SMEs - Afrikan Heroes

SMEs Are Lifeblood of the South African Economy

February 10, 2021

With a staggering 98 percent of the total number of businesses in South Africa, small and medium-sized enterprises (SMEs) have been described as the lifeblood of the country’s economy. The fact that SMEs also employ between 50 and 60% of the country’s workforce and are responsible for a quarter of the job growth in the private sector means they truly are the backbone of the South African economy, so says a new report from McKinsey.

Yet the SMEs have been at the receiving end of the brunt of the COVID-19 pandemic. Lockdown regulations have wreaked havoc, with the cash flows essential to sustaining smaller businesses completely drying up in some instances. Tragic stories of once-thriving businesses having to close their doors litter the financial landscape, and certainly, the virus could not come along at a worse time for owners already grappling with a precarious economy prior to its arrival.

But there has also been a significant silver lining. Despite questions over the country’s technological capability, thousands of small businesses have found ways to maximise the digital space to not only weather the storm but thrive in one of the most challenging trade climates in history. They have done so by recognising the potential of successful eCommerce.

“Digital and new technologies create an opportunity for SMEs to enhance their reach and efficiency at lower costs, overcoming the scale disadvantage they have relative to larger players. SMEs can focus on key areas of competitiveness in their value chain, product, and or operations and identify the best technology levers to enhance competitiveness.”

Confirming this is Bidorbuy’s CEO, Craig Lubbe who says that there are thousands of active SMEs using the platform each month.

“Many of these businesses have been attracted to the online world out of necessity due to lock-down restrictions. This has opened up our platform to wonderful diversity in both product offering and the individuals behind it all.”

There is no doubt in his mind that South Africans have undergone a form of “digital transformation” with the arrival of COVID-19. Schools and other places have already made the transition and “this includes businesses too”.

“Many businesses have had their first experience in online trade in the past year and most have realised there is nothing mystical or difficult about it. These businesses have opened up their offering to more than just local trade and will likely benefit immensely as more and more South Africans move to shop online.”

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

SME’s Are Key to Africa’s Economic Prosperity

October 7, 2019

If the African continent is to overcome poverty and make reasonable development strides, policy makers across the 55 countries or at least the major regional economic power houses should come up with policies that seek to engender and promote small and medium scale enterprises(SME’s). This was the observation of experts who deliberated on Africa’s development at the ongoing Nigeria Economic Summit taking place in Abuja, Nigeria.

The analysts who spoke with this Correspondent pointed out that with SMEs being responsible for an estimated 77% of jobs in Africa and as much as half of GDP in some countries, it should be the engine of economic growth for the continent, thus the need for governments to adopt a more proactive growth strategy to engender the sector and protect those operating within that sector.

They noted that SMEs are engines of global economic and employment growth as the World Bank estimates that SMEs are responsible for 77% of all jobs in Africa and as much as half of the GDP in some countries. It follows then that SMEs will help fill the gaps in the growing global workforce and generate much-needed employment, particularly in emerging economies. And this development is being helped by the growth of the information communication technology across the continent. Internet penetration is playing a very decisive role in causing disruptions in traditional businesses opening up competition for the SME’s.

This is because global trade is increasingly being driven by smaller, more agile businesses. An entrepreneur with a great idea, for example, can market on social media and implement digital or e-commerce solutions to deliver their products and services to customers anywhere in Africa or the world. And digital disruption is at the heart of this renewed energy sweeping through the African SME landscape — driving product and customer service innovation, and a sense of self-belief that no challenge, whether geographic or infrastructural, is insurmountable.

Importantly, Africa has the right ingredients for global success. Its population of about 1.2-billion people is projected to double over the next 30 years, making it an exception in a world of declining population growth. Additionally, Africa will soon be the region in the world urbanising the fastest. The continent has also proven to be an innovator and early adopter of all things digital and mobile. Countries across Africa have shown a great appetite for digital and mobile solutions that leapfrog traditional challenges and barriers to entry such as cost and infrastructure.

Experts are of the view that young people are largely the driving force behind this new position of Africa on the global stage. They are predicted to make up 50% of the continent’s population by 2050 — and combined with rapid technological changes and continued digital disruption; it is inevitable that the way people do business and communicate will undergo significant change.

