It is not a lack of or access to development financing in South Africa that is holding back small, medium-sized and microenterprises (SMMEs), but rather entrepreneurs’ understanding of and approach toward accessing financing, a panel of speakers told delegates at the Small Business Indaba on Monday.
Access to finance has long been a sticking point for many SMMEs and entrepreneurs, who have often called on government and development institutions to open up access to the funding that could ensure the survival of SMMEs.
Small Enterprise Finance Agency (Seda) CEO Thakani Makhuvha argued, however, that it was not the access to finance that was the obstacle, but rather entrepreneurs’ lack of awareness of which institutions to approach for financing and the required processes to access finance.
“It is not necessarily about access to finance, but how you make your information bankable when applying for development finance.”
Commonly, the challenge occurs during the application process, in that business plans are not watertight, the projections provided are too optimistic and information is outdated.
Business Partners regional general manager Jeremy Lang agreed, pointing out that there was enough funding available for SMMEs.
He explained that financial institutions often experienced generic applications that showed not much research about the funder was done before being approached.
Each financial institution has different funding models and mechanisms, have different industry preferences and different mandates, besides others, which many SMMEs overlook.
“SMMEs need to do their research on the institution. Because their homework is not done, they become despondent in the process,” Lang commented.
All the panellists, which also included National Treasury public finance unit chief director of economic services Owen Wilcox and African Development Bank economist Emanuela Gregorio, were in agreement that, along with providing loans, technical, financial and mentorship support needed to be provided.
“With funding, you need to provide support as well,” Lang pointed out.
Makhuvha said mentorship, largely in the area of financial discipline, and nonfinancial support were critical.
Seda itself appoints mentors to approved applicants to guide the SMME and ensure the funding is spent on the area specified in applications, with analysis, strict protocols and monitoring provided within its support structure.
Gregorio advised SMMEs to seek out further assistance, support and expertise, including technical assistance and business plan development to qualify.