If you’re a small-business owner or entrepreneur in South Africa, the biggest thing on your mind is probably where and how to find financing and business support. We have more than 2 million small, medium and microenterprises (SMMEs), representing more than 98% of formal businesses. However, they create less than a third of all formal jobs, which means that job creation is mostly in the hands of large corporations and government entities.

If we combine this with the high rate of youth unemployment, the number of small businesses that don’t survive past the first year, and the fact that most entrepreneurial businesses operate in the informal sector, it’s clear that South Africa has a lot of work to do to enable growth in SMMEs.

Government support for entrepreneurship

The Department of Small Business Development (DSBD) has been developing a national entrepreneurship strategy aimed at priority actions like cutting red tape for business owners, reducing bureaucracy, streamlining rules and making them easily accessible online, and simplifying tax and fiscal policies and support programmes. The DSBD is working with the United Nations Trade and Development agency to develop a national entrepreneurial development strategy, which has been working particularly well in the technology start-up sector.

What else is available to you as an entrepreneur?

MBAs and developing entrepreneurs

Programmes offering master's degrees in business administration (MBAs) in South Africa are faced with a dilemma. An MBA is the most sought-after business qualification to enable success in formal employment, but most business schools are increasingly concerned about fostering entrepreneurial skills as well, since they are the engine of a growing economy. The challenge in the South African market is that traditionally, MBAs focus on preparing students for formal job markets – but we really need sustainable small businesses to grow our economy.

Fortunately, many business schools are starting to respond to the need. In a recent survey of MBA programmes and entrepreneurship conducted by South Africa’s Financial Mail, most business schools agree that these skills can be taught but must be supported by real-world experience and learning.

The approaches that business schools recommend include the following:

• Begin at school level, and nurture entrepreneurial thinking in much the same way as sporting talent.
  
  
• Understand the learning experience of having access to fewer resources, as it can build practical skills and psychological resilience.
  
  
• Don’t underestimate the hard work that goes into making your own business a success – it's not a get-rich-quick scheme.
  
  
• Understand that you will often have to create informal networks to support your business activities. These can be highly efficient, without necessarily being formal 'old school tie' networks.

Access to funding: Options for young entrepreneurs

Capital isn’t readily available to fund your small business. Early-stage seed or investment capital is rare in South Africa – but is out there, if you know who to speak to and how to look for it. Nedbank has numerous avenues for advice and financial support.

Don’t underestimate this challenge – all over the world, lack of financing is the top reason why startups fail. What can you do to give your startup business the best chance of success?

Try things out

Don't make assumptions about the scale of the finance you need or the rate of growth in the business you have planned. Perhaps try a smaller version of your business idea to test demand and enable a better estimate of how much finance you’ll require.

Have the right financing network

If you’re planning a high-risk venture, it’s less likely that your bank will finance you without a solid, research-based business plan. But your bank also offers security and support so that you can plan properly. Other financing avenues include business competitions for your idea, and funded incubators and business accelerator programmes. Incubators and accelerator programmes can also help with access to mentorship and networking support, even if you don’t secure financing. SA also has a selection of venture capital companies, but they tend to invest in more developed businesses.

Prepare meticulously

You should do your homework on potential investors. What are they looking to invest in, and why? What funds do they have available? If you’re looking for finance, you’ll need to make your own company information, needs and strategic value propositions available to interested parties.

Keep going

If you’re building your own business and customer base, making turnover, and dealing with the challenges you encounter, you’re more likely to attract investors – rather than having to search for credit or other financial support for an unproven business concept.

Nedbank offers many options to fund, invest in and grow your small business. These range from a suite of banking options to various small-business solutions, services, support and advice to help you invest and grow your business.