Financing Your First Brickyard

At Hydraform, we know how passionate you feel about your business. And we know how frustrating it can be to have a dream without having the necessary capital to set down as the foundations for the realisation of that dream. No matter how brilliant small business ideas are, all of them require money. Whether it is funding at the launch stage or the business expansion phase, the biggest challenge is finding money. There is no single perfect-fit approach for all situations. According to the required amount, purpose, type of business, ownership, the sources may vary dramatically.

There are, however, various institutions across the African continent which support the development and upliftment of communities by funding small businesses. We’d like to provide you with a few possibilities which you may not have considered.

The Development Bank of Southern Africa (DBSA)

The purpose of the DBSA is to ‘Build Africa’s Prosperity by driving inclusive growth and securing innovative solutions that drive socio-economic development in emerging economies in sub-Saharan Africa. This is done by mobilising funding resources to be channelled into projects aimed at building sustainable infrastructure planning and development across the continent.

DBSA has identified specific sectors which are critical in the development and growth of the regional and national economy. Their aim is to support the government in its goal to reach a healthy economic standing in order to place South Africa – and other African countries – in a position where it can compete in the global market. DBSA has, therefore, identified economic infrastructure and social infrastructure as their main sectors of focus.

Economic infrastructure includes:

  • Information and Communication Technologies (ICT);
  • Transport;
  • Water and Sanitation; and

Social infrastructure includes:

  • Health;
  • Education; and
  • Human settlements.

You can find out more here.

South African Women in Construction (SAWIC)

SAWIC is a national association of women enterprises or professionals and technical staff in all areas of construction, from the skilled trades to business ownership, with international affiliation to the National association of Women in Construction (NAWIC). SAWIC administers, facilitates, advocates and lobbies all the Departments of Public Works for the empowerment of its members.

You can find out more information here.

Rural and Community Development Fund

The aim of the Rural and Community Development Fund is to provide funding to aspiring rural entrepreneurs and to facilitate skills transfer and operational involvement by community groups thereby promoting social and economic upliftment in pursuant of the NEF Mandate.

Sectors funded:

  • Agro Processing and Manufacturing
  • Eco-Tourism
  • Forestry and Fisheries
  • Commercial Property
  • Aqua and Marine Culture
  • Non – Farm Activities (rural based)

The key criteria of this product are:

  • Projects must be financially sustainable
  • BEE applicants should be actively involved in the day-to-day operations of the business
  • Technical partners should be actively involved in the day-to-day operations of the business
  • The NEF will invest using debt, equity and quasi-equity instruments
  • Minimum black ownership of 25.1% is a requirement
  • Joint ventures between black and non-black partners to support skills transfer
  • The business should be able to repay NEF’s investment
  • The business must have a clear value-add with a sustainable business case
  • The NEF will exit from the investment in 5 to 10 years
  • The NEF reserves the right to oblige applicants to participate in the NEF mentorship programme

The Rural and Community Development Fund offers acquisition, New Venture capital, or expansion capital. You can find out more here.

Fincheck

Fincheck partners with South African banks, lenders, and insurers to offer a real-time and independent means of comparing and applying for finance across 30 lenders.

They serve business owners seeking finance in South Africa.

Amount:

R20,000 – R72 million.

Lulalend

Lulalend delivers business funding by using proprietary scoring technology which offers an instant funding decision on applications.

They predominantly serve South African businesses across all industries trading for more than one year with annual revenue of R500,000+.

Amount:

R20,000 – R1 million

Choose Africa

The French Choose Africa initiative fulfils France’s commitment to support African entrepreneurship.

With Choose Africa, AFD Group (Agence Française de Développement and its private sector financing arm, PROPARCO) makes all its tools available to African start-ups, microenterprises and SMEs to finance and assist them at the various stages of their development, particularly through local partners supported by the Group.

In response to the economic crisis triggered by Covid-19, which is hitting microenterprises and SMEs hard, AFD Group is extending its mechanism with Choose Africa Resilience. It comes in addition to the initial responses to provide macroeconomic support. This EUR 1bn program is designed to support the formal and informal private sector in Africa

The Choose Africa initiative was initially set at EUR 2.5bn and has now been increased to EUR 3.5bn for 2018-2022.

You can find out more here.

The World Bank

A key area of the World Bank Group’s work is to improve SMEs’ access to finance and find innovative solutions to unlock sources of capital.

Their approach is holistic, combining advisory and lending services to clients to increase the contribution that SMEs can make to the economy including underserved segments such as women-owned SMEs.

Advisory and Policy Support for SME finance mainly includes diagnostics, implementation support, global advocacy, and knowledge sharing of good practice.

For example, the World Bank provides:

  • Financial sector assessments to determine areas of improvement in regulatory and policy aspects enabling increased responsible SME access to finance
  • Implementation support of initiatives such as development of enabling environment, design and set up of credit guarantee schemes
  • Improving credit infrastructure (credit reporting systems, secured transactions and collateral registries, and insolvency regimes) which can lead to greater SME access to finance.
  • Introducing innovation in SME finance such as e-lending platforms, use of alternative data for credit decisioning, e-invoicing, e-factoring and supply chain financing.
  • Policy work, analytical work, and other Advisory Services can also be provided in support of SME finance activities.
  • Advocacy for SME finance at global level through participating and supporting G20 Global Partnership for Financial Inclusion, Financial Stability Board, International Credit Committee for Credit Reporting on SME Finance related issues.
  • Knowledge management tools and flagship publications on good practice, successful models and policy frameworks

The Small Enterprise Finance Agency (SEFA)

Access to finance is one of the biggest hurdles to small businesses in South Africa, and in response to this SEFA provides assistance to build sustainable businesses through repayable loans.

