A Golden Opportunity for South African SMEs

The demand for “green”, or environmentally friendly, buildings has been strongly driven by the global shift towards sustainability as well as various push and pull factors. Unstable power supply and the ability to save on utilities are just two of the reasons businesses are considering going green, however, the central problem of high expenses for these businesses remains.
That’s according to Mark Paper, COO: Business Partners International at Business Partners Ltd, who was instrumental in launching a R720 million green building finance scheme for small and medium-sized businesses. (SME). The program, which launched in early 2022, will provide financing to SMEs to buy, build or retrofit buildings to make them green.

The paper explains that the appetite for green buildings as commercial properties and as an investment for SMEs continues to be hampered primarily by the capital outlay required to achieve green building status. To that end, he highlights how Business Partners Ltd’s green building financing program meets this need: “Our collaboration with the International Finance Corporation (IFC) to finance green buildings means that we offer one of the best products in the market. Through our green building financing program, some of the elements of property greening are free to the business owner. »

The paper elaborates that in addition to providing property finance of between 100 and 120% for green buildings, the cost of green certification is covered by a non-refundable grant of R150,000. In addition, Business Partners Ltd offers SMEs a rebate of up to 40% of the capital expenditure needed to green their buildings and achieve certified green building status.

Commenting on the benefits to be gained from “greener construction”, Paper states that “PWC reports that in 2021, South Africa experienced 1,136 hours of load shedding, costing the country’s economy up to to 400,000 potential jobs and a loss of 2.7% in real GDP growth. Much of this loss was absorbed by SMEs which, while playing a vital role in giving the South African economy the impetus necessary for its recovery, generally do not have the resources to invest in alternative sources of electricity supply Green buildings offer a solution that can help the country achieve its sustainability goals while helping small businesses mitigate the impact of load shedding.

Quantifying the benefits of green building, the International Trade Administration suggests that newly certified green developments are expected to save developers and occupiers 76 million kilowatt hours – the amount of electricity used by 5,300 households in one year. In addition, these developments are estimated to save 12 million liters of water per year, enough to support 34,000 households for one year. These estimates not only represent a significant reduction in the sector’s carbon footprint, but also correspond to substantial savings for companies.

According to the MSCI South African Green Annual Property Index, green certified buildings also attract and retain tenants much more effectively than their conventional counterparts. In an environment where the country’s commercial real estate sector has experienced a significant contraction due to the proliferation of remote working, green buildings offer a unique value proposition due to better tenant retention and lower building costs. operating reduced.

As Paper states, “SMBs have a unique opportunity to pioneer and increase profitability by adopting green building practices. Moreover, there is a significant potential for job creation among these SMEs and, ultimately, the possibility of having a positive impact on the country’s GDP.

Most notably, Paper says green buildings, while still expensive to build, are a very viable option thanks to Business Partners Ltd’s green building financing program. He explains: “Thanks to the discounts we offer, SMEs can reduce the payback period of the investment to green their buildings by up to three years”.

“There’s never been a better time for small businesses to take their place as key drivers of the green economy,” Paper continues, “by investing in green buildings that harness the power of renewable energy, a more carbon-efficient waste management and water savings. technologies is an investment in the future, both literally and economically. Everything indicates that investing in green construction will generate positive returns in the medium and long term.

The Green Building Council of South Africa points out that certified green offices have a 31% higher capital value than conventional buildings. Additionally, these green buildings contributed to a lower decline in net operating income and a lower vacancy rate over the study period. Green offices also produced returns 170 basis points higher than their uncertified counterparts. These numbers present a strong business case for more sustainable building practices.

Recognizing that the daunting task facing the industry cannot be solved by one or two financiers alone, Paper concludes by inviting other financiers to renew their focus on green finance: “We invite other financiers to follow suit. not and to intensify their efforts. to support the country’s SME sector by giving them the tools they need to advance the sustainable development agenda in South Africa.

About Business Partners Ltd.

Business Partners Limited (Business Partners Ltd) is a venture finance company specializing in owner-managed formal small and medium enterprises in South Africa and selected African countries. The company actively supports entrepreneurial growth by providing R500,000-50 million in funding, specialist industry knowledge, business premises and value-added services for viable small and medium enterprises. Since its inception in 1981, Business Partners Ltd has provided corporate finance worth over R21.5 billion in over 72,000 transactions facilitating over 671,000 jobs.

Business Partners Ltd has been named the 2019 Gold Winner in the SME Bank of the Year – Africa category at the Global SME Finance Awards*. V

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