Small businesses could unlock SA's economy - so why aren't they being handed the keys?

Bierman would like to see both the public and private sectors getting involved in assisting SMEs.
Bierman would like to see both the public and private sectors getting involved in assisting SMEs.
katleho Seisa/Getty
  • Business Partners marks its 40th anniversary this year.
  • It provided formal SME owner-managed businesses with a total of R20 billion in finance over that period.
  • CEO Ben Bierman shares insights and tips from the specialist risk lender's 40 year history of assisting SMEs.


Small and medium enterprises (SMEs) play an important role in South Africa's economy - from providing employment opportunities to solving business challenges.

And yet, says Ben Bierman, managing director of specialist risk finance company Business Partners Limited, the sector's survival is hanging in the balance. 

Business Partners, which marks its 40th anniversary this year, services formal small and medium owner-managed businesses. It provides financing from R500 000 to R50 million, specialist sectoral knowledge, business premises and added value services for viable small and medium businesses in SA and other African countries. To date, the company says it has provided R20 billion in finance to local business owners via more than 71 000 transactions, helping to facilitate over 671 000 jobs in the country.

But while Bierman is the first to give a vote of confidence to the SME sector, he remains concerned that if SA's vaccination roll-out is not executed quickly and effectively, the result could be devastating, particularly in the retail and hospitality sectors. 

Even before the pandemic, South African SMEs have had to overcome economic headwinds, he points out.

The vaccine factor

In Bierman's view, established businesses will have to continue pitching in.

"If you look at the current state of the country's SME sector, it is precarious, especially for certain sectors, and essentially they will require both the private and public sectors to work together to make sure there is no further damage and so that SMEs can survive the pandemic," said Bierman.

He explained that big businesses and government, which often make out important clients for SMEs, are also struggling, leading to their procurement being impacted. Furthermore, consumers are also under pressure.

"All these factors create a perfect storm for many SMEs. That is our concern. So, stimulus packages or relief packages will be crucial for SMEs over the next about six months to help climb the last hill. We need to remain positive. Good politics make for good economics," says Bierman.

Challenges

Added to the recent negative impact brought on by the pandemic, SMEs will likely continue to face challenges. These challenges include the high cost of running a business, excessive red tape, access to markets, financing and technical knowledge.

"Looking at various first-world economies, it's clear that a good balance of different sized businesses and equally distributed wealth in the business sector is crucial to a thriving economy. In South Africa, most of the economic power has for too long been held by the large corporates, and for our economy to grow and thrive, a larger base of medium-sized businesses is required," said Bierman. "This key shift, however, requires an ecosystem that better supports these businesses." 

Over the past 40 years, some of the key challenges Business Partners found to face SMEs include a lack of financial literacy among business owners, non-compliance with legislation and the availability of collateral which hinders access to much-needed financing opportunities. The impact of the pandemic has made these challenges even more pressing SMEs' battle for survival.

In order to better support SMEs on the road to recovery, Bierman suggests they harness technology to become more client-centric and give support quicker and efficiently.

He would also like to see government trim red tape to increase the ease of doing business.

"It's more important now than ever to invest capital and other resources into SMEs, as well as cut some of the red tape that exists in the legislative environment that makes it difficult to grow and create jobs. In comparison to big corporates, SMEs can often create more jobs at a lower cost," said Bierman.  

"SMEs often lack resources within their organisation to deal with legislative red tape. Often the entrepreneur or business owner spends more time jumping through administrative hoops rather than focus on running their businesses. Cumbersome legislation often becomes the biggest stumbling block for SMEs to develop access to markets, improve the ease of doing business, grow their businesses, or create much-needed jobs."

He would like to see both the public and private sectors getting involved in assisting SMEs.

"In this ever changing and uncertain environment, it is difficult for any business to commit to a long-term plan. By staying close to and prioritising SMEs, both government and the private sector can better respond to SME needs, and thereby contribute to a greater survival rate for these vital businesses," he suggests.

"If we can get a consistent political environment with less factionalism, and good policies, the true potential of SA's economy could become a closer reality."

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