The ambitious move will support the City’s economic transformation initiatives such as the SMME Economic Transformation Programmes. Small businesses and entrepreneurs contribute to the creation of many jobs in the country.
The boost for small businesses in Johannesburg comes ahead of the City hosting the (GEC) in 2017.
Kgamanyane Maphologela, Group Finance’s Director of Customer Communications says the strategic objective of the Working Capital Fund is to contribute to socio-economic development within the City.
“This initiative will amongst others, promote entrepreneurship and develop enterprises to ultimately become mature businesses that can sustain themselves in the long term. A central principle of the Working Capital Fund’s funding philosophy is the collaboration between Standard Bank and the City of Johannesburg to find innovative equity funding solutions to meet the unique requirements of the City’s SMMEs and Co-ops,” says Maphogela.
The Working Capital Fund will focus mainly in the following sectors: Information Communication and Technology (ICT), Manufacturing, Retail, Health, Transport, Property/ Construction and Green Infrastructure and Sustainable projects.
Maphologela says however, the sector focus will be dependent on the needs analysis to be undertaken by the City together with Standard Bank.
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The Working Capital Fund will have the following investment criteria:
- The entity must meet the definition of small enterprise
- The SMME must be based and operating in the City of Johannesburg
- Legally registered entities and compliant with all the legal requirements of a registered entity
- The entities must be up to date with their municipal rates and taxes as well as with SARS
- There should be significant potential for growth (in sales, profits and shareholder value) based on a clear strategy and scalable business model
- The management team should ideally have a successful track record within the relevant industry and/or in bringing new products to market
- Funds invested may be used for asset acquisition and working capital
- The entity must have a legally binding supplier contract with the City.
The Business Development Suppliers have been appointed and will assist the potential beneficiaries with amongst others:
- Provide technical, financial and business development support
- Assess the needs of the beneficiaries by means of technical and financial evaluation process
- Ensure that careful financial management is undertaken so that cash flow is effectively controlled and agreed profits are realized
- Assist beneficiaries to meet milestones set out in the contracts with the City
- Provide technical assistance to ensure that all aspects of the supply chain are cost effectively managed
- Assist each beneficiary to complete applications for banking facilities
- Comply with all training requirements imposed by the Bank under FICA to the full extent required
- Prepare and submit monthly reports and information reasonably required by the Bank and the City.
Applications for potential beneficiaries to be considered will be done through the Business Development Suppliers (BDS).
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COJ and SBSA Financing Contractors – FAQ’s
1. What is the relationship between City of Johannesburg and Standard Bank?
The City of Johannesburg in collaboration with Standard Bank is proud to announce a R250mill Fund open to Contractors of City of Johannesburg small businesses.
2. What is the purpose of the R250m Fund?
To assist Contractors with working capital to fulfil their contractual obligations to City of Johannesburg and their municipal owned entities.
3. What is the qualifying criteria for the R250m fund?
You have to have a valid contract or purchase order with COJ and any of COJ municipal owned entities in order to qualify for financing.
4. Who is 2020 Insight?
Standard bank have appointed 2020 Insight to assist the contractors with the finance application. 2020 Insight have been authorised to act on behalf of Standard Bank in terms of collection of documents and information. In addition 2020 Insight have also been authorised to manage the flow of funds using Standard Bank’s Banks Third Party Fund Administration account (TPFA).
5. Do we require a deposit or security to apply for finance?
Each application is dealt with on its own merit. Security or a deposit is not a pre-condition but the minimum security that will be taken is limited suretyship, cession of contract monies and cession of TPFA. If additional security is required, each application will be looked at on merit.
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6. What is the TPFA account and how does it work?
This is a SBSA product that will assist the contractor as well as 2020 insight to control the flow of funds. It is like having a back office to make payments and receive funds on the Contractors behalf. Loan funds and contract monies due will be paid into the same account.
7. What is the process?
Once all documents are received by 2020 Insight; they will prepare and submit an application to Standard Bank. Standard Bank will take approximately 5 working days to get an approval or decline.
If approved thereafter normal business process of securities have to be taken in and signed by client. Pay-out can be expected in approximately 2-4 weeks from approval, depending on contractor’s fulfilment of conditions of approval.
8. Will contractors qualify for the funding if they have a judgement or default against their name?
We will look at all applications as well as contractors with judgements or defaults. This will depend entirely on the default and if arrangements have been made to repay the default.
9. What is the interest rate?
This will depend entirely on risk and will vary from applicant to applicant. The standard admin fee is 2% of total facilities; this is besides an interest rate charge.
10. Do I have to be a SBSA customer to apply for finance?
No, any Contractor that has a valid contract with the City or municipal owned entities qualifies.