Small businesses need more than funding to grow and reach their potential
Small businesses and entrepreneurship are widely viewed, both locally and globally, as a key engine of economic growth and job creation, with their advantages of agility, capacity for innovation and potential for scalability.
However, the high failure rate of SMMEs is well-known, and SA ranks higher than the global average.
Supporting small business development as a means for inclusive economic growth has long been a central objective in our democratic era economic policy.
Yet, after three decades, government itself describes the SMME sector as characterised by low survival rates and growth 'stagnant at best', with ineffective support a key factor holding back its expansion potential (2023 National Integrated Small Enterprise Development framework).
In its Q1 2024 SMME update, the Small Enterprise Development Agency reported a significant decline in the number of SMMEs; and, more concerningly, declines in employment and real turnover at 4% each.
These lacklustre results are despite government spending an estimated R6bn annually on direct financial support to small enterprises in the form of loans and/or grants, according to calculations by the Centre for Development & Enterprise.
Despite the existence of a focused department of small business development and integrated Small Enterprise Development and Finance Agency, government initiatives to support small businesses remain fragmented across multiple departments and entities, with little coordination.
Add to this the many private sector initiatives in enterprise and supplier development by individual companies and by foundations, NGOs and so on.
The current state then, after 30 years of interventions and initiatives, is that there is a lot of activity and a lot of money being spent, but little in the way of tangible or measurable results.
Clearly, something must change. One cannot keep doing the same things and expect different results.
Much of the focus in small business development is on funding — either by government or the private sector seeking to offer funding as a solution, or in small enterprises believing that finance is all they need to succeed.
There is no shortage of funding, but our experience on the Entrepreneurship Desk at the Business Chamber has shown that money is not the 'silver bullet' for small business success.
Government agencies are willing to fund the development of a business plan aimed at enabling a small business to apply to banks or other government agencies for funding.
Yet, bankers tell us they regularly find business owners unable to present and engage with a business plan that looks solid on paper.
The bank is interested, but the business owner is let down by a plan that was developed without incorporating their practical inputs and realistic commitments.
Up to 90% of SMMEs are rejected by government agencies for funding, despite having a business plan that was funded by government.
A further challenge is 'training fatigue' — SMMEs often find themselves in a cycle of workshops, seminars, short courses, with generic content and no clear end goal or follow-up to assist them in implementing what they have learnt, and monitoring the results to identify further needs.
We recently celebrated the Chamber's Entrepreneurship Desk's third anniversary, having grown to about 350 active member businesses, with about 79% black owned and 54% female owned.
A key learning in this time has been that small businesses are held back not so much by lack of funds, but by lacking clarity on how to make a good idea or a special skill work in practice as a business.
What small businesses and entrepreneurs need most is to determine their market position and strategy, understand how to make their operations most efficient and cost-effective, manage their cash flow, how to target their marketing, drive sales, and access markets.
This needs training, mentoring, networking, access to information on opportunities; things that money to buy equipment or a business loan can't provide.
The E-Desk's starting point is a gap analysis to identify the needs of a specific business owner, and to address those through targeted training and practical support, so they can develop a business plan that is actionable and fundable.
Often the end result is that funding is not actually the need — by improving strategy and operations, the business performs better and finds they can succeed without the need for loans or grants.
We take a value chain approach — identify needs, implement training and capacity development, compile an actionable business plan, facilitate linkages to opportunities and markets. Funding comes last.
Seeing and hearing the success stories of E-Desk members at our anniversary event proved the success and impact of this approach.
Some spoke of having expanded premises, employed staff or moved from selling their product at markets to supplying major supermarket chains.
Others spoke of taking up opportunities to export, having learnt about the necessary documentation and processes; or the benefits of having access to a financial expert, gaining insights into costing and pricing, and how to leverage suppliers.
The overall message of growth from these small business owners was that they had gained in confidence and expanded their business visions and horizons.
If we can continue expanding practical and tactical actions that actually help small businesses to grow meaningfully, one step or one business at a time, then there is hope.
Lunga Mjodo is strategic initiatives ganager at the Nelson Mandela Bay Business Chamber.
