Small Enterprise Finance Agency 2020/21 Quarter 4 Performance, with Deputy Minister

Small Business Development

02 June 2021
Chairperson: Ms V Siwela (ANC)
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Meeting Summary

The Portfolio Committee met virtually to receive a briefing on the 2020/2021 Quarter Four Performance of the Small Enterprise Finance Agency (SEFA) for the 2020/21 financial year. Sefa’s amortised Total Loan Book as at 31March 2021 stood at R2.5 billion (including funds). The total approvals for Q4 were R532 million, representing 96% of the quarterly target. Total disbursements for the quarter were R424 million representing 107% of the quarterly target (R200 million DL and R224 million Wholesale Lending (WL). In Q4, a total of 10 247 SMMEs received financial support via the Sefa loan programmes, resulting in the creation and maintenance of 14 513 jobs. R372 million has been disbursed to black-owned SMMEs, R94 million to townships based SMMEs, R121 million to women-owned SMMEs and R107 million to youth-owned enterprises. The loan book portfolio at risk stood at 37% as at 31 March 2021.  The COVID-19 pandemic impacted negatively on the achievement of the disbursements targets due to the lockdown and uncertainty in the economic environment.

The Deputy- Minister assured the Committee that the Department will be able to understand and respond to all questions. Issues of passive communication from SEFA and disbursements for people living with disabilities were raised. Some Members asked for a clarification regarding the figures of applications, both approved or declined. Other Members asked about the implications of the pandemic on collections. The entity assured Members that measures are in place to deal with any issue.  

Meeting report

The Chairperson welcomed everyone and greeted officials from the Small Enterprise Finance Agency (SEFA). She urged Members to pray for strength to handle the difficult period and to follow regulations, considering that it is a difficult period with the third wave of COVID-19 infections looming.

The Chairperson explained that the purpose of the meeting was to be briefed by SEFA on the 2020/21 Fourth Quarterly Performance Report because the entity was unable to present the previous week. She appreciated the decision of the President to place the country in level two of lockdown restrictions so that the rollout of the vaccine can speed up while safety measures are being practiced.

Three apologies were noted. One was from Mr H Kruger (DA), who had been invited by the Portfolio Committee on Public Service and Administration to explain his Private Member’s Bill, ,Mr J De Villiers (DA), who was running late, and Mr V Zungula (ATM).

The Chairperson acknowledged the presence of the Deputy Minister of Small Business Development, Ms Rosemary Capa, Mr Lindokuhle Mkhumane, Acting Director- General, Department of Small Business Development (DSBD), and Mr Martin Mahosi, Chairperson: SEFA.

Mr H April (ANC) moved for the adoption of the agenda.

Ms M Lubengo (ANC) seconded, supported by Ms K Tlhomelang (ANC).

The Committee’s agenda for the meeting was adopted.

The Chairperson asked the Deputy Minister to lead the Department delegation.

Deputy Minister Remarks

The Deputy Minister apologised for the absence of the Minister, explaining that she had reports she needed to submit to Cabinet. The Deputy Minister said she was present to humbly lead the delegation which included the Director-General who is the accounting officer as well as a strong supporter of the entities in the Department.  All recommendations and instructions from the Committee, political or administration, the Department will understand. She appreciated the opportunity to account which is a requirement and compliance for the existence of the Department and its entities. She requested the CEO of SEFA to lead the presentation. The Director-General would assist whenever there is an omission. She said she supports what the Chairperson had mentioned about the third wave. The country is still trying to recover from the atrocities of the pandemic and if it gets worse, small businesses and the Department will not survive. The awareness of following safety regulations should be raised on every platform.

Mr Mkhumane requested the Chairperson of SEFA to take the Committee through the presentation.

The Secretary asked the Chairperson to acknowledge SEFA officials that had joined the meeting.

The Chairperson appreciated and acknowledged the presence of the Small Enterprise Development Agency (SEDA), especially Dr Joy Ndlovu (SEDA Board chairperson) and her team, for showing commitment. She advised the leadership to continue working hard as there are challenges which need attention, especially rural and township entrepreneurship programs. She hoped that after the meeting the Director General would solve issues raised.  She said that she would further engage with Dr Ndlovu because it is urgent. She then asked the Chairperson of SEFA to go on with the presentation.

