Small business gains in NEF and Absa tie up

Absa and the National Empowerment Fund (NEF) have signed a Memorandum of Understanding (MOU) which will set the framework for both organisations co-funding BEE transactions in the small and medium enterprise (SME) sector. 

The signing of the MOU complements each organisations strategy to support Black SMEs and allows the NEF and Absa to leverage off each others strengths.  They would also develop synergies and increase Black-owned SME access to funding. 

According to Ms Philisiwe Buthelezi, CEO of the NEF, it is in the interest of both the NEF and Absa to support each others initiatives in an effort to streamline funding mechanisms to black-owned SMEs as well as create national access points and infrastructure for the benefit and support of these SMEs. 

"By cooperating with Absa, the NEF would also be fulfilling its mandate to turn black-owned SMEs and entrepreneurs into bankable entities," added Ms Buthelezi.

Some of the areas that the NEF and Absa are considering to co-fund will include procurement contracts won by black-owned SMEs, initially with specific focus on the Extended Public Works Programme, transportation, franchising and agribusiness sectors.  Special emphasis will be placed on rural and community development projects through the national infrastructure of Absa and specialist skills at the NEF.

According to Daphne Motsepe, Managing Executive of Absa Small Business, the bank sees partnerships as a key strategy to ensure that entrepreneurs are able to access all the opportunities available.  This partnership will offer Black SMEs more opportunities to access finance, grow their business and create sustainable enterprises."
 
The most significant benefit of the agreement is the potential to further assist the SME sector in debt and equity finance.  This will help overcome some of the barriers to entry which includes the lack of business experience, collateral for security and own contribution in order to secure finance.

"We will also be able to jointly market products and engage on education initiatives. The agreement aims to maximise our synergies and at the same time ensure that we are able to support each other in deal referrals and a Management Information System (MIS)," says Motsepe.

The MIS will be tailor-made for transactions funded by the NEF but banking done with Absa.

The MIS will generate relevant reports which will assist in the monitoring of SMEs funded, increase deal flow, make turnaround times quicker and help in assessing SMEs funding requirements and repayment capabilities.

Ms Buthelezi was quick to emphasise that the MOU is a pilot project and will possibly be rolled out with other banks in keeping with the NEF's mandate of financially investing in broad-based BEE in all areas of the economy.