SME ACCESS TO FINANCE: WHAT ARE THE BOTTLENECKS?

KwaZulu-Natal MEC for Agriculture and Rural Development KLydia Johnson has conceded that the democratic government was facing serious challenges in terms of the kind of support they were giving to people starting their enterprises, in particular, the Black small and emerging enterpreneurs.
She was giving a keynote address to the FABCOS Roadswhow on challenges faced by the SMME's to access funding.
Johnson cited access to finance, lack of markets and the question of skills development as the critical factors that were impending and hindering the realisation of a broader socio-economic sector towards the total transformation of the South African political economy.

"Challenges of access to finance faced daily by our people, be they, informal traders, street vendors or low-scale farmers remain critical in the South African economy.
Unless as government and the private sector start to address the issue of training, mentorship, management development and how we market our products, the small emerging entrepreneur will never graduate from one operational level to the next.
In line with the ANC's 2007 Polokwane Conference resolutions our government, has among others, prioritised agriculture and rural development to empower the masses of our people.
Agriculture is going to be a platform to fight poverty as we build our economy" said Johnson.

She added that low-scale farming and commercial farms, already own by Black businesspeople, will be prioritised by the KZN government and announced that it had established partnership with the Ithala Bank's Business Finance Unit to fasttrack African entrepreneurship in the agricultural sector.

According to Johnson, the provincial department of finance and economic development under the stewardship of MEC Michael Mabuyakhuluhad dedicated/allocated a large chunk of budget to be utilised as seed money by the Black farming community.

"Empowerment, in line with the KZN government ethos, is not about taking away or repossessing the commercial farms from operators that were encountering difficulties in servicing their loans but we've pledged to give them full support in terms of more funding and technical educational programmes towards the better utilisation of the agrarian reforms" concluded Johnson.

However, it was Ithala's Divisional Manager on Business Finance Unit Neli Shezi who assurred participants that SME's access to finance awaits prospective businesspeople.
She said Ithala aims to become a catalyst that empower and capacitate all the Black small and emerging entrepreneurs in the province.

"The challenge though that Ithala was facing are the people who get funding from the bank and fail to service it. We have established a fund dedicated to assist Black farmers to service their loans by giving them a certain percentage as a grant and co-operatives are encouraged to apply as no collateral is required,
For example, when you're given a R100 000,00 loan you can only pay back R80 000,000 as the other R20 000,00 not repayaid and is designed to fasttrack socio-economic opportunities to our customers" said Shezi.

She further called upon Ithala clients to put in own contribution to lower gearing, eventhough, lack of collateral was not an automatic disqualification, and adverse credit record was not regarded as an automatic exclusion because Ithala was a finacier concerned with the developmental impact of their customers.

Also the Chief Operating Officer of Khula Enterprises Finance Ltd Mkhululi Mazibuko noted that they too were prioritising SME development and they were using various channels to unlock funding to leverage SME's footing.
However, Mazibuko cautioned that many lenders still suffer from insufficient understanding of the SME's landscape in South Africa's political economy.
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