Saturday, June 3, 2023

‘Funding relatively not major hurdle for SMEs’ – venture

Botswana’s Small, Medium Enterprises (SMEs) has wide ranging challenges, key among them being lack of access to markets and a reluctance of lenders to finance the sector.

However, this week the small businesses were told that unlike other markets, local capital is not a big issue. Experts have identified access to capital as not being a major hurdle for the sector, according to one connoisseur of venture capital funding.

“In our market, there is a lot of capital,” said Anthony Siwawa, the founder and Managing Director of VPB.

“I agree the biggest challenge for SMMEs is not capital,” he added. The statement did not go down well with captains of industry who asked the venture capitalist to explain himself in a market where the sector is crying for lack of access to capital.

“Relative to other challenges, this is not big if you rank the challenges. This is a relative statement and we are not saying it is not a challenge. It is a challenge,” he assured the industry.

Lisani Ndaba, Managing Director of Foamex Industries, had wanted Siwawa to explain why finance is not a core challenge when on their day to day walk ‘we encounter challenges to raise capital’ one example being collateral that potential financiers request.

Foamex Industries, according to SMME definition, falls into the category of the sector because it makes less than P3 million annually.

Siwawa was making a presentation at Botswana SMME conference and fair held in Gaborone this week under “Private Equity Funding for SMMEs – Does It work or does it not work?’.

SMMEs are classified as those businesses that make less than P5 million a year and, in Botswana, 75 percent are SMMEs. They are normally of small scale, operate in a single location, have an experienced manager, use minimal technology, they are sole traders and owners are lifestyle oriented.

They normally have a problem of access to finance because the balance sheet is not growing with any direction. Siwawa says private equity may not necessarily be good for the sector.

In 2007, $2.3 billion in private equity capital was raised, showing that capital is not a problem, but the mechanism to use it. Of all this money, less than 5 percent went to the SMME sector. He revealed that they are looking at financing the sector through intermediaries.


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