Risk-averse banks hamper support for SMEs. Picture: JAMES OATWAY
Risk-averse banks hamper support for SMEs. Picture: JAMES OATWAY

In this edition of Business Day Spotlight, we look at the SA economy through the lens of small business and some of the potential shortfalls of the government’s plan to get much needed liquidity to the sector through its stimulus package.

To explore the topic, host Mudiwa Gavaza is joined by Guy Hosking, CFO at Retail Capital, a small and medium enterprise (SME) funder.

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The discussion starts with some statistics around the size and scope of the small-business sector in SA.

Hosking says it is hard to get a firm grasp on how big the sector is, given the disparity in estimates from different parties. Some put SMEs as contributing close to half the country’s GDP, and employing about 9-million people. Despite this lack of firm information, the sector is important to SA’s economy, says Hosking.

He says the R200bn loan guarantee scheme set up by government to help SMEs has proven difficult and onerous for the intended recipients to access. “Because of that, uptake has been minimal.”

Business Day Spotlight host Mudiwa Gavaza. Picture: DOROTHY KGOSI
Business Day Spotlight host Mudiwa Gavaza. Picture: DOROTHY KGOSI

“Although [finance minister Tito] Mboweni announced that the government will be relaxing the qualification restrictions for SMEs, the fact that it is administered by risk-averse banks hampers its ability to support small businesses. Banks traditionally fund larger businesses — the R300m cap set on the loan guarantee scheme is a pretty big business. This leaves out the smaller SMEs doing turnovers of less than R30m. These companies make up the most vulnerable sector of the economy and banks are simply not geared to helping them.” 

The discussion also explores Retail Capital’s business; how to dispense funds better to SMEs; what lines of business offer good prospects for growth for small enterprises now; and an outlook for the sector going forward.

For more episodes, click here.

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Business Day Spotlight is a MultimediaLIVE production.

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