Small Enterprise Finance Agency (SEFA)

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The Small Enterprise Finance Agency (SEFA) is a governmental financial organization based in South Africa that provides financial products to qualifying Small, Medium, and Micro Enterprises (SMMEs) and Co-operatives.
What are the main aims and objectives?

The Small Enterprise Finance Agency (SEFA) in South Africa aims to foster the establishment, survival, and growth of Small, Medium, and Micro Enterprises (SMMEs), contributing towards poverty alleviation and job creation. It provides comprehensive financial support and prioritizes sectors such as services, manufacturing, agricultural, construction, mining, green industries, and IT. SEFA offers various funding programmes, including direct and wholesale lending, to ensure small businesses have access to a wide range of financial products. Additionally, it provides post-funding business development and support, addressing problem areas identified by SEFA. These objectives underscore SEFA's commitment to supporting the growth and development of small businesses in South Africa.

How does the program work?

SEFA's core function is to provide SMMEs and Co-operatives throughout South Africa with simple access to finance in an efficient and sustainable manner. It achieves this by delivering wholesale and direct lending credit facilities or products, providing credit guarantees to SMMEs and Co-operatives, and supporting the institutional strengthening of financial intermediaries. Additionally, SEFA creates strategic partnerships with a range of institutions for sustainable small, micro, and co-operative enterprise development and support

SEFA offers various types of support to Small, Medium, and Micro Enterprises (SMMEs) and co-operatives in South Africa, such as:

  • Wholesale and direct lending credit facilities or products
  • Credit guarantees to SMMEs and Co-operatives
  • Institutional strengthening support
  • Post loan business support
  • Non-financial support through its Institutional Strengthening Support programme
  • Business and technical support, commercial and industrial property rental
  • Mentorship for non-Financial Co-operatives
  • Training and skills development interventions
  • Support for land reform beneficiaries and contract-farming activities
  • Credit guarantee products to lenders
  • Support for strategic and organizational needs of the organization
What is the overall cost?

Since 2012, sefa has disbursed more than R15 billion (approx. $790 million) to 642,000 SMMEs. 

During 2022/23, sefa approved loans to the value of R1.7 billion (approx. $90 million) representing 76% of the annual target and disbursed R2.4 billion (approx. $130 million) into the economy representing 121% of the annual disbursement target for the year. The finance supported 74 762 businesses and facilitated 104 547 jobs in the economy. 

How was it implemented?

The Small Enterprise Finance Agency (SEFA) was created in 2004 as a result of the merger between the South African Micro Apex Fund, Khula Enterprise Finance Ltd, and the small business activities of the Industrial Development Corporation (IDC). This merger was intended to streamline and improve the delivery of financial and non-financial products and services to small businesses throughout South Africa. SEFA was established to provide financial products to qualifying Small, Medium, and Micro Enterprises (SMMEs) and Co-operatives, aiming to foster the establishment, development, and growth of these enterprises, contributing towards poverty alleviation, job creation, and economic growth.

Sefa’s operations are governed and guided by a range of foundational policies, sector-based policies and legislative requirements.

Foundational policies:

  1. The National Strategy on the Development and Promotion of Small Business in South Africa (1995)
  2. Integrated Small Business Development Strategy (2004– 2014)
  3. The Integrated Strategy on the Promotion of Entrepreneurship and Small Enterprises (2005)

Sector-based policies:

  1. Co-operative Development Policy (2004)
  2. Integrated Strategy on the development and Promotion of Co-operatives (2012)
  3. National Informal Business Upliftment Strategy (2013)
  4. Youth Enterprise Development Strategy 2013–2023 (2014)

Legislation:

  1. National Small Business Act 1996, revised 2004
  2. National Credit Acts No.24 of 2005
  3. Industrial Development Act No. 22 of 1940
  4. Financial Intelligence Centre Act (FICA) No. 38 of 2001, as amended
  5. Consumer Protection Act 2008
  6. Companies Act No. 71 of 2008, as amended
  7. Co-operatives Act No. 14 of 2005, as amended
  8. Insurance Act No. 18 of 2017, as amended
  9. Promotion of Access to Information Act No. 2 of 2000, as amended
  10. Public Finance Management Act 1999, as amended
What impact has been measured?

Since it was established in 2012, Sefa has disbursed more than R15 billion (approx. $790 million) to 642 000 SMMEs, creating and sustaining more than 850 000 jobs.

Sefa can demonstrate that for 2022/23:

  • 1,706,706 loans were approved (76% of the annual target)
  • 74,762 SMMEs and Co-operatives were financed (88% of annal target)
  • 104,547 jobs were facilitated (100% of target)
  • Facilities were disbursed to 928,361 women-owned businesses (116% of target)

While sefa tracks performance against predetermined corporate targets, the reviews do not demonstrate direct proof of impact through the use of control groups or other academically recognised techiques. Consequently, it is not possible to determine the full impact of the program on economic and social outputs. To access annual reviews of Sefa click here. 

What lessons can be learned?

The underperformance on the number of SMMEs financed and jobs primarily relates to the slow implementation of the Township and Rural Entrepreneurship Programme (TREP). During the implementation, TREP experienced inadequate staffing and high staff turnover challenges coupled with low quality applications. In addition, the uptake of programme funds in the Informal and Microfinance programme contributed to the slow uptake of funds from microfinance intermediaries post COVID-19. The MFIs are struggling to recover in their loan book partly because of high impairments/bad debts and challenges relating to achieving operational and financial sustainability. There is a lack of MFI institutional diversity across the country to lend to informal micro enterprises.

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom