South Africa: Government to provide more than $77 million in financing to entrepreneurs in 2023

MSMEs in South Africa do not receive enough funding according to the OECD. However, they face several challenges. In order to improve the sector and promote its growth, the government plans to implement new measures.

The South African government will provide more than $77 million in funding to entrepreneurs in 2023. The announcement was made by President Cyril Ramaphosa, during his State of the Nation Address released Thursday, February 9 by the Presidency.

More than 90,000 entrepreneurs are expected to benefit from this funding from the South African Small Business Finance Agency (SEFA). In addition, President Ramaphosa announced that the government was working with the SA SME Fund (the SME Fund of the Republic of South Africa) to establish a 10 billion rand (approximately $555 million) fund. ), intended to support the growth of SMEs and enterprises in the informal sector.

“The government is exploring the possibility of providing 2.5 billion rand for the fund and raising the balance of 7.5 billion rand from the private sector,” he said.

The initiative is part of a government policy aimed at substantially increasing local production. A strategy is also being implemented to “reduce regulatory obstacles for SMIs and cooperatives” and “facilitate the creation of businesses by entrepreneurs”. A Red Tape Reduction Committee has been set up by the Presidency for this purpose. It will help rid the administration of “unnecessary bureaucracy”.

South Africa, which will hold its 5th Investment Conference on April 13, aims to mobilize more than 2 trillion rand in new investments by 2028.

According to the Organization for Economic Co-operation and Development (OECD), in 2022, 37% of micro, small and medium-sized enterprises (MSMEs) were considered formal. The organization estimates that of the 2.6 million SMEs, 54% are micro-enterprises and 15% are located in rural areas.

In addition, the sector faces many challenges including violations of company law and accounting standards; reduced borrowing capacity of owners; adoption of unsuitable products designed for different purposes; and the increased risk of excessive personal indebtedness.

It should be noted that in its National Development Plan (NDP), the South African government forecasts that in 2030, this sector will contribute 60 to 80% to GDP growth and will employ 90% of the country’s workforce.

MSMEs are placed at the forefront of the fight against poverty and the creation of much needed jobs in the country. However, in 2020, they only had access to 25% of the total business loans granted by banks.