SOUTH AFRICA – SA SME Fund, a small-business investment house in South Africa, has invested R25m (US$1.68m) in A2Pay SA, a fintech fund manager that focuses on growth and trade financing for spaza shops.
A spaza shop is an informal convenience shop business in South Africa, usually run from home. They also serve the purpose of supplementing household incomes of the owners, selling everyday small household items.
According to Business Live, the fund was born out of a partnership between the government and local CEOs aimed at stimulating the economy and creating jobs.
The fund said it will provide finance for 10,000 spaza shops across SA and create more than 40,000 jobs through its investment in A2Pay over the next 10 years.
A2Pay, together with the Jobs Fund, provide small businesses with trade financing options. Business owners can borrow R50,000 (US$3,360), for example, purchase stock items, trade and pay back the initial loan when the stock has been sold.
Transactions are then recorded electronically, and a credit history built for each business owner through A2Pay’s in-store terminals.
“The SA SME Fund investment leverages the initial funding of A2Pay by the government’s Jobs Fund, which seeks to spur innovation and investment in activities that directly contribute to sustainable job creation and growing small businesses,” said the SA SME Fund’s CEO Ketso Gordhan,
Gordhan was speaking at the launch event at Sisters Tuck Shop, a spaza shop using the A2Pay system in KwaMashu, Durban.
“This is a brilliant collaboration that will have a profound impact on the lives of small business owners in SA,” he said.
The shareholders of the SA SME Fund are 50 of SA’s largest companies, and include Absa, Telkom, Discovery and FirstRand and the Public Investment Corporation (PIC).
The fund was started with R1.4bn (US$94m), R1.2bn (US$8.67m) of which is investable capital. The remainder is for the running costs and operations. Gordhan said R1.1bn (US$73.95m) has been invested so far.
“We began this journey by implementing a pilot project that culminated in us disbursing R3m in 78 capital loans to 48 spaza shop owners,” Tina Mason, COO of A2Pay, said.
“The combination of the loans, technology, and training has resulted in a 25%-30% sustained increase in their revenues, and some of the spaza shop owners have even opened up second stores.”
In addition to the money invested so far, Gordhan said the SA SME Fund hopes to bring on board more investment from other players to increase the number of loans available to business owners.