With COVID-19, all we hear about is the good news that there is significant financial support for established manufacturing business in South Africa to be able to retool or expand into the manufacture and supply of essential goods including hygiene, medical and food security commodities. Is this the reality on the ground?
With the entire world competing for the same products – including face-masks, hand sanitizers, protective clothing, infrared thermometers, ventilators – the surge in demand and restricted movement of goods has made it difficult for countries to ensure sufficient quality supplies.
With experts predicting that South Africa’s COVID-19 exposure will peak in or around September 2020, the lag in infections due to the lockdown has allowed for stock levels to increase in South Africa. However, this brings the challenge of effectively managing these stock levels as different countries see surges in different and unpredictable trends.
As the regional hub for manufacturing, South Africa is uniquely positioned to support itself and its neighbours through a very challenging health crisis. For example the automotive sectors has been able to shift its focus to retool for the manufacture of ventilators and we expect to see other manufacturers reposition their manufacturing outputs accordingly.
Growth funds include the approximately R3.5billion set aside by the development financial institutions including the Industrial Development Corporation (IDC), the National Empowerment Fund (NEF) and the Small Enterprise Financing Agency (SEFA) have indicated they will finance deals here at preferential interest rates (possibly as low as 2.5% over a 4 year period).
Furthermore, a number of commercial and alternative funders are assessing their ability to lend to Essential Goods manufacturers.
Whilst these funds are available and dealmakers are assessing applications, the quality of what is being received has resulted in many rejections as businesses struggle to articulate the business case at hand.
Manufacturers will need to ensure that their submissions comply with the compliance and viability requirements of these lenders – an area where Uzenzele can offer significant intellectual capital and experience.
If you believe that you have a viable business that would like to scale-up to supply Essential Goods then please get in touch with us.
DOWNLOAD: We have put together the Uzenzele – Covid-19 – Economic Report 23 April 2020 to help clients understand what funding options are out there.