USAID Gauteng SME Presentation

Quantitative and qualitativeresearchon SMEs in Gauteng

USAID Financial Sector Program

CONTENTS

AcronymsBackgroundThe Financial Sector ProgramMethodologyGIS findings and mapsQuantitative findingsQualitative findingsDemographicsNeed and use of financial BDSBanking and financial servicesLegal and regulatory mattersKnowledge and information managementAnalysis and conclusionsKey Recommendations

ACRONYMS

BDSBusiness Development ServicesBEEBlack Economic EmpowermentBSMBusiness sophistication measureGEPGauteng Enterprise PropellerFSPFinancial Sector ProgramHDIHistorically Disadvantaged IndividualsICTInformation and Communication TechnologyLRALabour Relations ActPAYEPay-as-you-earnSDLSkills Development LevySETASector Education and Training AgencySMESmall and Medium EnterprisesVATValue Added TaxUIFUnemployment Insurance FundUSAIDUnited States Agency for International Development

BACKGROUND

The Small Business Act (1996) and subsequent legislation gives recognition to the important role played by SMEs in the South African economyIt is estimated that SMEs account for 41.7% of private sector employment in South Africa.Increasingly, government has looked to this sector (as opposed to micro enterprises) as the source of job creation in the country.In Gauteng alone there are about 1 053 818 small business owners However, as (very often) members of the second economy, the challenges faced by SMEs (both historically and currently) have to do with, for example, access to markets, finance, business opportunities or business support servicesSmall businesses were ranked based on their level of business sophistication in Gauteng (BSM) in the 2006 FinScope study. SMEs mainly belong to BSM 6 and 7

BACKGROUND

Small and Micro-Businesses by Sophistication Segment

BSM1BSM2BSM3BSM4BSM5BSM6BSM7Business ActivityStall Traders SurvivalistsStall TradersSale of GoodsUnregistered individuals/ Sole PropCC/PartnershipOperate fromFootpathHomeHomeHomeHomeOffice blockCell phoneNoYesYesYesYesYesYesEducation LevelSome H/SSome H/SSome H/SMatric MatricPost MatricPost MatricNumber of Employees0.10.140.230.470.851.788.88Annual TurnoverR9 113R10 723R16 793R24 710 R27 841R66 597R463 747Note: BSM business sophistication measure, from less to more sophisticated.

Source: FinScope, Small Business Survey Report Gauteng 2006 (Johannesburg: FinScope, 2006)

BACKGROUND

BACKGROUNDSmall business and the formality of the business

FINANCIAL SECTOR PROGRAM (FSP)

The FSP is funded by USAID. The objective of the program is to:expand access to financial services and lower financing costs for small and medium enterprises (SMEs) throughreforming the legal and regulatory framework affecting the financial sector and business environment andimproving the commercial viability of lending to historically-disadvantaged SMEs in South Africa.The ultimate result is to mitigate market credit risk leading to increased SME access to a range of quality affordable financial services.

FSP Workstreams:

Financial business development servicesFinancial management, business planning, access to and use of support organisationsBanking and financial servicesFinancing from outside the business, use and constraints of loans.Legislative and regulatory mattersImprove financial sector legal and institutional framework; enhance regulatory environment for SMEs Knowledge and information managementAccess to and sharing of information, knowledge of changes in business environment, use of ICT

RESEARCH BRIEF AND PURPOSE

Quantitative analysis of SMEs in the BSM 6 & 7 FinScope small business survey of 2006Qualitative research by way of focus groups among HDI business owners with a turnover of more than R200 000The purpose of the above was to provide the most relevant information that will enable the FSP team to accurately design and implement their work plan and determine the targets of the Performance Management Plan

ASSUMPTIONS

The BSM model provides the most realistic segmentation of small businessesUsed adjusted Banking Associations definition of SME Turnover of R500 000 to R20 million per annumBottom threshold was decreased to R200 000To include SMEs in transition to higher levelIncludes the highest concentration of HDI SMEsExpected that this group will need support the mostExcludes micro enterprises

