Entrepreneurs are the lifeblood of South Africa’s economy, and with enough support, they’ll be central to reaching our full potential. Small and medium enterprises (SMEs) across South Africa represent 98% of businesses and employ more than half of the country’s workforce across all sectors, but they’re also the most at risk financially.
“The COVID-19 pandemic and the recent economic downturn has led to lower demand and cashflow, which means these businesses need as much financial stability as possible,” says Naledzani Mosomane, Head of Enterprise Development at Standard Bank South Africa.
Across the country, informal businesses employ over 3 million workers, and many still rely almost exclusively on cash to operate. But in times of financial instability, cash is definitely not king, and getting banked means businesses can become more secure, more profitable, and more efficient.
Here are Mosomane’s top four reasons for getting a bank account and leveling up your business:
- The stats don’t lie: you’ll earn, work better, and save more when banked
The World Bank has said that formalizing business results in, on average, 19% better salaries for workers than ones working in the informal economy. Informal businesses are also only about 25% as productive as their more formal counterparts, meaning they’re usually less profitable, and they generally lack access to finance to build up their capabilities.
“Using a bank account is one of the most important steps in becoming a formalized business, and like we’ve said in the past, an account will keep your money safe, let you earn interest on your earnings, make money more accessible, and help you work towards your financial goals,” says Mosomane.
- Financing and consultation are key to building bigger, better businesses
“We understand that enterprises face a myriad of challenges ranging from a lack of access to finance, markets, skills, and resources. That’s why we are constantly identifying new ways to support businesses beyond just banking,” says Mosomane.
In sub-Saharan Africa, 51% of businesses lack access to funding, as credit constraints remain a serious challenge. However, blended finance solutions such as concessional debt, technical assistance grants, and access to equity give SMEs the opportunity to expand without ultimately bankrupting themselves.
“We have therefore been deliberate in building and creating a range of non-banking solutions that aim to strengthen enterprises. You may not know all your options, but through our Enterprise Direct virtual environment, entrepreneurs can consult with a team of business bankers and specialists who understand unique business needs and match them with the right set of solutions,” she says.
- Having an institution that cares – and works as fast as you do – on call
During the COVID-19 pandemic, SMEs and other smaller entities struggled to survive economically as the world came to terms with lockdowns, shutdowns, and hybrid working models. However, many banks across the world announced financial relief measures for small businesses, giving them the breathing room to survive even in a global health crisis.
“At Standard Bank, our top priority was allowing our business clients to manage their financial commitments and honour payments to their employees. We then offered a 3-month moratorium on loan payments, loan extensions, restructurings, and payment holidays. It wasn’t easy, but we knew we had to work as fast as our clients do to make sure they were safe,” says Mosomane.
- Newer digital solutions and products to streamline your work
In a study by McKinsey on how banks can better serve SMEs, one of the key factors was offering new product innovation and strengthening digital channels. “Digitization of key SME client journeys” was vital to customer satisfaction, and many SA banks were noted in the report as having adopted this as a business strategy. More mobile credit options, and other sector specific solutions are already helping SMEs and even smaller enterprises to succeed – and they’re usually only available through financial institutions.
“Our digital enterprise model has virtual capabilities, meaning that regardless of the size, turnover, and location of a client, they are always able to access a direct team of business bankers and specialists who proactively address their needs. Banks across the country are always trying to develop new, cutting edge digital solutions to ensure South Africa’s economic success,” says Mosomane.
By Naledzani Mosomane, Head of Enterprise Development at Standard Bank South Africa.
