By: Anna Majavu
The Small Enterprise Finance Agency (Sefa) has launched a forensic investigation into a financial intermediary who may have been channelling public money to beneficiaries who do not exist. Sefa CEO Mxolisi Matshamba told Parliament’s Small Business Development Portfolio Committee that Ernst and Young had been tasked to “investigate fraudulent funding” by Intellimatch Financial Services, “to find out if their book is not composed entirely of ghost SMMEs”.
Vutivi News reported last week that the committee had discovered during an oversight visit to the North West that Sefa was using financial intermediaries to channel funds to SMMEs, instead of paying approved applicants directly. Some of those intermediaries were charging the SMMEs up to 29% in interest. The committee uncovered that Intellimatch was approved by Sefa to on-lend money immediately after it was given its licence by the National Credit Regulator.
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This contravened Sefa’s own policy, that it would only approve intermediaries once they had at least two years of lending experience. Matshamba told Parliament there was nothing wrong with Sefa using intermediaries to pay SMMEs because their mandate was to provide “access to funding”. He pleaded with the portfolio committee not to “throw the baby out with the bathwater”, saying that the financial intermediaries currently paid 400,000 SMMEs, mainly in rural areas.
Between them, the intermediaries had almost 100 branches across the country and employed nearly 1000 people to make the payments. The government did not provide Sefa with the funds to employ that many staff, he said. “It is critical for us as government to continue crowding in the private sector. Let us come up with an intervention that is a win-win for the end users. Let us deal with this issue of the interest rate that they charge. We cannot afford to lose that network,” said Matshamba.
Department of Small Business Development (DSBD) director-general Lindokuhle Mkhumane said DSBD minister Stella Ndabeni-Abrahams had already summoned the Sefa board to discuss the 29% interest rate and the role of the lenders in getting funds to SMMEs. Portfolio committee members also questioned whether rural and disabled people found it easy to access Sefa and the Small Enterprise Development Agency (Seda), which some said were barely visible in remote parts of the country and should set up offices in every municipality.
Seda acting CEO Nkosikhona Mbatha said this did not work well for Seda if they set up office in a municipality that was failing to deliver services. “The challenge is the efficiency and effectiveness of the municipalities, and then everyone is associated with lack of performance,” Mbatha said. Committee chairperson DA MP Henro Kruger and ANC MP Violet Siwela also said both funding agencies must cater more for SMMEs owned by disabled people. “They feel like they are being isolated in life,” Siwela said.
Matshamba said most SMMEs owned by disabled people were looking for grants and not blended finance or loans, but that Sefa would do more work on this. The committee members also complained that they had repeatedly asked Sefa and Seda to provide separate numbers of co-operatives and SMMEs that they had funded, but the agencies persisted in providing only one figure. This meant the committee did not know if co-operatives were being properly funded.
