Seek financial advice

 To grow your business

When one thinks of taverns or shebeens, it is seldom considered first as someone’s business and subsequent livelihood. Often, these establishments are viewed from an affable perspective, where we meet friends, family or colleagues to unwind from a hard day’s work.

This is so especially when one recalls the history of these establishments in a South African context. Shebeens played an essential role in South Africa’s pre-democratic social and political history. During apartheid, they came to be associated with the townships where, they served as meeting places for political dissidents.

Now, in a post-democratic dispensation the clinking crockery and sparkling glasses, the soothing sounds to jazz music and the feast of local food attracts people from all walks of life. To get to this kind of success takes great sacrifice, patience and commitment. This is the essence of running a business but one requires tools to ensure longevity.

Small Medium Enterprises (SMEs), like taverns and shebeens, account for at least 60 percent employment in South Africa. A key driver of economic growth, the South African government has prioritised SME and informal sector development for their potential social and economic growth prospects. However, how do we ensure that SMEs survive? Are SME owners fully equipped to run efficient businesses and are they knowledgeable about their businesses and how they should be capitalised? As vehicles for entrepreneurship and employment opportunities, SMEs face challenges such as access to finance, markets, technology, skills and management.
A FinScope SME survey developed through FinMark Trust looked and how small business owners sourced their income and how they managed their financial lives. The survey looked at owners of micro, small, and medium enterprises, as well as individual entrepreneurs.

The survey indicated that over 82 percent of small business owners claimed to have started their business by themselves. “Financial constraints, including sourcing of money and cash flow, were cited by 39 percent of small business owners as key obstacles experienced when starting their business. While financial problems are diverse and widespread, they could be alleviated through better training and improved access to microfinance and business support.”

When one thinks of taverns or shebeens, it is seldom considered first as someone’s business and subsequent livelihood. Often, these establishments are viewed from an affable perspective, where we meet friends.

Such business support is available from various banks where SMEs can receive assistance, advice and support to build and grow their businesses into successful and sustainable operations by having access to funding, access to the market and assistance in skills development and management.

The FinsScope survey further stated that 53 percent of business owners agreed that they would use their personal savings for the business. “Thirty-nine percent claim to save for business purposes. Of those claiming to save for their business, 82 percent claim to save at a bank and 14 percent claim to save with a stokvel society, burial society, umgalelo or savings club. Sixty-three percent of those who belong to an informal savings group believe that this form of saving holds advantages such as networking, marketing and business support.”

Usage of both formal and informal credit and loans is low suggesting, according to the survey, and that risks associated with both these categories of debts are perceived to be intimidating. “Only five percent of small business owners claim to be currently repaying for either money or goods or to have borrowed in the past 12 months.

The main reasons cited for borrowing are to grow the business, for day to day business needs or to finance stock. Fifty-two percent of business owners who had borrowing of some form claimed to have done so from friends, family or colleagues and 49 percent claimed this as their largest source of borrowing.”

Starting and running a business is said to be an adventure that brings along great risk and challenge. Just as we manage our financial affairs in a private capacity through budgeting, spending wisely and saving, it is equally imperative in a business context. Savings habits and healthy financial management become an important attribute in anyone’s life.

The key to achieve this is through financial literacy.

Financial literacy and education plays an increasingly important and necessary role in the management of finances of individuals and business owners; simply put, people have to be taught or informed about financial management. Financial literacy is about behavioural change in how a business owner such as a small business tavern or shebeen owner manages his/her financial affairs and adopting relevant interventions at different phases of the lifecycle. This behavioural change needs to incorporate key building blocks of SME financial literacy. These include;

  1.  Acquiring entrepreneurial and basic SME management competencies, 
  2. Understanding consumer and personal finance, learning and understanding accounting and financial management, 
  3. Understanding funding options and access to finance requirements, awareness of and financial regulations, legal and tax issues 
  4.  Awareness of financial risks, capital investment, complex fund raising and financial policy matters affecting your business.

The Banking Association South Africa contributes to socio-economic growth and development by facilitating and encouraging member banks to deliver services to a broad spectrum of the population and catalyses change and transformation. It is such that we encourage small business owners to approach their bank of choice and seek to get assistance, advice and support to build and grow their businesses into successful and sustainable entities.

By: Luyanda Tetyana,
Communications and Media Manager at The Banking Association South Africa