Qualifying small businesses urged to apply!
There is no doubt that the extreme disruptions and repercussions caused by the COVID-19 pandemic in South Africa will continue for some time. The long-term effect on the already challenged small and medium businesses will also be profound.
Fortunately, initiatives such as the newly launched Abadali Equity Equivalent Investment Programme (EEIP) aims to have a real, meaningful and direct impact on the South African economy and job creation, specifically within this sector.
This joint initiative by the The Department of Trade, Industry and Competition (the dtic) and international investment bank J.P. Morgan, will provide short-, medium- and long-term finance over an eight-year period for qualifying businesses requiring growth capital, with priority funding being mainly directed at industrial and sustainable green enterprises.
Primary objectives of the Abadali EEIP include enabling the development and growth of sustainable black enterprises, creating at least 1 000 permanent jobs and providing much needed strengthening of the local economy through business support. The programme will promote economic inclusion and opportunities for previously disadvantaged owners and employees of black enterprises.
The Abadali EEIP will be administered by a joint venture between established local fund manager Edge Growth and short-term capital fintech company Profit Share Partners.
Edge Growth will manage the deployment of capital to medium- and long-term investments.
“We are proud to announce that we have been awarded the opportunity to administer the medium- and long-term commitments of the Abadali EEIP, which will undoubtedly create much needed positive economic and social impact locally,” says Richard Rose, CEO Edge Ventures at Edge Growth. “We are privileged to be associated with this initiative to boost small and medium businesses, especially given the devastating effects of the pandemic and the need to grow businesses and job opportunities now more than ever,” he says.
By directly addressing the major contributing factors to business failure which include lack of financial support and the inability to raise funds, the Abadali EEIP aims to effect small business growth and entrepreneurship while also providing wraparound business support in terms of aspects such as business case development, legal advice and tender negotiation support.
The deployment of J.P. Morgan’s initial R300 million through the Fund and R40 million through the Grant is expected to result in R2 billion worth of financing transactions and create a minimum of 1 000 jobs over the eight-year period of the Abadali EEIP. The Abadali EEIP will specifically address the critical funding gap for small and medium enterprises that do not meet the traditional underwriting criteria of general commercial banking requirements.
Call for applications for medium- and long-term funding
Qualifying majority black owned and majority black managed enterprises, whether sole proprietors, partnerships or joint ventures, with an annual revenue of at least R1 million and a track record of trading for at least 12 months, are urged to apply. Preference will be given to those trading in the financial services, industrial, education, healthcare, green and digital inclusion sectors.
Please apply by submitting your application here.
Please visit the Abadali website here for more information.
About the Abadali EEIP
• Funds have already been made available to the Abadali EEIP, which means that eligible applications will be able to be accepted immediately. The Abadali EEIP is therefore not exposed to the risks and delays relating to securing and raising funds, which may be difficult in the current economic climate.
• This programme will use debt instruments with flexible terms and conditions that are tailored to the typical needs of early-stage businesses. These could include loan repayment holidays and minimum to no security, which are crucial requirements for early-stage South African businesses that often experience a lead time from initial investment until their revenue and cash flows can ramp up to service loan repayments. These businesses also traditionally have capital-light balance sheets which prevent them from providing sufficient security for traditional finance.
• The loans will be non-dilutionary and can be used by scaling businesses as an alternative to traditional venture capital or private equity investment
• Short-term finance will be provided to businesses by ProfitShare Partners even if they have no initial revenue but have a requirement for capital of R250 000 or more. These applicants will not require a trading history, financials or security as long as they are in the supply chain of large corporates or government. The aim is to develop these SMEs to make them bankable and then graduate them to the medium- or long-term part of the fund or to transfer them to the traditional funding sector.
• Medium- to long-term finance will be offered by Edge Growth to businesses with revenue starting from R1 million. The eligible, selected businesses will be majority black owned and managed enterprises and have a track record of at least 12 months of trading. These businesses can include sole proprietors, partnerships or joint ventures. The sectors targeted will be financial services, industrial, educational, healthcare, green and digital inclusion sectors of the South African economy.
About Edge Growth
Edge Growth is a leading SME and Venture Fund Manager, specialising in developing small businesses and creating jobs and real transformation by connecting corporates and entrepreneurs, and growing SMEs by addressing their key constraints: Access to finance, markets and skills. Our offering consists of three services areas, designed to achieve maximum Impact:
• ESD Strategy for corporates & building SMEs in their value chain
• Investing in and growing SMEs through fund management
• Scaling businesses to full potential through accelerator programmes
If you would like more information, please contact Linda Erasmus via email at lerasmus@edgegrowth.com.
