Before COVID-19, access to funding has always been a challenge for many of South Africa’s Small, Medium, Micro, and Exempt Enterprises (SMMEEs).
The pandemic has exacerbated the challenge as these businesses have been at the epicentre of the COVID-19 crisis, with 42.7% of these businesses being forced to close. Now, recent looting sprees in Gauteng and KwaZulu-Natal have pummelled the ailing sector even further.
With SMMEEs employing between 50% to 60% of the country’s workforce and contributing around 39% of GDP, MyGrowthFund Venture Partners – in partnership with Sasfin – have launched the Vuka Fund, a first of its kind R350 million debt fund aimed at rebuilding these businesses and the economy too.
MyGrowthFund CEO, Vusi Thembekwayo, explains that the tool most businesses need to unlock growth is quick access to cash. “However, the conventional banking approach to capital lending doesn’t suit the characteristics of SMMEEs in need of money. Additionally, venture capital and private equity automatically exclude 90% of the current SMMEE landscape. Equity is also notoriously expensive, and the process of unlocking equity funding is very cumbersome which delays the release of capital. This is why we’ve developed a more relevant funding mechanism for the market and the times that can be made available more cheaply and within a matter of days. With this fund, business owners raise debt and use it as working capital to make their business productive and then use that product to pay back the debt. Ultimately, what we want to achieve is money circulating within the real economy as swiftly as possible.“
Meagan Rabe, Head of SME Lending and Strategic Alliances at Sasfin says: “We are very excited to partner with MyGrowthFund on this initiative, especially as they share the same values as Sasfin in terms of wanting to make a difference to the SMMEE market and grow South Africa into South Africa Pty Limited – something we all need, especially in the current climate.”
The fund seeks to simplify the process of enabling access as a result its criteria is that a business should be trading for a minimum of 12 months and making a minimum of R1 million in annual revenue.
This is a revolving credit facility, which means that once they pay back the original capital, business owners can use it again and repeat the process as many times as necessary. “Unlike conventional debt instruments, which usually entail having to apply for several different products – each with its own cost of capital, the application process, and transaction fees – revolving credit is priced once and can be used multiple times, making it more affordable, less onerous and more functional. Plus, it is non-prescriptive which means you can lend against your income for any purpose,” explains MyGrowthFund Chief Investment Officer, Justin Rovian Naidoo.
“Vuka is a Nguni word that means ‘wake up, but the more colloquial translation means ‘take charge’ or ‘take ownership’. I would like to encourage SMMEEs affected by recent events to take charge of their futures, and that of the country, by applying for the Fund,” concludes Thembekwayo.