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R700 million allocated to township entrepreneurs – here’s how the money is being split

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R700 million allocated to township entrepreneurs – here’s how the money is being split

The Township and Rural Entrepreneurship Programme, founded in 2020, has been allocated a new budget of R694 million.

Most of this money will go directly towards financial assistance for some 24,000 enterprises.

Motor mechanics, panel beaters, and auto fitment centres have received the biggest share of the fund.

Shisanyamas and fruit and vegetable sellers have been allocated R13 million each.

 

Almost R700 million has been allocated to South Africa’s Township and Rural Entrepreneurship Programme (TREP)

which offers financial support to small businesses in the informal economy.

Small, medium, and micro-sized enterprises (SME),

which typify the economy of South Africa’s densely populated and underdeveloped townships,

are estimated to account for at least third of total turnover generated by the country’s formal business sector.

The real value of the burgeoning township economy is, however, hard to quantify due to informal trading and a legacy of economic exclusion.

Despite a lack of regulation and data, the South African government agrees that

supporting township economies is vital to the country’s recovery from the coronavirus-induced downturn.

To develop and formalise the sector,

which faces an uphill battle in accessing capital through formal financial institutions,

government founded the Small Business Development Ministry in 2014.

Shortly before the Covid-19 pandemic gripped South Africa,

the TREP initiative tabled by the Department of Small Business Development was approved and allocated a reprioritised budget of R413 million.

The fund, managed by the Small Enterprise Development Agency (Seda) and

the Small Enterprise Finance Agency (Sefa), offers credit guarantees, loans, grants, and

business support services to qualifying township and rural-based enterprises.

In the 2020/21 financial year,

more than 14,000 entrepreneurs and businesses benefited from various TREP subsidies,

according to the Minister of Small Business Development, Khumbudzo Ntshavheni.

This was revealed during the minister’s budget speech for the 2021/22 financial year on

25 May and included revised TREP funding which accounts for more than half of Sefa’s R1.25 billion budget.

“The purpose of TREP is to elevate enterprises in the townships and rural areas previously

relegated to the second economy to the mainstream economy, and to further integrate

opportunities in townships and rural areas into competitive business ventures,” explained Ntshavheni during her department’s budget speech.

A total of R694 million allocated to TREP will be used to support approximately 24,000

township and rural enterprises across eight industry-specific programmes.

More than 90% of the total allocation will be used to provide direct financial and

operational support to entrepreneurs, while the remainder covers administrative costs.

Autobody repairs and mechanics – R300 million

A total allocation of R300 million is targeting 800 motor mechanics, panel beaters, auto fitment centres, and auto spares shops.

The financial support package for this sector includes:

  • Maximum of R500 000 (R400 000 equipment and R100 000 working capital) for motor body repairers, mechanics, and auto spares shops, and auto fitment centres.
  • The R500 000 will be provided by the commercial banks with a guarantee from Sefa.

The programme also offers support in the form of training, business advice, registration,

and access to market in both the private and public sectors.

Spaza shops – R150 million

The Spaza Shops Support Programme within TREP is targeting 15,000 enterprises with a

budget of R150 million with the primary aim of facilitating “the banking of the unbanked”.

South African owned and managed spaza shops, holding a valid licence to trade, can

apply for the following financial and operational assistance through TREP:

  • Access to working capital investment and a revolving credit facility that is backed by the Khula Credit Guarantee Scheme of Sefa, in partnership with Nedbank and Standard Bank South Africa (R10,000 grant and R5,000 credit facility)
  • Coordinate and support bulk buying on a pre-approved basket of goods and distribution through a list of approved wholesalers (applicants must be willing to participate in the bulk buying scheme)

Clothing, textile, and leather – R70 million

The clothing and textile industry, which was enlisted by the department’s support

programme to produce personal protective equipment (PPE) during the height of the

pandemic in 2020, has been allocated R70 million which targets 1,400 entities.

The support scheme offers assistance to seamstresses, garment makers, patternmakers,

designers, pattern calculators, pattern cutters, art designers, knitters, machinists,

tanneries, fabric manufacturers, shoemakers, and handbag makers.

The financial package offered to entrepreneurs within these sectors includes:

  • Maximum of R350,000 towards working capital, cost of equipment, or any other CAPEX (paid directly to supplier).
  • The financial package will be offered in the form of a blended finance with 50% of the total approved amount being a grant (maximum grant amount of R50 000).

Successful applicants will have 36 months to repay the loan at a fixed interest rate of 5%. The financial package is only offered to entities which have a turnover of below R1.5 million per annum.

Butcheries – R42 million

A total of R42 million has been allocated to reach 1,400 township and rural-based butcheries. The scheme offers equipment, access to discounted stock – with a predetermined inventory worth R5,000 – and financial support as follows:

  • Maximum of R350,000 towards working capital, cost of equipment, or any other CAPEX.
  • The financial package will be offered in the form of a blended finance with 50% of the total approved amount being a grant (maximum grant amount of R50 000).
  • Grant portion is not repayable, but it is not accessible as a stand-alone facility. Applicants qualify for a grant simultaneously with the loan.

Standard loan repayment terms – as applicable to those in the clothing sector – apply to accepted butcheries.

Hairdressers and personal care – R36 million

The R36 million coverage is aimed at 3,000 existing informal and micro-business hairdressers, make-up artists, massage therapists, and nail technicians. Businesses can be based at home or in a salon and may also be mobile. The financial support package includes:

  • A blended funding model of 50% portion loan and 50% grant.
  • Funding to the maximum of R50,000 per enterprise.
  • It covers working capital and cost of equipment.

Standard loan repayment terms apply and, to qualify, the entity needs to have a turnover of less than R1 million per annum. The programme also offers compliance training within the Occupational Health and Safety Act Standards.

Bakeries and confectioneries – R17 million

A total of 1,400 owner-managed micro, home-based, and co-operative bakeries and confectioneries have been allocated R17 million as part of the latest TREP funding. The financial package offered to these enterprises includes:

  • Maximum of R350,000 towards working capital, cost of equipment, or any other CAPEX.
  • The financial package will be offered in the form of a blended finance with 50% of the total approved amount being a grant (maximum grant amount of R50 000).

Standard loan repayment terms apply and applicants will need to have a turnover of less than R1.5 million. Businesses will also need to comply – or be willing to comply – with the minimum bread and confectionery nutritional requirements. The programme offers assistance to businesses looking to acquire an environmental health and food safety certificate.

Fruit and vegetable sellers – R13 million

Fruit and vegetables vendors have been allocated R13 million which will disbursed to around 6,500 entities. The financial package includes a R2,000 once-off grant which can be used to purchase discounted stock through producers participating in the programme.

Bulk vegetable packages include onions, carrots, beetroot, tomatoes, green beans, potatoes, butternut, spinach, cabbage, and peppers. The fruit package includes apples, bananas, oranges, avocadoes, mangoes, and peaches.

Shisanyama and cooked food – R13 million

Informal and micro restaurants which participate in the cooked food industry have been allocated R13 million intended to assist 1,300 entities.

This programme is open to containerised and mobile cooked food outlets, concession stands, food carts, open-air vendors, and home-based restaurants. Shisanyamas with a turnover of less than R1.5 million a year may also apply. The financial support package offered to these enterprises includes:

  • Maximum of R350,000 towards working capital, cost of equipment, or any other CAPEX (paid directly to supplier).
  • The financial package will be offered in the form of a blended finance with 50% of the total approved amount being a grant (maximum grant amount of R50 000).

The programme also offers training in the correct handling of food and compliance with environmental health and food safety standards.