SEFA Quarter 4 Performance 2020/21

Mr Mahosi expressed his condolences to the Deputy Minister for her loss and acknowledged the presence of the Director-General and all the officials from the Department. It is important to note that that Quarter Four had improvements on approvals although the entity could not cumulatively make up for the annual target. The entity continues to have challenges in terms of meeting the development key targets.

He handed over to the CEO to go through the presentation.

Mr Mxolisi Matshamba, Chief Executive Officer, Small Enterprise Finance Agency, went through the presentation, which provided an overview of SEFA’s fourth quarter performance against the approved corporate plan for the financial year 2020/21. Sefa’s amortised Total Loan Book as at 31 March 2021 stood at R2.5 billion (including funds): R1.2 billion Wholesale Lending (WL) facilities and R1.3 billion Direct Lending (DL) facilities.  The total approvals for Q4 were R532 million, representing 96% of the quarterly target. Total disbursements for the quarter were R424 million representing 107% of the quarterly target (R200 million DL and R224 million Wholesale Lending (WL).  In Q4, a total of 10 247 SMMEs received financial support via the Sefa loan programmes, resulting in the creation and maintenance of 14 513 jobs. R372 million has been disbursed to black-owned SMMEs, R94 million to townships based SMMEs, R121 million to women-owned SMMEs and R107 million to youth-owned enterprises. The loan book portfolio at risk stood at 37% as at 31 March 2021. 

Loan book performance

The total loan book approvals for quarter 4 were R532 million against a target of R554 million, representing 96% of the quarterly target:

-R267 million from Direct Lending (DL)

-R80 million Wholesale SME (WL SME)

-R55 million Microfinance

-R130 million Khula Credit Guarantee

Total approvals for the year were R2 billion, representing 69% of the annual target of R2.8 billion

The total loan book disbursements for Q4 were R424 million against the quarterly target of R397 million, representing 107% of the quarterly target. DL disbursements were R200 million. WL loan programme disbursed R224 million:

-WL SME disbursed R133 million

-Microfinance disbursed R30 million

-KCG disbursed R61 million.

Total disbursements for the year were R1.6 billion representing 80% of the annual target of R2 billion

Development impact

The Q4 performance against target is as follows:

-Jobs facilitated was 44% of the quarterly target

-Total jobs facilitated for year were 60% of the annual target.

The majority of jobs facilitated were contributed by the Informal and Microenterprise sector

The COVID-19 pandemic impacted negatively on the achievement of the disbursements targets due to the lockdown and uncertainty in the economic environment.

In value terms, majority of Sefa’s disbursements were done in Gauteng followed by KwaZulu-Natal then Western Cape. The reason being that Gauteng, KwaZulu-Natal and Western Cape have a higher density of SMMEs registered in South Africa.

Post investment monitoring

As at 31 March 2021, the portfolio had a total balance of R2.5billion (including funds). The total portfolio is made up of R1.2bn WL representing 47% and R1.3bn is in DL representing 53%. Of the WL book, 33.7% is invested in RFIs, 25.2% Funds, 27.5% LREF, 5.5% MFIs, 1% in Co-Operatives, 0.3% in SFS and 4.7% in SBIF Kickstart Loans and 2% in EU ESD Loans. The WL book increased by 2% (R23m) quarter-on-quarter as a result of the net effect of repayments and disbursements. The DL book grew by 10% quarter on quarter as a result of new disbursements, repayments and write offs.

The Portfolio at Risk (PAR) is a technical measure that accounts for the exposures that are 60 + 1 day in arrears. The overall Portfolio at Risk decreased from 39% in Q3 to 37%. This comprises of 32% in WL and 40% in DL. The DL PAR improved by 2% from 42% when compared to Q3. Only 6% of the SMME relief fund is at risk as at the end of March 2021. This is mainly due to only 57 accounts out 1 155 that have reached the PAR threshold. The WL PAR decreased by 2% from 34% to 32% when compared to Q3

The net increase in arrears, quarter on quarter is 7.43%. This reflects the amount that Sefa was unable to collect from its customers during the fourth quarter as a result of the negative economic impact on funded investments. The total Sefa arrears as a percentage of the total loan book outstanding is 26.8%. R7.2 million of the R19.6 million arrears in Direct Lending is attributed to instalments missed by the SMME relief fund clients. The Wholesale Lending arrears  increased as a result of non-payment of R13.2 million

Total Sefa collections

The overall collection rate of 75.5% is below the target of 85%. The main contributor is the low collections of 51.0% from the Direct Lending book.

