Gauteng, Johannesburg – The Industrial Development Corporation (IDC) today launched an R1 billion Transformation and Entrepreneurship Scheme (TES) to serve the financing and entrepreneurial needs of South Africa’s marginalised groups.

The initiative is an umbrella scheme incorporating five funds which include the Women’s Entrepreneurial Fund (R400 million), Equity Contribution Fund (R150 million), People with Disabilities Fund (R50 million), as well as the existing IDC Development Fund for Workers (R250 million) and the IDC Foundation Fund for Communities (R150 million).

The funds will also include an Investment and Business Support grant.

The Scheme has been designed to facilitate the development of targeted marginalised entrepreneurs and enable them to access financing as well as serve as a propeller for new entrants into the formal sector entrepreneurial activity. The Scheme will be managed by the IDC’s Risk Capital Facility unit.

“We are committed to creating sustainable economic development opportunities through the funding and promotion of enterprises and industries with a strong job creation element especially in SME and BEE transactions,” says IDC CEO Geoffrey Qhena.

Qhena says while setting a benchmark for development finance by investing in higher-risk projects, the scheme would complement existing funds provided by the IDC. The ring-fenced scheme aims to act as a catalyst for the targeted entrepreneurs by providing high-risk and largely concessional capital for start-up businesses, acquisitions and expansions.

“The scheme will develop marginalised entrepreneurs – it is also intended to have strong bias towards black women-owned enterprises.”

About TES

Each of the five funds has its own qualifying criteria which have been clearly outlined in the information booklet (see below).

Investment criteria for all funds:

•    Demonstrate economic viability and financial sustainability

•    Funding provided will generally not be less than R1miliion

•    Operations must fall within one of the sectors or regions in which

  IDC investment activity occurs

•   Provisions must be made for the employment of people with

  disabilities

Transformation and Entrepreneurship Scheme (TES)

Background

•    The Transformation and Entrepreneurship Scheme (TES) focuses on

  the financing and entrepreneurial needs of marginalised groups
  such as women, people with disabilities, worker groupings and
  community groupings.

•    TES was approved by the IDC Board in February 2008.The scheme is

  in line with the IDC mandate of being a catalyst for development.

•    TES will accept transactions with a higher risk profile and will

  provide various concessions and incentives.

Scheme structure

Transformation and Entrepreneurship Scheme

Business Support

Women Entrepreneurial Fund Equity Contribution Fund People with Disabilities Fund Development Fund Community Fund

Scheme period

The scheme will have an investment period of seven years.

Characteristics of the scheme

The defining characteristic of the scheme is to increase the access to finance by the identified high risk groupings through the following:

•    The acceptance of the high risk nature of the target markets.

•    The provision of patient risk capital.

•    The provision of pre- and post-investment business support as grants.

•    The provision of concessionary terms with respect to equity

  pricing and structuring.

•    An all inclusive pricing with no separate charge for fees.

Investment channels

There are two types of investment channels, namely stand-alone or co-financing with the IDC.

Business support

Business support will consist of a grant and will be provided during pre- and post-investment phases.


Pricing

The pricing for the Community and Development funds will be capped at 2,5% and 5% real after-tax IRR respectively.The remaining funds are priced at 3% real after-tax IRR plus upside where appropriate.

Investment criteria for all funds

All applicants must fulfill the following criteria:

•    Demonstrate economical viability and financial sustainability.

•   Funding provided will generally not be less than R1 million.

•    Operations must fall within one of the sectors or regions in which

  IDC investment activity occurs.

•   Provisions must be made for the employment of people with

  disabilities.

Funds investment guidelines (individual funds)


Women Entrepreneurial Fund

•    Minimum shareholding by women/(woman) in the funded vehicle of at

  least 60%.

•    Available for new entrants (shareholder/s having a direct or

  indirect total net asset base less than R15 million).

•    Can be a start-up or expansion.

•    There must be operational and management involvement by women.

•    Investee size is limited to a total asset base of R80 million.

•   Maximum investment amount of R30 million.

Equity Contribution Fund

•    Available for new entrants (shareholder/s having a direct or

  indirect total net asset base less than R5 million).

•   Can be a start-up, expansionary acquisitions, expansions or

  acquisitions.

•    There must be operational and management involvement by the black

  shareholders who are financed under the scheme.

•    Available for black individuals companies where the entity is at

  least 25% + 1 share black owned.

•    Investee or target company size is limited to a total asset base

  of R80 million.

•    Maximum investment amount of R10 million.

People with Disabilities Fund

•    Minimum shareholding by people/(person) with disabilities must be

  at least 50% + 1 share in the investee company.

•    Investee size is limited to a total asset base of R80 million.

•    Can be a start-up, or an expansion.

•    There must be operational and management involvement.

•    Available to new entrants (shareholders having a direct or

  indirect total net asset base less than R15 million).

•   Maximum investment amount of R8 million.

Development Fund

•    Finance only provided for broad-based empowerment transactions for

  black blue-collar workers.

•    Can be a start-up, expansions or acquisitions.

•    Maximum investment amount of R15 million.

Community Fund

•    Finance only provided for broad-based empowerment transactions for

  black community owned entities.

•   Can be a start-up, expansions or acquisitions.

•    Maximum investment amount of R10 million.