Question NW83 to the Minister of Small Business Development

Reply:

I have been advised that:

1. The performance and sustainability of MSMEs and Co-operatives have been impacted by factors such as: the low economic growth environment, structural impediments (load-shedding, poor infrastructure especially at local government, crime, etc), high-interest environment and its impact on the cash-flow performance of the MSMEs and administered pricing. This has significantly affected the majority of the MSMEs especially those that are in the start-up phases.
2. As part of the Small Enterprise Finance Agency (sefa) business processes, sefa monitors the performance of the clients after approval of funds into businesses, this is performed through the sefa Post Investment Monitoring division. The processes include monitoring whether businesses achieve their projected sales and ensuring that the funded businesses are viable, sustainable and achieve the targeted jobs. During the monitoring processes, the accounts are graded into three categories, good, performing and portfolio at risk (PaR). The good accounts category are those accounts that are up to date with their payments, the performing category refers to those with arrears of between 31-60 days and the PaR category refer to those with arrears of more than 61 days.
3. Depending on the category, these accounts are afforded different interventions such as close monitoring, restructuring and providing value-added service and mentorship. Restructuring interventions include extending the client’s loan terms, extending more money to these businesses where necessary and providing them with payment breaks.
4. Based on the monitoring results, the Post Investment Monitoring Division and Lending Business have monthly regional meetings to share the performance on funded transactions, challenges, lessons learnt and collections statics, to improve on quality of the deals and transactions.
5. sefa has put more focus on entrepreneurial assessment to determine the suitability of entrepreneurs applying for funding. As part of our due diligence process and as part of the credit assessment, the character behind the business which sefa is considering for funding is one of the most important elements in ensuring the success of the businesses being considered for funding. The entrepreneurial assessment checklist is being used.
6. In addition to that, the following interventions are implemented to improve the quality of applications received:
   1. Targeted business development initiatives are done, often in collaboration with key partners in the MSME ecosystem (such as business chambers).
   2. Value chain financing by targeting MSMEs that benefit from opportunities created by corporates (e.g. commodity groups in agriculture).
   3. Building relationships with credible franchisors.
   4. Partnerships with entities that provide opportunities to MSMEs through their procurement spent.
7. sefa management together with the Regional Managers and Heads of Departments / Divisions at sefa are involved in the Project Bhatala, which aims to increase collections. sefa continues to list defaulting clients on the credit bureaus to assist with the recoveries.