The response to last week’s conversation about whether development finance institutions are reaching the businesses they were created to support has been telling. Few disputed the critique, but many have been asking where SMEs should turn if traditional funding isn’t accessible.
It’s a crucial conversation in South Africa, where business ideas and entrepreneurial drive are in abundant supply. The only thing we suffer from is a shortage of access to capital and of pathways that turn these ideas into scalable, sustainable businesses.
Yet, even in this constrained environment there is hope. Instead of waiting for funding to fall into their lap, a different type of entrepreneur has emerged, one that is actively turning to unconventional routes such as pitching platforms and funding competitions to access funding.
Recently, I attended Change the World, an initiative founded by Francisco Da Silva, where both early-stage and established businesses pitched for funding. What stood out for me was not just the quality of ideas but the immediacy of access. Rather than having to navigate months of bureaucracy or complex application processes, entrepreneurs with viable business ideas were, in that one room, put directly in contact with investors and decision-makers.
The good news is that we are seeing more of these platforms emerge. Companies such as Naspers, for example, run funding competitions such as the Tech FoundHER Africa Challenge, offering $100,000 (R1.7m) prizes to high-potential businesses. The challenge for today’s SMEs is how to position themselves in existing funding circles to make use of these legitimate funding pathways.
There is also growing investor appetite for opportunities in emerging markets from beyond our borders, and we are seeing more businesses raise capital abroad, bypassing many of the constraints that exist domestically. Our tech start-ups have been excelling here, with Littlefish for example, successfully raising R150m internationally.
What this shows is that sometimes the limitation is not the availability of capital, but the scope of where we are looking for it. Institutions such as chambers of commerce and international business networks play a far more strategic role than many SMEs realise. Beyond facilitating trade, they can act as bridges into global funding ecosystems that remain largely untapped by South African businesses.
At the same time, alternative funding models are fundamentally reshaping how capital is accessed.
While traditional lenders tend to prioritise financial history, collateral and rigid compliance frameworks, alternative funders take a different approach, assessing real-time business performance, cash flow and transaction data to determine viability.
This shift matters because it aligns funding with how SMEs actually operate.
Solutions such as invoice discounting, purchase order funding and merchant cash advances are becoming increasingly relevant too. Instead of waiting 30, 60 or even 90 days for payment, businesses can unlock cash tied up in invoices or confirmed orders, improving liquidity and enabling quicker growth.
We are also seeing funding embedded directly into everyday business platforms like accounting systems, payment platforms or e-commerce tools
We are also seeing funding embedded directly into everyday business platforms such as accounting systems, payment platforms or e-commerce tools, which is a significant step in reducing the friction between needing funding and accessing it. A funding start-up called Bridgement, for example, has integrated their platform with accounting systems to simplify the way accountants help clients with funding.
Perhaps the most important shift, though, is a psychological one. For too long, South African entrepreneurs have approached funding as a one-off event, where you apply and then wait to find out if you were successful.
These days, businesses are doing the opposite, opting to treat funding as a continuous strategy. They build relationships long before they need capital and position their businesses within ecosystems where funders are actively looking for opportunity. More importantly though, they are preparing their businesses so that they are fundable via both traditional and alternative channels.
None of this diminishes the structural challenges SMMEs face in South Africa. Access to capital remains one of the most significant barriers to SMME growth, but what is becoming increasingly clear is that funding is no longer confined to banks and development finance institutions.
It is fragmented, dynamic and evolving, and some entrepreneurs are waking up and coming to the table.
In a market where capital exists across multiple platforms, networks and models, the advantage will go to those businesses that start looking for funding beyond the obvious, and start to integrate funding competitions, investor roadshows and funding programmes. Knowing how to position themselves to access funding will be key.
• Mtwentwe is MD of Vantage Advisory and host of the SAICABIZ Impact Podcast
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