The Herald
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Herald
an hour ago
- The Herald
Innovate Africa: Inside the future – a conversation with Vuyo Mpako from NEXT176
NEXT176 is Old Mutual Group's new growth and innovation arm. While the parent company has been around for 180 years, NEXT176 is focused on what's next, backing bold ideas that can improve people's lives across Africa. Led by MD Vuyo Mpako, the team is working to make a difference in health, education, jobs, financial wellbeing, sustainability and debt management. Their goal is to have an impact on 1-billion lives on the African continent. In our interview, Mpako shares the hard lessons of corporate venturing, how NEXT176 bridges the gap between start-up speed and corporate structure, and why partnering with the likes of SC Ventures makes sense when trying to build financial tools that work for everyone. This is a conversation about real-world innovation, what it takes, what's working and where it's going. TimesLIVE
Mail & Guardian
3 hours ago
- Mail & Guardian
Buy now, panic later: A legal deep dive into South Africa's payment revolution
New legislation seeks to close regulatory gaps to protect consumers and promote a competitive digital finance system. Photo: Nadine Hutton/Bloomberg via Getty Images) Buy now, pay later (BNPL) payment options have strutted onto South Africa's financial runway with the swagger of innovation, offering interest-free instalments, bypassing traditional credit checks and boasting sleek user interfaces that make old-school lay-bys look prehistoric. For consumers, it feels like a dream: swipe today, split it tomorrow. For platforms, it's fintech gold. But beneath the surface of this frictionless façade lies a regulatory grey zone thick with risk, ambiguity and potential litigation. Is BNPL empowering consumers or quietly indebting them? And when the legal hammer finally drops, who's left holding the bill? BNPL services allow consumers to make purchases immediately and pay for them in installments over a set period, usually without interest if payments are made on time. However, as BNPL use increases, so do concerns around consumer debt, regulatory arbitrage and financial exclusion. The central question in South Africa is whether BNPL products fall within the ambit of the National Credit Act (NCA) or the Financial Advisory and Intermediary Services Act (FAIS Act). The National Credit Regulator is responsible for compliance with the NCA, while the Financial Sector Conduct Authority (FSCA) is responsible for compliance with the FAIS Act. The South African BNLP landscape The consumer credit environment in South Africa is governed by the NCA, which regulates all credit providers and mandates affordability assessments along with other consumer protection mechanisms. BNPL providers often argue that they are not credit providers, as their terms and conditions do not constitute a credit agreement. This is because they charge no interest and operate within a very short payment cycle (for example 4 to 6 weeks). As a result, many BNPL firms claim exemption from NCA obligations. According to the Intergovernmental Fintech Working Group, BNPL falls into a regulatory void. The NCR has taken limited action against providers, while the FSCA has yet to issue clear guidance. Consumers thus face reduced transparency, no guaranteed recourse mechanisms and inconsistent contract terms. BNPL's legal classification determines the scope of regulatory obligations. If BNPL is credit, then the NCA mandates affordability checks, registration with the NCR and extensive disclosures (among other things). However, most BNPL operators avoid these obligations by structuring their offerings as payment solutions or deferred billing. The FAIS Act regulates financial advice and intermediary services. BNPL providers rarely claim to offer financial advice and, as such, FAIS oversight is generally not invoked. This ambiguity causes a jurisdictional conflict between the NCR and FSCA, with little hope of resolution. Moreover, South African consumers are often unaware of potential late fees, the implications of missed payments and the lack of legal recourse, especially when providers collapse or change terms unilaterally. While legal classification remains unresolved, enforcement action against BNPL providers in South Africa has been minimal. In practice, the NCR's enforcement has focused largely on traditional credit providers, while the FSCA's mandate remains unclear in the absence of explicit statutory triggers. This lack of supervisory clarity raises risks of selective compliance, where only larger players seek legal advice or act preemptively, while smaller or offshore providers bypass South African oversight altogether. Moreover, without designated supervisory frameworks, enforcement becomes reactive, often occurring only after consumer harm has materialised. The Conduct of Financial Institutions Bill is envisaged to address these regulatory gaps. A modern regulatory regime must therefore address, not only classification and jurisdiction, but also enforcement mechanisms, investigative powers and co-ordinated oversight, possibly through inter-agency memoranda of understanding or joint supervisory task teams. Without this, regulatory gaps become systemic vulnerabilities. Global BNLP landscape UK: The Financial Conduct Authority will regulate BNPL under new legislation taking effect in 2026. Providers will be required to conduct affordability checks, obtain authorisation, and ensure clear disclosures. Consumers will be granted section 75 protections under the Consumer Credit