Sunday, November 2, 2008

New investment facility to boost SME development in South Africa

The Industrial Development Corporation (IDC), in collaboration with New Economic Partnership for African Development Business Foundation (NBF) have structured an investment facility to boost small- to medium-sized enterprise (SME) development.

Following three years of discussion, the IDC and the NBF have created a funding mechanism that would facilitate SME access to finance across the continent and help grow this sector.

This investment facility was applicable to the continent as a whole, with key focus countries at this stage being Kenya, Zambia, Botswana, Tanzania, Mozambique and Mauritius.

“Access to finance for small enterprises, has continually hampered the growth and expansion of SME development across the continent with the challenges relating to access to capital and the cost of financing”, said NBF working group chairperson Demetri Pappadopoulos.

“This continent has an extremely large informal sector, which needs to be serviced. SME companies play a pivotal role in progressing the industry within this sector. Therefore, SME development is critical to the creation of employment, poverty reduction and the harnessing of skills from the informal sector,” added Pappadopoulos.

Traditionally, commercial banks have been reluctant to finance SME development owing to the risk profile involved and it was difficult for SMEs to trade across borders into other African countries and access funding.