Some South African development finance institutions were seeing great interest from local small, medium and micro enterprises in their recovery offerings, pushing them to lobby for more funds from the National Treasury because demand has resulted in them exceeding their initial budgets. Photographer: Waldo Swiegers/Bloomberg
Some South African development finance institutions were seeing great interest from local small, medium and micro enterprises in their recovery offerings, pushing them to lobby for more funds from the National Treasury because demand has resulted in them exceeding their initial budgets. Photographer: Waldo Swiegers/Bloomberg

Finance houses seek funds to meet SMME demand

By Given Majola Time of article published Aug 24, 2021

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SOME SOUTH African development finance institutions were seeing great interest from local small, medium and micro enterprises (SMMEs) in their recovery offerings, pushing them to lobby for more funds from the National Treasury because demand has resulted in them exceeding their initial budgets, according to Department of Small Business Development finance manager Goabi Moiloa.

At the Productivity SA and Business Unity of South Africa World Entrepreneurs’ Day on Friday, the eve of the international day, as it fell on a weekend this year, Moiloa said the demand for finance was even coming from entrepreneurs based in townships and rural areas, particularly those in manufacturing.

Productivity SA chairperson Professor Mthunzi Mdwaba said it was a major concern that South Africa still had a dual economy with one of the highest inequality rates in the world, which has been made worse by the Covid-19 pandemic.

“On the one hand, we have an economy comparable to that of industrialised nations, with more than 700 000 of the 2.3 million sophisticated SMMEs supported by worldclass infrastructure and a sophisticated financial system.

“This is an economy that is highly productive, with a sizeable and growing middle class; is reasonably well diversified, with a range of key strategic sectors which are horizontally and vertically integrated among themselves.

“It has features of a more educated and highly skilled workforce, with a huge concentration of wealth and is predominantly white-owned,” said Mdwaba.

“On the other hand, we have an informal economy characterised by almost more than 1.5 million of the over 2.3 million SMMEs in the country operating mainly in the rural provinces and about 34 percent black-owned.”

SMMEs in the informal economy were relatively stagnant and struggled to transform their informal operations into established businesses, thus limiting their potential to create jobs and make a meaningful contribution to the economy. These enterprises might not recover from the pandemic, he said.

He said although the challenges seemed insurmountable, entrepreneurs could grasp this opportunity and help pull South Africa out of the doldrums.

Last year, at the onset of Covid-19, the board of Productivity SA said it worked to see the lifting of the suspension of the job-saving programme that was the Business Turnaround and Recovery programme funded by the Department of Employment and Labour through the Unemployment Insurance Fund.

This was recapitalised with R104 571 000 during the 2020/21 financial year and processes were put in place to relaunch the programme.

Small Business Institute chief executive and chairperson of the SMME task team at Business Unity South Africa, John Dludlu, said the lack of commercial funding for start-ups was a problem that was worsened by the fact that South Africa did not have a well-developed venture capital industry to support entrepreneurship.

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