The on time collection rate of 33.8% indicates the true state of the SMME repayment ability. This reflects the difficulties that the SMMEs have with regard to the performance of their businesses. The current state of the economy has negatively affected sefa’s clients resulting in dishonoured debit orders hence the low collections rate.

The on time collections of R35.5 million includes R14.9 million from the SMME relief clients. The expected instalment of R105 million includes R25.6 million from the SMME relief clients. The total collection rate for the quarter is 75.5%.

The WL total collections of 129% are a result of on-time collections of R25.2m, arrear collections of R3.1m and advance payment R33.9m. The main contributor to the advance collections is SEF that made a payment of R30.4m before it was due.

Financial performance

The cost to income ratio for Q4 is in line with the target and 93% was achieved due to increase in interest income received  (investment income and interest on lending operations) and the cost savings (personnel and operating expenses).  In Q4 accumulated impairments of 39.4% resulted from an  improvement in the effective management of the portfolio at risk. 

  • minimising of the portfolio roll forwards,
  • the restructuring of loans,
  •  the six months payment holiday granted to clients affected by COVID-19,


Mr G Hendricks (Al Jama-Ah) appreciated the report and said he is confident it will improve as he was aware of the industrial action in the form of a go slow. Assurance that when emails are sent from the office of a Member of Parliament staff will be appreciated. People are working from home because of the pandemic but it is unacceptable that no one replies to emails, especially in Cape Town. It is also disrespectful to a Member of Parliament when a PA to an officer takes a message, and the officer does not return the call.

The Chairperson agreed with Mr Hendricks because the role of Members of the Portfolio Committee is to exercise oversight and a healthy relationship and communication is important.

Ms M Lubengo (ANC) asked the entity how the target of disbursement on people living with disabilities will be improved.

Mr F Jacobs (ANC) referred his question to the 48% of Small to Medium Enterprises (SMEs) that were financed. He asked for the specific number of people who applied, the number of applications approved and reasons for non-approval. The entity needs to explain how the application process will be improved if 50% of applications are declined. There has been reports where double payments were taken from loan recipients, and he asked about measures in place to deal with that. The main concern is meeting targets and the disability target is very bad as well as disbursements to township and rural areas. He asked how SEFA will ensure that assistance reaches the intended beneficiaries. There is uneven distribution with more clients in KwaZulu Natal, Eastern Cape and Gauteng getting SEFA disbursements compared to rural areas and Cape provinces. He asked the entity how that will be solved.

The Chairperson asked about the challenges that SEFA is facing when it comes to collection and to provide details of the financial institutions that the entity is working with in the Khula Credit Guarantee and the relationship between the institutions and SEFA. She also asked how much SEFA disbursed to other population groups in the country.

Mr D Mthenjane (EFF) asked about the collection rate performance comparing the period before the pandemic and when the debt fund relief was in place and the implications.

Ms B Mathulelwa (EFF) said the disabled community did not get help from SEFA and the Small Enterprise Development Agency (SEDA). She asked if the entities have data it was rated on and advised that even if the disabled community was not assisted the Committee would be able to work with the entities to collect data.

The Chairperson asked for details of the person responsible for following up on clients who default payments and how the responsibility is carried out. The Committee wants small businesses to grow and create jobs and revenue for the country. She highlighted that the question is important because it benefits the Department, clients and the Government itself.


Mr Mahosi said he will answer some of the questions and will leave the questions about statistics for the CEO to respond.  Responding to Mr Hendricks, he pointed out that he is probably confusing the situation at SEDA with SEFA because the entity is not experiencing any industrial action. Whenever the entity receives correspondence from members of the public, let alone Members of Parliament, the entity strives to respond as quickly as possible to provide any clarity and unblock any challenges. He said he was not aware that SEFA has not been communicating and appreciated that Mr Hendricks brought it up so the entity could intervene.

