EU, IDC launch small business fund

2 April 2007

The European Union (EU) and the Industrial Development Corporation (IDC) have launched a R450-million funding facility for emerging small businesses in South Africa.

According to Business Day, the Risk Capital Facility 2 (RCF2) will be funded by the Department of Trade and Industry (DTI) over the next three years and co-managed by the IDC and the European Investment Bank.

R430-million of the total amount will be available for investments in qualifying projects, while R20-million will be used for ancillary costs.

The RCF2 follows a similar successful funding structure, the Risk Capital Facility 1 (RCF1), which had a R300-million investment, leveraged R650-million in co-investments and created more than 5 000 jobs in 90 small businesses.

According to Business Day, the RCF2 funds will be co-invested alongside the IDC’s mainstream business. It will also have venture capital funds targeting specific sectors and third-party investments where it will co-invest with other financial bodies.

IDC chief executive Geoffrey Qhena told Business Day that the corporation’s primary objective as a development financier was to contribute to economic empowerment through job creation in various sectors.

“The RCF2 channels donor funding from the European Commission to deserving South African investments in response to development needs and opportunities for growth,” Qhena said.

According to EU ambassador Lodewijk Briet the credit facility is designed to support sustainable employment creation in under-developed regions.

“Despite notable challenges, the successes of this programme has allowed us to consider funding for smaller initiatives in the years ahead,” Briet said. “The EU’s support in this sector underscores our commitment to partner the government in its undertaking to create a better life for all.”

DTI Deputy Director-General Lionel October said growing small enterprises was “vital to achieving our goal of halving unemployment and poverty by 2014.” reporter

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