With these two potent weapons; a very high youth population, and fast growing internet penetration, Africa should have the world as its Oyster, says Dr. Abel Adelakun. Dr. Adelakun noted that understanding this evolving environment provides extensive opportunities to change how people, companies and even economies work through the disruptive power of technology, allowing SMEs in particular the opportunity to expand their footprints and act as the drivers of growth and development.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

How This Company Is Trying To Bridge Funding Gaps For Small Businesses In South Africa

August 7, 2019

Despite the important contribution small-to-medium enterprises (SMEs) make to the economic growth of South Africa, the sector battles to access funding using traditional means.

And even though there are about 2.5 million SMEs in the country, the biggest stumbling blocks they encounter still revolve around the risk barriers and red tape associated with traditional funding products. The underwriting systems and financials required by institutions to finance small business simply do not provide a true reflection of operating conditions.

This has seen the emergence of fintech solutions and alternative funding products that have been steadily gaining momentum.

Yet most local SMEs are unaware of how and where to gain access to funding. For many, the only apparent path is to obtain funding via banks. By the time the business receives the funding (if ever), it is often too late and beyond the point where it can help the company turn things around.

However, funding entails so many different nuances beyond the traditional, and SME owners need to make themselves aware of what is available, and what will suit their specific requirements.

For their part, investors must adapt their digital strategies to engage differently with SMEs. For example, by using mobile as a platform for funding, the investor not only differentiates itself in the market, but the SME gains access to a real-time solution capable of addressing its unique needs.

This cannot happen on its own.

By partnering with a range of fintech organizations, the mobile-driven funding model provides SMEs with real-time, pre-approved offers based on turnover. And thanks to the availability of machine learning and artificial intelligence, these solutions will become more common. However, investors need to be viewed as more than just funders.

They can be true partners in working with SMEs and assisting them in positioning themselves in the market. Of course, the benefit of this is that they become part of a growing enterprise that has a direct impact on the economy of the country.

By incorporating electro-neural networks that enable the use of a sophisticated decision-making methodology requiring no human intervention, funders can more effectively identify where to invest their money. Invariably, the technology has built-in affordability metrics providing the SME with the peace of mind that funding received will not leave them over-indebted.

The graphic below shows the contribution to total turnover by all companies in South Africa in 2015, based on their size (sizes are determined by DTI, cut-offs and adjusted for Stats SA sampling purposes).

Behind-the-scenes, machine-learning algorithms have a deep understanding of business trading patterns and seasonality. This ensures the SME is unable to access more funding than what the business can afford. Such an affordability measurement is a great way to drive financial inclusion, irrespective of physical location, without leaving the SME over-indebted.

Using this sophisticated technology also enables funding to be done faster and more conveniently than before. Eliminating reams of paperwork and manual-intensive application process enable the owner to keep their focus on driving business growth.

And thanks to the ubiquity of mobile, SMEs can apply for funding irrespective of the time of day, using an environment that they are comfortable in. Funding requires no collateral, or security, and is completely unrestricted.

Depending on the funder, it is possible for SMEs to access funding with same-day pay-outs. However, for it to be truly inclusive, such a solution must be available to formal and informal businesses.

For our part, Retail Capital is driving this mobile focus very strongly to be the first to market with a platform that does exactly all of this. It is about delivering SMEs with an enabling environment to get funding using more innovative methods as quickly and effectively as possible. In fact, this smarter funding approach has resulted in mobile now representing more than 20% of the funding taken up at the organization.

Irrespective of the platform used, funding is the lifeblood of an SME. In these challenging market conditions, a multi-product approach that highlights how digital is changing access to working capital is necessary.

This creates a powerful platform for growth and the betterment of the economy, entrepreneurs and the country’s SME sector.

Miguel Da Silva is the Managing Director of Funding at Retail Capital.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

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KENYA: How To Access The New Loans Without Collateral For SMEs

May 21, 2019

SMEs in Kenya now have access to new loan facilities without collateral. About five Kenyan commercial banks are now backed by the Central Bank of Kenya to provide loan facilities targeting small businesses.

Under The New Loan Structure (Known as ”Stawi”)

Micro, small and medium enterprises (MSMEs) will be allowed to access loans without collateral ranging between Sh30,000 ($297) and Sh250,000 ($2500) from the new loan product dubbed “Stawi”.

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The loans will be accessed and processed through mobile phones.

Also Read: Importing Maize in Kenya is Now Duty Free

Unlike other mobile loans like that issued by Branch, you can request for a second loan if you have managed to pay 80% of the first loan you owe Stawi.

