The influence of BBBEE on access to funding for SMEs in South Africa

Abstract

Since 1994, the South African government has introduced legislation to redress the ills of apartheid. Broad-Based Black Economic Empowerment (BBBEE) and its antecedent Black Economic Empowerment (BEE) was promulgated to break the poverty cycle of the black masses by providing a platform for the black population to participate in the mainstream economy by owning and managing businesses in South Africa. The promotion of Small and Medium-sized Enterprises (SMEs) is the focal point in the government’s strategy of redressing the imbalances of the past. This emphasis is to overcome the current challenges that the economy faces with regard to unemployment, poverty and inequality. Access to finance is widely accepted as a common challenge that SMEs face. There is a magnitude of funding opportunities available for SMEs, yet there is a disconnect between SMEs and funders. This study aimed to determine the influence that BBBEE has on SMEs with regard to accessing funding. Fifteen participants from SMEs were interviewed to assess their perspectives on BBBEE and the funding process, as well as, their opinions on the challenges that they faced when accessing funding. The research results affirmed that the amended BBBEE codes are an inhibitor for SMEs when accessing funding due to many reasons. Therefore, the study posed some recommendations to improve SMEs in their endeavor to access funding.