Question NW1389 to the Minister of Economic Development

Reply:

(a) Economic Development Department

The Economic Development Department (EDD) has from time to time supported different initiatives initiated through the IDC, sefa, and other departments such as Department of Small Business Development and Trade and Industry.

1. EDD, jointly with the IDC manages the Agro Processing Competitive Fund (APCF) which support small agro-processing businesses and corporates

Funding to R250 million was made available by National Treasury in April 2011 following the fine imposed by the Competition Commission on the Bread Cartel. For the period between 1 April 2011 to 31 March 2016, the APCF achieved the following:

• Loans approved (interest free) : R201 425 701
• Funds disbursed : R186 277 970
• Write-offs : Nil
• Number of jobs created (inception) : 2 401
• Jobs created in 2016-17 financial year : this will be known after the expiry of the period
• IDC co-investment : R223 885 641

2. The department conducted research on township based enterprises in Gauteng that have received funding from state owned funding institutions such as IDC, NEF and sefa. The purpose of the research was to determine the levels of impact of DFI funding to township enterprises. For 2016/17 financial year, the department may expand this research survey to cover one or two additional provinces.

3. As part of the Township Economy work, EDD is piloting a project of spaza shop development project which aims at re-establishing a network of more than 25 spaza shops in Mamelodi. Sefa is considering the application to recapitalize such spaza shops.

(b) IDC

The IDC advises that, over the last 20 years, more than 70% of the number and 18% of the value of IDC funding approvals pertained to small and medium enterprises. The IDC realised that empowerment could not be exclusively driven by its focus on funding large projects, and that SMEs, inclusive of black entrepreneurs, had to increasingly participate in all sectors of the economy, which have been dominated in most instances by very large players. The IDC has also directly promoted black empowerment through the development of a credible and strong SME sector.

In addition the IDC has spearheaded the establishment and support of development agencies at a local level to facilitate economic development within municipalities as an approach for identifying and supporting opportunities generating jobs and wealth in communities through the employment of local mechanisms and strategies; and, the leveraging of local resources, assets and capabilities. IDC provides funds for institutional and opportunity development.

Through the Social Enterprise Fund the IDC continues to support social enterprises throughout the country. Social enterprises are businesses with social missions and trade to tackle social and environmental problems, and improve the lives of people and communities, often the most vulnerable. The legal form that many of these social enterprises take often include cooperatives. Under this programme, IDC finds, funds and supports social enterprises, as well as to those organisations providing support to this sector.

The Spatial/Special Intervention Fund, which aims to address the socio-economic and developmental needs of targeted, largely marginalised, areas through public, private and community partnerships, has resulted in many innovative and impactful initiatives. These initiatives include the establishment of business development support organisations for small businesses and pursuing inclusive business approaches with supplier linkages into retailers and corporates.

The IDC is one of three founding partners of Startup Nations South Africa (SuNSA), focused on advancing the national agenda for entrepreneurship and the creation of sustainable startups and small businesses which can contribute to the economic and social development of South Africa meaningfully. SuNSA works very closely with an international network of entrepreneurship capacity development experts to advance the local entrepreneurship movement. This programme supports entrepreneurs through providing training, peer networking events and linking them to potential investors and clients; and further endeavors, through research, make inputs into policy impacting on enterprise development

IDC also has a well-defined Business Support Programme that seeks to offer both pre- and post-investment support to entrepreneurs in respect of its general business mandate. Not only is this programme aimed at making applications investment-ready, but also ensures their sustainability post approval. There is a deliberate focus in support of youth, women and Black Industrialists. The funding in relation to this programme operates on a shared basis.

An amount of R50m is specifically earmarked for the above-mentioned programmes of Agency Development and Support, Social enterprises and Spatial/Special Interventions. The IDC uses these funds as a catalyst to “pump-prime” the participation and crowding in of other funders and partners. The IDC endeavors to support and include small businesses in all aspects of its normal operations and activities too, which is difficult to quantify and business support is provided on a case-by-case basis.

Jobs created are highly dependent on the nature (sector, location, etc) of each particular application. Having said that, the IDC endeavors through the above-mentioned funds/programmes, to create a 1000 jobs with the budgeted R50m.

SuNSA operates on co-funding basis and IDC’s contribution is R1m per annum, as well as accomodating the Project Management function.

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