Small businesses need easier access to financial resources to grow
From Cape Town to Limpopo and all places in-between, small businesses are powerful sources of job creation.
They employ about half of SA’s workforce, contribute about a third of its GDP, and make available essential goods and services to millions of people every day.
Take entrepreneur Senzo Buthelezi, for example.
He recently explained to us at the International Finance Corporation (IFC), a member of the World Bank Group, how the indignity of knowing his 97year-old grandmother was suffering without a flushing toilet spurred him into action.
From an idea scribbled on a piece of paper he has built his company, Eco Nars, into a 50employee-strong enterprise that designs, manufactures, installs, and manages public sanitation systems in and around Johannesburg.
“My voice is important. When we talk, we talk about possibilities,” Buthelezi said.
“Without entrepreneurship there’s no evolution. It is important that what we dream about gets heard.”
But are small businesses being heard?
SA’s small business sector has stagnated over the past decade, its growth stunted by difficulties accessing markets, finance, and training.
These businesses, already pillars of the economy, could be doing so much more to help SA grow.
By better listening to what smaller businesses need, regulations can be designed and financial services and tools provided that will help them become even greater engines of growth and job creation.
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And what are SA’s small businesses saying?
The IFC recently interviewed the owners of more than 2,500 micro, small and medium-sized businesses countrywide to understand their needs, challenges, and aspirations.
They told us that the informal sector should not be overlooked.
While more than 85% of SA’s small businesses are informal, meaning they aren’t registered enterprises, they are nevertheless vital to job creation.
As informal businesses grow, they create opportunities for full-time employment.
We need to ensure the informal sector can access the same valuable services such as finance, training and banking that formalised businesses benefit from.
They told us they need easier access to financial resources and markets.
Most informal businesses, and even many formal ones, don’t use business banking accounts, which help open the door to finance sources and other support.
Small businesses are also hungry for tools to better run their businesses, and to access skills training so they can reach new customers, hire more people and apply for finance.
They told us they remain heavily reliant on cash, whether transacting with clients and suppliers or paying employees.
Small businesses worry whether they have enough cash for working capital needs while also being more exposed to the risk of theft.
This presents an opportunity to invest in affordable digital solutions that help small businesses, especially in the informal sector, to grow. Increase lending
Small businesses also operate with limited business infrastructure and digital connectivity.
About half of informal businesses have no business premises and only 15% have access to a smartphone or tablet.
This digital gap should be bridged and hubs should be built close to small business epicentres.
The IFC has compiled these interviews in a report, “The MSME Voice”, that can be freely accessed online, as part of our work is to support financial service providers to increase lending to small businesses.
The report follows IFC’s earlier publication, “The Unseen Sector”, which outlines the size of the small business market in SA.
We hope it contributes to the discussion and inspires us all to continue innovating and growing SA’s small businesses.
When small businesses talk and we listen, we can learn a lot about what is required to help them grow, innovate and create jobs.