China gets into the act with Economic Planning

Economic Development Minister Ebrahim Patel said, during his department’s Budget vote speech in Parliament, that the China Development Bank and the IDC had signed an agreement to access US100 million for small business lending based on a 10-year tenure.

The recently formed Small Enterprise Finance Agency (Sefa) is also to received R2bn to be made available over the next three years to “strengthen its direct lending capability, increase the disbursement to small business and work to lower the costs of bureaucracy and overheads”, minister Patel said.

He was giving details on how his department would divide up its R672m budget on funding exercises, much of which will go to small business development and towards the competition authorities – minister Patel stating that R169m would go to Sefa for the current year and R173m to the competition board.

Funds for Sefa would be made available from both “fiscal transfers” and a direct R921m loan from the Industrial Development Corporation (IDC), Patel said.  IDC is to separately issue a R4bn “jobs bond” with the purpose in mind of promoting lending that had strong emphasis on job creation.

Sefa, which was formally launched this month, was the result of the old Khula Finance fund run by the department of trade and industry (DTI) consolidated with the DTI’s Apex fund for small business microfinance and the IDC small business “lending book”.

The agreement with the China Development Bank would allow the IDC to access about R800-million from China for small business lending at favourable terms.

Minister Patel said in his address to parliamentarians, “By reducing the number of agencies, we estimate annual savings in excess of R20-million through cutting duplication of costs and services. That money can flow into more lending to small businesses, rather than the bureaucracy. The idea of all such funds under one umbrella organisation was mooted a number of years ago by DTI in proposals before Parliament.

Sefa, which would be an entity of the IIDC, would offer loans initially of up to R3-million to small businesses.

Minister Patel said of the department’s R673m budget allocated for the 2012/13 financial year, R60m was for administration and capex, R29m for economic policy development, R42m economic planning and coordination, and R18m for economic development and dialogue.

The remainder of the budget was the amount going to Sefa for small business funding, the competition authorities with R173m, the International Trade Administration for South Africa which would get R74m and IDC, again, for their agro-processing fund which would receive R108m.

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