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South African Business 2016 edition

  • Text
  • Investment
  • Government
  • Business
  • Development
  • Network
  • Sectors
  • Investing
  • Business
  • Africa
  • African
  • Economic
  • Manufacturing
  • Mining
  • Opportunities
  • Economy
  • Overview
South African Business is an annual guide to business and investment in South Africa. Published by Global Africa Network Media in Cape Town, the 2016 edition is in its fourth year of publication. The publication provides up-to-date information and analyses of the country's key economic sectors, as well as detailed economic overviews of each of the nine provinces in South Africa.

SPECIAL FEATURE

SPECIAL FEATURE Business funding There is a massive amount of funding available for businesses, from multi-national corporations through to SMMEs. The key is knowing how to access it. SOUTH AFRICAN BUSINESS 2016 26

SPECIAL FEATURE “Before any bank funding is sought, a business needs to have equity, a proven track record and experienced team, guaranteed inputs or raw materials, proven market demand; and a robust project finance model,” says Andre Pottas, Corporate Finance Partner at Deloitte. “If these attributes are not all in place, as is common for startups and new, innovative technologies, then alternatives to bank debt must be sought.” Pottas stresses that it all depends on the type of business that is being developed, in addition to the level of the returns that can be realistically predicted. “For innovators and disruptors, who often have little own equity to contribute, selling their idea can be really difficult and self-funding may be the only option available in the short term. For example, to get equity finance, it is a trade-off between the new networks and expertise you expose your business to, and the percentage of equity and control that you are willing to give away. Loan finance on the other hand guarantees that you keep all of your shares and can run the business as you like, yet the loan can create a strain on the cash flow of the business,” says Pottas. An alternate source of funding that is gaining in popularity is crowdfunding, which allows business owners to raise capital in small amounts from a variety of funders, typically via social media. “Crowdfunding had been incredibly successful in the United States and Europe, but those are very developed markets, and they are working from a much higher base of business skills and IT penetration. In South Africa, there are so many people and youth coming out of school, starting up ideas, but our education system has not actually prepared us to run enterprises. Coming up with ideas we are good at. Figuring out how to make them ideas that will work we’re not so good at,” says Thundafund co-founder Patrick Schofield. “There are several reasons for that prudence, or inability to take risk by the venture capitalists. Most importantly is that they can’t get their money back. If you loan someone money, below R500 000, because of the legal processes it takes to get the cash back, you might as well give the damn stuff away. If they don’t give it back, to get it back through the legal routes is very expensive and almost not worth it. So it makes it very difficult for anyone to loan cash, which 27 SOUTH AFRICAN BUSINESS 2016

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