Capital constraint to entrepreneurial start-ups in South Africa's emerging agribusiness industry

Abstract

This study is aimed at uncovering the capital constraints of emerging agribusinesses in South Africa. The goal of the research is to provide South African policy makers, programme administrators and development practitioners with information to make sound policy and programme decisions for the reduction of such constraints. The research also aims to make potential entrepreneurs aware of the importance of considering capital constraints to the start-up and growth of their businesses. This research was informed by the principles of qualitative research and is both exploratory and interpretative in nature. The research process comprised of two phases. The first phase constituted a sample of five experts from the finance-enabling environment (financial institutions); and the second phase was made up of twenty start-up entrepreneurs in the emerging agribusiness industry. The research found that barriers to accessing finance are largely due to lack of collateral, a poor credit record, inadequate business skills and communication problems between financiers and entrepreneurs. On the issue of what role the finance-enabling environment should play in reducing barriers to finance, findings from the research suggested more risk-taking by the financiers, relaxing the stringent credit assessment criteria, increasing the risk appetite and providing more for impairments or bad debts.