Joining CNBC Africa for more is Cleola Kunene, Head of SME Development at the Johannesburg Stock Exchange.
Well, we have Cleola Kunene who is the Head of SME Development at the Johannesburg Stock Exchange and she's going to be in conversation with my colleague Godfrey Matiza because they are looking at the role of SMEs in driving the country's economic growth. Absolutely, an important conversation because as it so happens I came across research showing that the JSE according to these figures, this is from Momentum, that's a story I'm hoping that will carry in closing bell, we're talking about a peak of 484 listed companies in 2002. However, I've also seen research suggesting we were over 600 companies listed on the JSE in 1998 and the question is what is the JSE doing about it? Well, Cleola has got the answer, I hope Cleola, so it's an important conversation as you say, so perhaps let's just get into the genesis of this initiative of yours and what you're hoping to achieve. Thank you very much, Godfrey. So, it's in essence economic development. As we know in South Africa, there is a huge need for SMEs to grow. By 2030, 90% of jobs are projected to come from SMEs and as the JSE, we are playing our role fundamentally to help scale up medium-sized companies as well as supporting small businesses and collaborating with the SME development ecosystem and government and a core focus of that, of course, is how do we create the next generation of large enterprises in our own economy. Yeah, large enterprises that are going to be listed on the JSE at some stage, I hear you say silently, but I just wanted to know what this initiative is offering that is different to the work that you have done in the past. You speak about working with the Western Cape government and you're talking about potentially going to the free state. So, thank you for the question. I think it's in two parts. We have an accelerator program that has focused on really scaling companies that have been kind of stuck in that medium space but have been ready for scaling, right? And we support those companies with market access, development support as well as capital access. In fact, the previous cohort raised about development support as well as capital access. In fact, the previous cohort raised up until now over a billion rand collectively. So, it demonstrates our role in fast-tracking access to capital. And we've taken some of those learnings and key fundamental principles and collaborated with our government entities starting with a pilot program in the Western Cape last year where we launched a funding readiness program and capital matching initiative with 15 of the country's funders that range from banks to smaller funders and VCs. And we then matched companies with funders and raised 233 million which was allocated to SMEs in the Western Cape last year. And when you're referring to the free state and Eastern Cape, that is just us now taking that model and expanding it into other provinces with the cooperation and collaboration of SIDA, SIFA, of course various development institutions and of course our funders. Yeah, I'm curious as to the types of companies that are reaching out to you and saying would like to work with you on that front. So, it's all types of companies that reach out to us, of course, but if we look at the accelerator when we say medium-sized companies, these are companies that have been in operation for a number of years and they are truly ready for that next stage of growth. It's very hard to scale a company that's still small and a startup and hasn't gone through the rigor of being able to, for instance, expand internationally because one of the key components we provide is international market expansion. But we are industry agnostic, of course. When it comes to the funding side in terms of the capital matching, it is companies. We look at varying sizes of companies from startups to companies that have been in operation. The key aspect there, of course, is are they funding ready or can we get them funding ready because there is a bit of work to do and we offer this training for free and support, first-hand support for free to companies to get funding ready. And once we feel that they are funding ready, we match them with funders. Yeah, what are your thresholds in terms of who you're targeting here? You did say startups, but on the other side, who qualifies? So for the accelerator, when we look at medium-sized companies, we're looking at companies that are over 15 million in revenue as a minimum. Of course, we have companies on the accelerator that are also 250 to 300 million rand in revenue, but we try and categorize the companies based on their readiness to scale. So we spend a lot of time analyzing each company and determining if they are ready to scale because a company can be, for instance, 50 million rand in revenue, but yet they haven't yet, you know, expanded beyond how they don't know how to scale. So they may not be at that stage yet. When it comes to the capital matching, we're looking at companies in terms of, they need to have some level of operating history as well, and also obviously need funding. And we look at whether they can also get access to funding, depending on the funding that's right for their business. Because what we are focused on there specifically is also sustainability and not just accessing funding that would not serve the business and its own growth. Yeah, two quick questions. One is on tech hub. What has it been like on the ground? Have you been inundated and you've had to turn people away? That's one side. And then I just wanted us to go quickly, if you can, through some of the sort of common problems that you have seen with the companies that you have been trying to assist. I'm imagining someone who's sitting perhaps somewhere in the Western Cape is saying, but how have I been left out of this? No, thank you. I think, let me start with some of the common problems. I think communication is certainly an issue. Reaching the companies that do need funding. We try and work with development organizations and communicate and advise that we are doing this program. But obviously we hope that many companies do apply. And then I