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

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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

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