If their latest reports are anything to go by, the state’s two main agencies established to support small businesses are failing the sector and doing so at the worst time. The Covid-19 pandemic and the resultant lockdown have decimated small and medium businesses, and many need state support to stay afloat more than ever before.
In addition, the government has prioritised the sector in its economic recovery plan and is betting on it to lead the way in creating jobs and kickstarting a dormant economy. But the Small Enterprise Development Agency (Seda) and the Small Enterprise Finance Agency (Sefa) have not managed to meet many of their targets, casting doubt on the government’s plans. According to its 2020/21 third-quarter performance report, Sefa’s loan book stood at R2.4-billion on 31 December. A total of R1.1-billion went to wholesale lending facilities and R1.2-billion to direct lending facilities.
A total R449-million in loan facilities was approved, representing only 54% of the R831-million quarterly target. The agency provides financial products and services to qualifying SMMEs and co-operatives through a hybrid of wholesale and direct lending channels. Sectors include retail and wholesale trading and tourism, manufacturing, agriculture for land reform beneficiaries and small-scale construction contractors and miners.
The agency attributed the underperformance to the fewer township and rural businesses participating in its Township and Rural Enterprise Programme. Around 23,556 SMMEs received financial support via Sefa loan programmes, which created and maintained 25,760 jobs. Approximately R298-million was disbursed to black-owned SMMEs, R56-million to small township businesses, R182-million to women-owned SMMEs and R55-million to enterprises owned by youngsters.
Only 78,662 out of a targeted 164,210 jobs were facilitated. This meant that 52% of the target was achieved. Approximately 57,357 out of 106,883 small businesses were financed, achieving 73% of the target. According to the report, rural enterprises received R195-million in the third quarter, while township-based businesses received R56-million. Ironically, Sefa blamed the lockdown – from which many of its beneficiaries would have needed cushioning – for negatively impacting the achievement of targets, as businesses were partially operating.
In its third-quarter report, Seda’s numbers also mirrored this trend. The agency, whose mandate includes designing and implementing a standard and common national delivery network for small enterprise development and integrating government-funded small enterprise support agencies across all tiers of the state, said 1559 SMMEs were assisted through various platforms. The document says only 4019 of 12,000 spaza shops were supported. It said that “there are challenges where spaza shop owners are reluctant to join the programme”. However, it did not give any further details. However, many individuals and organisations representing small enterprises have complained of the onerous compliance burden for small companies looking to access government relief programmes.
A total of 2954 out of 3500 SMMEs were helped to access financing. The agency claimed that clients were more in favour of grants than loan funding. Around 102 out of 400 tech start-ups were supported due to budget cuts. And the picture was dismal for small enterprises attempting to do business with the state and corporates. Only 33 out of a projected 500 SMMEs accessed procurement opportunities. This was because clients were reluctant to provide information on contracts and procurement opportunities that were accessed, the agency said.
It said it helped 3162 rural and 3769 township businesses with “development interventions”. About 96% of those assisted were black-owned enterprises, 48% were owned by women, 31% by youth and 1% by the disabled. The largest number of rural and township businesses supported were from KwaZulu-Natal (2694), followed closely by Limpopo (2369). “In Kwa-Zulu Natal, Liberty Ezolimo Secondary Co-Operative received a grant assistance from the Department of Small Business Development’s Cooperative Incentive Scheme to the total value of R7,149,406 in 2019 to buy a milk-processing plant in order to produce cheese and Maas,” the agency said in the report.
It assisted the co-operative with technical mentorship so that it could deal with bacteria that was affecting the quality of the milk.
But as the reports themselves show, Liberty Ezolimo’s positive story represents only a fraction of the impact Seda and Sefa need to make if the state is going to realise its economic recovery and job creation goals.