Question NW3395 to the Minister of Small Business Development

Reply:

I have been advised that:

The Department of Small Business Development (DSBD) is planning to implement the SMMEs and Co-operatives Funding Policy in the 2024/25 financial year with a view to resolve the problems of red tape around access to funding by small-scale and informal businesses. The following are proposed interventions:

• To reduce the red tape on access to funding by small enterprises, the SMMEs and Co-operatives Funding Policy is proposing that the financiers must implement a simplified lending process by introducing common funding application form, standardised term sheet and business plan template. This will make the referral of misdirected funding applications seamless.
• That the funding institutions digitise their funding application processes to address the issue of prolonged lead times on funding applications, more especially in instances where capital is required on an urgent basis for working capital or purchase of raw material to service a contract.
• As part of financial literacy, the SMMEs and Co-operatives Funding Policy requires that the Business Development Service providers in South Africa institutionalise the practice of assisting SMMEs and Co-operatives with pre-funding support (compliance, directing small businesses to the relevant financiers, matching funding to business needs, etc.).
• The banks’ preferred collateral is not aligned to the asset composition of small enterprises which mainly consists of short-term (movable) assets in the form of inventories, receivables, insurance policy and cash deposits. To alleviate this challenge, the SMMEs and Co-operatives Funding Policy proposes that the DSBD develop an enabling legislation for the operation of the movable collateral registry in South Africa and to provide operational infrastructure for such a registry.