SEFA’s core function is to foster the establishment, development, and growth of SMMEs and Co-operatives, and to contribute towards poverty alleviation, job creation, and economic growth.

SEFA provides SMMEs and Co-operatives throughout South Africa with simple access to finance in an efficient and sustainable manner by:

  • delivering wholesale and direct lending credit facilities or products;
  • providing credit guarantees to SMMEs and Co-operatives;
  • supporting the institutional strengthening of financial intermediaries, so that they can effectively assist small and micro-enterprises and co-operatives;
  • creating strategic partnerships with a range of institutions for sustainable small, micro and co-operative enterprise development and support;
  • monitoring the effectiveness and impact of our financing, credit guarantee and capacity development activities; and
  • developing (through partnerships) innovative finance products, tools and channels, to speed up increased market participation in the provision of affordable finance.

SEFA offers loans through direct and wholesale lending from R500 up to R15-million.

Amongst the products they offer are:

  • Asset Finance
  • Bridging Loan
  • Term Loan
  • Structured Finance Solutions
  • Credit Guarantee Scheme
  • Land Reform Empowerment Fund

The Department of Trade Industry and Competition (the DTIC)

The DTIC was established after the merger of the Department of Trade and Industry and the Economic Development Department. Their vision is to function as a dynamic industrial, globally competitive South African economy, characterised by meaningful economic transformation, inclusive growth and development, decent employment and equity, built on the full potential of all citizens.

The DTIC’s mission is to:

  • Promote structural transformation, towards a dynamic industrial and globally competitive economy.
  • Provide a predictable, competitive, equitable, and socially responsible environment, conducive to investment, trade and enterprise development.
  • Broaden participation in the economy to strengthen economic development.
  • Continually improve the skills and capabilities of the DTIC to effectively deliver on its mandate and respond to the needs of South Africa’s economic citizens.
  • Co-ordinate the contributions of government departments, state entities, and civil society to effect economic development.
  • Improve alignment between economic policies, plans of the state, its agencies, government’s political and economic objectives and mandate.

The DTIC’s values are:

  • Promotes the Constitution, with special reference to the chapters on human rights, cooperative governance and public administration.
  • It promotes decent work outcomes (more jobs as well as better jobs), industrialisation, equitable and inclusive growth and social inclusion.
  • Operational excellence – service delivery standards, international best practice, Batho Pele Principles, continuous improvement and ethical conduct.
  • Intellectual excellence – continuous shared learning, innovation, relevant knowledge and skills improvement and knowledge management.
  • Quality relationships – improved and continuous communication, honesty, respect, integrity, transparency, professionalism, ownership, leadership, and teamwork.

The DTIC offer a variety of funding programmes:

Programme 1: Administration

Purpose: Provide strategic leadership, management and support services to the department

Programme 2: Trade Policy, Negotiations and Cooperation

Purpose: Build an equitable global trading system that facilitates development by strengthening trade and investment links with key economies and fostering African development, including regional and continental integration and development cooperation in line with the African Union Agenda 2063.

Programme 3: Spatial Industrial Development and Economic Transformation

Purpose: Drive economic transformation and increase participation in industrialisation.

Programme 4: Industrial Competitiveness and Growth

Purpose: Design and implement policies, strategies and programmes for the development of manufacturing and related economic sectors, and contribute to the direct and indirect creation of decent jobs, value addition and competitiveness, in both domestic and export markets.

Programme 5: Consumer and Corporate Regulation

Purpose: Develop and implement coherent, predictable and transparent regulatory solutions that facilitate easy access to redress and efficient regulation for economic citizens.

Programme 6: Industrial Financing

Purpose: Stimulate and facilitate the development of sustainable and competitive enterprises, through the efficient provision of effective and accessible incentive measures that support national priorities.

Programme 7: Export Development, Promotion and Outward Investments

Purpose: Increase export capacity and support direct investment flows, through targeted strategies, and an effectively managed network of foreign trade office.

Programme 8: Inward Investment Attraction, Facilitation and Aftercare

Purpose: Support foreign direct investment flows and promote domestic investment by providing a one- stop shop for investment promotion, investor facilitation and aftercare support for investors.

Programme 9: Competition Policy and Economic Planning

Purpose: Develop and roll out policy interventions that promote competition issues, through effective economic planning, spatial implementation and aligned investment and development policy tools.

Programme 10: Economic Research and Coordination

Purpose: Design and oversee socio-economic research, assess policy options and engage stakeholders to facilitate inclusive economic growth.

The Industrial Development Corporation (IDC) of South Africa Limited

The IDC was established in 1940 through an Act of Parliament (Industrial Development Corporation Act, 22 of 1940) and is fully owned by the South African Government.

The IDC priorities are aligned with the national policy direction as set out in the National Development Plan (NDP), Industrial Policy Action Plan (IPAP), and industry Master Plans. Our mandate is to maximise our development impact through job-rich industrialisation, while contributing to an inclusive economy by – among others – funding black-owned and empowered companies, black industrialists, women, and youth-owned and empowered enterprises.

Simultaneously, the IDC must ensure its long-term sustainability through prudent financial and human resource management, safeguard the natural environment, and increasingly position itself as a Centre of Excellence for development finance.

The IDC offers funding across a wide range of sectors.

While gaining funding to get your business off the ground may seem daunting, there’s no reason not to at least try. You may not always succeed, but the first step in any venture is the most important, and any measures you take towards the attainment of your dream is already a big accomplishment!

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