Business Maverick


Big banks step up financial support including energy subsidies for SME sector

Big banks step up financial support including energy subsidies for SME sector
Absa corporate logos outside the bank's headquarters office in Johannesburg, South Africa, on 7 August 2018. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

In a move aimed at supporting and growing small and medium-sized enterprises (SMEs), Absa will provide up to R50-million in energy subsidies under its Green Asset Finance programme for qualifying SMEs.

The energy subsidy is intended to support smaller businesses as they battle to finance solar installations to keep the lights on. Eligible SMEs that already have their commercial properties financed by Absa will be contacted by Absa and need not take any action to apply for this support.

Subsidy amounts will differ depending on various factors and can reach up to R50,000 or 10% of the overall installation value. Identified and qualifying SME customers will be invited by Absa to opt in or opt out of the subsidy for their green finance needs.

“SMEs make a significant contribution to job creation and economic growth in South Africa. However, in many instances, the operating environment over the past few years has made it very difficult for these vital enablers to grow and thrive,” says Ronnie Mbatsane, managing executive for SME Business at Absa Relationship Banking.

“Load shedding, in particular, continues to hamper the potential of many SMEs. Through these subsidies we are helping to put liquidity back into the hands of small businesses to power their business into full production,” Mbatsane adds.

The initiative adds to the arsenal of other efforts Absa has made in the renewable energy sector, including the solar offering for Absa home loan clients and a personal loan option for retail customers to procure alternative power sources.

Through its supplier value chain development initiative, Absa has supported SME installers by funding their Sapvia (South African Solar PV Industry Association) PV Green Card accreditation, which in turn supports emerging township economies.

“The Absa energy grants underscore our commitment to this vital segment and connecting individuals and businesses to communities,” concludes Mbatsane.

In December, rival FNB committed R200-million to the Vumela Enterprise Development Fund for deployment into new, innovative alternative SME financing solutions, aiming to benefit about 150 businesses and create more than 1,000 jobs.  

Significant and growing unemployment and poverty are risks to the sustainability of South Africa. A growing and sustainable SME sector does a great deal to contribute to the alleviation of these factors. The Vumela Enterprise Development Fund was established in 2009 by FNB Commercial and Edge Growth to create an innovative model to finance and support black-owned “missing-middle” SMEs, unlocking their potential for sustainable growth and subsequent job creation. 

Missing-middle SMEs are those that do not fit into the traditional funding continuum provided by traditional financiers. They are too large for microfinance, don’t meet traditional credit criteria in terms of collateral and balance-sheet requirements, are too small or early stage for private equity, and don’t yet generate the exceptional returns that venture capital seeks. 

Gordon Little, the chief executive of FNB Commercial, says following the initial capitalisation of Vumela, FNB has committed two additional tranches of capital. Vumela 1, launched in 2010, deployed R102-million in capital to eight SMEs, creating 360 jobs. In 2015, Vumela 2 was launched with a specific focus on job creation. This tranche deployed R157-million in capital to 10 SMEs, creating more than 6,000 jobs.

Another R145-million was deployed in the third tranche in 2018, creating another 213 jobs. DM/BM


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