METHODOLOGYAnalysis of the 2006 FinScope small business survey for BSM 6 and 7Identify areas were BSM 6 & 7 are locatedDiscussion guideQuestions pertaining to each of the 4 workstreamsCriteria for selectionHDI business ownerAnnual turnover of more than R200 000Recruitment of participantsRecruiters in selected areasRecruitment questionnaireConducted 11 focus groups across Gauteng

QUANTITATIVE SURVEY RESULTS

2006 SMALL BUSINESS SURVEY

About 1 053 818 small businesses in Gauteng109 441 are HDI BSM 6 & 7 SMEsAwareness of support organisations is high57% never used support organisations42% need for capital most important problem faced2% had a loan at the time of the survey

2006 SMALL BUSINESS SURVEY

BSM 6BSM 7Registered29%94%HDI owned73%37%Self taught46%26%Full-time92%96%Banked (personal or business)81%97%Aware of support organisations52%85%VAT registration26%83%Cost of compliance too high70%43%Shareholders/partners18%40%Financial records67%96%Bookkeeper member of staff50%7%Business plan18%55%Telephone/landline36%78%Computer20%73%

2006 SMALL BUSINESS SURVEYBUSINESS TURNOVER OVER PAST 12 MONTHS

BSM 6BSM 7Up to R3 0006%5%R3 001 - R10 00013%5%R10 001 R50 00017%16%R50 001 R100 00010%15%R100 001 R200 0005%16%R201 001 R300 0002%10%R300 001+2%15%

BSM Maps

Created from the 2006 FinScope SME survey using small area estimation techniquesMaps show percentage households falling into BSM 6 and 7 within an enumeration areaMost of the focus group areas were selected using BSM 6 map where highest concentration of HDI small businesses are foundMore African and Coloured SMEs found in BSM 6 while Asian SMEs mainly found in BSM 7BSM maps enabled focus group areas to be selected and provided epicentres for HDI small businesses to be found

Distribution of BSM 6 households

Inset: Location of Gauteng province in South Africa

Distribution of BSM 7 households

Inset: Location of Gauteng province in South Africa

SELECTED FOCUS GROUP AREASPretoriaPretoria CBD AfricanEersterust ColouredMamelodi AfricanSoshanguve AfricanLaudium - AsianJohannesburgEldoradopark - ColouredFlorida - ColouredLenasia - AsianSoweto AfricanAlexandra AfricanTembisa - African

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Focus Group Area Maps

Focus group area maps show selected enumeration areas from BSM 6 and 7 maps in Google EarthExamination of focus group area maps show that selected enumeration areas are generally located near the commercial and industrial centresAsian and Coloured focus group areas tend to be larger in extent than African areasAfrican focus group areas differ from one another depending on levels of urbanization and formal settlementAfrican focus group areas tend to have several separate areas where SMEs are concentrated

MAMELODI FOCUS GROUP AREA

EERSTERUST FOCUS GROUP AREA

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SOSHANGUVE FOCUS GROUP AREA

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PRETORIA CBD FOCUS GROUP AREA

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LAUDIUM FOCUS GROUP AREA

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TEMBISA FOCUS GROUP AREA

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ALEXANDRA FOCUS GROUP AREA

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SOWETO FOCUS GROUP AREA 1

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SOWETO FOCUS GROUP AREA 2

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ELDORADO PARK FOCUS GROUP AREA

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QUALITATIVE SURVEY RESULTS

DEMOGRAPHICS

MaleFemaleTotalBlack282957Coloured25429Indian/Asian19019White101Participants (TOTAL)7333106

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COMPANY TURNOVER

Turnover per annumTotalR100K-R199k9R200k-R499k76R500k-R999k8> R1m12 (1)TOTAL105 (106)

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TURNOVER BY POPULATION GROUP

