Increasing Capital Flows to Africa

1
Increasing Capital Flows to Africa

• Financing SMEs a Bankers perspective

Roy Ross Director, Business Banking Standard Bank
of South Africa Limited 29 September 2004
2
Introduction

• SMEs claim that ACCESS TO FUNDS is a major
  constraint to starting/ growing a business.
• Dichotomy
• Not True
• GEM Survey Results
• True
• BEE, Previously disadvantaged individuals

3
The South African Context

• NOT A HOMOGENEOUS MARKET...
• Professional Entrepreneur vs. Emerging
  Entrepreneur
• Differences
• Implications
• The Self Employed

4
The South African Context - continued

• Other Factors...
• Macro-economic stability
• Supportive legal framework
• Favourable Human Resource Environment
• Well developed Banking Sector and (Venture)
  Capital Market

5
Financing SMEs in South Africa summary of the
market
6
Sources of Financing

• GEM Research
• 54 own funding
• 37 own network
• 27 institutional finance

7
Sources of Financing, continued
8
Sources of Financing, continued

• Venture Capital Market
• Private Equity
• Social Investment Funds
• Business Angel risk capital

9
Conclusion

• Myth that all access to capital (money) is a
  barrier to growth to all SMEs
• Lack of formalisation, inedequate record
  keeping (cash-book, inventory, assets, P/L) and
  financial statements presents a barrier
• Lack of skills, i.e experience in business, the
  particular market, presents a challenge.

10
Conclusion, continued

• Barriers exist to new entrants with (good ideas),
  little skill, and no collateral
• Innovative ways of reducing risk (barrier to bank
  lending)
• Venture Capital
• Contract lending (linked with capacity building)
• Lessons from the micro-finance industry