Funding for Black Businesses in South Africa

Funding for Black Businesses in South Africa

South Africa is one of the many countries where some racial groups have been disadvantaged economically due to a painful history of oppression. In many of these countries today, several efforts are being made continually towards achieving equity – or some semblance of it.

Funding Black Business in South Africa

When opening a new business, outside of a good and feasible plan, nothing is more important than capital. Fortunately for black entrepreneurs in South Africa, securing funding for black businesses has become a priority for many funding organisations.

From loans to grants to overall support of new black-owned enterprises, we shine a light on the resources available to all aspiring entrepreneurs.

National Empowerment Fund (NEF)

We recently looked in brief at the COVID-19 response by the NEF to help black businesses. If you have ever tried to secure funding for your venture, you might already be familiar with this government organisation. The National Empowerment Fund was created to drive the development mandate that encourages black participation in entrepreneurship.

It is made up of 3 subdivisions, notably:

  1. iMbewu Fund: aimed at funding new businesses and expanding existing ones. Funding ranges from R250,000 to R10,000,000.
  2. uMnotho Fund: on top of financing new and existing black businesses, this fund of R2-75 million also aids black entrepreneurs looking to buy equity in all businesses.
  3. Rural Community Development Fund: this fund specifically looks at green categories. The fund ranges from R1m and R50 million.

When applying for funding, make sure you familiarize yourself with the criteria. The NEF website outlines a list of information they assess before approve your business for funding.

Small Enterprise Finance Agency (SEFA)

Unlike other funding schemes that pour money into enterprises, SEFA provides direct finance to entrepreneurs in the form of loans. These loans range from R50,000 and R3 million. Funding for black businesses from the government fund SEFA is divided into these 3 main categories:

  1. Bridging Loans: this short term one-year loan is aimed at providing working capital.
  2. Term Loans: SEFA uses term loans to help entrepreneurs procure assets such as machinery, office equipment or trucks. Payment terms range from 1 to 5 years.
  3. Structured Finance: this funding is provided by a debt facility and can be repaid over 5 years. However, the funds cannot be attributed to liquor, gambling, tobacco, speculative real estate, sex trade, buy-out funds, armaments, and any illegal trade.

You can visit the SEFA website for details on how to apply to the fund.

Khula SME Fund

Khula SME Fund is also a government-run funding organisation offered to black businesses. The fund aims to increase sustainability of and grow small black enterprises. Some of the areas Khula focuses on are:

  • Early-stage and expansion funding for SMEs
  • Economic support for rural and peri-urban SMEs
  • Offers debt funds to organisations that meet the criteria
  • Create job opportunities by helping businesses grow

Overall, Khula, as its name suggests, focuses on sustainable growth of black enterprises for the benefit of both the enterprises and the community. To apply, you can simply visit the SEFA website or contact Khula at +27 11 807 8464.

More Funding Entities for Black Businesses

Some other funding organisations you can look at are:

  • The Isivande Women’s Fund (IWF)
  • Incubation Support Programme (ISP)
  • Industrial Development Corporation Funding (IDC)
  • National Youth Development Agency (NYDA)
  • Black Business Supplier Development Programme (BBSDP)

There are plenty other funding opportunities for black businesses. Now that we have given you a list of places to look, it should become much easier to fund your enterprise.

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