Many business-minded individuals and young entrepreneurs who cannot find jobs in the public sector are now creating their own small enterprises. Bioentrepreneurs in South Africa have a vast avenue to seek funds for their innovative projects. Besides commercial banks, there are government agencies such as the Development Bank of South Africa job fund, the Technology Innovation Agency (TIA), Industrial Development Cooperation (IDC), Growth Fund and Enablis Khula Loan Fund.
South Africa’s ZAR9 billion (US$1.3 billion) Jobs Fund recently announced by Finance Minister Pravin Gordhan in his budget vote plans to create 150,000 jobs over the next three years. The fund should encourage many entrepreneurs, associations, companies and non-governmental organizations to create innovative projects that will either expand companies or produce innovative products to be spun into new companies.
The Development Bank of Southern Africa will be implementing this fund on behalf of the South African Government and call for proposals will close July 30, 2011. The fund will focus on these areas:
Enterprise Development – investments in product development, local procurement, marketing support, equipment upgrading or enterprise franchising.
Infrastructure Investment – such projects as light manufacturing enterprise zones, local market and business hub facilities, critical transport and communication links and upgrading of infrastructure services.
Support for Work Seekers – support programmes for unemployed young people such as job search projects, training activities and career guidance and placement services.
Institutional Capacity Building – projects aimed at strengthening institutions through which jobs are created or overcoming institutional barriers to job creation
There is also the Technology Innovation Agency (TIA), established in 2008 to stimulate and intensify technological innovation, in the hopes of improving economic growth and the quality of life of South Africans across the board. The agency has six key sectors (health, agro and industrial biotechnology, and in the industrial area, mining, ICT and advanced manufacturing). Funds could be for idea development and establishing new start-up companies.
The oldest of all the funding institutions is the Industrial Development Corporation (IDC), established in 1940. The IDC is a national development finance institution set up to promote economic growth and industrial development. The IDC operates many funds but the most accessible to young entrepreneurs is the Support Program for Industrial Innovation Fund (SPII). This fund is designed to promote technology development in manufacturing industries in South Africa through support for innovation of competitive products and/or processes.
With the expected increase in the development, expansion and restructuring of infrastructure and related projects, provincial governments are also establishing their own funds. A good example is the ZAR1.1billion (US$164 million) long-term debt fund of the Kwazulu Natal Growth Fund. The Growth Fund is intended to create sustainable economic development, and help with job creation and broad-based black economic empowerment. The fund is accessible to entrepreneurs who would like to invest in the province.
Enablis Khula Loan Fund, a ZAR 50 million Fund (US$7.5 million), which provides a 90% loan guarantee exclusively to Enablis members in South Africa through its banking partner First National Bank. The Funds’ objectives are to foster entrepreneurship, strengthen the SME sector, promote ICTs, open new markets, create jobs and encourage meaningful economic participation, with a focus on supporting business ventures of historically disadvantaged persons in Africa.
Angel investors and venture capitalists are not yet playing a strong role in South Africa. The few available are the Shuttleworth – Linux distribution enterprise Ubuntu Project and Bio venture South Africa. It is anticipated that the picture will change if more innovative ideas come out of the universities, research institutions and the private sector.