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Government Funding

Khula SME Fund

Khula SME Fund was established to provide early-stage and expansion capital to SMEs.

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Vital Stats

  • Company name: Khula Enterprise Finance
  • Contact telephone number: +27 (0)11 807 8464
  • Physical address: 7 Mellis Road, Rivonia, 2128
  • Website address: www.sefa.org.za

Company Profile

Khula Enterprise Finance Ltd is dedicated to the development and sustainability of small business enterprises in South Africa.  A leader in its field, it has a proud history of more than 13 years service of involvement in the rapidly growing and economically vital, small and medium enterprise (SME) sector.

The company is a wholesale finance institution which operates across the public and private sectors, through a network of channels to supply much-needed funding to small business.

Khula’s channels include South Africa’s leading commercial banks, retail financial institutions, specialist funds and joint ventures in which Khula itself is a participant.  Its primary aim is to bridge the “funding gap” in the SME market not addressed by commercial financial institutions.

Fund Overview

Khula SME Fund was established to provide early-stage and expansion capital to SMEs.

Purpose of the fund

  • Provide early-stage debt funding to qualifying SMEs (majority-owned by South Africans)
  • Reach out to SMEs in rural and peri-urban areas of South Africa
  • Promotes black economic empowerment
  • Improves access to finance
  • Create new jobs
  • Encourage meaningful economic participation of black South Africans
  • Foster entrepreneurship for both men and women in the SME sector.

Applicant criteria

  • South African SMEs (preferably black) who hold majority stake in their businesses who seek to start and or grow their businesses.
  • South African SMEs who hold majority stake in their businesses situated in rural areas.

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Government Funding

IDC Transformation and Entrepreneurship Scheme

The Transformation and Entrepreneurship Scheme has been set up to finance marginalised groups in South Africa. Our aim with this scheme is to stimulate and develop largely small and medium enterprises, and make the mainstream economy accessible to marginalised groups – women, people with disabilities, and workers and communities.

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IDC

Company name: Industrial Development Corporation of South Africa

Contact telephone number:+27 11 269 3000

Postal address: P.O. Box 784055, Sandton, 2146

Physical address: 19 Fredman Drive, Sandown

Email address: callcentre@idc.co.za

Website address: www.idc.co.za

Company Profile

Established in 1940, we are a national development finance institution set up to promote economic growth and industrial development. We are owned by the South African government under the supervision of the Economic Development department.

Fund Overview

The Transformation and Entrepreneurship Scheme has been set up to finance marginalised groups in South Africa. Our aim with this scheme is to stimulate and develop largely small and medium enterprises, and make the mainstream economy accessible to marginalised groups – women, people with disabilities, and workers and communities.

The Transformation and Entrepreneurship Scheme is designed to help entrepreneurs access finance to develop and grow their business. We offer funding for start-up businesses, expansions or expansionary acquisitions. Along with this, we offer business support, by way of a grant, helping with business planning, training and mentorship.

Applicant criteria:

There are general criteria set out for all funds:

  • Applicants must be able to demonstrate that their business is economically viable and financially sustainable.
  • The business must be in one of the IDC’s mandated sectors.
  • Provision must be made for the employment of people with disabilities.
  • Funding provided will generally not be less than R1-million.

Specific guidelines have also been drawn up for each of the five funds:

Women Entrepreneurial Fund

  • This fund applies to businesses with a minimum shareholding by women of at least 50%; shareholding between 25% and 50% will be considered on revised terms
  • It can apply to a start-up business or for expansions;
  • It is available to new entrants – that is, those shareholders with a direct or indirect total net asset base of less than R15-million;
  • The business must include women in its operations and management; and
  • Finance is provided to businesses with a total asset base of up to R80-million and the maximum amount we will finance under this fund is R30-million a transaction.
    • This fund applies to companies where a person or people with disabilities have a minimum shareholding of 50% plus one share; shareholding between 25% and 50% will be considered on revised terms
    • Applicants must demonstrate operational and management involvement;
    • The maximum amount that can be financed under this fund is R8-million and applies to start-up and existing companies that wish to expand; and
    • Only new entrants qualify for financing – that is, those shareholders with a direct or indirect total net asset base of less than R15-million.

People with Disabilities Fund

Equity Contribution Fund

This funding is available for new black entrants where shareholders hold a direct or indirect total net asset base of less than R1.5-million; Only black individuals or individuals of a 100% black-owned company. In the case where the company is not wholly black-owned, the black shareholding must be 25% plus one; This fund applies to start-up businesses or existing companies that wish to expand Black shareholders who are financed under the scheme must be involved in both the operations and management of the company; A maximum limit of R10-million has been set for each application; and Finance is provided to businesses with a total asset base of up to R80-million.

