To celebrate the sector and raise awareness of what support is needed, the UN General Assembly designated 27 June as World MSME Day.
Micro, Small, and Medium-sized Enterprises (MSMEs) play a vital role in South Africa’s economy, but the sector still does not receive the support it deserves.
To celebrate the sector and raise awareness of what support is needed, the United Nations General Assembly designated 27 June as World MSME Day.
Luncedo Mtwentwe from Vantage Advisory says South Africa’s funding gap takes centre stage, with only 25% of small and medium enterprises (SMEs) succeeding in raising enough capital to scale up.
“That means three out of four businesses are locked out of the funding they need to launch, hire or expand.”
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Small businesses are not investor-ready
Mtwentwe adds that funding is not scarce in the country, but the reality is a lot of small businesses are not investor-ready and by the time they realise this, it is often too late.
“We need to stop thinking of capital raising as a last resort. It’s not a lifeline but a leadership skill that must be developed early, long before cash flow runs out.”
He says one of the most common pitfalls is a reactive approach to funding. Entrepreneurs often seek capital in a crisis, weakening their negotiating position and eroding investor confidence. “By then, it’s no longer about potential but about patchwork.”
How small businesses get funding
Mtwentwe acknowledges that funding in the country is also uneven. He says that geography and networks often shape who gets funded and who does not.
“Some founders have resorted to raising capital abroad because they lack the connections or co-founders with the right credibility in SA. Unless you are in the right province, you can forget about raising here.”
He was told by investment professional Zama Khanyile that capital is flowing into Africa, but it often skips South African startups. “If we want to attract that capital, we need to get better at telling our impact story, not just our profit potential.”
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Cracking the capital code
He advises entrepreneurs to normalise conversations around investor readiness and equipping themselves with the tools to build credible, fundable businesses.
His top tips include
- Start Early: Fundraising is a process, not an event. Begin preparing at least 6–12 months in advance of your capital needs.
- Build a Fundable Structure: Investors look for governance, accountability, and growth potential, regardless of your size or sector. Get your basics in place – clean financials, compliance, contracts and operating systems.
- Focus on People, Not Just Product: Investors fund people first. A solid team with vision, credibility and financial discipline often matters more than a polished prototype.
- Target the Right Investors: Match your business stage and sector with the right funder. Understand their ticket size, risk appetite and portfolio. Green finance is gaining significant traction lately, opening even more funding opportunities for sustainability-driven startups.
- Tell a Scalable Story: Investors need to believe in your growth. Show traction, validated assumptions, customer pipeline, or offtake agreements, no matter how early.
- Lean Into Mentorship: You do not need to do it alone. Leverage incubators, advisors and mentors who can help position your business for funding.
- Keep Marketing and Sales in Focus: No investor will back a business without a revenue engine. Sales traction and go-to-market strategy are critical.
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