TurnoverBlackColouredIndianMaleFemaleMaleFemaleMaleFemaleR100K-R199K126000R200k-R499k2225113150R500k-R999k113030>R1m41511TOTAL2829254190

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BUSINESS SECTOR

SectorNumber1.Mining02.Manufacturing103.Electricity, gas & water14.Construction85.Retail Trade296.Tourism07.Wholesale Trade68.Catering & Accommodation99.Transport1010.Finance, insurance & business services811.Community, social & personal services1912.Professional accounting, medical, engineering5 (1)TOTAL105 (106)

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YEARS IN BUSINESS

Years in BusinessNumber Less than 12 years1112-24 months122-5 years39Greater than 5 years43 (44)TOTAL105 (106)

FINANCIAL BUSINESS DEVELOPMENT SERVICES

Financial Business Development ServicesBy Financial Business Development Services (BDS) we mean a range of services that are intended to develop/improve business performance. These services are provided by government agencies, private sector and NGOs. Financial BDS focuses on: Financial management, which includes budgeting, costing / pricing, cash flow management, records keeping, book keeping, preparing and analysing financial statements, auditing and tax submissions Provision of consulting and advisory services, training and mentoring Key issues relating to financial BDS that need to be assessed include access to information and financial intelligence; and proximity/accessibility, affordability and relevance of services

Aware of Financial BDSAware of following support/advice services (in order of prominence):Khula EnterprisesSETAsDTIUmsobomvo Youth Fund NAFCOCGEPDBSAFNB, ABSA, NedbankNEFAware through advertising, offices nearby, forums and consultantsMostly approached for loan but not successfulSETA approached for training and professional adviceOthers approached for business and marketing plans, support in running businesses, training and education

Aware of Financial BDSBDS support not up to standard and not making a difference or fulfilling their mandateResulting in SMEs doing their own financial management, development of business and marketing plansSMEs have closed down because of a lack of supportSupport from BDS institutions must be systematic and over a period of timeBDS providers not keeping pace with needs and expectations of SMEsUnrealistic expectation of BDS for SMEs to develop big and beautiful business plans

Need for Financial BDSFinancial support the most important needAdvice and training on the step-by-step procedures needed to start and run an SME including:Determining if a business is viableSecuring start up and longer term fundingDetermining the legal vehicle to useSetting up and structuring the businessDeveloping business plans and profilesLocating the businessSecuring and maintaining clientsNeed for bookkeeping services to assist with VAT, PAYE, SDL, UIF, etcAffordability of bookkeeping services identified as a concern

Need for Business PlansSMEs understand the value of business plansNeed for business plans is increasing because they are needed to access finances, support services and to tender for workOne SME indicated that the business plan was needed to grow the business and keep it sustainable into the futureAdvice on developing business plans from business associates, financial advisors, advocates, family and friendsSome SMEs use professionals to develop business plans but some question the ability of SMEs to operationalize theseMany SMEs dont develop business plans because they are too busy.

Need for Marketing PlansSMEs see marketing plans as important in reaching potential customersMarketing plans must be workable considering limited turnover of SMEs (ie use appropriate marketing tools pamphlets, wall signage, etc)Location of SMEs in relation to their customers was seen as criticalAll focus groups indicated need for training in developing business and marketing plans

Use of Financial BDSLimited knowledge and infrequent use of BDS institutions and service offerings now and in the pastNeeds of SMEs not being met when approaching BDS institutions because:No feedback given on applicationGiven the run around and staff not helpfulBureaucratic processes and lack of capacityDeposit and documents required too restrictiveAssisting too few SMEs because of restrictionsTo get assistance must have developed business plan (catch 22 situation)Location of BDS must be closer to SME business premisesNeed for support/advice in own language

Business RecordsSome SMEs have bookkeepers and keep recordsFamily membersSelfMany others not keeping records because they are too busy or have not been trained to do soMost SMEs are using manual systems few have progressed to using computerized systems