Development Fund for Workers

This fund provides finance to Broad-based Black Economic Empowerment transactions for at least 85% owned black worker groupings to acquire shareholding in IDC funded projects; It applies to black low-skilled workers who may have little prospect of accessing equity; Businesses that can apply may be start-ups, or companies looking to expand ; The maximum amount that can be financed under this fund is R15-million per transaction; There are no restrictions on the business size; The workers must acquire a meaningful stake in the business.

Community Fund

This fund provides finance to marginalised communities that want to acquire shares in a company funded by IDC; These businesses can be start-up, or companies looking to expand. The maximum amount that can be financed under this fund is R10-million; and There are no restrictions on the business size but it is a requirement that the community acquires a meaningful stake in the business.

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Government Funding

IDC Support Programme for Industrial Innovation

Developing new technologies is an important way of strengthening South Africa’s global competitiveness. The IDC Support Programme for Industrial Innovation is designed to help this sector by providing financial assistance to projects that create innovative products and processes.

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IDC

Company name: Industrial Development Corporation of South Africa

Contact telephone number:+27 11 269 3000

Postal address: P.O. Box 784055, Sandton, 2146

Physical address: 19 Fredman Drive, Sandown

Email address: callcentre@idc.co.za

Website address: www.idc.co.za

Company Profile

Established in 1940, we are a national development finance institution set up to promote economic growth and industrial development. We are owned by the South African government under the supervision of the Economic Development department.

Fund Overview

Developing new technologies is an important way of strengthening South Africa’s global competitiveness. Our Support Programme for Industrial Innovation is designed to help this sector by providing financial assistance to projects that create innovative products and processes. The programme focuses specifically on the phase from the conclusion of basic research – the proof of concept stage – to the point at which a pre-production prototype has been built.

There are three schemes within the support programme:

Product Process Development;
Matching Scheme; and
Partnership Scheme.

These are available to all South African registered businesses or individuals, depending on the merit of their project proposals.

Applicant criteria:

We evaluate all applications according to:

  • The technical innovation of the new project;
  • The marketability of the project;
  • The ability to manufacture and market the processes or products developed;
  • A significant portion of the development and production must take place in South Africa;
  • The availability of project management skills to develop the project; and
  • The financial ability to successfully complete the proposed development.

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Government Funding

IDC Risk Capital Facility Programme

Our primary focus is to provide risk finance to companies owned by historically disadvantaged people. In addition, the companies – small and medium enterprises – must show significant job creation potential.

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IDC

Company name: Industrial Development Corporation of South Africa

Contact telephone number: +27 11 269 3000

Postal address:  P.O. Box 784055, Sandton, 2146

Physical address: 19 Fredman Drive, Sandown

Email address: callcentre@idc.co.za

Website address: www.idc.co.za

Company Profile

Established in 1940, we are a national development finance institution set up to promote economic growth and industrial development. We are owned by the South African government under the supervision of the Economic Development department.

Fund Overview

Our primary focus is to provide risk finance to companies owned by historically disadvantaged people. In addition, the companies – small and medium enterprises – must show significant job creation potential. The funding is provided by the European Community through the Department of Trade and Industry. The IDC co-manages the fund with the European Investment Bank.

There are three channels through which funding is provided: a direct channel operating alongside the IDC’s mainstream business; a niche fund channel, where venture capital funds target a specific sector that has a developmental focus; and a third party channel, where funds co-invest with other financial institutions. The maximum investment for the niche fund channel is R30-million.

Applicant criteria:

All applicants must fulfill our investment criteria:

  • Demonstrate financial profitability, technical feasibility and economic viability and be environmentally sound;
  • Highlight job creation features and empowerment compliance;
  • Demonstrate elements of women entrepreneurs;
  • Show a significant involvement of historically disadvantaged persons in management;
  • Demonstrate compliance with South African environmental legislation; and
  • Have a programme for HIV/Aids prevention and awareness.

All sectors of the economy are eligible except for projects in armaments, tobacco, and gambling fields and investment terms are decided on a case-by-case basis.

Guidelines for those applying for direct or third party channel funding:

  • The applicant must be an SME;
  • The minimum historically disadvantaged persons ownership must be 25% and above;
  • Job intensity of an investment, calculated on a cost per job basis, may not exceed R60 000;
  • The minimum investment amount will be R250 000 for township and rural areas and R500 000 for other areas; and
  • There is a maximum single investment amount of R20-million; and funds will be applied to improving the financial structure of under-capitalised companies.

Guidelines for those applying for niche fund channel support:

  • Applicants must invest in SMEs;
  • The maximum investment is R30-million;
  • The Risk Capital Facility Programme will always be a minority equity investor;
  • The exit period will be determined on a case-by-case basis; and
  • The fund manager must demonstrate a sound track record, with a minimum historically disadvantaged persons ownership of 25% plus one share.

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