Somehow, in the midst of so many funding discussions, small and medium enterprises (SMEs) never seem to actually get a turn. Often talked about, never funded. That is not only wrong and short-sighted, it’s stupid.

Everybody knows it has to happen, but no “formal” capital wants to go there, really. Why would they? There’s enough to eat, to feast on, in the traditional, established, predictable business models of high street, corporate SA.

Lend money where the ratios are known, where everyone knows what ebitda stands for and which covenants will get through credit. It’s how it’s always been, and there’s enough margin to share the spoils. Let’s build another skyscraper in Sandton, rather than a business in Alexandra.

Let’s roll the facility for another year. Have you got a game on Saturday? We’re short one in our four-ball. Deal.

If we don’t create a fat middle-class, there’ll be no survivors in either of the skinny tails of our skewed wealth distribution curve — neither the rich nor the poor will make it.

If properly structured, fairly priced, longer term, enabling funding doesn’t find itself under the skin of SMEs, then that’ll continue to be where the loan sharks feed, where the dark money is made, and (mainly) lost.

At the price at which you can raise money in the informal market (read “on the street”), credit is a destroyer, not an enabler. In our economically unequal society the cost of a cigarette (once they’re legal, more until then), of an apple, of a minute of airtime — the cost of consumption in general, is highest for the poorest.

SA’s idling economy

But there is a way out. Knowledge and technology are no longer the preserve of the few. Credit assessment mindsets have to change. We have to explore, understand and trust developing business. We have to go, eagerly, where stale, traditional funders fear to tread. Not only will it be virtuous, but it will be worth it.

An appropriate mix of tiered-risk capital (ranging from equity through to secured debt), which is fit for purpose in the very particular circumstances of our vast population of SMEs, will fire up the currently idle economic engine of our country’s future.

There is a fair price, it can be controlled, but we have to get involved. It goes beyond money. Data is part of it, access to mainstream media is part of it, affordable professional services are part of it, mentorship is part of it, portfolio risk mitigation is part of it.

Where will the money come from? There is a gaping hole in the array of assets fund managers, pension funds, development finance institutions, and even banks can choose from to invest in. The world is no longer only defined by listed equities, bonds and cash. That comfort zone is not where tomorrow’s winning capital allocators will play — that is where the intermediaries will live and eat, practically risk free, off mediocre returns.

Clever, agile capital will want direct, informed, particular access to growth, and they’ll find it in SMEs. Investing in properly filtered, clearly understood economic models of next-generation businesses will be where the exceptional value will be planted, grown and harvested. The key difference will be early access to the growth curve in SMEs — the asset class of the future.

I can’t for the life of me understand why this market hasn’t been funded to flourish up to now. Perhaps it’s because we all thought it wasn’t our problem. Perhaps we just didn’t need to go there.

Well, we need to go there now, and it’s an opportunity, not a problem.

• Barnes, a former SA Post Office CEO, chairs the Kisby SME Fund, which provides structured funding solutions for SA SMEs.

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