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Access to finance remains a challenge for SMMEs

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Access to finance remains a challenge for SMMEs:

While government is fully cognisant that access to finance remains the most significant barrier to entry for new venture creation, small, medium and micro enterprises (SMMEs) and entrepreneurship, steps are being taken to address this.

This is according to the Deputy Minister of Trade, Industry and Competition, Zuko Godlimpi, who was during the Financial Inclusion Week session in Johannesburg.

“The consequences of government inability to increase the pace of transformation after 30 years are evidenced by the lack of economic growth, unsustainably high levels of unemployment, widening inequality and market concentration,” Godlimpi said.

“Though government policies have worked to dismantle many structures of the apartheid state and increase living standards, these efforts have not translated into the creation of job opportunities for many South Africans,” he said.

Godlimpi pointed out that the Department of Trade, Industry and Competition (the dtic) and its agencies, which include the Industrial Development Corporation (IDC) and the National Empowerment Fund (NEF), have managed to attract new business projects in which they will be investing R78 billion.

“We have also agreed to push the dtic and its entities to go beyond the Treasury standards to pay SMMEs. This ensures that we, as an institution of nine branches and 18 entities, do not contribute to the barriers that constrain our SMMEs.”

Glodlimpi explained that on the policy front, government is aware that SMMEs find it difficult to access different forms of finance, including debt.

He said when SMMEs approach debt markets, they are often faced with onerous credit checks and, at times, fall victim to negative reinforcement tools such as credit bureaus due to a lack of access to patient capital.

“When a small business owner misses debt repayment due to delayed payments from clients and, in many instances, the government, they are blacklisted. According to [the] Small Enterprise Development Agency’s SMME Quarterly and Stats SA, SMMEs contribute about 59% of total employment in the country,” he said.

Godlimpi said this picture demonstrates the unsustainable structure of credit market in South Africa, which is embedded in a consumption logic rather than a developmental and investment orientation.

“As part of the Minister Parks Tau’s new wall-to-wall approach, we have begun to look at sharing important economic data within the dtic to enhance our understanding of the economy and achieve complementarity in deploying the various tools to achieve our industrial policy objectives,” said Godlimpi. – SAnews.gov.za

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Africa’s Economic Heartbeat and the JSE

Johannesburg is the undisputed financial capital of the African continent. It is classified as an “Alpha Global City,” meaning it plays a primary role in the global economic network. The city generates roughly 16% of South Africa’s GDP and is the headquarters for 74% of the major multinational companies operating in Sub-Saharan Africa.

At the center of this economic power is the Johannesburg Stock Exchange (JSE). Founded in 1887, just one year after the city’s birth, the JSE was initially a way to raise capital for deep-level mining. Today, it is the largest stock exchange in Africa and ranks among the top 20 in the world by market capitalization. The financial district has moved from the historic city center to Sandton, an area often called “Africa’s Richest Square Mile.” This shift reflects Johannesburg’s evolution from a rough-and-tumble mining camp into a sophisticated service-and-finance economy. Despite the decline in actual mining, the city remains the “command and control” center for the continent’s mineral wealth, telecommunications, and banking sectors.