Interest And Repayment Period

The loans have a repayment period of between one year and 12 months and an interest of nine per cent (9%) per year.

Other charges to be collected upon disbursement are facility fees of four per cent, insurance cost of 0.7 per cent and excise duty at 20 per cent of the facility fee

Which Banks To Access The Loans From

The facility will initially be managed by:

Commercial Bank of Africa (CBA)
Cooperative Bank of Kenya (Co-op Bank)
Diamond Trust Bank Kenya (DTB)
KCB Bank Kenya
NIC Group

“We are excited to work with the five banks to minimise the complexity of developing new and more accessible loan offerings as they bring much-needed capital to this underserved yet vital segment of the market,” CBK governor, Patrick Njoroge, said during the launch of the product at Nairobi’s Gikomba Market.

Pay Back In Time And Get Cash Rewards

The scheme will also see good borrowers rewarded with cash based on their borrowing profiles.

“Small and mid-size enterprises are the lifeblood of any economy, but many have struggled to secure the necessary financing to continue operations in the current economic climate,” said Ngoroge

The latest intervention is coming after private sector credit grew just 3.4 per cent in the year to February In Kenya, well behind the Central Bank of Kenya’s target rate of 12–15 per cent that is needed to support economic development.

Kenyan borrowers were recently spared a rise in the cost of loans after the CBK retained its benchmark rate at 9.0 per cent amid mounting defaults and reduced appetite for lending to individuals and small enterprises by commercial banks.

How to Apply for Stawi Loan?

To apply for and get Stawi Loan, download the Stawi Mobile application on your phone(play storelinks will be shared when it goes live in Mid June 2019 ).

After downloading the mobile app, register with an agent and create your wallet and request for a loan. Your loan will be issued via your wallet.

To be among the 3500 traders who will benefit from the first round of Stawi loan that will be issued to SMEs on pilot test, register with an agent through any of the listed banks above.

Charles Rapulu Udoh

Charles Rapulu Udoh, a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.

BREAKING: Startups, SMEs In Nigeria Can Now List on The Nigerian Stock Exchange

May 13, 2019

There is now the fourth board on the Nigerian Stock Exchange meant for small businesses and startups. The board, known as the Growth Board will offer startups and small businesses the opportunity to raise equities for their businesses. All the startups and the SMEs need to do is to obtain approval from the Nigerian Securities and Exchange Commission and then list their shares for public subscription.

The New Framework For Startups, SMEs

The framework for the operation of the new listing platform at the Nigerian Stock Exchange (NSE), to be known as growth board, has been approved by Nigerian apex capital market regulator, Securities and Exchange Commission (SEC).

The framework creates two segments on the growth board for start-ups, micro and small companies and medium-sized companies.

Start-ups and small companies are denoted by market capitalisation of between N50million and N500million while medium-sized enterprises are companies with market capitalisation of between N500million and N4billion.

Start-ups and small companies are expected to be listed on the first segment, known as entry segment, while medium-sized companies will be listed on the second segment, known as standard segment.

The growth board will be the fourth board at the NSE. There are three existing listing boards at the Exchange, including premium board-for large-cap companies that meet additional requirements on dedicated corporate governance assessment, main board- the general board for all companies that meet the specific stringent listing rules and alternative securities market (ASeM), which provides listing for quotable companies that cannot meet or sustain listing requirements for the main board.

Requirements For Listing

For any company to be listed on the growth board, it must be a duly incorporated public limited liability company with at least two years of operations, audited financial statements in line with the International Financial Reporting Standards (IFRS) and must have grown its revenue by a minimum of 20 per cent cumulatively in its last two years of operations.

Also, all companies to be listed on the growth board must undertake that their promoters or directors shall retain a minimum of 50 per cent of their shares for a minimum period of 12 months from date of their listing, and that the directors or promoters shall not directly or indirectly sell or offer to sell such securities during that 12-month period.

The framework meanwhile provides alternative requirements for listing for each segment.

Under the entry segment, a new business may be considered for listing if it can provide evidence of investment in it by a core investor or a strong technical partner that has a minimum of two years’ operating track record, or a majority shareholder, who is either a High Net Worth Individual (HNI) or is a director of a listed company.

Under Nigerian rules, High Net-worth Individual is an individual with net worth of more than N100 million.