Communication with BDS institutionsCommunication problems include:Inability to get hold of BDS providers, especially in government:the phone will ring until hallelujahInability to be put through to the right personTime to get feedback is lengthy and sometimes the issue is not addressed at all Only way is to know someone in the BDS institutionBDS staff are often unfriendly

RECOMMENDATIONSStrategy to improve awareness of BDS support/services offered by organisationsMore communication, advertising and coordination of BDS offerings requiredTraining of BDS staff in addressing needs and being responsive to SMEsDevelopment of simple information products on the availability of BDS institutions to contact and individuals to speak toBooklet on how to set up and manage small businesses and how BDS providers should communicate with SMEsIntegrated approach in the provision of BDS support/advice in different sectors government to facilitate

RECOMMENDATIONS

SMEs identified need for dedicated capacity building on:business planningfinancial managementday-today business managementSector specific mentoring requiredLocation & quality of support to be improved through training of BDS staffResearch into BDS provided in public and private sectors to determine what they offer, effectiveness of services and medium used to communicate with SME

BANKING AND FINANCIAL SERVICES

Banking and Financial ServicesBanking and financial services covers the areas of: Existing use of finances from formal and informal institutions and under what conditions Suitability of financing from an amount and repayment perspective Need for financing Past experience in applying for financing and reasons for being declined Reasons for not applying for financing

Access to FinanceMajority of SMEs have personal bank account, business bank account or bothType of account is mainly a savings or ATMBlack SMEs and females have less access to bank accounts and have greater challenges in getting access to financingNeed for finance to enable:Businesses to growImprove workplace conditionsBuy stock and equipmentFind bigger and better premisesYes, we are always short of cash flow. The more money you have the more stock you can buy. In a business you can never have enough money (Laudium businessman)

Obstacles to accessing financeMany indicated that they could not get funding and found financing/ BDS support a challengeThere are numerous reasons why SMEs have difficulty getting access to financing including:No accounts with institutions must have an account for at least 6 monthsNo credit historyPoor credit historyLack of security/collateralNot enough cash flowNot enough equity in their businessInadequate financial records and no accountant needed 3 years of bank statements for businessPoor financial literacyNot in business long enoughBlacklistingBusiness owners don't have always have title deeds to their residential propertiesFeel intimidated by financial institutions

They [financial institutions] have a fear when you dressed like that [in a suit and tie with a briefcase] (Tembisa businessman)

Further obstacles to accessing financeBanks only allow savings accounts to start up businesses that don't provide statementsHigh interest ratesInstitutions only fund large projects and in specific sectorsWith Umsombovu you have to understand that they are interested in big projects, like manufacturing. They will send you to Gauteng Shared Services, the DTI, or Gauteng Growth something. Theyll tell you that those people will be able to help you with those small funds, but they are not interested in those projects. (Alexandra businessman)

Obstacles to accessing government finance .. I am aware of all of those, I am in business for a long time now, I went to KHULA and they told me that they will provide a loan, but they want security. It is a long process. When you go to them they will assist you and then they send you there and then they decide if your business is worth it, it is a waste of time. Maybe it is where we come from and we are used to struggling to make ends meet and then maybe in the end we will grow.

What happens here is that they all have different names, they but they all want the same. If you have a bad experience with one of them, you look at them as just another one.

Umsombovu, yes, but its not more of a financial assistance if you are in services. They are also not interested in something less than R60 000. If you come up with a need for a small amount like R45 000 they say go to a financial institution. You must remember they are a bank themselves and need to make a profit. Even Khula is also not funding on a small scale.

