Johannesburg - Of emerging entrepreneurs, 60% have lost
faith in banks and government-owned finance houses, opting to finance small,
medium and micro enterprises (SMMEs) from their own pockets, according to a
study released this week.
“Access to finance did not emerge as a critical barrier to
expansion of staff numbers,” reads the report conducted by non-profit SMME
“But the prevailing perception across the panel (emerging
entrepreneurs) is that banks are not willing to lend to small businesses, and
that financial assistance programmes provided by government departments and
agencies such as the Industrial Development Corporation are administratively
overcomplex and thus largely inaccessible,” reads the report.
“If SMMEs that are more than two years old and stable find
it hard to access finance from banks, this means that the businesses would find
it hard to survive when they experience cash flow problems,” said Kerri
McDonald, a research manager at SBP.
South African Chamber of Commerce and Industry chief
executive Neren Rau said banks needed to change the models used to assess
entrepreneurs for finance.
“We are dealing with unusual economic circumstances and are
struggling to keep the door opened. SMMEs need to be supported in order for the
economy to create jobs,” said Rau.
“Banks should stop using conservative methods to assess
risks and rather employ psychographic methods to qualify people for finance.”
He said banks should simplify their lending criteria.
“For instance, we cannot expect an entrepreneur to go
through a sophisticated application process when applying for R2 000.”
The survey interviewed 500 SMMEs in Johannesburg, Cape Town,
Durban, Limpopo and North West that have been operating for at least two years.
The businesses operate in the tourism, business services and
manufacturing sectors. Each firm interviewed employs between 10 and 49 people,
and on average generates a yearly turnover of R6m.
The focus was on what drove SMME survival and growth.
Another interesting finding is that 25% of the country’s
SMMEs are owned by people aged between 20 and 40, while the remainder belonged
to entrepreneurs aged between 41 and 70.
Jobs have steadily been falling.
Rau said the culture of entrepreneurship in South Africa was
in decline because the country had not done enough to nurture entrepreneurship
and business confidence was dampened by economic challenges.
The study shows that 43% of SMMEs do not have black economic
empowerment (BEE) rating certificates, which could enhance their chances of
winning government tenders.
McDonald said the SMMEs felt that the cost implications of
securing rating certificates made it unattractive for the businesses to secure
This was especially so when they were not doing business
McDonald said South Africa’s regulatory environment was
hostile to SMMEs.
“If older entrepreneurs who have been in the game for at
least two years still complain about the regulatory environment, that does not
bode well for young entrepreneurs who do not have the experience of running
businesses,” said McDonald.
The survey highlights the fact that SMMEs are not in favour
of BEE because of perceptions that it limited opportunities to do business with
large firms and government.
“The SMMEs think that BEE shareholders are difficult to
attract and that there is a high level of job mobility among skilled BEE
staff,” reads the survey.
- City Press