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Development Finance
Small, medium and micro enterprises (SMMEs) are vital to job creation and the Industrial Development Corporation is particularly engaged in projects in Mpumalanga.
• The Industrial Development Corporation has a new regional office in Nelspruit.
• Khula and Tsb Sugar have created a fund to support emerging sugar-cane farmers.
SMME support
Organisations like Mpumalanga Economic Growth Agency (MEGA) exist to unlock economic growth in areas with potential. There are also a number of national financial institutions whose brief is to support smaller enterprises.
Eight small-scale farmers have the use of land to grow flowers for the domestic market as a result of a corporate social investment initiative of the Manganese Metal Company (MMC). MMC leases 27.5 hectares of land to Timbali Technology Innovator (TTI), a Section 21 company that helps farmers enter the mainstream economy. TTI assists the farmers, who are allocated tunnels in which to cultivate flowers, with financial support and skills and marketing training.
Another example of how big corporations can assist emerging business comes in the form of Nthegeng, a community-based enterprise which is represented by the area’s local traditional leader, or Kgosi. Two Rivers Platinum Mine, an African Rainbow Minerals mine, now sources its protective equipment from Nthegeng after having seen to it that the local group received training in many aspects of the business ranging from quality, systems and stock control, cash flow and administration to financial management. The training was provided by Liebsa.
Two Rivers Mine is now looking into developing similar projects with local communities to do their catering on-site and to see to the mine’s transport needs.
Small projects to support local economic development are taking place at Beeshoek and Dwarsrivier (olive trees) and Khumani, where an integrated cleaning enterprise has been established, creating 61 jobs.
The provincial government promotes procurement policies that support small business. Particular attention is paid to companies that promote broad-based black economic empowerment (BBBEE). In addition, the provincial government has prioritised the fast-tracking of financial support to small businesses in distress.
In 2010, representatives from nine SMMEs accompanied Department of Economic Development, Environment and Tourism (DEDET) officials when they travelled to Italy on an investment-promotion mission. The DEDET is also investigating a possible agreement with the National Small Industries of India for the setting up of small enterprises in the rural areas of the province.
Mergers for efficiency
A number of enterprises owned by the provincial government have been merged to promote efficiency. Thus only the Mpumalanga Economic Growth Agency continues to exist as an entity. MEGA has taken over the briefs of the Mpumalanga Agricultural Development Corporation (MADC) and Mpumalanga Housing Finance Company (MHFCO).
MEGA exists primarily to promote growth in Mpumalanga through its trade and investment service offerings and its knowledge of the economic environment in the province. MEGA is not a development-finance institution as such, but is committed to SMME support. It helps facilitate export finance and counsels SMMEs on export matters.
MEGA’s enterprise-development division promotes the growth of small, medium and micro enterprises, including cooperatives, in the province. Within this division, MEGA offers various products and services, including loan funding of between R10 000 and R1-million and bridging finance linked to an existing contract. MEGA is working on sustaining SMMEs beyond the first three years of their existence because that has been found to be the critical time period beyond which many do not survive.
Formed in mid-2009, the National Youth Development Agency (NYDA) had, by April 2010, approved loans to the value of R23-million. The NYDA was created from a merger between the Umsobomvu Youth Fund and the National Youth Commission. The agency made 7 500 loans and disbursed 4 244 business consultancy vouchers with a value of about R33-million.
National development finance institutions (DFIs)
Industrial Development Corporation
The Industrial Development Corporation (IDC) approved funding worth R89.5-billion in 2008 across South Africa, of which more than 75% was for expansions and start-ups. More than 40% of the 33 600 new jobs that will be created are expected to be based in rural areas. The major focus of the corporation’s R1.5-billion investment in Mpumalanga has been mining, followed by outlays in the wood and paper sector. These and other interventions have created approximately 12 000 jobs. Approximately 254 further jobs are expected to be created as pipeline projects worth R169-million come on stream.
The IDC opened a regional office in Nelspruit in September 2009 and supported the establishment of the Umjindi Development Agency. An investment of R31.5-million is supporting a sustainable tourism project in Hazyview and the IDC has a 29.8% share in York Timbers Holdings.
The Nelspruit office enables the IDC to monitor and support entrepreneurs more easily in the post-investment phase, through the Business Support Programme. Closer relationships with government and financial institutions will also be pursued.
The IDC supports four Dinaledi schools in the province. The Dinaledi schools project aims to increase access to mathematics and science in schools in poor areas. Each school receives equipment to the value of R100 000 per year from the IDC and the top matriculant receives a bursary.
The signing of an agreement in 2009 between the IDC and Brazil’s development bank, BNDES, holds great potential for Mpumalanga sugar-cane growers because the initial focus will be on the development of bio-ethanol from cane.
Land and Agricultural Development Bank of South Africa
The Land and Agricultural Development Bank of South Africa (Land Bank) has been the leading agricultural financier in South Africa since 1912, offering tailor-made development finance to established and emerging farmers.
Development Bank of Southern Africa
The Development Bank of Southern Africa plays the role of financier, advisor, partner, implementer and integrator to mobilise finance and expertise for development projects. The bank specifically funds physical, social and economic infrastructure in South and Southern Africa.
Department of Trade and Industry
The Department of Trade and Industry (the dti) has several agencies responsible for development finance. Khula is an independent agency of the dti focused exclusively on development finance for the fast-growing SMME sector. Its Siyakhula microcredit outlets in Nelspruit and Middelburg give loans from R300 to R3 500. The Khula- Adwandze Fund concentrates on black sugar-cane farmers, with loan financing available from R1 300 to R15 000 per hectare. The fund, a joint venture between Khula and Akwandze Agricultural Finance (a BEE vehicle in which Tsb Sugar and the farmers of Liguguletfu have stakes), has made loans to more than 900 farmers.
The Export Marketing and Investment Assistance Scheme (Emia) helps exporters by paying for some costs.
Small Enterprise Development Agency
The Small Enterprise Development Agency (seda), supports SMMEs through products, training and services.
National Empowerment Fund
The National Empowerment Fund (NEF) is another of the dti’s development-finance agencies, specifically geared towards driving and implementing broad-based black economic empowerment (BBBEE) in South Africa. The agency acts as a channel for government to demonstrate its financial commitment to broadening participation in the economy. The NEF is also strongly involved with women empowerment in South Africa, with overall participation of women amounting to 35% of the overall NEF portfolio.
Online resources
Development Bank of Southern Africa: www.dbsa.org
Industrial Development Corporation: www.idc.co.za
Khula Enterprise Finance Ltd: www.khula.org.za
Land and Agricultural Development Bank of South Africa: www.landbank.co.za
Mpumalanga Economic Growth Agency: www.mega.gov.za
National Department of Trade and Industry: www.thedti.gov.za
National Empowerment Fund: www.nefcorp.co.za
National Youth Development Agency: www.nyda.gov.za
Small Enterprise Development Agency: www.seda.org.za