Sources of finance used by SMEsBecause it is so hard for SMEs to access financing from formal and informal institutions they secure funding from:Family and friendsRetrenchment packagesPensions and other savingsOther sources of financeBond on their homeUse property as suretyLoan taken in personal capacityFrom industry Black listed SMEs forced to use informal money lenders

Support from financial institutionsSMEs reported working through consultants and filling in applications but still not getting supportSMEs informed to come back after 3-6 months once had enough bank statementsSMEs requested institutions to visit their premises to see potential of businessesIndication of cultural/racial issues in securing fundingThere was a white relationship manager at the bank I needed a cheque that had been deposited into my bank account cleared urgently there was a big problem if I had a Black relationship manager there would not have been a problem

Opinions on financial institutionsBanking is only for the good times....for a long time my account was okay and then I ran out of money, so I went to the bank to ask them for money and they said no. Banks are perceived to be a good place to get financeWe normally approach the bank because it is the trustworthy party. (Soshanguve business women)Banks don't consider SMEs importantI suppose I am a small thing (Lenasia business man)

Opinions on financial institutionsBanks don't provide the full loan amount required by SMEsYes I had an account, I still remember I borrowed only five thousand Rand; they didnt give me more and couldnt cover everything. (Soshanguve business women)Banks don't reject loan applications because of race/cultural considerations but because of ineffective communication on their sideI dont think it is based on colour, it is based on risk but they dont go to the level where they explain to you what makes you a high risk. (Eersterust businessman)

Deficiencies in SMEsLack of financial education and literacyLack of business trainingHighly competitive and undiversified marketsLack of record keeping and proper documents (eg company documents, tax clearance, UIF, etc)Inability to present formal business plansPoor credit ratingsLack of collateral/security for loansLimited capital bases and ability to grow capitalMisconceptions about the risk analysis process

Deficiencies in financial institutionsRigid credit scoring policiesRigid collateral requirementsReluctance to provide small loansRigid repayment schedulesSupport organisations acting like banksLack of understanding of cultural differencesPoor report-back to applicants on loan refusalsPoor communication of services offeredLack of differentiation of product and approach offered to clientsRestrictions placed on lending via the National Credit Act - additional documentation, calculations and checks

Recommendations

Investigate possibility of informal lenders being part of credit scoring system in futureDevelop clear step-by-step guidelines on what is needed to secure funding from institutionsProvide guidelines to staff in financial institutions and government organizations on communication standardsTo address deficiencies on the supply and demand side as regards access to finance

RecommendationsDevelop equity accumulation programs subsidized share schemes include in Financial Sector Charter requirementsGovernment funded equity/asset base creation program fund fixed assets development for SME's (start-up capital) Re-design collateral scoring techniques consider "non-western" collateralProvide tax incentives on mentoring programs from bigger businessRelaxation on re-payment "holidays", interest rate capping, extended re-payment periodsExtensive financial literacy training programsEasy/cost free access to firm's credit rating informationDevelop the third tier banking system granting smaller loans with short repayment periods create Micro Banking/DivisionsEncourage formal banks to finance third tier bankingMore flexible interpretation of National Credit Act for categories of small businessChange mindsets of the formal banking institutions vis-a-vie small business

RecommendationsFund technology drive in small businessDevelop creative funding approaches learned from informal/NGO schemes:Repayment in publicNotional collateralTargeting women's groupsDevelop market access programsEncourage segmentation of Donor/Support Agencies against specifically targeted SME segments using the BSMSimplify the "business plan" requirements processExpand geo-graphic coverage of Micro Bank/Division coverage from formal banksSubsidised/lower interest for start-up capital/technology purchases for small businessBetter training of bank staff to understand small business needsGovernment capital injection incentive program for small business - -for every compliance registered get 10 points 100 points equals computer

LEGAL AND REGULATORY MATTERS

Legal and regulatory mattersLegal requirements and compliance knowledge of benefits and liabilities associated with different types of companies; knowledge of regulatory requirements; need of legal/regulatory training.Relationships with public institutionsAt the national, provincial and municipal levelsKnowledge of BEE legislationAwareness of business opportunities and benefits associated to BEE legislation. Need for trainingAssociation membership and AdvocacyCapacity of associations to help and defend members