Besides, companies heading for the entry segment must have market capitalization of not less than N50 million, a minimum of 10 per cent of its shares available or to be available to minority retail investors and at least 25 shareholders.

Under the standard segment, a new business may be considered for listing if it can provide evidence of a core investor or a strong technical partner who has a minimum of four years operating track record, or a majority shareholder who is a HNI.

The company must also have a minimum market capitalization of N500million, at least 15 per cent of its shares must be held or will be held by minority retail shareholders and it must have a minimum of 51 shareholders.

The NSE stated that it aims to use the growth board for greater global visibility for eligible Nigerian entities and foreign companies in order to engender global capital flows.

The new board is designed to support SMEs’ growth as part of the strategic initiatives by the stock market to enhance its traditional roles as catalyst for economic growth and development.

Also See: More Funds – Now Available For Nigerian Small and Medium Enterprises

SMEs and start-ups account for more than 90 per cent of businesses in Nigeria and provide about 85 per cent of employment, according to various national and international data.

Charles Rapulu Udoh

Charles Rapulu Udoh, a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.

New Survey: Late Payments Are Assassinating Small Businesses

May 6, 2019

Not all promises to pay actually work. A new survey conducted by the South African Small Business Institute has hinted that as many as 40% of late payments were being written off as bad debt by Small and Medium scale Enterprises.

The business owners reported that they received payments, on average, 101 days after the promise to pay back was made. The business owners had, however, set a 30-day period for repayment, on average. The Institute called late payments the “assassin of small businesses”.

“SMEs should consider claiming interest and debt recovery costs if another business is late paying for goods or a service,”says Bernard Swanepoel, executive director of the Small Business Institute (SBI).

It Is A Case of Big Businesses and Governments Swallowing SMEs Through Unpaid Invoices

The Small Business Institute of South Africa recently sent a letter to each of the top 100 companies on the Johannesburg Stock Exchange, asking whether invoices containing purchases from SMEs are treated on time — that is whether SMEs are paid 30 days from the day the invoices were written in their favour.

Also See: South Africa Has The Best Startup Ecosystem In Africa, Says New Ranking

Out of the total replies, only 25% reported a specific policy to pay SME suppliers in 30 days or less. A few said they pay SMEs within seven to 15 days.

“We hear stories every day of SMEs having to close their doors because neither big business nor government pay invoices on time; sometimes they do not get paid at all, ”Mr. Swanepoel said.

South African Department of Small Business Development, in its report released in September 2017, has also disclosed that government departments in South Africa do not honour their contracts with suppliers to pay within 30 days. A total of 71 883 invoices to the value of R4.3bn($297 million), according to the report, were unpaid by government departments and were older than 30 days in 2016 alone. Only over 23 000 invoices were paid late by provincial government departments in 2016, totalling more than R2bn.

This trend in South Africa follows reports by South Africa’s Department of Trade and Industry (dti) that some 70% of SMEs fail within the first 2.5 years, which is even made worse by a recent study from the Global Entrepreneurship Index that only 15% of startups are successful in South Africa.

”Small businesses need predictable cash flow to gain traction, pay their employees, market their products and services, and invest in their businesses. One of the surest ways to disrupt it is to delay paying them for their services,” said Mr. Swanepoel.

The SBI therefore recommends that big business, government and state-owned enterprises apply the South African government’s new definitions of what constitutes small, very small and medium enterprises, that is, to pay businesses falling into the first two categories within seven days, and medium-sized enterprises, depending on the invoice amount, in 30 days or fewer.

Charles Rapulu Udoh

Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.

More Funds – Now Available For Nigerian Small And Medium Enterprises

April 25, 2019

The Central Bank of Nigeria has again released the sum of $210,000 million on the Nigerian Interbank Market in continuation of its mediation in the inter-bank foreign exchange market, to sustain the availability of cash in that segment of the market.

From the figures released by the CBN:

Authorized dealers in the wholesale segment of the market, as in previous deals, were offered the sum of $100million.
Those in the Small and Medium Enterprises (SMEs) segment got a boost of $55 million.
Customers purchasing foreign exchange for invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA), among others, were also allotted a total of $55 million.

Related: Nigerian Forex Market Gets $210m CBN Boost

This has not in any way, however, changed the exchange rate of the Naira as it is still on N360/$1 in the BDC segment of the market, Thursday morning.

Charles Rapulu Udoh

Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.