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Key to successful economy is better balance of SMEs

As financier Business Partners Limited marks 40th anniversary milestone, Managing Director – Ben Bierman – reflects on how the local SME sector has still not reached full potential

 The positive role that small and medium enterprises (SMEs) play in the local economy has been raised time and time again and is largely undisputed. From providing employment opportunities, to solving business challenges, these businesses can offer an innovative and agile approach oftentimes lacking in larger companies.

SMEs have however recently had to overcome economic headwinds, even pre-COVID-19, due to a sluggish economy and – added to the recent challenges of the pandemic – will likely continue to face challenges such as the high cost of running a business, excessive red tape, access to markets, financing and technical knowledge. This is according to Ben Bierman, Managing Director of Business Partners Limited, a specialist risk finance company for formal small and medium owner-managed businesses, reflecting on the company’s past four decades in the local SME financing landscape.

“Looking at various first-world economies, it’s clear that a good balance of different sized businesses and equally distributed wealth in the business sector is crucial to a thriving economy,” Bierman points out. “In South Africa, most of the economic power has for too long been held by the large corporates, and for our economy to grow and thrive, a larger base of medium sized businesses is required. This key shift, however, requires an ecosystem that better supports these businesses.”

Bierman adds that Business Partners Limited is proud of the contributions made to the SME eco-system, albeit more remains to be done. 2021 marks the company’s 40th anniversary, and to date Business Partners Limited has provided R20 billion in finance to South African business owners via more than 71 000 transactions, which has in turn assisted in facilitating over 671 000 jobs in the country.

Bierman says that over the past 40 years some of the key challenges that were facing the industry have remained and include a lack of financial literacy among business owners, non-compliance with legislation and the availability of collateral which hinders access to much-needed financing opportunities. The challenges are even more pressing today as SMEs battle to survive the current pandemic.

He highlights some of the key changes he has witnessed, as well as urgent efforts that need to be taken by both South Africa’s Government and the private sector, in order to better support SMEs as the country paves the road to recovery:

Harness technology to become more client-centric and give support quicker and efficiently

There have been great forces of change in the macroeconomic environment, and the biggest driver of change in the past few years has been technology. Due to improvement and access to technology, we have had to adapt to doing things quicker to meet client demand in terms of decision-making and support. Big data, fintech and systems play an ever-increasing role in shaping the way financial institutions operate, especially to improve the understanding of the client’s needs and the ability to assess business risk.

Red tape to be trimmed to increase ease of doing business

SMEs often lack resources within their organisation to deal with legislative red tape. Often the entrepreneur or business owner spends more time jumping through administrative hoops rather than focus on running their businesses. Cumbersome legislation often becomes the biggest stumbling block for SMEs to develop access to markets, improve the ease of doing business, grow their businesses, or create much-needed jobs.

It’s more important now than ever to invest capital and other resources into SMEs, as well as cut some of the red tape that exists in the legislative environment that makes it difficult to grow and create jobs. In comparison to big corporates, SMEs can often create more jobs at a lower cost.

Innovate and adapt to meet needs of SMEs

In this ever changing and uncertain environment, it is difficult for any business to commit to a long-term plan. By staying close to and prioritising SMEs, both Government and the private sector can better respond to SME needs, and thereby contribute to a greater survival rate for these vital businesses.

“As a business, this responsiveness has contributed greatly to us remaining relevant over four decades. With the disruption caused by COVID-19, we have had to respond to what our clients tell us and introduced a variety of relief initiatives aimed at SMEs.

“As we look to the next 40 years, our ambition is to continue supporting and financing SMEs by innovating and being responsive to the needs of entrepreneurs. We will support them as they build and grow their businesses, and in the process add economic and social value through wealth creation, contributions to tax revenue and job creation in our country,” Bierman concludes.

About the Author: Ben Bierman

Ben Bierman has been our Managing Director since 2015. He joined our company in 1990 and has risen through the ranks occupying various positions ranging from being a management accountant, Head of Information Technology and Chief Financial Officer. Ben is an avid reader, enjoys classical music and being in the outdoors including for hunting trips. He is our go-to-spokesperson for our SME Confidence Index, SME sector policy and trend matters, and business leadership articles.

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