SME Guides To Government Funding In South Africa

SME Guides To Government Funding In South Africa

One of the key ways that the South African government drives the growth and sustainability of small businesses is by providing development funding. This is because the SME sector is of great importance as it contributes to job creation and is an engine of growth for the economy.

In recognition of the role small businesses play, the government has prioritised the promotion and development of small businesses in an effort to reduce the SME failure rate and to help small businesses to grow.

SME Guides To Government Funding In South Africa

The funding landscape

There is great demand for funding in South Africa.  According to the SME South Africa Landscape Report, ‘An Assessment of South Africa’s SME Landscape: Challenges, Opportunities, Risks and Next Steps’ (Landscape Report), the majority of small business owners surveyed said they are actively looking for funding however, the vast majority (94%) had not received any kind of funding from the government. Only 6% said they had received funding of this kind.

Of the 6% of business owners who noted that they had received government funding, the largest share pointed toward government grants (21%) as the key funding mechanism used. Business owners indicated that they have received funding from other government structures such as the DTI (17%), the NYDA (16%), SEDA (15%), and the GEP (15%). A small portion (13%) of these business owners did indicate ‘other’ government avenues that they have pursued to secure funding, including the Umsobomvu Youth Fund, the National Film and Video Foundation, and the Gauteng Department of Enterprise Development.

Government funding challenges

The Landscape Report points to a number of reasons for the low uptake of government funding, primarily a lack of accessibility to and knowledge about the various funding options available to the small business community, as well as a lack of funding readiness.

Darlene Menzies, CEO of Finfind, an innovative online platform linking finance seekers with matching SA funders highlighted.

“Most entrepreneurs don’t know where to start when it comes to applying for finance. The world of funding is largely foreign territory to them, and learning to navigate it can be a challenge. Applying for finance is a daunting task. When you ask about Government funding, the common response is that they know there is funding available, but that it is very difficult to secure. If you are successful, it takes forever for the funds to be paid to you, which often occurs after the opportunity which required funding has been lost.”

To combat this, recommendations in the Landscape Report are additional or improved support for SMEs looking to secure finance, including more information about SME funding to be made available, such as where it can be accessed and the requirements for each fund.

To address the lack of funding readiness, the report recommends that the government take initiative to train and mentor business owners on business fundamentals such as how to write good business plans, how to integrate accounting systems and better manage their businesses.