No Shortage of Money – Why is accessing finance such a challenge for most SA businesses?


By Anton Ressel

A recent snap survey by Fetola shows that 93% of small businesses are uncertain about where and how to access finance.
This finding was confirmed in the 2014 GEM report released by the University of Cape Town’s Graduate School of Business. The Report found that a key challenge to small business development is not a lack of available finance per se, but the knowledge to access it.
“It seems that in South Africa at least, there is not so much a problem of insufficient finance for business, but rather the inability or lack of records needed to get one’s hands on it. This is an important distinction,” says Chantal de Kock of Fetola.

This lack of financial nous seems to be a common theme for many finance providers. Victor Mzimela of Khula Enterprise Finance says that “a lot of our work is to educate business owners how best to manage their finances, how to retain records and how to build a solid offering that is attractive to finance houses such as banks, VCs and public and private finance agencies.”
Small business specialist Cynthia Olmesdahl concurs, adding that “often small businesses confuse the need for better financial management with the need for finance. Some simple tools to help with the management of cash flow and stock levels, for example, can sometimes negate the need for major finance and ultimately unlock a whole new business future.”

Knowledge is key
Many fairly robust businesses struggle to gain finance for similar reasons – their recordkeeping is poor, they are deemed too risky, they are still in a start-up phase or don’t fit BEE lending criteria. In fact, Minister of Economic Development Mr Ebrahim Patel noted a few years back at the launch of the SME funding body SEFA (Small Enterprise Finance Agency) that “in a very short space of time, lending has dropped from near all-time highs to record lows. For example, growth in credit extension last year was the lowest in over 50 years.” This, despite the fact that SA has more potential sources of finance on offer than just about any time in our history, suggests that we entrepreneurs are perhaps missing a beat somewhere.
The businesses that do succeed in attracting finance seem to share some common traits, and the most important of these is an understanding of what finance partners require from applicants before they will part with their cash. Sound recordkeeping is another non-negotiable.

Non-profit sector under strain
Whilst there are numerous avenues for finding finance for businesses, especially black-owned businesses in South Africa (see for a comprehensive list), non-profits and social enterprises seem to be taking strain. “Funding seems to be more and more difficult to access these days,” says Louise Batty of Keep the Dream 196, a child-focussed non-profit based in Limpopo. “Most of our funding now comes from overseas donors, and I find that we need to be increasingly proactive and creative with our fund-raising if we want to maintain our programmes at their current levels.”
Having a worthy cause is no longer enough to guarantee financial support, and more and more non-profit funders are looking at factors such as financial controls, sustainability, reporting, monitoring & evaluation and return on social investment as criteria when deciding which initiatives to fund.
This is exactly the challenge that funding and financing agencies face when assessing the hundreds of applications they receive every quarter. “From a Corporate Social Investment (CSI) perspective, we need to look at return on investment just like a banker or investor would – not from a monetary gain perspective, but from an impact perspective. If we give a certain organisation R500,000 in funding or financing, will that translate into a return in terms of job creation, sustainability or building a better community?” explains an application reviewer at Old Mutual Foundation.

Money is not the problem
It appears that available money for investment in new and emerging enterprises is not the problem, and some research would bear this out. While accessing start-up finance from commercial banks does indeed remain out of reach for many entrepreneurs, an increasing number of ‘angel investors’, venture capitalists, government-aligned funding agencies and other potential sources of finance seem to be filling the void created by the more conservative lending policies of the major finance houses since 2008.
“The starting point to success is confidence – and understanding the fundamentals of money, where to find it and how to use it in your organisation are critical. South Africa has a wealth of opportunity, and there is money available,” says Fetola’s Chantal de Kock. “What is needed is a much better understanding of where the money is and what is required from the finance house in order to get hold of it,” she concludes.
Financiers list sound financial records (at least 3 years), a well thought-out cash flow and financial plan, proof of concept, some ‘skin in the game’ and a proven track record of entrepreneurial success as some of the minimum requirements before they will give out money. Do you tick all the boxes?


  1. Wow, incredible blog layout! How long have you been blogging for? you make blogging look easy. The overall look of your site is fantastic, let alone the content!

  2. Hi I need to know something when in comes to finances, especially those of the company, do I need to have some money activity in the business account? If I dont will I be wasting my time in applying for those funds. Until I have something?
    Q2. What are the most important one needs to have in order to get funding? Do I need to have an accountant or bookkeeper ?

    • Catalyst is a platform for us to share information with you, however if you join us on Mentor Hotline, we will be happy to help. Mentor Hotline provides access to experienced mentorship support and advice, practical business tools and access to a network of like-minded entrepreneurs and business owners.

      Isabel du Toit- Fetola

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