Ruperts’ fund aims to pay its loans forward
• Sukuma has helped to save more than 26,000 jobs
The principle of paying it forward is not something usually associated with business loans — or any finance for that matter. But this is how the Sukuma Fund, established with a R1bn donation from the Rupert family and Remgro to help small and medium enterprises face the Covid-19 pandemic, plans to make use of the money repaid by firms it has helped. The intention is for the fund to become a permanent relief fund for small businesses hit by a future crisis — with repayments becoming a lifeline extended to other firms in distress, says David Morobe, spokesperson for the fund and executive GM for impact investing at Business Partners.
The principle of paying it forward is not something usually associated with business loans — or any finance for that matter.
But this is how the Sukuma Fund, established with a R1bn donation from the Rupert family and Remgro to help small and medium enterprises (SMEs) face the Covid-19 pandemic, plans to make use of the money repaid by firms it has helped.
The intention is for the fund to become a permanent relief fund for small businesses hit by a future crisis — with repayments becoming a lifeline extended to other firms in distress, says David Morobe, spokesperson for the fund and executive GM for impact investing at Business Partners.
The fund, which is being administered by Business Partners, has now paid more than R42m in non-refundable survival grants to 1,692 sole proprietor businesses. Alongside this it has provided R26m in survival grants as well as more than R547m in soft loans to more than 1,000 small firms.
“The principle is that once you are on your feet, please help us to be able to help others in any future crisis that may arise,” Morobe told Business Day.
According to the fund the average loan provided to small businesses is about R517,000, which has to date helped save 26,620 jobs at an average of 13 jobs per SME. The loans are interest free for the first year, after which they are paid back at the prime rate.
Small businesses have been the hardest hit by the pandemic and the ensuing lockdown restrictions, which, despite easing up incrementally, have left many small firms at nowhere near their pre-lockdown turnover levels.
The fund had to shut down its application portal three days after it opened, thanks to a flood of applications that would ultimately tally about 30,000.
This is testament to the need in the sector, which accounts for about 98.5% of all businesses in SA, according to a recent report from consultancy McKinsey & Co. It also accounts for about a quarter of all jobs in the private sector and contributes about 39% of GDP.
Though it closed its application portal, the fund invited SMEs to contact it directly, after which it provided each business with a dedicated link where it could apply. According to Morobe, it has been processing applicants in batches, with the last batch going out last week.
The fund adopted a “rescue approach”, he said, motivated by the need to help firms that “through no fault of their own ... are facing imminent closure”. Applications are based “entirely on economic merit” with no prequalifying requirements and no requirements for surety from the applicants, he said.
The businesses are required to provide audited financials up to 2019 and their most recent management accounts, along with evidence of things like tax compliance, Morobe added.
Payments are then made over four months, with the business required to provide a record of how the money was spent — whether it was to pay employees or cover operational costs such as rent — before the next tranche of money is released.
Though the plight of SMEs is evident, Morobe said, the fund could not help all those that applied. Amid the 30,000 applications, there were a number of duplications — for instance where more than one family member in a family-owned business approached the fund.
Only about 60% of applications were fully complete, he added, while some firms did not meet subsequent due diligence requirements.
Nevertheless, Morobe said he expected there would be an estimated R300m available for a second wave of applications, though it might be slightly more, depending on any additional donations from third parties.
“We are meeting with the trustees providing oversight as to how we open up the second wave,” he said.
The fund is one of several efforts to help SMEs, including the SA Future Trust set up by the Oppenheimer family and administered through the country’s major banks, and the department of small business development’s SME debt-relief facility.
The department noted in May that its relief fund was short by an estimated R4.4bn if it were to meet the almost 13,000 completed applications that it was unable to assist.
On Sunday, the Treasury and the SA Reserve Bank announced revisions to the R200bn loan guarantee scheme, which was launched to help SMEs survive the crisis.
Despite being the largest programme devised to support businesses, the scheme has seen low uptake due to, among other issues, concerns that its terms may be too onerous.
The Treasury said the revised scheme will allow bank credit assessments and loan approvals to be “more discretionary and less restrictive”, longer repayment terms and an extended interest and capital repayment holiday. Previously, the scheme was limited to firms with turnover of under R300m per year. This has now been replaced with a maximum loan amount of R100m.