This fund looks to help black-owned businesses stay open amid COVID-19 crisis
7.2 million South Africans unemployed, those are the most recent figures coming from Stats SA. Many businesses have been severely affected by the COVID-19 regulations, forcing job cuts, and even closure. While President Cyril Ramaphosa pleaded with business and civil society to pull together to save jobs, the National Empowerment Fund seems to have headed the call by establishing an economic distress fund. Hlengiwe Makhatini, Divisional Executive: Venture Capital and Corporate Finance at the National Empowerment Fund joins CNBC Africa for more.
Wed, 24 Feb 2021 11:27:58 GMT
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AI Generated Summary
- The NEF prioritizes black-owned businesses that have been operating for at least three years, providing financial assistance and support to stabilize operations and preserve jobs.
- Concessionary loans with a low interest rate of 2.5% are offered to eligible businesses, with a focus on those employing at least 10 people.
- The fund targets productive sectors like manufacturing and explores opportunities in tourism and the digital space to support economic recovery and innovation.
The COVID-19 pandemic has brought about severe economic distress for businesses around the world, with South Africa being no exception. The latest figures from Stats SA reveal that 7.2 million South Africans are unemployed, highlighting the urgent need for intervention to support struggling businesses and preserve jobs. In response to this challenging environment, the National Empowerment Fund (NEF) has partnered with the Department of Trade, Industry and Competition to establish the Economic Distress Fund. This fund aims to provide much-needed financial assistance to black-owned businesses that have been in operation for at least three years. Hlengiwe Makhatini, Divisional Executive of Venture Capital and Corporate Finance at the NEF, recently discussed the initiative in an interview with CNBC Africa.
The key theme of the interview centered around the NEF's efforts to assist black-owned businesses in weathering the economic challenges brought on by the pandemic. Makhatini highlighted that the NEF is targeting businesses that are majority black-owned, in line with the organization's mandate to support black entrepreneurs. The fund, which has received more than 150 million in government funding, is specifically focused on businesses that have been in operation for at least three years and have all necessary compliance measures in place, such as tax clearance and financial statements.
Three key points emerged from the interview. First, the NEF is prioritizing businesses that employ at least 10 people, with a dedicated support system in place to ensure a swift response to funding requests. Second, the fund offers concessionary loans with an interest rate as low as 2.5%, well below market rates, to ease the financial burden on struggling businesses. Third, while there is no specific revenue threshold for qualifying for the fund, the NEF typically invests a minimum of 250,000 rand in businesses, with a maximum loan amount of 10 million rand for the distress funding.
Makhatini emphasized the importance of supporting businesses in productive sectors, particularly focusing on manufacturing industries. While the NEF remains committed to assisting businesses in the current economic climate, it is also looking forward to the post-pandemic recovery period. The organization is exploring opportunities in sectors such as tourism, anticipating a surge in demand once travel restrictions are lifted. Additionally, Makhatini discussed the NEF's engagement with young entrepreneurs in the digital space, recognizing the potential for innovation and growth in the technology sector.
In conclusion, the launch of the Economic Distress Fund by the NEF signifies a proactive response to the economic challenges facing black-owned businesses in South Africa. By providing financial support, personalized assistance, and low-interest loans, the fund aims to stabilize businesses, preserve jobs, and contribute to the long-term sustainability of the economy. As businesses navigate the uncertainties brought about by the pandemic, initiatives like the Economic Distress Fund play a crucial role in fostering resilience and promoting economic recovery.