By Andy Nssien
The African Securities Exchanges Association (ASEA) has identified lack of adequate access to finance as one of the major obstacles and constraints to the growth of SMEs. Other factors are corporate governance and marketing, costs of listing and corporatising of business.
These challenges were spotted by the ASEA SME Facilitation Working Group formed by the Asoation to establish the efficacy of financing of SMEs across African capital markets. The working group comprised various stock exchanges and is chaired by the Johannesburg Stock Exchange (JSE).
According to the working group, the key challenging factors identified in the survey were access to finance (37%), followed by corporate governance and marketing (18%). Some of the other issues identified included costs of listing; which relates to continuing obligations for SMEs; and corporatising of business.
“Lack of adequate access to finance is considered as one of the major obstacles and constraints to the growth of SMEs. The results reveal the gap that exists for exchanges, and other role players, to play a role in readying SMEs to list. These include; providing mentorship, roadshows to create awareness, and to provide information and training at various touch points in the ecosystem,” says chairperson, Zeona Jacobs.
While 19 exchanges have SME platforms, the survey revealed that most of these SMEs were not aware of exchanges as an alternative to raising finance.
Following the survey results, the working group developed a report on the Capital Raising Opportunities for Small and Medium (SMEs) on Stock Exchanges in Africa, which is a consolidation of survey responses of the 15 ASEA member exchanges who responded.
The working group said the report was set to provide ASEA member countries with valuable insights that might be beneficial in the development of solutions to assist in meeting the capital raising needs of SMEs in Africa.
It explores the challenges and opportunities that exist for SMEs wanting to list on exchanges. Featuring prominently on the motivating factors for listing, is the prospect of raising funds, elevating company profiles and to enhance corporate governance.
The ASEA working group conducted a survey to 28 ASEA member exchanges to determine the fundamental issues experienced by African small and medium enterprises (SMEs) in accessing finance, as well as opportunities available for these SMEs to raise capital on exchanges.
As a key driver of employment in Africa – with a job creation level of 80%, SMEs are lauded for contributing to the development of a new middle class that has created significant demand for new goods and services.
According to the report, the working group had established that there was a major role to be played not only by exchanges, but governments and private sector organisations could contribute meaningfully to strategically setting up SMEs for long-term growth as well.
