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State ‘to get tough with small business loans’

| Economic factors

The government does not have an endless bounty of cash to keep investing in unsustainable small business ventures and will now be stricter when granting loans and financial support, Small Business Development Minister Lindiwe Zulu said.

Ms Zulu was on a fact-finding visit in Limpopo to gather views on how her department could support small businesses and co-operatives. She said her department would be thorough when selecting businesses to support.

A number of government institutions have been under pressure to desist from micro-financing small businesses, which has led to the majority of these loans being written off. Since its formation in 2012, the Small Enterprises Finance Agency (Sefa) has been disbursing loans as little as R5,000 to these businesses.

The agency’s expenditure in the 2013-14 financial year was R808m, and 98% of Sefa’s 46,182 loans were disbursed by micro-finance intermediaries, charging very high interest rates. "The government has to put money in people who will be able to use it," said Ms Zulu.

The department, which was allocated R3.5bn in the national budget, said a significant chunk of the budget vote would be used to spearhead its entrepreneurship programme, aimed at providing customised support to small businesses and co-operatives.

Ms Zulu said government imbizos had revealed challenges to small business, such as access to finance, markets and lack of infrastructure.

Complaints about these hurdles have been rife for years, coming from small business, opposition parties and various experts on entrepreneurship.

Muriel Chinoda, principal at consulting firm Business Engine, said: "There is a need to check if the people seeking funding will deliver on (a) project.

"Most of the time everything looks good on paper but ultimately most people will drop projects half-way through."

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