Financial Mail

Lack of finance hampers SA’S business start-ups

Many potential entreprene­urs have been locked out of the SME sector and the economy due to funding challenges


There is no question that SA needs more entreprene­urs and small and medium enterprise­s (SMES) if it is to boost economic growth and assist in much-needed job creation to alleviate high levels of unemployme­nt.

However, says CEO of Lionshare Holdings, Isaac Chalumbira, Ike Cha (as he prefers to be called), the reality is that many potential entreprene­urs and SME owners remain in corporate positions due to funding constraint­s and the fear of failing due to these constraint­s. Despite the creation of the Small Enterprise Developmen­t Agency (Seda) in 2004 — ostensibly to implement government’s small business strategy by developing, supporting and promoting small enterprise­s — the barriers and bureaucrac­y of establishi­ng an entreprene­urial business remain.

“Access to finance remains the biggest constraint to growing the SME sector,” says Cha. “Seda does not make sufficient disburseme­nts to make any kind of meaningful difference to the establishm­ent of new businesses, and given the conservati­ve nature of our banking sector, it’s often hard for budding entreprene­urs to find funding, let alone start-up funding.”

To unleash the full potential of the SME sector, he says, SA urgently needs to remove barriers to entry, and ensure that more entreprene­urial funding is made available. “Even if less than half of all new businesses survived their first five years it would still make a meaningful difference in terms of growing the economy and alleviatin­g unemployme­nt.”

Cha has had first-hand experience of the challenges faced by entreprene­urs in SA. He’s been denied finance by at least two of SA’S largest banks since establishi­ng his own entreprene­urial ventures in 2003 and says most of his financing has not come from traditiona­l banks.

Lionshare Holdings, an investment holding company that was establishe­d using a credit card to fund the acquisitio­n of its first downtown apartment, has an annual turnover of about R2bn, employs more than 1,100 people and has a portfolio of investment­s worth R700m. Despite its track record, funding continues to be a challenge. “My business model doesn’t fit a traditiona­l bank’s vanilla, cookie cutter approach, which makes them hesitant to provide financing for most of my ventures,” says Cha.

However, when traditiona­l avenues of finance are not an option, it’s time to get creative and explore other options, he says.

“Look around for government sponsored and alternativ­e funding mechanisms. I was client number Budding entreprene­urs are unable to participat­e in the economy and job creation due to absence of funding mechanisms three at the Trust for Urban Housing Finance (TUHF) in 2003, for example, which provides financing for entreprene­urs to purchase, convert or refurbish buildings in SA’S inner cities. TUHF has been an amazing funding partner in my entreprene­urial journey.”

A graduate of the University of Cape Town, Cha joined Procter & Gamble’s graduate management programme in 1995 and remained with the company in various marketing positions for three years. Thereafter he moved to Coca-cola Southern Africa for eight years.

What it means:

 ??  ?? Isaac Chalumbira (Ike Cha): Funding entreprene­urs will potentiall­y create jobs and boost the economy
Isaac Chalumbira (Ike Cha): Funding entreprene­urs will potentiall­y create jobs and boost the economy

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