Founder says there is a disconnect locally
Bifm acknowledges a lack of support
At a recent bond market conference, Opelo Motswagae, the founder of Ticano Group, summed up the lack of access to capital by SMEs in a few words: It’s “a disconnect between what we are trying to do on the ground as SMEs and the funding channels.”
It’s interesting that as Motswagae shed light on this pervasive issue within the entrepreneurial landscape, he revealed that in the international market “we are actually making inroads,” underscoring the global reach and potential opportunities for SMEs beyond local confines. Ticano, a champion for Purchase Order Financing and Invoice Discounting in Botswana, has secured capital from investors in Mauritius and South Africa, Motswagae said.
The conversation surrounding SMEs’ access to capital has lingered, with the CEO of the Botswana Insurance Fund Management (Bifm), Clair Mathe-Lisenda, acknowledging that “they are not able to scale up because of the fact that they really don’t see the support that they’d like to.”
Often for early-stage businesses, there are types of capital structures that tend to suit funders other than promoters. Allan Gray Portfolio Manager, Tapologo Motshubi, explained that equity is the best form of funding for early-stage investment or some kind of hybrid debt-equity blend. “I think as fund managers, what works well for us is where someone is aggregating all these loans to SMEs and then we invest in that.”
The other way that institutional fund management comes into play is venture capital funding. But again, Motshubi said that tends to be an equity kind of funding. “So it’s not to say that we don’t have appetite, but I think practically it’s not easy for traditional fund managers to directly fund.”
Typically, Motshubi said, someone has to stand in the middle. “And then we are always happy to give that money to whoever meets regulatory requirements.”
Oftentimes, there are competing products for funding provided by banks. But Lesego Osman, Stanbic Bank’s Head of Business and Commercial Banking, argued that there is a need to find a better balance. He said there are pros and cons to customers or SMEs accessing both sides despite some of the healthy concessions that have been put in place.
“I think those are some of the things that we need to look at. And also to look at putting in place frameworks. Just understanding how can we create something that gives the SMEs the best understanding that if we give them an impediment, then they are going to look for alternatives, meaning they’re coming to us or other financiers.”
Osman wants frameworks that work for everyone and “maybe we will start to see a better mix.” In other words, the market will see an element of their funding coming from banks and some coming from asset managers.
With private equity, Mathe-Lisenda said the intention is that “we can use some pension fund assets towards that (funding SMEs).”
Motswagae believes what is important when raising capital is to look at the risk profile, how it’s managed, and the returns.
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