Logie Naidoo, the Deputy Mayor of Durban who attended the 2011 Construction Indaba advised the event attendees about the potential of SMEs and urged them to work more in the private sector. Talking about tendering bigger projects, Naidoo stated that the SMEs can gain experience and build their respective capability through contracts.
‘Two sectors’
No doubt, the economy of South Africa is currently divided into two major sectors. The first one deals with the investment of the international companies and their contribution in the revenue generation and GDP. On the other hand, the second sector includes these SMEs who do play a very pivotal role in both business and economic impact of the country.
Over the years, Durban has been playing an essential role in boosting the growth of the SMEs so that the small business profiles can be boosted and in return, revamped into major sector industries with higher economies of scale and more concrete business models.
But these SMEs are often ignored because of the risk involved in financing them. Most of the times, their business models include entrepreneurial assets, which definitely is challenging to incorporate since the recession effects are still not bygone.
‘The bank financing and loans’
Though, Amrei Botha, the head of the Standard Bank’s Africa SME Unit stated that during the past years, the banks have started to understand the potential of the SMEs and have been positive in investing in them.
For example, the Standard bank has started financing the loan worth $300-$30,000 dollars for a period ranging from three to twelve months. Another impact is also pursuing the entire finance of SME’s in a unique manner.
‘Porter’s Five Forces’
Taking into consideration the ‘Porter’s five forces’, the growing SME’s need to understand the potential of the new companies which are entering into the same market, the threat faced by the introduction of substitutes, the difference in the bargaining power of the consumers and the buyers and above all, the increase in the competitive rivalry.
Nevertheless, the avenues present for the venture capitalists and the tenders are increasing in the sector of small and medium scale enterprises. With innovation, technology and communication boosting the integration of functionality with business, the enterprises have a direct effect on the consumer spending.
Hence, tapping the wealth can be done through involving the right investment, especially by following the trademarks set by the Standard Bank and financing the SMEs which have the power to revamp the economy of South Africa.
shubhdachaudhary 