National Empowerment Fund provides emergency funding to manufacture medical supplies

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Security guard at entrance 5 with mask sanitises people's hands during the media briefing to discuss the first case of Covid-19 at Tygerberg Hospital in the Western Cape.(Photo by Gallo Images/Misha Jordaan)
Security guard at entrance 5 with mask sanitises people's hands during the media briefing to discuss the first case of Covid-19 at Tygerberg Hospital in the Western Cape.(Photo by Gallo Images/Misha Jordaan)

The National Empowerment Fund has announced emergency funding for black-owned small and medium enterprises who manufacture and supply medical products.

Joining a handful of financiers who have announced relief for businesses affected by the nationwide lockdown implemented to try and contain the spread of the coronavirus, the state-owned funder also announced that the black entrepreneurs who will be given this funding will get a "repayment holiday".

The NEF is a governmental development finance institution which has the explicit mandate promote Broad-Based Black Economic Empowerment. It provides loans at more favourable interest rates than commercial banks, called concessionary loans to businesses owned by black women and black industrialists.

In a statement, the NEF said it has set aside R200 million to fund concessionary loans of between R500 000 and R10 million for black businesses to buy machinery, raw materials and to other items they need manufacture and supply medical masks, sanitizers, dispensers and related healthcare products.

"A total of R200 million has been set aside for the purpose, and once disbursed black entrepreneurs will be accorded a 12-month repayment holiday to help their businesses stabilise. The loans will be offered at 0% interest for the first year and thereafter at 2.5% per annum," read the NEF’s statement.

The organisation said businesses who get the funding will have five years to pay it back.

To qualify for a concessionary loan, registered and taxpaying businesses applying should be aiming to produce hand sanitisers, disinfectants, hand soaps, facial masks, gloves, medical protective clothing and steel beds, among other items. hey should also be a registered supplier of one of the retailers or other institutions who have agreed to purchase the products that will be manufactured.

To be classified as black-owned under the NEF’s funding criteria, more than 50% of the business must be owned by black South Africans as defined by the B-BBEE Act. And at least half of the business’ managing and controlling team who are directly involved in the day-to-day running of the operations must be black.

The new loans will be used only to fund new working capital and not to service existing debt, said the NEF.

The funding comes amid increased calls for state-owned development finance institutions to step in and help small businesses who are in the financial crunch as the virus disrupts operations.

The Congress of South African Trade Unions wants the Public Investment Corporation and other DFIs to support a stimulus plan for heavily affected economic sectors such as hospitality and manufacturing.

The Democratic Alliance also wrote to the trade and industry minister Ebrahim Patel, saying that DFIs should avail 0% interest bridging finance to SMEs.

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