By: Tebogo Mokwena
First National Bank pledged R200 million this week to support the development of SMEs through its Vumela Enterprise Development Fund. This is the fourth cash injection from FNB since Vumela was established in 2009. So far R404-million has been invested. Historically, Vumela has supported black-owned SMEs that are either too large to receive microfinancing, are too small for private equity and do not generate enough profit to attract venture capital support.
Since its establishment, Vumela has assisted 29 SMEs and created over 6000 jobs. It plans to benefit an additional 150 businesses and create more than 1000 jobs. This year’s investment is also seeking to address the lack of funding amongst early seed-stage SMEs which cannot obtain money because they are not investment-ready. These businesses will be provided with an accelerated loan, which is low-cost funding for capital expenditure, working capital, or operational expenditure.
Tech startups will also be targetted this year through a venture debt product, which is a loan that is extended to tech-enabled scale-ups with a fast growth rate. FNB commercial CEO Gordon Little said that the fund’s vision was to build a sustainable model that would strengthen South Africa one SME at a time. “By providing SMEs with contextual funding and growth support relevant to their specific size and stage of business and funding need, we can catalyse growth and provide ongoing support in the scaling journey, which is not an easy one,” Little said.
FNB’s head of SME Development, Heather Lowe, pointed out that Vumela played a critical role in alternative financing that was designed in the first instance to benefit and support investees. “SMEs are the engine of job creation, transformation, and reduced wealth inequality,” Lowe said. “We are exceptionally proud of the fact that through Vumela we have been able to build a model that is demonstrably sustainable and impactful in its ability to enhance this engine. “Over the past decade, we have analysed and mapped the South African funding ecosystem in detail, and we are becoming more confident in the potential of Vumela to effectively address the needs we have identified,” she also said.