SMMEs call for greater venture capital funding
Lewanika Timothy | Thursday June 15, 2023 09:39
Their frustrations are further heightened by their failure to secure funding from local fund managers who are in charge of more than P100 billion in pension and other funds.
The challenges were revealed earlier this week at the BSE’s Tshipidi Forum, the inaugural consultative workshop around the local exchange’s mentorship initiative. The BSE’s Tshipidi initiative is a comprehensive and interactive programme where selected local enterprises that have hopes of listing on the Exchange, are handheld through the processes and changes they need to make to be ready for the listing.
Tshipidi graduate, Sandra Manhota, who is the CEO of FIMA enterprises, said that after leaving the initiative, she was disappointed to learn that local and external investors are not attracted to funding Tshipidi Board listees. She added that finding funding for the growth of the financial service company was arduous.
“We live in a country with so much resistance against the funding of SMMEs, and for us, we have failed to secure debt financing in both local and international markets and hence we struggle to rise,” said Manhota.
Her sentiments were echoed by local entrepreneur, Percy Raditladi, founder of Homec Investments and another graduate of the Tshipidi initiative. Raditladi said there is a major mindset problem in the local market as funders shun SMMEs only to fund similar-sized businesses in other countries.
“Counterpart funders in international markets view funding enterprises differently from how it is viewed in Botswana and the most painful thing is that most fund managers locally finance the growth of SMMEs in international markets while shunning local enterprises,” said Raditladi.
Raditladi said fund managers should channel funds into venture capital firms and specify such allocations as a proportion of their assets under management. He said this would benefit SMMEs as venture capital firms are more suited to investing in upcoming enterprises.
The World Bank reports that SMMEs dominate emerging market economies and account for 50% of employment in these markets. Locally, figures provided by Statistics Botswana indicate that 50% of private sector employment in Botswana is created through SMME activity with their contribution accounting for 15–25% of the Gross Domestic Product.
Responding to entrepreneurs’ concerns, Kgori Capital managing director, Alphonse Ndzinge, said fund managers’ hands are tied as they cannot invest beyond the risk appetite of their clients, saying this is what constricts them from further investing in the local market.
“We can only invest as stipulated by the mandate of the funds. “Our hands are tied and we can go beyond the risk appetite of those who entrust us with their money if they do not give us the mandate to invest heavily in the local market,” said Ndzinge.
Botswana Public Officers Pension Fund CEO, Moemedi Malindah, said the fund is hopeful that with the implementation of new pension fund rules that will require 50% of assets to be invested locally, greater funding of SMMEs would occur.
“Amendments to the prudential rule will improve local exposure to investment vehicles. “The money is coming and enterprises must ready themselves for it,” he said.