There has been a trend in declining uptake of applications which is a result of the status of the economy. He said he highlighted the same issue of comparable performance between the entity and an institution like Business Partners to the Committee in a previous meeting. He agreed with Mr Jacobs that it is important that the entity targets the outlying areas. It was reported previously that the entity will look for players to assist in covering areas where the entity does not have the necessary coverage. There has been an overreliance historically on some entities that do not have presence across the country. Mr Mahosi said that the CEO of SEFA would confirm that two people have been brought in and it was his understanding that there might be an increase in numbers.  It is also important to note that the Board is concerned about the extent to which SEFA and the present institution will be negatively impacted if spaces are left open.

He said the entity is conscious of the fact that although SEFA and SEDA are state owned entities it is very important to benchmark them against other institutions. One of the key areas to make the entity attractive is for people to know what they can get from SEFA. This will enable curiosity to access more information about the entity. It was mentioned in the previous meeting, that the entity had appointed a PR agency that is assisting in marketing SEFA products. Members could be aware because some adverts are conducted via social media. The main objective for the entity is to increase its visibility.

When it comes to the demographics, Mr Mahosi said the question has always been whether the operation model of the entity is correct or responsive to the conditions of the country and to what extent it might be able to surpass the hurdles that are being experienced, especially reaching out to people in the townships and rural areas which are priority areas as per the APP.

The entity has a post management unit which monitors the transactions post the approval process to check performance of the entity and those funded including collections. The Minister and the entity reported in the previous meeting that the executive responsible for post investment management has been seconded as the CEO of SEDA. He has not abdicated his responsibilities from SEFA and is still in touch with the entity but on a limited level. The entity was aware that when he leaves there might be vulnerability in terms of capacity because he had been available for two years. Fortunately, just before he left the entity was able to recruit additional resources in collections and restructuring that reports directly to him. He was aware that the Committee is challenging the entity to adjust the target on collections. The reality of the economy should also be put into consideration and as the economy recovers, it will be slow for entrepreneurs and small business owners to meet the obligations as far as repayments are concerned.

Mr Mahosi said he was not being overconfident but, collections were not as bad as expected because clients were given a payment holiday. The entity is interested in watching the number of collections grow without giving people a loophole to escape their obligations. It is too early to discuss the implications, because the figures available are from the first batch of collections. The results would probably be visible in Quarter One of the 2021/2022 report. There are many relief measures for building the economy post Covid, for example the Business Viability Program that is aimed to assist SMEs on long term and more sustainable basis.

Mr Mahosi said it is impossible to say the entity has reliable data on people with disabilities. The entity appreciates the support from the Committee and has acted on referrals given by the Committee. Assistance from the Committee to collect data and refer possible clients with disability challenges would be appreciated. The same applies to all other entrepreneurs that needs support from SEFA.

Mr Matshamba said he would personally follow up on the officer who was rude to Mr Hendricks. The entity works very hard training the staff to be respectful not only to MPs but to all the clients because it is their duty to serve. A special focus to improve on the performance of the organization in supporting people with disabilities is a priority. The entity will hire a person who will work closely with institutions that work with people with disabilities. One of the critical issues when dealing with a specific sector is understanding its dynamics and challenges.

Mr Matshamba said the applications data will be provided to the Committee in writing because it was not part of the presentation. The primary focus was on the number of people who were supported. In Quarter One, the target was 21 377 and the entity delivered 32 065, exceeding the target. The wheel came off in Quarter Two when the lockdown was implemented so the 48% for the current quarter is an impact of the lockdown. Total approvals for the year were 68%.

The true picture around collections for the SMEs COVID-19 relief program will emerge in the current and the next Quarter. Once the payment holiday is over, it will be clear to see who will meet the financial obligations in providing for payments that are due in the form of debit orders. There are improvements in certain sectors but, the third wave is worrying because all pandemic regulations impact directly on the SMEs funding as these are small enterprises that have no reserves that big corporates would have. The entity will monitor to analyse the impact of the third wave and will engage with the most affected to find the most suitable arrangement for both parties, be it another payment holiday, extension or restructuring of loans.

