Backing SA’s township economy

South Africa's township economy, often overlooked in the grand scheme of the country's economic landscape, is finally receiving the recognition it deserves with the launch of a R300 million fund. The partnership between the Houting Provincial Government, the IDC, and the SA SME Fund has brought about the establishment of the SMME Crisis Partnership Fund, aimed at providing support to small and medium enterprises in townships. Ketsuo Gordan, the CEO of the SA SME Fund, discussed the fund and its significance in a recent interview on CNBC Africa. Gordan highlighted the impact of the COVID-19 pandemic on small businesses, particularly in terms of working capital shortages leading to closures. This prompted the collaboration with the Houting Government to create a fund to help these struggling businesses survive. The fund, totaling R300 million, will primarily focus on supporting businesses in Houting, where there is a significant informal sector that often goes underserved by traditional financial institutions. The partnership's goal is to leverage the government's initial capital investment with additional funding from private sector institutions to reach and support around 10,000 to 12,000 businesses. Through working with various intermediaries, such as In Blue Living, which provides loans for property development, the fund aims to address housing needs, create jobs, and generate income for small business owners. Other initiatives include financing motorbikes for delivery services, funding small taxi businesses, and providing capital and asset finance support to a range of businesses. The fund is structured to offer affordable interest rates, with the IDC and the SA SME Fund expecting prime returns on their investments. The Houting Government, on the other hand, is providing low-cost funding with a first-loss guarantee, demonstrating a collaborative effort to support township businesses. Importantly, the lending approach of the fund is largely unsecured, recognizing the challenges SMMEs face in providing traditional collateral. Gordan emphasized that while some cases may require collateral, efforts will be made to simplify and facilitate the process for borrowers. With plans to disburse the funds by the end of the year, the initiative aims to not only provide financial support but also to build a sustainable ecosystem for township enterprises, fostering growth and resilience in these vibrant economic hubs.