Despite South Africa’s strong economic and political foundations, the country suffers from severe income inequality, poverty, unemployment and a lack of relevant job skills among historically disadvantaged populations. These deficits, if unaddressed, threaten the country’s stability and its potential to foster growth and investment in the region.
USAID assists the establishment of sustainable, broad-based economic growth in South Africa and stronger regional economic linkages. Working in partnership with the Government of South Africa, we are increasing access to finance for small and medium-sized enterprises, improving linkages to historically disadvantaged businesses and leveraging evidence for policy-making to maximize the effectiveness of public resources.
Private Sector Development
Small and medium-sized enterprises contribute half of South Africa’s gross domestic product and employ 60 percent of the workforce, yet historically disadvantaged businesses continue to struggle. In support of the Government of South Africa’s aim for greater participation and inclusion of black-owned businesses in the economy, USAID assists these organizations in accessing domestic and international market opportunities. To foster sustainable relationships between large and small businesses, USAID supports the South African Supplier Diversity Council, a corporate-led organization that champions diversity in supply chains and increases capacity and business opportunities for black-owned small and medium-sized enterprises geared toward becoming long-term, qualified and competitive national and international suppliers.
South Africa’s small businesses and historically disadvantaged entrepreneurs face challenges to access credit. To address this need, USAID supports credit guarantees with local banking institutions and development of new financial products to meet the needs of small and medium-sized enterprises. USAID has several credit guarantee agreements in place, with a total portfolio exceeding $100 million. These include:
- A partnership with Cadiz Life Limited, which is expected to make financing available to more than 300 small and medium enterprises, create over 20,000 jobs in South Africa,
- A partnership with ABSA Bank, of which at least 60 percent of its new clients under the guarantee will be historically disadvantaged borrowers.
USAID’s Development Credit Authority is also used to increase and improve the flow of capital to high impact social and environmental initiatives addressing critical global challenges including poverty, climate change or renewable energies.
USAID promotes the Government of South Africa’s capacity to adopt policies and programs that foster economic growth, equity, and employment. This includes support that:
- Assisted the Department of Trade and Industry in developing legislation that reduces costs and administrative burdens for small and medium enterprises
- Elevates the role of evidence-based policymaking through activities such as randomized control trials to assess youth employment efforts
- Promotes competitive business practices and economic policies through partnerships with South Africa’s Competition Commission and the U.S. Federal Trade Commission
Last updated: January 03, 2014