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Development Finance
• The Land and Agricultural Development
bank of South Africa has a big presence in
the Free State
• The Free State Development Corporation
is stepping up its activities
The Free State Provincial Government and its agencies have actively been encouraging the growth of small, medium and micro enterprises (SMMEs) as a means of tackling unemployment and creating wealth. Partnerships are the order of the day in delivering opportunities to startup businesses, with national institutions typically teaming up with provincial and municipal entities. In the Free State, private companies have also been actively involved
In a province with a large and important agricultural sector, the Land and Agricultural Development Bank of South Africa (the Land Bank) plays a vital role, not only in lending money to existing farmers but also in supporting emerging farmers and development projects. A low rate of interest (10%) is available to historically disadvantaged people to encourage them to take up farming.
The Development Projects Unit does not charge interest, but rather takes a share in eventual profits. The Step Up Scheme, for very small loans, has proved quite popular.
The Land Bank has offices in Bloemfontein, Kroonstad and Bethlehem, with a satellite office in Phuthaditjhaba.
Free State Development Corporation Since 2006, the Free State Development Corporation (FDC) has been mainly focused on promoting the development of SMMEs. A strategic plan for the years 2007 to 2010 was put in place and the benefits are now being reaped. A highlight of this process was the hosting of an SMME conference in Bloemfontein in 2007.
As a result of the work of the conference, a number of partnerships were entered into with banks like Absa and agencies like Umsobomvu, the Small Enterprises Development Agency, and the Productivity SA. Offices were opened in all five districts of the province, which brought the services of the FDC closer to all communities.
Loans are routinely offered at prime less 2% or 3%. Collateral is required, but repayment periods are sometimes extended and entrepreneurs who repay early are given substantial discounts. In the 2008/09 financial year, the FDC signed joint ventures with 14 small businesses that were not able to provide their own collateral. The FDC sometimes claims equity in the business taking the loan.
In the 2007/08 financial year, the FDC made 131 loans of less than R1-million inside the targeted period of 14 days, 21 loans of between R1-million and R5-million and four loans above R5-million were approved within 60 days. These improved turnaround times contributed to introducing more entrepreneurs into the economic mainstream.
Youth and women were beneficiaries of set targets within the FDC and, up to the end of the 2008 financial year, 67 youth-owned and 75 women-owned enterprises received FDC support. The first loan, of R5-million, was also made to a project initiated by a disabled person.
In 2008, the FDC distributed more than R119-million in business loans, but the support went beyond simply writing cheques. The corporation also established a Business Development Support Service unit to minimise business failures for funded enterprises. Funding in future will be set aside to cover coaching, mentoring, marketing and promotion of the SMMEs supported by the FDC.
Various programmes are encouraging ‘business literacy’. In partnership with the National Small Industries Corporation of India, the FDC Business Park Revitalisation Programme, known as the Kganyang Project, was launched in July 2008. Other incubation projects with ChemCity, in Sasolburg, intend to promote and incentivise SMME start-ups.
National Development
Finance Institutions
The Development Bank of Southern Africa (DBSA)
plays the role of financier, advisor, partner,
implementer and integrator to mobilise finance
and expertise for appropriate development
projects. Since its inception, it has approved
loans of R33.25-billion.
The Industrial Development Corporation (IDC) is a self-financing entity that promotes economic growth and industrial development.
A joint venture by the DBSA, the IDC and the Free State Provincial Government has borne fruit for an apple-growing collective called the Bethlehem Farmers’ Trust. Its first operating profit was recorded in 2007, when exports comprised a sizable proportion of income. In 2008, the Trust received a boost when agricultural services group, Afgri, donated a bus to assist the 74 farmers who travel to the project on a daily basis.
Other IDC projects in the Free State have supported initiatives concerned with biodiesel production, the beneficiation of diamonds and the treatment of silicon metal.
Khula Enterprise Finance Ltd is an independent agency of the Department of Trade and Industry (the dti). It focuses exclusively on development finance. The institution has ties with the public and private sectors, including banks, retail institutions and joint ventures, and aims to bridge the gap not addressed by commercial-finance institutions.
The National Empowerment Fund is another agency of the dti, specifically geared towards driving and implementing broad-based black economic empowerment.
The Umsobomvu Youth Fund (UYF), reporting to the national Department of Labour, is tasked with the promotion of entrepreneurship, job creation, and skills development and transfer among the youth of South Africa, defined as anyone between the ages of 18 and 35. The UYF has trained more than 200 000 youth, created over 116 000 jobs and is supporting over 85 000 entrepreneurs through finance and businesssupport services. It has established a network of 121 youth-advisory centres across the country, which receives 1.8 million visitors each year.
KEY CONTACTS
Business Partners: www.businesspartners.co.za
Development Bank of Southern Africa:
www.dbsa.org
Free State Development Corporation:
www.fdc.co.za
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
National Department of Trade and Industry:
www.thedti.gov.za
National Empowerment Fund:
www.nefcorp.co.za
Small Enterprise Development Agency:
www.seda.org.za
Umsobomvu Youth Fund: www.uyf.org.za
