Picture: ISTOCK
Picture: ISTOCK

The big players in the financial services sector congregated in Sandton on Thursday last week to pledge their commitment to transformation and even changed the name of the Financial Sector Charter Council to the Financial Sector Transformation Council (FSTC). A lot of promises have been made in the past but when are we going to see them materialise into something?  In the 2018 budget speech, former finance minister Malusi Gigaba announced that the financial sector would set aside R100bn to provide funding to black-owned businesses through the Black Business Growth Fund. At the launch of the FSTC Business Day caught up with Trevor Chandler, senior policy adviser on transformation at the Association for Savings & Investment in SA (Asisa),  to find out when the funds will start rolling to the businesses in need.


Q: It’s been months now since the finance ministry announced this funding programme. What have you done to date? 

A: What has already happened or what we were hoping for is that people will start creating funds to facilitate this. If you look at the likes of 27four, they’ve already created a fund. The mechanism is already there to start this.

Q: What about the other big players?

A: They will select different mechanisms to be able to do it. They might create internal teams or outsource to others but the market will take care of that sort of thing. You can’t be too prescriptive. You can’t tell anyone you have to do it this way.

Q: How much are you as Asisa contributing to this R100bn?

A: It’s going to come from a combination of the banks and the life insurance players. There are different types of funding. Some funding like loans, are a better fit for the banking sector and equity-type funding is traditionally better for the insurance sector, but not exclusively. Each institution will get an individual target but that hasn’t happened yet because the targets only kick in from the 1st of January 2019.

Q: You spoke about the standards that will govern the disbursement of these funds. Do you have the specifics, like if it’s a loan, what is the range of interest the banks can charge?

A: We do have those standards, yes. For instance, if you [as a lender] are going to charge above prime for instance, you will get less [BEE] credit. You won’t get a rand-for-rand credit. But if you offered it at a more aggressive funding rate, you’ll get more credit. Likewise, if you provide funding [to a project] that doesn’t create many jobs, you won’t get an additional incentive.

Q: So through these incentives, are you encouraging credit providers to look beyond the borrowers’ risk profile and consider the socioeconomic impact more?

A: It’s both. They are still banks. So they still have to look at the risk profile but they also have to look at the socioeconomic impact. The other thing is, we are trying to create a space for debt and equity funders and so on. The reason why that’s quite important is, sometimes an entrepreneur will walk into a bank and they do have a high-potential business, but a loan is not the appropriate mechanism to fund that but equity might be an appropriate mechanism that can be provided by another division of the bank.

Q: You said that you’re looking mostly to fund businesses that have been in operation for some time because the sweet spot for job creation is among those. What size of businesses are we talking about here?

A: SMEs are generally the sweet spot for us. But in SA we tend to define SMEs in line with the BEE legislation, which is under R50m. But internationally it’s defined as businesses generating between R50m and R200m in annual revenues. That’s the sweet spot for us. The smaller businesses create jobs incrementally but it takes a long time for it to become sustainable.

Q: Will you be funding businesses in specific sectors?

A: We haven’t been sector-specific. There’s a limit to how specific you can make this thing. But yes, some sectors are high-turnover businesses but employ two people. The employment creation potential will be very important.