SA launches green fund to drive investment into SMMEs

South Africa has embarked on a new initiative that aims to infuse much-needed liquidity into the Small, Medium and Micro-sized Enterprises (SMMEs) sector, particularly in the green economy space. The Green Outcomes Fund, with a sizable amount of 488 million rand set aside for fund managers, is a joint collaboration involving South Africa's national treasury, public, philanthropic, and commercial funds. This innovative financing model is designed to increase investments in early-stage high-impact green businesses by linking impact to the capital provided. The timing of the launch amid the COVID-19 crisis may seem challenging, but it actually presents an opportune moment to support green SMEs that are facing immense pressure. Tina Fisker Henriksen, the Innovative Finance Lead from UCT GSB Bertha Centre, and Mark van Wyk, the Head of Unlisted Investments from Mergence Investment Managers, shed light on the significance and potential impact of this groundbreaking fund. Henriksen emphasized that the fund's main goal is to create verifiable green outcomes such as green jobs, improved energy access, and wastewater treatment to support the green SME sector. She highlighted that the fund provides grant incentives to fund managers, enabling them to take more risks and invest intentionally in green SMEs across various stages of growth. This mechanism ensures that green businesses, which may have limited access to capital, receive the necessary support to thrive. On the other hand, van Wyk, who manages an impact fund focusing on infrastructure development, stressed the importance of the fund in revitalizing the economy post-COVID-19. He mentioned that the fund aligns with the national development plan and has already allocated significant capital to primary impact businesses, including renewable energy projects. Despite the current market challenges, van Wyk remains optimistic about the fund's ability to kickstart the green economy, create job opportunities, and make a positive environmental impact. When asked about the expected return on investments post-COVID-19, van Wyk pointed out that fund managers have diverse internal benchmarks based on asset classes and investment strategies. He shared that their existing infrastructure development debt fund has delivered stable returns over the years, even in the current market conditions. Additionally, their equity fund focusing on renewable energies has achieved impressive returns and shown resilience in the face of economic downturns. Renewable energy, being an essential asset class with resilient demand, offers a promising investment avenue for investors seeking returns in a post-COVID-19 landscape. Despite inherent risks, van Wyk believes that the fund's investment strategy can generate attractive returns for clients while contributing to the growth of the green economy in South Africa. As the Green Outcomes Fund sets out to drive sustainable investments in green SMEs, it embodies a forward-thinking approach that prioritizes environmental impact alongside financial returns.