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Legal requirements and complianceSMEs were registered mainly as close corporations (CC) and sole proprietors Larger SMEs tended to register as CCsBenefits of registering as a CC were listed as:Made business senseGet access to VAT number and Tax Clearance certificateBetter positioned to get access to government workSome were not aware of the benefitsFew knew that it reduces risks and liabilities of SMESMEs started business because wanted to own their own businessAdvice received from business associates, family and accountants in selecting legal vehicle

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Legal requirements and complianceReasons why SMEs were not registered included:Limited time available to SMEs Limited knowledge of registration process registration process is not complicated or expensiveSaw themselves as too small a businessDid not see the benefits of registeringMost participants did not understand the benefits associated with the different types of companies

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Legal requirements and complianceMost SMEs try to respect their obligations towards SARS, but were not aware of the new VAT threshold in 2009SMEs knew to register their employees for UIFSMEs more likely to comply in paying income tax and PAYEReasons for non-compliance was indicated to be a lack of knowledge

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Relationship with public institutionSMEs indicated that public institutions were not very usefulSMEs raised several concerns about public institutions:Were not accessible as they were located in major urban centresDid not understand SMEs so they were not able to help them properlyNeeded to communicate with them better and within local languagesDid not know where to find public institutionsBureaucratic and length procedures, not transparent and practiced nepotismStaff needed to be trained in understanding policies/regulations and how to deal with customersDid not follow-up with SMEs after initial engagement

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Relationship with public institutionGovernment should assist SMEs by:Facilitating access to loans from financial institutionsProviding training and education in the setting up of SMEsProviding access to business premisesProviding access to relevant information in local languages

Most important thing is that they must make information more easily accessible in all the languages; some off us has difficulty in finding the right information

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Knowledge of BEE legislationSMEs generally dont know the BEE legislation - they think it is biased and reserved for big companiesSMEs were not aware that they had to register to be BEEYes, I havent register for it, I thought being black you are automatically registered as BEE

Almost all SME were not registered as a BEE company and most of them did not know how to do it.SMEs dont see how they can benefit from the BEE legislation.

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Knowledge of BEE legislationSMEs were not registering to be BEE because:They were too busy running their businessBEE is a mechanism whites use to get government businessSMEs indicated they needed more information and training on the benefits of BEESome SMEs felt that BEE only benefitted AfricansBEE is a waste of time for us, for me, myself because first of all it hasnt been marketed properly. We - Im talking as a young Indian businessman we havent been educated as to what resources we can get w.r.t. BEE. I think to be quite frank it is only beneficial to the Black man in the country. In the old government I wasnt white enough, now I am not Black enough. Thats my view.SMEs felt that they were overlooked because they were located in townships and were too small

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Association membership or professional associationLimited membership of professional associations with no advocacy roleWomen, colored and Asian seem more likely to participate in business forums and associations

I think communication is a problem, especially in the taxi industry. The only time we communicate with them is when we strike.

On the issue of communication between the community and the government, the communication does reach us, and it goes back to them. The problem is that there is a messenger in-between, so there is a break-down, so its not sufficient.

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ConclusionsSMEs need:More information and training on all aspects relating to registering of businesses, Labour Relations ActTraining on BEE legislation and business opportunities created by BEE legislationMore support of public institutions in their neighbourhood.More support to strengthen their business/community associations and forums.

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KNOWLEDGE AND INFORMATION MANAGEMENT

Knowledge and information managementKnowledge and information management focuses on: Mechanisms of sharing knowledge and experiences between organizations Support being provided by government and other organizations Needs, capacities and challenges in sharing knowledge and learning Best practices being used amongst SMEs in sharing knowledge and learning BEE businesses and influences from a cultural, identity and learning perspective ICT support for SMEs

Sharing of knowledge and learningLearning of SMEs obtained mainly from previous employerSMEs generally not sharing knowledge and learning with one anotherType of sharing mechanisms suggestedRegular production of bulletins and pamphletsSimple step-by-step procedures in handbook Use of Internet (E-mail and web)Business EXPOsOrganize forums and workshops

