Picture: 123RF/ISMAGILOV
Picture: 123RF/ISMAGILOV

Funding has long been one of the biggest obstacles facing entrepreneurs. But the government narrative is that there is money — a lot of it — that has been set aside to support small businesses, particularly during Covid-19. Yet entrepreneurs and small business owners still claim that access to funding is the biggest hindrance to their growth and performance.

When SA went into the hard lockdown in March, the government pledged support for small, medium and micro-enterprises (SMMEs) that amounted to about R100m. In April, President Cyril Ramaphosa announced that an additional amount of R2bn would be made available to assist “SMEs and spaza shop owners and other small businesses”.

Nearly eight months later, many SMMEs are no better off. How effective have funding and debt-relief interventions really been for small businesses in SA? Has access to funding improved or stayed the same? What needs to change to ensure ongoing support for small businesses and start-ups?

These questions were addressed at a recent panel discussion hosted by Wits Business School, at which the overwhelming consensus was that there is a disconnect between the expectations of funders and those of entrepreneurs, and things need to change.

The panelists were Finfind project manager Robynne Erwin; Fetola SME investment readiness manager Grant Prince; and National Youth Development Agency business development officer Phuti Mojela.

The same funding criteria that have been in existence for years are still being applied, even in times of Covid-19. Funders claim there is plenty of money, but entrepreneurs say they can’t access funding, so clearly we are not talking the same language.

To overcome the impasse, a number of points were raised as possible first steps towards change:

  •  Funders need to be clearer in their communication regarding exact funding criteria and risk profiles: who they are prepared to fund and who they are not. This will take the guess work out of the process for entrepreneurs, who may spend a lot of unnecessary time barking up the wrong tree.

  • The government should play more of an enabling role in support of funders that may be risk-averse: to help minimise the risk and make funding start-ups more attractive; asking for a black entrepreneur for collateral is not appropriate.

  • There is a gap in the market for smaller funding amounts for micro-enterprises.

  • Non-financial support is also needed but on a case-by-case basis.

  • Relief funding should not be channeled through the banks as this means more administrative red tape.

  • The process needs to be simpler, and there needs to be more interaction between funder and entrepreneur.

At the same time, entrepreneurs need to ensure they play their part by diligently keeping records; obtaining financial training and ensuring they understand the different funding types and requirements; ensuring they are compliant (CIPC, UIF, VAT, tax clearance, and so on); and building a solid track record.

Change in the funding process is long overdue. Rather than working in silos and taking a “one-size-fits-all” approach, funders need to engage more with small business owners. We cannot keep talking over each other — it is time funders and entrepreneurs came together with a clear objective: how to make funding simpler and easier to enable small businesses to succeed, during Covid-19 and beyond.

• Dr Msimango-Galawe is a senior lecturer in entrepreneurship at Wits Business School.

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