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What Financing Options Are Available to South African Youth?

By B Cressy

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June 19, 2024

With Youth Day fresh on the minds of most South Africans, our thoughts are with the many young entrepreneurs who make critical contributions to the economy by running local SMEs. Small businesses employ between 50-60% of the South African workforce, yet many young business owners struggle to secure financing options suitably tailored to their growing enterprises. Even though SMEs are the engine that drives the South African economy, their long-term success is often thwarted by a lack of access to business funding solutions that facilitate fast and simple access to capital. 

What financing options are available to entrepreneurial youth in South Africa? 

Comparatively fewer young entrepreneurs turn to traditional lenders for business finance than their elder peers, especially as they are less likely to have accrued the collateral assets and credit history they typically require. As a result, young entrepreneurs — typically aged between 18 and 34 — are more likely to see financing options from alternative sources, such as friends and family, foundations, angel investors, and venture capitalists. 

However, this is not where their options end. Alternative lenders represent a favourable option for young entrepreneurs seeking business finance options to maintain a healthy cash flow, especially considering the current state of entrepreneurial youth in South Africa.  

The state of entrepreneurial youth in South Africa 

Data released by Statistics South Africa in May 2023 showed that the total number of unemployed youth (aged 15-34 years) stood at 4.9 million or 46.5%, reflecting a 1.1% increase compared to the last quarter of 2022. For comparison, South Africa’s overall unemployment rate stands at 32.9%. 

Possibly as an antidote to the rampant unemployment rates affecting their demographic, some South African youth are turning to self-employment and entrepreneurship. However, without adequate education in business acumen and, even more importantly, suitable financing options, many of these businesses fail to thrive. 

During a seminar she presented to the University of Leeds’ Virtual International Program (VIP), Deputy Director of the University of Pretoria’s Centre for the Future of Work Dr Olebogeng Selebi pointed out that, although SMEs run by South African youth contribute significantly to the economy, they also tend to perform poorly. “Many young South African entrepreneurs are unable to meet their business goals for successful business operations,” she said. “[T]hus support is needed specifically from external stakeholders, such as universities, private institutions, and/or government.” 

Youth employment and entrepreneurship are not only essential for financial support, but meaningful employment also fosters dignity, empowering people to develop profitable skills and a sense of agency and equipping them with the means to positively shape their lives and their communities. This is precisely why Bridgement is passionate about supporting the sustainable growth of South African SMEs through accessible financing solutions. 

In addition to the external support recommended by Dr Selebi, other solutions proposed to combat the youth unemployment epidemic in South Africa include the targeted support of youth entrepreneurship in technology-based and green economies. Considering that they are earmarked for innovative expansion and a burgeoning demand for skills, services, and products, it makes sense that both public and private investors should prioritise business development and accessible funding opportunities to entrepreneurs in these industries. 

Furthermore, Colin Timmis, country manager of Xero South Africa asserts that a well-crafted business plan and a positive attitude towards digital adoption are significant factors in the success of young small business owners. “Young entrepreneurs and small business owners are already digital natives and are leading the way when it comes to embedding technology at an early stage and innovating to do things differently,” he says. 

Acknowledging that access to funding and support can pose an enormous hurdle for young entrepreneurs, he says that “[p]rofessional advice can unlock resources to access funding, mentorship, and training programmes aimed at the youth that can propel businesses forward. Our research found…[a]lmost half (49%) go to their accountants for business advice and guidance.” 

The best local financing options for South Africa’s young entrepreneurs 

Bridgement’s fast and flexible financing options are especially well-suited to young entrepreneurs (and their accountants) who run growing enterprises for the following reasons: 

  • Our flexible eligibility criteria mean that, unlike traditional lenders, we do not require collateral assets before we approve financing
  • Our application process is 100% online, making the experience quick and easy for digital natives 
  • Our cash flow finance facilities mean that you can withdraw as much as you need precisely when you need it, meaning that your business has short-term access to cash flow solutions without signing up for long-term debt 

It only takes 2 minutes to apply to a finance partner that could chart the course of the rest of your entrepreneurial journey. Apply today and access funding from R20,000 to R5,000,000 within 24 hours or less. 

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