Oct 17, 2013
Johannesburg — J.P. Morgan announced today that Cadiz Asset Management (through their Protected High Impact Fund), GroFin and Imprint Capital have become the first investment partners in the firm’s SME Catalyst for Growth Programme (C4G Programme). These C4G Programme investment partners will not only have access to a pipeline of high-performing SMEs that are currently seeking finance, but will have information for investment already collated and verified directly by the business development support (BDS) providers, thereby limiting transaction costs. Additionally, the C4G Programme will develop and launch an independent rating platform to help bring accountability and transparency to the South African BDS market.
The C4G Programme, supported by the JPMorgan Chase Foundation, is the firm’s first significant social investment in the SME space in South Africa, with an investment of more than $1 million. The two-year pilot programme is run in collaboration with three core partners: Aurik Business Incubator (Aurik), Raizcorp and Dalberg Global Development Advisors (Dalberg). C4G supports the provision of BDS to selected entrepreneurial companies, while building knowledge and experience on the value and impact of effective BDS services.
Historically, the inability to assess or compare different types of BDS has been a hurdle to SMEs seeking assistance to grow. The new C4G Programme rating platform will address this knowledge gap by providing performance data on BDS providers across the country. The ratings will be based on information gathered from SMEs that have received support from these types of providers in areas such as business growth, improvement of systems, financial performance and literacy.
John Coulter, Senior Country Officer for J.P. Morgan in Sub-Saharan Africa (SSA), said:
“We are very pleased with the progress of this innovative C4G Programme for SMEs and excited that three investment partners have joined the initiative after only one year. Their participation allows further scale to the C4G Programme, and is a strong independent endorsement to the programme. The ratings tool that will be developed in the coming year will also start to address the inconsistent quality that currently exists across BDS providers and will enable SMEs and investors to have an independent and verified platform of information. It can also accelerate growth in the BDS market across Africa by diverting scarce resources to the most impactful providers.”
Evidence shows that after one year into the C4G Programme, the entrepreneurs’ businesses have significantly improved, which indicates that strengthening business systems is leading to enhanced revenue, increased employment and better access to finance. Since the programme was initiated in 2012, the overall average increase in revenue of participating SMEs was 43%, with a 19% increase in permanent employees. The SMEs also appear to be having more success in accessing capital, as the percentage of successful applications for finance among the group has risen by 13%.
Speaking at a J.P. Morgan event last night updating clients and partners on the programme, the Minister for Trade and Industry (dti), Dr Rob Davies, said that The J.P. Morgan Programme has a number of synergies with the dti’s initiatives to transform the SMME space in South Africa.
“Government alone cannot address the enormous need to create more entrepreneurs. We need to collaborate with the private sector to empower many more South African people to find a livelihood and to create job opportunities. In line with this, the dti has focused on initiatives such as incubator programmes to ensure that SMMEs graduate into the mainstream economy, as well as addressing red tape, as we realise complex requirements are huge impediments inhibitors to small business.
“For example, the new Companies Act reduces the burden of registration on companies and the department has also amended the Broad-Based Black Economic Empowerment codes to assist partnerships with big business. The amended codes will further alleviate the financial burden on small black-owned companies, as they will no longer be required to be rated by empowering agencies to prove their credentials. The codes are also prioritising supplier development and have adjusted thresholds for exempted micro enterprises and qualifying small enterprises.”
Welcoming the Minister at the event, Lord Renwick, Vice Chairman of J.P. Morgan said:
“The Programme reaffirms J.P. Morgan’s global commitment to South Africa and the development of SMEs in the country. Over half of South Africa’s current employment is created by small to medium enterprises. The additional efforts that government is making to stimulate this important sector will ultimately have a positive effect on South Africa’s economy.”
Dr. Agostinho Zacarias, UNDP Resident Representative in South Africa, said:
“The UNDP is committed to SME development to promote growth that is both inclusive and sustainable. We are proud to be in partnership with the Department of Trade and Industry in the implementation of a supplier development programme that uses best practice from similar middle income countries globally. The programme is designed to increase the competitiveness of small and medium-sized enterprises through the adoption of corporate good practice and financial controls that enable higher profitability in both domestic and international markets. In this regard, we are happy to link with J.P. Morgan’s efforts to further the development of this sector.”
Pavlo Phitidis, the CEO from Aurik, said:
“The J.P. Morgan C4G Programme provided us with the opportunity to prove the benefit of our BDS programmes across start-up, early stage and growth companies in the eye of the public domain. As 94% of businesses started are never being sold, value for entrepreneurs is eroded on a personal basis, as well as for big business through their supply chains and for government in achieving fiscal growth and economic inclusivity. This is devastating and makes high impact BDS a necessity if we want to succeed as a country.”
Allon Raiz, the CEO from Raizcorp, said:
“J.P. Morgan has been extremely supportive and proactive in ensuring the success of the Programme. It is wonderful to see such a large organisation put their weight behind a programme in a way that keeps the entrepreneurs’ best interests at heart. Our continuing journey with these entrepreneurs has significantly added to Raizcorp’s body of knowledge about entrepreneurs, and particularly high growth entrepreneurs. This has led to meaningful adjustments to our learning methodology and guiding approach.”