An old debate that small enterprise development experts and policymakers thought they had put to rest has quietly returned. The proposed merger between the Small Enterprise Finance Agency and the Small Enterprise Development Agency into a single entity is back on the agenda.
The central thrust of their argument is that the merged entity will suffer from implementing a diluted mandate, rendering it ineffective and incapable of delivering its services effectively. Furthermore, there are concerns that the merger will result in the government pulling back from funding nonfinancial support, forcing Sefa to divert funds meant for providing loans to nonfinancial support.
As a development financier, Sefa takes a bigger risk than commercial lenders — they are often wary of funding borrowers who lack collateral and strong cash flows. Sefa finances small, less mature businesses compared with commercial lender Business Partners, which mainly finances established medium-sized businesses since they are considered less prone to failure and therefore unlikely to default on their loans.
Small business development minister Khumbudzo Ntshavheni will have to ponder the question of whether the merger is in the best interest of the SMME sector. Her department has its hands full dealing with the effect of the Covid-19 pandemic on the SMME sector and implementing its flagship policy, known as the SMME support plan, which was introduced in 2019, the year Ntshavheni replaced Lindiwe Zulu as minister.
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