SME’s are a vital part of the South African economy. The top 5 industries in the SME market are manufacturing, agriculture, logistics, information technology and tourism. These industries are vital to South Africa and its people and the circle of demand and supply cannot be closed without one of these industries. We need to take care of each and every industry to grow the economy and invest in a better future for the citizens of South Africa.

SME’s account for more than 89% of South African businesses and employs between 50 and 60% of the nation’s people. [1] SME’s therefore play a tremendous role in the South African economy. The SME market has been underperforming prior to 2018 with some signs of hope in early 2018 of a turnaround. [2] The unexpected turn of events when the COVID-19 pandemic hit the world, left SME’s suffering quite substantially in 2020, seeing a large number of businesses closing their doors, restructuring businesses or rethinking the way they operate or generate sales. It is unfortunate that the pandemic deepened the recession and worsened the weak South African economy, but it is important not to forget that the economy was in crisis-mode before the pandemic. South Africa was downgraded to junk status before lockdown started on 26 March 2020. We could say that the pandemic merely highlighted, and then worsened, the crisis.

In a recent survey done by SME South Africa, the two major reasons why businesses were established was to have a positive impact and to pursue their passions. South Africans are passionate and the private sector is key to economic growth in the country. South Africa is finding itself in the middle of a major labour crisis where almost 21 million individuals are dependent on state money for monthly salaries. 14 million individuals are employed in the private sector and after the lockdown, 2.5 million individuals lost their jobs in this sector. More than 100 000 privately owned companies closed their doors during the 2020 lockdown and as economist Dawie Roodt said, it is not the virus that caused the crumbling of the economy, it was the lockdown itself. His personal advice to South Africans is to know what is going on in the economy, identify the risks in your industry and then manage those risks adequately.

South Africa needs to start rebuilding their economy. Other than President Cyril Ramaphosa’s Reconstruction and Recovery Plan for the South African Market, strategies are being put in place by South African businesses where the marketing and purchasing of local goods are highly advertised and recommended. Shoprite, for instance, agreed to stop their exclusivity clauses in their agreements, which means there are more possibilities for specialised/spaza stores to open shop in malls where Shoprite stores already exist. [3] Smile 90.4FM recently launched a Small Business Benefit Programme where they give back to Cape Town businesses by sponsoring airtime to promote their businesses. Businesses are now converting their sales to online orders and deliveries to accommodate citizens who do not wish to go out and purchase their goods where the chances of them contracting the virus is high. But, to support local, advertise locally and changing your game plan is not the key drivers (although has a huge impact) to save the economy.

Funding the SME market is a big constraint in the country. It should be a focal point for first and second tier lenders to consider granting facilities to these businesses. The SME South Africa Survey indicated that only 6% of the SME’s in the country received government funding, which leaves a possible 94% of SME’s looking for alternative funding. The main reasons for the refusal of funding by government was insufficient operating history and inadequate cashflow. After the MTBPS 2020 speech by Tito Mboweni in November, it is more evident that the banks need to step in and assist the country’s businesses to grow, create and protect jobs and to help the SME’s survive in a constrained economy.

South Africa’s SME sector is expanding and due to commercial bank’s low risk appetite, niche banks or non-bank financial intermediaries are becoming crucial to help build and grow this sector through tailor made financial offerings.

Finrock will assist SME’s with a product that will give businesses access to funding to ensure sustainability and growth and therefore contribute to the employment strategies of the South African Government. Since the SME sector is known for employing more than half of the country’s labour force, Finrock will assist these SME’s to create jobs and ensure job security.

To support the SME sector through financial means requires innovation and risk taking by financial providers. With 50 decades of experience in the Finrock management team, the skills, knowledge and capabilities will assist the business to analyse the risk and make decisions while providing profitable funding to its clients.

[1] Damon Sivitilli, ‘How Some South African Businesses Survived The Pandemic’, 2020.

[2] Supplied, ‘These Are the Top 5 Sectors for SME’s in 2019’, IOL, 2019.

[3] Ernest Mabuza, ‘Tribunal Confirms Order Prohibiting Shoprite’s Exclusive Lease Agreements’, 2020.