Last week’s decision by the South African Reserve Bank to cut the repo rate by 25 basis points was welcome news for businesses hungry for relief. For many entrepreneurs it reignited hopes of easing liquidity, more accessible finance, and fresh growth opportunities.
But while this rate cut may slightly loosen the purse strings, it’s by no means a magic wand. If anything, it reminds us that the real problem isn’t a lack of funding but the lack of fundable businesses.
The statistics are sobering, to say the least. Despite growing efforts by the government and private sector institutions to position new funding vehicles into the market, only 25% of South African businesses succeed in their capital-raising attempts. That leaves a staggering 75% either undercapitalised or forced to bootstrap their way forward, often at the expense of speed, scale or sustainability.
So why is the failure rate so high?
The short answer is that most small and medium enterprises (SMEs) and entrepreneurs wait too long to think about capital. Capital-raising is not a reactive tactic but a proactive skill, and like all skills it must be cultivated deliberately from the early stages of a business’s life.
I often remind SMEs and entrepreneurs that capital-raising is as much about readiness as it is about access. Far too many business owners approach investors when they’re already in a financial pinch, but this eleventh-hour mentality not only reduces their leverage, it also often reveals a lack of strategic thinking around long-term growth and scalability.
To be investor-ready, businesses need to be structured for scale from day one, and that starts with people. Investors back jockeys, not horses, meaning a strong founding team with a clear track record is often more important than the product itself. OpenAI, for instance, didn’t become a tech juggernaut overnight. It attracted major backing early on because of the strength, vision and credibility of its founding team.
In South Africa, we are starting to see a welcome rise in alternative funding platforms like Altvest, which has listed on the JSE and aims to democratise access to capital. The more diversified our funding ecosystem, from seed stage to growth, the better for our economy. But alternative funders are still hamstrung by one major constraint: the investability of the average applicant.
Put plainly, too many entrepreneurs are presenting ideas, not businesses.
They lack solid business systems, financial transparency, and defined go-to-market strategies. Many can’t clearly articulate their market capture plans, validate their assumptions with real data, or demonstrate the scalability of their solutions. Offtake agreements, customer pipelines, or even basic market research are often missing from pitch decks.
Equally critical is targeted investor engagement. Approaching investors without alignment is like swiping right on every profile on a matchmaking app and hoping for a wedding. Just as with dating, finding the right capital partner requires clarity, compatibility and shared values. Not every investor is a fit either, with some funders having sector preferences, ticket-size thresholds and risk appetites. Doing the research to understand which investors back your industry and stage is imperative.
Another essential trait of capital-ready businesses is lean discipline. Start-ups that stay lean and optimise for efficiency while building out robust systems and governance often become investor favourites. They are accountable, agile and credible, and this is especially true in South Africa, where the gap in early-stage funding, particularly venture capital and angel investment, is needed. Most SMEs don’t have traditional collateral and yet have high growth potential. We need investors willing to take a calculated leap of faith, but they can only leap if there’s something worth landing on.
Development finance institutions also need to relook at their mandates. There’s a real opportunity to shift the focus here from asset-backed lending to potential-based investing. That means promising funding to entrepreneurs who may not have balance sheet strength but who do have grit, track records and scalable ideas. Without this shift, the capital mismatch in our economy will only widen.
Ultimately, mastering the art of capital-raising can be the difference between building a livelihood and building an empire. It is a skill, opposed to a tick-box exercise, that every SME and entrepreneur must invest in. Just like strategy, sales and operations, capital-raising must have a seat at the table from the start.
The Reserve Bank’s recent rate cut has sparked renewed attention on the business funding climate, but now it’s time to move the conversation forward. Capital is available, but fundability is earned.
• Mtwentwe is MD of Vantage Advisory and host of the Saica Biz Impact Podcast
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