Funding not an SME inhibitor – Absa
The failure of one in seven small and medium-sized enterprises (SMEs) within the first year of operation was not a result of a lack of access to funding, Absa South Africa head of business banking Happy Ralinala asserted on Tuesday.
Access to market and relevant business skills were the bigger – and much more pressing – impediments to success, she said at the fourth Proudly South African Buy Local Summit, in Sandton.
South Africa provided a “flood” of funding for small business, through banks, developmental finance institutions, microfinance firms, government and the private sector, besides others.
“Enterprise development and job creation is a call beyond financial assistance,” Ralinala said, stating that, while funding played a significant role, it was not the only determinant for a successful enterprise.
A lack of managerial or business skills, including financial literacy, limited knowledge or experience and a lack of institutional support, particularly as SMEs battled to penetrate the markets in competition with established larger firms, resulted in the failure of 60% of start-ups in the first year and another 22% in the second year of operations.
Absa had committed R250-million a year in nontraditional lending to assist SMEs to overcome these hurdles, in addition to opening access to market through the introduction of a procurement portal linking South Africa’s large blue-chip corporate companies with SMEs for supplies.
“The market is there but the linkages do not exist,” she explained.
The platform currently linked 43 000 verified and validated SME suppliers to 3 400 blue-chip firms.
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