The Green Outcomes Fund
Brief description of the initiative:
The Green Outcomes Fund (GOF) supports and incentivises local South African fund managers (known as Catalytic Finance Partners) to increase investment in green Small, Medium and Micro-sized Enterprises (SMMEs). The Green Outcomes Fund aims to achieve clearly defined green outcomes, encourage greater capital allocation to green businesses by local fund managers, and catalyse higher quality, consistent reporting of green impacts.
Type of funding/investment instrument:
Registered SMMEs can access debt, equity or mezzanine finance through the GOF Catalytic Finance Partners (CFPs).
Brief description of the fund:
Private and public sector stakeholders have committed a total of R92.6million in grant funding, catalysing R395.5 million in investment capital from local investment funds, totalling an amount of R488.1 million mobilized through GOF for investment into South African green SMMEs.
The aim of the GOF is to incentivise local fund managers to use new approaches and financing models to target high potential and fast-growing SMMEs operating in South Africa’s green economy. The funding will enable lending and investment on terms and to SMMEs which would not be feasible without the GOF’s support.
The GOF blends concessionary funding with private capital, thus enabling participating Catalytic Finance Partners (CFPs) to develop and adapt their SMME investment criteria and support services in ways that were not previously possible – realising greater impact in terms of the types of SMMEs funded and green outcomes created.
The current CFPs to GOF include Business Partners Ltd, Conservation International Ventures, Edge Growth Ventures and Mergence Investment Managers.
Size of funding thresold:
The GOF CFP deal size ranges are: Business Partners: R500K – R50mil CI Ventures: R3mil – R8,5mil Edge Growth Ventures: R500k – R50mil (fund-dependent) Mergence: R10mil +.
Some of the funded business activities:
The GOF CFPs provide growth finance to registered, green SMMEs. Typical funded activities include CAPEX, working capital, operating expenses, buy-out/buy-in for transformation deals, and infrastructure. As an outcomes-based catalytic grant fund, GOF disburses funding to the CFPs whose green SMMEs achieve green outcomes. The outcomes-based payments are used by the CFP to re-invest towards the green SMME to further grow and support their business.
Some of the non-funded activities:
The GOF CFPs are mandated to fund locally registered, green SMMEs that can generate green outcomes. Businesses that are not locally registered, are not recognized as green, and do not produce any green outcomes will not qualify for funding from the GOF.
Eligibility criteria for funding/investment:
SMMEs that wish to make an application for funding by the Catalytic Finance Partners to GOF must:
- Be a registered, investment-ready small, medium or micro-sized enterprise as per the definition of an SMME contained within the Revised Schedule 1 of the National Definition of Small Enterprise in South Africa in the Government Gazette, 15 March 2019;
- Be a green SMME:
Green SMMEs are defined as businesses that limit or prevent harm to the natural environment relative to conventional alternatives. The term ‘green SMME’ refers to the total governance of the business, which includes know-how, procedures, goods and services, equipment as well as organisational and managerial procedures. In addition, green SMMEs:
Are less polluting and/or use all natural resources in a more sustainable manner and/or
Recycle more of their wastes and products and/or
Handle residual wastes in a more acceptable manner - Generate either one or more of the suite of 13 green metrics developed by GOF:
Green Sector Direct Jobs
Green Sector Indirect Jobs
Soil Organic Carbon
Synthetic chemical fertilizer reduction
Persons reached by reliable clean energy grid/source that were without prior access to the transitional energy grid
Energy generation – total installed capacity
Energy efficiency – generic energy saved based on deemed savings value per unit installed
Waste to landfill avoided
Avoided waste incinerated
Waste recycled/reused
Chemical recovery
Wastewater treated
Water intensity - In addition, the GOF CFPs have specific investment mandates for qualifying applicants across their funds. The GOF CFP investment mandates can be found on the GOF website (https://www.greencape.co.za/content/sector/the-green-outcomes-fund)
Application procedure:
Funding Application Forms can be accessed from GOF’s website under “How you can get involved – If you are a green SMME”. A green SMME must review the CFPs investment mandates, make an informed decision on which CFP to apply for funding, and follow the application processes of each of the CFPs.
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