Unlocking capital, boosting support – building the ecosystem for eco-entrepreneurship in South Africa
This year’s South Africa Symposium brought together more than 200 entrepreneurs, practitioners, investors and policymakers to discuss how to grow and support social and eco-enterprises in South Africa. The event focused on two key challenges facing SMEs in South Africa: how to unlock investment capital for SMEs in terms of financial support products, and how to, in parallel, foster skills and knowledge through affordable, effective business development support services.
Funding gaps will not be solved with a single approach
It became clear during the discussions around unlocking capital for SMEs that funding gaps will not be solved with a single approach. The conversation illustrated a clear need for a complex system of investors providing innovative financing models for different stages of enterprise development. Furthermore, discussions between entrepreneurs and investors made clear that impact investors have to focus equally on financial, social and environmental returns.
This requires a comprehensive understanding of those three impacts. Businesses of interest for investments have to create impact and at the same time run efficiently with an accountable structure, without a doubt challenging requirements for both entrepreneurs and investors. In order to attract impact investors, entrepreneurs need to find a way to measure their non-financial impact – something that is currently difficult to do, due to the lack of commonly accepted metrics. It’s clear that addressing this hurdle will be crucial to helping attract new funding in the sector.
Another key point that emerged during the event and the discussions around SMEs is that not all social enterprises are investment ready and some may choose not to go down that path at all. Instead, we need to look at a variety of funding streams and start thinking more about creating an ecosystem of financial products that can meet the needs of SMEs throughout their lifecycle rather than a one-size-fits-all approach.
The current landscape of BDS providers lacks clarity and quality
With a view to non-financial support, discussions at the SEED South Africa Symposium outlined that Business Development Support Services (BDS) are critical to fostering successful entrepreneurship. It became clear that the current landscape of BDS providers lacks both clarity and quality.
It lacks a comprehensive overview of the different players, their approaches and objectives. Creating a standard and a common language for BDS would provide entrepreneurs with clarity on which service provider to ideally approach with a view to their industry and stage of development.
As a first step, this year’s South Africa Symposium tackled this challenge with a BDS practitioner dialogue to provide a platform for the actors within the ecosystem, including incubators/accelerators and BDS providers, to discuss the content, focus and implementation model of a South African Standard for BDS services.
All stakeholders expressed agreement that there was a compelling need for standardization of BDS services, which would be beneficial as well for large corporates, international donors, business associations, governments and financial organisations.
The workshop’s participants flagged several critical success factors for a qualitative standard, including developing a catalogue of minimum qualitative requirements, having a nationally accepted body who owns the standard and keeping the standard’s content as simple as possible. It was also noted that the South African government has a significant role to play, as there are various ministries involved in supporting entrepreneurship.
A move towards a more collaborative approach in their activities would likely create synergies within the space rather than the current sense of competition.
To improve the quality of BDS, experts, entrepreneurs and practitioners outlined the importance of monitoring and evaluating support services with regards to their actual impacts on enterprises. Identifying current strengths and weaknesses would enable BDS Providers to tailor their services and approaches even closer to the enterprise’s concrete practical needs.
New task force on standard development for BDS services
To build on the successful first steps made at the South Africa Symposium, SEED will now work on the content and focus of the future standard for BDS services with a task force of the key local players such as the International Labour Organisation, Catalyst for Growth, the Department of Environmental Affairs South Africa and the Institute of Business Advisors South Africa. The task force will also work on the accreditation model and the governance structure behind the standard.
SEED thanks all participants and speakers of this year’s South Africa Symposium very much for contributing to this event. A special thank you to the International Labour Organisation, GIZ’s Practitioners Dialogue on Climate Investments (PDCI) and our further Symposium partners.