A RECENT snap survey by enterprise development specialists
Fetola showed that 93% of small businesses are uncertain about where and how to
“It seems that in South Africa at least, there is not so
much a problem of insufficient finance for business, but rather the inability
to get one’s hands on it,” says Catherine Wijnberg, Fetola CEO.
This surprise finding was confirmed in the 2011 GEM report
released by the University of Cape Town’s Graduate School of Business, which
found that a key challenge to small business development is not a lack of
available finance, but rather the knowledge on where and especially how to
Knowledge is key
Simpiwe Somdyala, head of the Masisizane Fund, which
supplies soft loans to high potential black-owned and community-based
businesses, is forthright in terms of the challenges faced by the financing
“In our experience it is proving more and more difficult to
find suitable emerging businesses for our loans.
“The problem is that many organisations just don’t
understand their own finances or indeed the needs of the banking sector – so
much education is needed,” he explains.
Victor Mzimela, head of Enablis business incubator concurs.
“A lot of our work is about educating business owners how
best to manage their finances, how to retain records and how to build a solid
offering so that they become attractive to sources of finance such as banks or
investors,” he says.
Business management specialist Cynthia Olmesdahl agrees,
noting that financial management is a common challenge at small, micro and
medium enterprise (SMME) and non-profit level alike.
“Smaller organisations often confuse the need for better
financial management with the need for finance.
“Some simple tools to help with the management of cash flow
and stock levels, for example, can sometimes negate the need for major finance
and ultimately unlock a whole new business future,” she explains.
Lending at record lows
In spite of numerous financing options available - from
commercial banks to government funding agencies, equity investors or venture
capitalists - more advanced businesses are also currently struggling to gain
finance, for a range of reasons.
Naturally, the global
credit crunch has had a huge impact on lending , but other reasons may be that
some businesses are deemed too risky, others are early stage startups or
perhaps don’t fit the black economic empowerment (BEE) criteria laid down by
government to access support.
In fact, Minister of Economic Development Ebrahim Patel
recently noted at the Launch of new SME funding body Sefa (Small Enterprise
Funding Agency) that “in a very short space of time, lending has dropped from near
all-time highs to record lows.
“For example, growth in credit extension last year was the
lowest in over 50 years.”
For a country that desperately needs to accelerate growth in
the small business sector, this is not good news.
What use are the dozens of funding agencies and options, if
getting money out of them is so challenging for the average entrepreneur or
Non-profit sector under strain
Non-profits and social enterprises seem to be taking
“Funding seems to be more and more difficult to access these
days,” says Louise Batty of Keep the Dream 196, a child-focused non-profit
organisation based in Limpopo.
“Most of our funding now comes from overseas donors, and I
find that we need to be increasingly proactive and creative with our
fund-raising if we want to maintain our programmes at their current levels.
“From a corporate social investment (CSI) perspective,
funders increasingly look at return on investment just like a banker or
investor would – not from a monetary gain perspective, but from a social and
economic impact perspective.
“If we give a certain organisation R250 000 in funding or
financing, will that translate into a positive return in terms of job creation,
sustainability or building a better community?” asks Clarence Tshitereke, head
of the Old Mutual Foundation which funds numerous ED and CSI projects
The starting point to financial success in business is
confidence – beginning with a solid understanding of the fundamentals of money,
where to find it and how to use it in the organisation.
Simple tools, practical training and basic access to
information are sorely needed.
“South Africa has a wealth of opportunity, a growing
population and a growing economy.
“Now is the time for business leaders to get help, get wise
and manage their finances in a practical and positive manner,” says Catherine
“What is needed is much more clarity in terms of when and
where to use loan finance, where the money is and most importantly, how to get
hold of it.
“We also need to translate the language of finance into the
language of small business.
“For example, when a potential investor talks about
‘Equity-based finance’ they really mean ‘we give you money in exchange for part
of the ownership in your business’ – but many emerging entrepreneurs and SMEs
do not understand this language, and so feel at a disadvantage in discussions.
“These are just some of the gaps that need to be filled,”
Luckily, there are some innovative local solutions that are
making inroads, such as Angelhub – a South African initiative that attracts
collective private investments into high potential, high growth local
businesses, mostly in the tech and IT sector (www.angelhub.co.za).
Other solutions include the growing internet-based
fund-raising, or crowdfunding, opportunities that attract large numbers of
small investors into profit and non-profit enterprises, who pitch their
business proposition on the net. (eg: www.kickstarter.com).
For black-owned businesses, there are also numerous government
agencies that can assist with startup and other funding requirements, provided
the business case is compelling and all criteria are met.
For individuals and organisations wishing to learn more, an
upcoming Access to Finance workshop and interactive conference for SMMEs and
non-profits will be held in Johannesburg in September.
This practical event forms part of the Legends business
development programme and will feature a number of business leaders, financing
agencies and other experts who will cover how, when and where to get the
necessary finance to grow an organisation.
For more information visit
Other resources for entrepreneurs wishing to learn more
about finance include Absa Enterprise Development Centres (see www.absa.co.za),
FABCOS (www.fabcos.co.za), Small Enterprise Funding Agency (SEFA) - Tel: +27
12 394 1807 and many of the SEDA branches nationally (www.seda.org.za).
*Anton Ressel is an experienced business development consultant with a special focus on community-based businesses, emerging entrepreneurs, small-scale manufacture and the creative industries.
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