Access to funding still a sizeable obstacle for SMEs - CNBC Africa

Access to funding still a sizeable obstacle for SMEs

Special Report

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An open air barber shop in Kigoma, Tanzania. PHOTO: Getty Images

“We deal in the business of financing Small to Medium Enterprises, which ranges from start up to expansive-type projects. We see on a daily basis the challenges that SME entrepreneurs face, we deal with them and we’ve certainly seen that giving them the money is not enough,” Jeremy Lang, regional manager of Business Partners Limited, told CNBC Africa.

“You need to also provide the support with it. At the end of the day, the success of that business is in the best interests of all the stakeholders.”

(READ MORE: Africa's SMEs require an enabling environment)

Some Small to Medium Enterprises (SMEs) have however been successful, such as Mainstreet Walks, a South African inner city tourism company that provides tours of Johannesburg’s inner city. The company has now been running for two years, and receives an average of 300,000 rand in turnover.

Similarly, Xola Ndziba, founder and creator of software company Limu, has collected roughly 500,000 rand in revenue for the company. Limu allows parents to access their children’s primary and high school marks and keep track of performance. Learners can also access their school work from anywhere in the world, on any device and at any time.

Small businesses such as Limu and Mainstreet Walks nevertheless explained that access to funding was among the more difficult challenges in starting and maintaining a business.


“Obviously the biggest obstacle for any entrepreneur would be cash flow. To start off a business, especially in my industry, being a science business, we had to fund research to be able to produce these types of products,” said Ashley Uys, managing director of Medical Diagnostec.

“For me, the biggest obstacle was to get the funding to do that. So we’ve applied for some government grants to be able to conduct our research.”

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Medical Diagnostic focuses on research and development production, marketing and distribution of diagnostic test kits for HIV, malaria and pregnancy.

Private and funding companies are equally sceptical about providing much needed capital to SMEs that don’t provide a track record of growth and sustainability.

“Different financiers have different mandates and different risk appetites. Entrepreneurs, to some extent, just go knocking on door looking for money, and they become disheartened after a while because if you knock on the wrong doors you’re going to get the wrong answers,” Lang explained.

“To understand what type of businesses they want to finance at what stage they want to finance is very important before you go knocking on that door. It is much easier if there is a track record.”