When Lack of Funding Fails Small Business

When Lack of Funding Fails Small Business


Government has confirmed its support for SMMEs, stating its awareness that these small and medium enterprises are the answer to economic growth and job creation in South Africa and that banks and funding agencies are to assist SMMEs where possible.

Where then is this support for SMMEs and how does one access it?

No response to funding application

Vaalnest Boutique Hotel, the Gauteng winner of the 2010/2011 Entrepreneur of the Year Award (ETEYA), is an 85 percent black owned and managed company. The owners have invested more than R8 million into the business. Yet when applying for funding, little or no response was received.

In 2010 the hotel was given the opportunity to expand its capacity with an order that arose as the result of the World Cup. Vaalnest needed funding in order to finance the development of the hotel.

An application for funding was made to the Gauteng Economic Development Agency (GEDA).

The property was assessed and the request forwarded to the Gauteng Enterprise Propeller (GEP).

After six weeks it was established that the GEP did not recognise GEDA’s assessments, and a new application had to be made. The application was completed again, but Vaalnest was advised that the GEP was taking a break from funding owing to new management. The GEP has since resumed supplying funding, but has not responded to Vaalnest’s application.

Missed opportunity for job creation

Should this funding have been received, 128 permanent jobs would have been created, with a further 60 temporary jobs. As many as ten new businesses could have been developed in nearby Mamello.

Job losses ensued

As a result in the above delay, Vaalnest came under financial pressure and has been put into liquidation.

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