Mr Matshamba confirmed that the entity is working with Standard Bank, ABSA, FNB, Nedbank and has just been joined by UBank. The entity was desperate to work with UBank because of the introduction of the SMEs support and the footprints are for poor areas and small towns. It is the strategic partner needed in the fold and can reach areas where their network is present. The entity is also working with Mercantile Bank which has been acquired by Capitec, hence Capitec is talking about introducing SMEs funding. The entity is also in engagement with Bidvest Bank, who is also introducing SMEs funding to build a strategic relationship between the two parties. The entity is focused on SMEs that are black owned as defined by the Act. A further racial breakdown can be provided to the Committee in writing.

Mr Matshamba said collections before the pandemic were average but, there were clients who were struggling. It started getting worse when the pandemic came. This also affected properties of the entity and tenants were given payment holidays because they could not pay rentals as they could not trade fully. The same principle was applied to entities that SEFA provided with funding. Once that happened there had to be a payment rate in place for example six months, to monitor the cashflow of the entity and see if enough revenue had been generated to service the debt. That is why the Chairperson of SEFA said a clear picture will be available once payment holidays lapse and with the third wave, payment holidays for some SMEs might need to be extended.

Mr Matshamba said there was a system glitch in the first three months of the year between the entity and the bank. Debit orders were not processed but when they eventually did, transactions were duplicated. Clients were immediately engaged with, and the debit orders were reversed. It was a once off error which was addressed, and measures were put in place to avoid a repeat. The Chairperson of SEFA explained the involvement of Mr Mbatha at SEDA. There will be challenges now that it is the end of the moratorium. There has to be support and restructuring of debts but, the entity has hired a person on a short-term contract. In an organisation, three to six months is needed to settle but Mr Mbatha provides support and leadership when it is necessary. The entity is not allowed to fill some of the positions on a long -term contract basis because of the merger. People will be hired on short term contracts of 6-12 months while monitoring the rollout of the merger. This is to make sure that the entity does not get stuck with people on long term contracts until the merger is concluded. The short- term interventions in place are short term contracts and usually people on short term contracts are not always the best people in the market for one reason or another but that is what the entity can do for now.

Mr Kruger announced his presence to the Chairperson who appreciated the honesty in his work but said the meeting was about to end.

The Chairperson asked Members for follow up questions and mentioned that she was happy with the attitude of SEFA’s response and that further information will be gathered and be shared with the Committee.

Mr Mkhumane said that there had been challenges because of the economy but the Department is working closely with SEDA and SEFA to resolve them. The issue of people with disability is a priority to the Department and the entity has engaged with the Department of Labour as it has some factories run by people with disabilities. The Department is looking at getting more people to support. It is a target that has not been doing well and it is important to improve. The District Development Model (DDM) is also assisting in reaching areas that have not been doing well historically. The Departments wants to make sure that the support provided does not benefit the same people in Gauteng, Western Cape and Durban and make sure that the Northern Cape, North- West and Eastern Cape and other Provinces get the deserved support. This will be done to improve performance and make sure that SEFA and SEDA do not operate in silence and are visible enough for everyone.

The Deputy- Minister thanked Members for raising questions and was happy that the delegation was able to respond. She apologised for not acknowledging the presence of SEDA’s Chairperson Dr Ndlovu. She highlighted that there is a need for a coordinating arrangement to help the disability community. Minister Maite Nkoana -Mashabane and Deputy Minister Hlengiwe Mkhize (responsible for women, youth and persons with disabilities) have an overall supervision power to oversight.  Deputy Minister of Social Development, Ms H Bogopane Zulu, has written asking all Deputy Ministers to meet in terms of the DDM arrangement to have an engagement on people living with disabilities. The Department will need to work with the Department of Social Development to create and assess an environment according to the level of disability. The preparatory level will be funded by the Department of Social Development. The information gathered in every Committee is that SEDA must ensure that people who aspire to work as cooperatives and small businesses are prepared. There is no point applying to SEDA when the credit profile is not attractive. The preparatory level is mandatory so that SEFA will not have to disapprove lots of applications which do not qualify.

The Chairperson appreciated the honest report and was happy about the relationship with other banks which might help reduce the backlog. This will speed up processes because people are unemployed. The two entities must continue working together to achieve targets. The benchmarking against other institutions is also appreciated.

Committee minutes

The minutes of 26 May 2021 were considered and adopted.

The Chairperson thanked everyone for participating saying that this will make the entity strong. She recommended that Members should continue offering guidance to the entity to achieve the mandate.

Meeting adjourned.




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