Big help for the little guy
The SA SME Fund has raised R1.39bn to help small businesses recover from Covid
An investment group that is fighting for small businesses is committing R1.24bn to 14 funds that support these ventures.
The SA SME Fund was established in 2016 by members of the CEO
Initiative to encourage entrepreneurship and help grow established small businesses. Recently it has focused on businesses affected by Covid lockdowns.
“We engaged with government departments to try to help them develop protocols for the return to work in certain industries, like hairdressing salons,” says Lisa Klein, executive director of the CEO Circle. “There’s a lot to be said for co-ordinating our voices and having one powerful interaction with the government to try to change regulations and red tape.”
The fund was set up with contributions from 50 large corporates, money from the Public Investment Corp and the Unemployment Insurance Fund.
“We ended up with R1.39bn and we’ve committed R1.24bn to 14 funds — some that we call ecosystem initiatives, which are not investment activities but contribute to growing the venture capital of the SME and nonbank financial institution spaces from a governance point of view,” says fund CEO Ketso Gordhan. “We have some really capable and committed people helping to guide the overall activities.”
The fund does not invest directly. As a fund of funds it channels money to established investment businesses that specialise in venture capital or growth, or have an impact on investing.
With Covid, SMEs were badly hit. “SMEs, being the smallest businesses at the forefront of the pandemic, were impacted hugely,” says Klein, who also addresses what she calls “the issue of sentiment”.
“Entrepreneurs are the ones who believe in the country,” she says. “They’re the people who build businesses, who believe there’s a great future. And that business has done this in a very visible way makes people feel optimistic, and it provides leadership in terms of the fact that we are a national asset, and we do a lot of social good.”
Another focus for the fund is intellectual property (IP). Gordhan says the fund wants to commercialise IP coming out of government institutions. “SA has an incredible track record of doing primary research, of registering patents.”
He says emphasis has not been placed on commercialising some of the country’s IP, such as HIV testing.
Simon Travers, co-founder and CEO of Hyrax BioSciences, a DNA sequence analysis software company, says in resource-limited countries such as SA, there is no HIV drug resistance testing done routinely because of cost. “We work with various companies to reduce the cost of HIV drug resistance testing and thereby provide access globally for these types of diagnostics,” he says.
Gordhan says that IP came out of the University of Western Cape. The SA SME Fund has concluded deals with Stellenbosch University, the University of Cape Town and North-West University, and hopes to continue to expand its partnerships.
The fund works with the department of science & innovation, the Technology Innovation Agency (TIA) and the universities and science councils because they will “play a significant role over the coming years in unlocking the IP and creating huge new industries and solving many problems that SA and the region faces”, says Gordhan.
TIA chair Matsi Modise says: “If we all had to do it alone, we wouldn’t be able to do it properly. But now, as a collective in the private sector, it shows confidence in cocreating new industries in technology and innovation.”
Mmboneni Muofhe, deputy director-general in the department of science & innovation, says: “Our partnership with the fund means we’re able to bring together the different competencies. We’ll bring the funding and exposure to the various IPs that are sitting in our entities, and from the fund, they have that experience of picking up and being able to take through due diligence many of these initiatives, so that they can take them to commercialisation.”
He says that if the state does not support young people with bright ideas, “we may be depriving ourselves of the kind of future that we need. So working with the fund, one of the challenges is how to begin to pick those young entrepreneurs and support them.”