Act. Australia: The Australian Securities and Investments Commission has introduced legislation bringing BNPL under the National Consumer Credit Protection Act. From mid-2025, providers must hold a credit licence, conduct responsible lending assessments and comply with disclosure obligations. These requirements are tailored to balance innovation with consumer protection. US: The Consumer Financial Protection Bureau has classified BNPL loans accessed via digital accounts as 'credit cards', triggering protections under Regulation Z. Dispute resolution, refunds and chargeback rights are now part of BNPL transactions, although industry litigation may reverse this. These models demonstrate that proactive regulation, coupled with flexibility, is essential for managing BNPL risks. Comparative legal analysis of South Africa South Africa's current dual-regulator model (the NCR and FSCA) is ill-equipped for the digital fragmentation of modern finance. The lack of a clear BNPL regulatory framework stands in contrast with jurisdictions where regulators have already expanded definitions of credit to include BNPL explicitly. Key takeaways include: The UK's reliance on disclosure and licensing. Australia's focus on credit licenses and suitability assessments. The US approach of function-over-form classification (if it behaves like a credit card, it is regulated like one). The hope is that the Conduct of Financial Institutions Bill will reconcile institutional gaps and avoid regulatory arbitrage by expanding statutory definitions and enforcing consistency. Fintech partnerships and platform liability BNPL services are frequently integrated directly into online retail platforms via application programming interface partnerships. This embedded finance model raises questions of liability, especially when the BNPL provider operates outside the regulatory net. In South Africa, it is unclear whether a platform offering BNPL at checkout could be deemed to be providing or facilitating credit under the NCA. Retailers and marketplaces must consider whether they are indirectly exposing themselves to liability or reputational risk, especially if their BNPL partners engage in misleading conduct, impose unlawful fees or collapse without notice. Globally, regulators are beginning to scrutinise not just BNPL providers, but also the platforms and merchants who offer such services. The UK's Financial Conduct Authority, for example, has signalled that contractual and operational accountability may extend beyond the primary credit provider. South African platforms should pre-emptively assess their BNPL partnerships through the lens of operational risk, consumer protection and reputational resilience. Digital identity and affordability in a credit-light economy One major challenge for effective BNPL regulation in South Africa lies in consumer verification and affordability assessments. Without a robust credit history or consistent income documentation, many consumers who use BNPL services remain invisible to traditional risk models. This opens the door to over-indebtedness, particularly among the underbanked. Future BNPL regulation must therefore account for the reality of fragmented digital footprints and low formal credit participation. There is room for innovation — open banking frameworks, mobile payment data and transactional analytics could support dynamic affordability models. However, this would require legal certainty around data access, privacy and proportional use of financial profiling. BNPL operators who proactively invest in these tools, backed by transparent disclosures and consent practices, will probably be best positioned when regulation catches up. BNPL has redefined consumer finance by promising simplicity and speed but the country risks repeating mistakes seen in unregulated microcredit booms if it fails to address its regulatory gaps. Global trends show that regulation can evolve in tandem with technology. By embracing reform and cross-sector collaboration, South Africa can lead in creating a safe, competitive digital finance ecosystem. Lerato Lamola & Anél de Meyer are partners at Webber Wentzel.
The Herald
6 hours ago
- The Herald
Worker killed at Harmony's Joel mine in the Free State
A worker was killed in a fall of ground accident at Harmony Gold's Joel mine in Free State on Wednesday. The company said all relevant authorities, family members and colleagues had been informed. It said it was devastated by another loss of life. 'Our safety strategy and culture include both systemic and humanistic factors and controls. These controls are designed to avoid incidents, protect our employees and have to be adhered to at all times. No working area will be accessed unless it has been declared safe,' said Beyers Nel, Harmony CEO. The Association of Mineworkers and Construction Union (Amcu) said this was the 11th fatality at Harmony this year, bringing the total fatalities in the South African mining industry to 25. 'Eleven fatalities point directly to the company's failure to provide conditions that are safe for the operation to take place,' Amcu said. The union added that if Harmony dodges analysing organisational failures and blames the deaths on the behaviour of employees, it is likely they will experience more injuries and disasters. Harmony said Thursday has been declared a day of safety across all Harmony's South African operations to engage with the company's employees and stakeholders and to reflect on the company's safety practices at each of its mines. 'Our day of safety is not simply a pause, it is a call to action,' said Nel. TimesLIVE
