The launch of the R165 million Godisa Fund will boost small black owned business and also help in addressing youth unemployment, says Public Enterprises Minister Malusi Gigaba.
Speaking at the launch of the of the Fund -- which is a collaboration between Anglo American's enterprise development arm Zimele, Transnet and the Small Enterprise Finance Agency (SEFA) -- Minister Gigaba said the fund will advance economic transformation.
Although progress has been made in the country in the last 20 years, the youth have remained on the margins of economic participation with unemployment of the youth being rampant.
"The time has arrived to move the country forward ... [we] should decisively shift our focus towards ensuring that young people have access to quality business opportunities," said Minister Gigaba on Friday.
Each of the three entities have contributed R55 million towards the Fund that aims to nurture black owned suppliers so as to facilitate sustainable socio-economic transformation and development.
"Of the country's almost R5 million small and medium entrepreneurs, 70% don't survive beyond 18 months due to issues such as a lack of access to funding. This is something that our economy will not self-correct," noted Minister Gigaba.
Godisa, which in Setswana means to nurture or grow, will offer loans and capital for the development of black-owned Transnet suppliers in the manufacturing and service sectors, said Transnet group chief executive Brian Molefe at the launch held at Transnet Rail Engineering Koedespoort.
The fund aims to promote growth and sustainability among existing and potential black owned suppliers of Transnet.
"What we found in our BEE suppliers who supply products to an organisation like this one [Transnet Rail Engineering] is funding, this will go a long way in helping with the funding," noted Molefe.
Commenting on the notion that the R165 million over a ten year period is too little, Molefe said should funds be depleted before the ten year period, it would be replenished. "The money will be advanced as loans or just advances. The duration will differ depending on what the money is required for. The money will be paid back with interest," said Molefe.
Over the next ten years, R150 million will be used for investment financing, while the remaining R15 million will be used for support services such as mentoring.
The fund, said Minister Gigaba, will encourage young black people who have aspirations to be entrepreneurs and suppliers of light and heavy manufactured products to access funding.
"We need to increase our appetite for risk, take a handholding approach and trust black people as capable entrepreneurs so that we don't build the economy on the back of fronting entrepreneurs with no experience or skills," he added.
The economy would not recover or achieve social inclusion without partnerships to correct market inefficiency.
Applications to the fund will need to take the form of an investment proposal accompanied by a formal business plan. Once evaluated potential recipients will have to present their business case to a committee consisting of the fund manager among others.
Economic Development Minister Ebrahim Patel said the deal will have positive spin-offs for business.
"This whole deal that we are announcing is not simply a sum of money that is available... . Transnet is agreeing in this arrangement to pay the participating companies on production of a valid invoice within 30 days.
"Small companies will have this commitment upfront that they'll pay within 30 days. These are companies in many cases that either can't access the kind of overdraft facilities of large companies or companies that are paying enormous premiums. Secondly the certainty of orders is really quite important because they can pay ahead," Minister Patel said.
Chairperson of Zimele and Executive director at Anglo America in SA, Khanyisile Kweyama, said that enterprise development has become a vital source for job creation and poverty alleviation in the country.
Minister Gigaba added that in the past 20 years government through social wage has prevented millions of South Africans from sinking into abject poverty.
"We are all aware that social grants do not generate sustainable incomes and cannot be a sustainable basis to grow our economy and achieve development and social inclusion and justice."