The Defence Industry Fund (DIF), a South African defence industry initiative to provide funding for small and medium-sized enterprises (SMMEs), is now eight months into its existence and has not yet issued a loan.
This is because fund manager, Crede Capital Partners, is raising capital independently as there is no seed funding available from government, according to Trevor Mketi, Director: Industry Support at the Department of Defence (DoD).
Capital funding is being sought both locally and internationally and Crede is currently under due diligence by various investors looking to place up to R400 million with the DIF. Mketi said work was also underway on “a pipeline of agreements” to facilitate export finance.
“Raising capital is a lengthy process the fund manager embarks on after designing it and putting the necessary policies in place to ensure operational competence (working with DoD procurement and other stakeholders), financial soundness and investment robustness. At least the first four months of the DIF’s life was spent on design and the various set-up processes.
“This means Crede has only been in the capital markets for a maximum of six months to raise funds and is currently not in a position to consider loan applications,” he said.
The Crede Capital Partners website has it that the DIF aims to provide access to affordable finance for existing and prospective defence companies as well as access to support services, tools and support to keep businesses running along with technical skills and a platform for creation and skills transfer spin-off.
The DIF is targeting an initial fund size of R1 billion from which the maximum loan size will be R50 million and a minimum of R100 000. The minimum loan term is a month and the maximum 36 months with an envisaged target return of CPI plus 8%.
There is, as yet, no indication when the DIF will be able to accept applications for funding.