Franchise fund launched for S.Africa’s youth - CNBC Africa

Franchise fund launched for S.Africa’s youth

Southern Africa

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Business owner turning open sign on door. PHOTO: Getty Images

The platform, backed by the Development Bank of Southern Africa, is aimed at young and previously disadvantaged entrepreneurs with limited access to capital and assets to qualify as franchisees.

“Purchasing a franchise in South Africa can be quite onerous given that the franchisor normally requests a 50 per cent own contribution. This fund will provide affordable franchising opportunities to those who would otherwise not have had the opportunity to acquire a business,” said Christo Botes, executive director of Business Partners in a statement.

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The total fund amounts to 107 million rand, which consists of 48.65 million rand from the National Treasury’s Jobs Fund (38.92 million rand for financing and 9.73 million rand for technical assistance), as well as 58.38 million rand from Business Partners.

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The funds allocated to technical assistance, Botes added, carries a zero per cent interest rate for the entrepreneur and is only payable upon completion of all other business financing debt being repaid.

 “Our key outcome is to provide funding, training and mentorship to 125 viable and long term sustainable franchises, with most applications for finance ranging between 600 000 rand and 2 million rand, and in the process also facilitate the creation of more than 700 jobs. These newly employed individuals will not only be empowered as a result of the training they will receive, but also build a solid employment record.” explained Botes.

The fund however is only open to franchisors who have been accredited by South Africa’s Franchise Warehouse and Business Partners, and that comply with the minimum requirements such as proper founding documents, full Franchise Association South Africa membership and accreditation.

It also requires a minimum own contribution of ten percent of the total financing from the entrepreneur.  

“The applicants, or franchisees, are required to undergo a thorough screening process and formal training program facilitated by SA Franchise Warehouse. This includes ensuring that the entrepreneur is sure of the franchise brand he/she wants to pursue, as well as whether the sector is in fact best suited for him/her,” added Botes.

To date, the Franchise Fund began processing applications at the beginning of 2014 and has already approved six deals, disbursing two of them.

Kobus Oosthuizen, managing director of SA Franchise Warehouse, added that franchising in South Africa has great potential to contribute to the country’s gross domestic product (GDP) through effective funding platforms.

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“Franchising in South Africa represents a significantly smaller portion of the GDP (8 per cent) in comparison to other first world counties, such as the UK and the USA, where franchising accounts for more than 50 per cent of GDP. Taking into account that franchising directly employs around 300 000 people in South Africa, it shows the potential of effective funding and incubation models, such of the Franchise Fund,  can be devised,” added Oosthuizen.

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