In this Monday, Aug. 28, 2017, photo, workers prepare to ship dresses in the company's offices in San Jose, Calif. Growing companies need to allow for more expansion. When online bridal retailer Azazie launched in 2014, the handful of staffers fit into one room. Since then, the company has expanded its physical space twice: once when the company's staff reached 10 and again when the staff reached 40. (AP Photo/Marcio Jose Sanchez)

JOHANNESBURG - The majority of business failures can be attributed to financial, management and reporting factors that can ordinarily be addressed through mentorship and technical assistance support throughout a business’s life cycle. This is supported by the 2014 Turnaround Management Survey which estimates that as much as 36% of business failures were caused by inadequate financial management.


As such, the launch of a R50 million (US$ 4 million) Technical Assistance Programme for Small and Medium Enterprises (SMEs) in South Africa by Business Partners Limited (BUSINESS/PARTNERS) with the support of the Swiss State Secretariat for Economic Affairs (SECO), aimed at improving the business, labour and environmental performance of SMEs, is sure to be a welcome relief to local SMEs who want to increase the profitability of their businesses.

Speaking at the launch in Johannesburg last week, Ben Bierman, MD of Business Partners Limited (BUSINESS/PARTNERS) – a premier risk finance company for formal SMEs in South Africa, said, “In the 36 years of our existence, we have learned that providing SMEs with finance alone is not enough; the sustainability and prosperity of businesses increases significantly when the finance they receive is coupled with well-planned, well-executed and accurate technical assistance.”


Referring to their experience, Bierman points to an independent study on their technical assistance programme which showed that their unique methodology of coupling finance with technical assistance has been able to generate significant socioeconomic returns. The study showed that all companies that were beneficiaries of technical assistance reported a 26% increase in jobs created by the business supported, a 32% increase in turnover and a 79% increase in profit.


As South Africa’s unemployment figures rose to its highest level in 14 years, reaching 27.7% in the first quarter of 2017, and considering that SMEs are one of the key contributors to employment creation in the country, the Technical Assistance Programme (TA Programme) will also go a long way towards supporting South Africa in attaining its corresponding objectives as described in the National Development Plan, notably to reduce the official unemployment rate to 6% by 2030 which the Government expects will mainly be driven by SMEs.

The TA Programme is best placed to respond to SME challenges by supporting business owners – particularly those who seek to grow and run their businesses more efficiently, but are underserved by the traditional South Africa finance industry. The Programme involves SMEs approaching BUSINESS/PARTNERS for finance and mentorship and/or technical assistance support services ranging from legal and accounting assistance, distinct training skills for employees to the creation of information and communication technology (ICT) capacity within the company.


For the first phase, this TA Programme targets to support over 1500 SMEs – all of them existing or future BUSINESS/PARTNERS clients – and the technical assistance loan amount will be capped at 30% of total exposure to BUSINESS/PARTNERS per business owner. The technical assistance loan is interest-free and the repayment thereof is aligned to the business’s free cash flow improvements that are expected as a result of projected operational improvements brought on by the introduction of technical assistance in the business.


Bierman said that they believe that when SMEs are required to repay these funds, they apply themselves better to the benefits of the technical assistance. “Once repaid, the funds can be recycled to other deserving SMEs, thus increasing the overall socioeconomic return.”


BUSINESS/PARTNERS will contribute R25 million (50%) of the funds for the TA Programme and the Swiss State Secretariat for Economic Affairs (SECO) will contribute the remaining R25 million (50%).


Davorka Shepherd, Head of SECO in South Africa, said that projects like the TA Programme can assist in creating dynamic entrepreneurship and a more inclusive SME base in South Africa. “We hope that the Programme will assist with strengthening skills and cover the knowledge gaps that entrepreneurs might have from general to more specific business knowledge. Specifically, we hope the technical assistance will provide on-going, intensive support services, including services which enhance the ability of the companies to realise business plans, enabling them to build skills and directly increase their ability to grow and develop innovative ideas to fulfil their growth and employment potential.”


Bierman added that a Programme of this magnitude was significant to the future socioeconomic development of South Africa and acknowledged the crucial contribution being made by SECO in this respect. “Through working with like-minded development financial institutions whose mandate and objectives are aligned in the need to address key challenges facing SMEs, we are able to effectively grow the SME sector in South Africa as a means to foster economic growth, job creation and economic inclusion.”