How SMEs can benefit from the Employment Creation Fund

Posted on October 15th, 2014

How SMEs can benefit from the Employment Creation FundThe rate of unemployed people in South Africa sits at more than 25% according to Stats SA’s latest Quarterly Employment Survey. Caught within these structural constraints of high levels of inequalities, unemployment and poverty, are a majority of black youths.

To curb unemployment from increasing further, the Department of Trade and Industry was appointed to administer a newly-created Employment Creation Fund (ECF) that was established five years ago with a R550 million budget.

The fund supports projects and programmes that have a positive impact on employment creation, skills development and capacity building. Although it is state entities who apply for funding, they form partnerships with the private sector players.

The Employment Creation Fund

One of the reasons why the ECF was created, was to finance innovative and relatively higher risk project that are not likely to be funded through government’s normal budget processes, or where the commercial financial sector is unable or unwilling to provide financial services.

Areas of focus for the ECF are the development of the green economy, the agriculture and agro-processing value-chain, technology diffusion and commercialisation, public employment creation, rural development and the business environment.

There is a minimum investment of R10 million over three years.

Who benefits?

The ECF finances projects at research and conception phase; feasibility and development phase, start-up phase and initial implementation phases.

The fund allows for two types of project applications.

1) A concept development where there is an idea or concept that still needs further work or research before it can become an employment creation project.

2) A business case where a project to create employment has already been defined and

comprehensive research undertaken.

Technical support

Under its Cluster Support Facility, the ECF provides technical support to develop business cases where that supported is needed.

Funding for this purpose will be limited to a maximum of R 350,000 per application.

How SMEs benefit

The fund provides gap and risk funding to private sector enterprises, industry associations,  and co-operatives. Over and above that, it also funds national, provincial and local government departments, non-profit and community-based organisations in South Africa.

SMEs must comply with South African legislation of BB-BEE and also demonstrate that the project is sustainable. Projects are not excluded on the basis that they have other sources of funding.

Difference from rest

The fund is not meant to compete or crowd-out any of the existing public sector funding initiatives. The intention of the ECF is to complement, help crowd-in other funding and enable new initiatives that require off-take.

The ECF distinguishes itself from other government schemes by focusing on initiatives that have potential for bigger impact on employment but could not be financed through the fiscus given their risk profile. Business plans need to reflect the achievement of job targets within three years.

Application process

Electronic, emailed and posted applications are accepted.

Documents necessary to support the application are a business plan, a tax clearance certificate that is valid for at least one year from date of application.

Also, legal entities in existence for more than 18 months are required to provide their audited annual financial statements and the management accounts for the month prior to the date of the submission for funding.

All funding applications is submitted to the ECF Secretariat utilising the prescribed application form and accompanied by the documents.