be ­efficient,” he said.

- City Press
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