SMME: Funding key issue

The main problems entrepreneurs face are finding customers, funding, a lack of guidance and entrepreneurs’ tendency to wear too many hats, according to a survey of over 900 start-up entrepreneurs. Seed Academy, a school for entrepreneurship, surveyed entrepreneurs who have been in business less than five years.

The results showed that while entrepreneurs faced key challenges, the majority were startlingly positive and motivated to grow and develop their businesses. These challenges confirm that entrepreneurial development should be aimed at providing business education, helping to create a network, offering tangible guidance to find customers and of course, preparation to raise funds at the most appropriate time for the business.

Funding emerged as a key issue. Only a small percentage of entrepreneurs fund their businesses from the vehicles formally established to support them. This raises questions regarding the accessibility and effectiveness of funding programmes.

Innovative funding mechanisms

The creation of innovative funding mechanisms is important. Pension and provident funds do not currently invest in early stage businesses, as their mandates prevent this and they are not incentivised to do so. They should be mandated to spend a small component (even as little as 0,5%) of their allowable 10% (under regulation 28 of the Pension Funds Act) on venture capital funds. When invested, this will create significant momentum for the entrepreneur ecosystem.

The growth of incubators and accelerators is becoming a powerful tool for entrepreneurial development and early-stage business growth in the ecosystem. Additional funds need to be allocated by Government to support incubators and accelerators which should be managed on behalf of Government by these entities. It is key that the incubators and accelerators be measured based on their success and performance as to the management of funds.

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