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Partners
- Minister Ebrahim Patel announced an equity equivalent fund with JP Morgan, which hoped to unlock R2 billion in SA's economy.
- The programme will see JP Morgan invest R340 million into loans and grants for small businesses.
- JP Morgan can expect a boost in its broad-based black economic empowerment scorecard, while the green economy and manufacturing businesses get assistance.
Minister of Trade, Industry and Competition Ebrahim Patel has announced a partnership between his department and international financial services firm JP Morgan. The partnership will see an equity equivalent fund established that hopes to unlock R2 billion to aid small businesses.
The Abadali Equity Equivalent Investment Programme seeks to support small, medium and micro-enterprises (SMMEs) - especially in the green economy and manufacturing - with funding and mentorship. The goal is to create a thousand new jobs, mostly from the green and industrial sectors, Patel added.
South African small businesses are widely regarded as a potential source of jobs growth, but faced a number of challenges even before the Covid-19 pandemic or this year's unrest in KwaZulu-Natal and Gauteng. South Africa has an exceptionally high failure rate for startups, with the majority failing within the first year to two years.
Abadali will see JP Morgan investing R340 million into loans and grants for small businesses, as well as offering short-, medium- and long-term finance to qualifying firms over an eight-year period.
Patel described the partnership as win-win, saying JP Morgan would receive a boost to its broad-based black economic empowerment (B-BBEE) scorecard as it provides funding facilities to qualifying businesses.
"The Equity Equivalent Investment Programme is part of our B-BBEE framework, allowing multinational corps who cannot sell equity stakes to contribute positively to the economic transformation of South Africa. It is an alternative, if you like, to allow companies to participate," said Patel.
Patel praised JP Morgan for being the first international financial services firm to participate in such a programme alongside government. He said the grants and loans sought to unlock R2 billion in capital in short-, medium- and long-term funding over the course of the eight years.
"The funding is intended to support SMME in sectors of public importance line green economy to manufacturing. SA needs more jobs for young people and deeper levels of industrialisation," Patel said.
Patel said the equity equivalent programme was particularly beneficial because many SMMEs cannot qualify for loans from commercial banks and may be hesitant to take on the commitment that comes alongside.
"This will facilitate an injection into the economy for businesses that have funding constraints and may not meet the requirements of commercial banks.
Rebuilding after unrest
JP Morgan SA senior national officer Kevin Latter said the Abadali equity equivalent programme would focus on the crucial challenge of creating jobs for people through developing skills and providing finance, after Covid-19 and unrest rocked small businesses.
"The outbreak of Covid-19 occurred when the economy was already vulnerable. As a firm, we provide support to those that need it. In response to the pandemic, we provided R21 million for relief funds. We also provided R4.5 million after the unrest," said Latter.
He stressed that the core goal was offering a helping hand.
"The application process is efficient, with turnaround time of a week, from application to payout. We will offer flexible terms and will be able to begin processing applications for funds in September," Latter said.
He said sustainability and growth are challenging to achieve without a level of support, especially for small business and the Abadali Fund was looking to assist with R300 million for long- and short-term financing and R40 million in grants to provide business support.