think in terms of the companies itself, I think the education is sorely lacking. Even companies that have gone through development programs seem to lack the information in terms of what's required of them to get access to funding. And you'll hear often companies say, but I've applied to four different institutions. Everybody's turned me down. But when you look at the company, they may not even have the fundamentals in place to get access to funding. And even if you say, okay, what is the funding that you're looking for? The type of financing? Is it procurement financing? Is it working capital? What is the debt structure? They seem to lack that education. So I think one of the things that we're seeing on the ground is a huge gap in terms of just the baseline information about the funding opportunities, the landscape. What are the requirements for you to get access to funding? What does it mean for your business? How much is the right amount? And how are you even going to use that amount of money? And how will you use it to optimize the growth of your business? So I think there is a lot of information still that needs to be shared. That is why we're trying to work as much as possible with so many organizations, including, as I said, with our government entities to educate, inform, and equip everyone. And of course, bring the right funders along so that we can bridge that gap in terms of funding. And when we do this right, Godfrey, what we've seen, and especially in terms of our flagship, our pilot last year in the Western Cape, we had a 62% success rate. So obviously we want to increase that, but that also depends on the SMEs themselves and their willingness to do the work. And I suppose that information gap, I'm trying, we're trying our own little bit here at CNBC Africa to talk about some of those issues that you are identifying. I wanted to go to the issue of fundraising. How do you help? Because as you say, these companies are telling you, we're trying to raise funds and we've been turned down, and you give the example of someone being turned down by four banks. So in the capital matching, where we start in terms of helping is just providing education. We have created an online training and we have live Q&A sessions with the entrepreneurs where we bring funders into the sessions. So we do it on two fronts. One is just giving them everything, equipping them with templates, ratios, and making the training as easy as possible so that they understand what's required. Secondly, when we do the Q&A sessions, it gives them the opportunity to ask their questions. And, you know, you should even join some of these sessions, because companies talk honestly and tangibly about some of the issues that they're facing. And you can see immediately that, you know, lights going on between them and the funders, and they can say, oh, okay, I didn't know this. I didn't even know that I required technical assistance. What is this? So when we start with education as a baseline, which is what we've done, we see that that makes a huge difference. Secondly, we work with funders directly. We work with a multitude of funders. So it's not just one type of funding. It's various types of funding. We bring DFIs in, we bring ESD funding, we bring debt financiers, we bring microfinanciers, and we really try and say, okay, what is your mandate? What are you aware that they meet those requirements to ensure that the funding process is easier? And, you know, we get to the point where the companies are funded within a few months, as opposed to it taking a year for them to get financing. Fantastic work. Fantastic work, Cleola. No question about that one. Final question would then be, is there a pathway for these companies onto the JSC? And you have got a number of platforms where you are now trying to get companies to come and list without the onerous burden of listing on the main board. There's always a pathway for listing. You know that we've done a lot of work in terms of reviewing what is required for companies. But even if you look at optics, I think a lot of companies don't realize that they actually do qualify. And in addition, we have also launched a private placement platform, where companies that may not yet want to go public still want to raise capital, we offer that opportunity as well. So we have, as the JSC, now extended the breadth and width of ensuring that companies get access to financing. In fact, today, we are hosting a group of international investors at the JSC. And we have brought a group of entrepreneurs into the room. And they're talking to the investors directly, you know, whereas it would have been very difficult for them to travel to that country to get access to these individuals who want to invest in small African businesses. And here we are, the JSC, bringing investors directly to them. So our focus is how do we make things easier? And how do we facilitate as much as possible? Because after all, our goal is the same as the rest of the country is to create jobs and see our economy thrive. Absolutely. So you remember to invite me to one of those sessions? Yes. Absolutely. Thank you. I recorded that. Cleola, thank you. Cleola Kunene, Head of SME Development at the JSC.
Theme: Driving Economic Growth through SME Development
The Johannesburg Stock Exchange (JSE) has been at the forefront of driving economic growth in South Africa, particularly through its focus on Small and Medium-sized Enterprises (SMEs). Cleola Kunene, the Head of SME Development at the JSE, recently sat down with CNBC Africa to discuss the pivotal role SMEs play in propelling the country's economy forward. Kunene highlighted the JSE's commitment to supporting medium-sized companies and small businesses, with a vision to create a new generation of large enterprises within the local economy. Through strategic collaborations with government entities and the SME development ecosystem, the JSE aims to foster a conducive environment for SMEs to thrive and ultimately contribute to job creation and economic prosperity.
"Our goal is the same as the rest of the country's, to create jobs and see our economy thrive."
['JSE', 'Cleola Kunene', 'SME Development', 'South Africa', 'economic growth']