Mechanisms of sharing knowledge and learning

SMEs not participating fully in Chambers of Commerce and other associations becauseNot aware of themToo busy to attendToo far away from their business premisesSee them as a waste of timeSMEs acknowledge need for forums and workshopsSMEs are willing to share ideasMust be close to their business premises

Government supportCascading information down to SMEs on running businessesVAT and BEE benefitsWho to contact and where to goPamphletsProvide hands on training Develop database of small businessesFollow-up and monitoring of SMEs Financing and subsidies of access to ICTsAdvertising on TV, radio and in newspapers

Needs, capacities and challenges

Skills development in all aspects of SME management

Basic literacy training on computersUse of the InternetE-mail clients and suppliers

Public institutions where SMEs can access ICT facilities free of charge

Culture, identity and religious influencesSoshanguve women said:We never come across it at allWomen in central Pretoria said:but with identity you are more likely to get a bank loan if you are white than you are blackKnowing someone in a financial institution is seen as a way to get assistance....through knowing the people at the bank we were able to open a bank account.An Asian man said: We need advice on how to grow as a business and how to become a BEE? We dont know the procedures. How do we qualify, first we are not white enough now we are not black enough

ICTs in sharing knowledge and learningSMEs use of computers:Internet bankingNot many use it for financial management purposesMore advanced uses are for bookkeeping, income and expenditure, tracking profits, monitoring sales and stock takingE-mail is used to communicate with clients and suppliersWeb is used to access information and place orders with clientsInternet and phones can be used to hold teleconferences

ICTs in sharing knowledge and learning

Mobile phones used to do banking and SMSs used to send and receive relevant information, monitor bank transaction and check bank account balancesRadio can be used to: present short programmes in appropriate time slots (e.g. after 8pm) on running businessesHave invited guests with people phoning in to ask questionsSimilar programmes can be presented on TV

RECOMMENDATIONS

Analysis and conclusionQuantitative analysis has allowed us to get a handle on what is a small business in GautengDeveloped an understanding of the characteristics of these SMEs and the size of the sectorEnables areas to be identified for selection of qualitative focus groupsQualitative research enabled researchers to develop more nuanced understanding of SMEs in relation to:Financial business development servicesBanking and financial servicesKnowledge and information managementLegal and regulatory matters

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Analysis and conclusionFinancial BDS services are there but not being used as effectively as should or in addressing needs of SMEs This is because they are:UnfocusedMany factors inhibiting the use of financial BDSMost important need is for financial support but also training, advice and services (eg bookkeeping)Need for business plans is increasing to enable SMEs to access finance and workCommunication is a major stumbling block between financial BDS and SMEsKey recommendations made in relation to issues identified in focus groups

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Analysis and conclusionSMES generally have personal or business bank accountMany obstacles to SMEs getting finance but there is a distinct needSMEs are not well positioned to access financing from institutions deficiencies in supply and demand Consequently, SMEs are getting finance from other informal sourcesMany recommended opportunities for intervention most of all FSP workstreams

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Analysis and conclusionSharing of knowledge and learning not happening amongst SMEsMechanisms for improving knowledge and learning clearly articulatedGovernment has a distinct role to play in providing information, training, databases, monitoring, facilitating access to finances and communicationNeeds of SMEs in the knowledge and learning arena clearly articulatedICTs being used but there is a need for more use and trainingKey recommendations made with the development of a knowledge portal being at the forefront

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Analysis and conclusionAlthough SMEs are formally registered great need for training and education in benefits and mechanisms of establishing legal vehiclesGenerally there is good compliance amongst SMEs in registering with the various regulatory bodies, especially SARSPublic institutions are not assisting SMES as much as they should - facilitate access to loans, training and education and to relevant information SMEs simply dont know enough about BEE, its legislation and its potential benefitsMore developed SMEs part of professional associations but not bodies that act in an advocacy roleMany opportunities for input by FSP but especially in conduct research into making SME associations and forums more effective

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Discussion.