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Social Entrepreneurship News South Africa

Big funding boost for SME auto parts suppliers in Eastern Cape

The Eastern Cape Development Corporation (ECDC) has launched a R50m blended finance scheme in Gqeberha today, 3 June, for up-and-coming micro, small and medium-sized automotive component suppliers, and aftermarket service providers in the Eastern Cape.
Source: Unsplash

Introducing the Automotive Operator Blended Finance Scheme, ECDC chief executive officer Ayanda Wakaba says the focus on this segment of the market is a bid to bridge current funding gaps facing small and medium operators due to resource constraints, lack of elaborate business history, lack of collateral, informal nature of business operations, and barriers to market which affect access to opportunities.

The scheme is offered on a 70% loan and 30% incentive basis to applicants who must be individuals and/or companies that have been in operation for 12 months and who are majority Black-owned.

The minimum disbursement figure for the blended finance scheme is R300k with a maximum of R1m.

“The scheme is mainly targeted at the emerging operator segment in the form of aftermarket operators (services and components).

“It will fund fixed fixtures, equipment, machinery, stock and other distinct critical industry compliance or operating environment improvement measures such as a specific accreditation or growth programme, or specialised training.

“The blended finance scheme intends to increase the number and size of the operations of emerging automotive component suppliers and aftermarket service providers while transforming others into large-scale automotive operators.

“This segment of the market is ripe for meaningful support considering that the Eastern Cape’s original equipment manufacturers (OEMs) and component suppliers employ about 60,000 people.

The province’s aftermarket operators are made up of a considerable number of small black operators which are a source of employment and livelihood for many families.

The Automotive Operator Blended Finance Scheme intends to exploit the potential of the sector by using this funding instrument to attract more service opportunities for this targeted group.

The blended finance approach is meant to stimulate the sector and support increased job creation security among micro, small and medium operators,” Wakaba says.

Wakaba says the Eastern Cape’s rich automotive history is demonstrated by the presence of five OEMs in the province, Daimler Chrysler, Volkswagen, Isuzu, FAW and BAIC. The province accounts for 46% of South Africa’s production volumes while accounting for 56% of the country’s vehicle exports. The sector features many aftermarket service providers and component suppliers.

“However, there is a realisation that the automotive industry needs to adopt transformation initiatives to empower historically disadvantaged individuals to participate in the industry value chain.

“It must provide opportunities for new entrants to enter the industry, and to foster meaningful participation.

“Looking at the demographics of participants in the sector, it clear that there is a need for meaningful participation of Historically Disadvantaged Individuals in the sector,” Wakaba says.

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