The South African Government should recognize that Fintech companies can play a central
role in distributing capital to small businesses and early-stage companies.
The two sectors have the potential to reduce unemployment numbers, therefore, the greatest
need for financial access. However, a general lack of collateral among small businesses
doesn’t attract traditional banks.
In the era of online lending and equity crowdfunding platforms, we have seen an upsurge in
investment to build the software for onboarding, screening, approval, distributing, and
servicing of loans and equity investments to small businesses. Now, it’s far more secure to
use technology when interacting with audiences that need protection against fraudsters.
The regulators and policymakers need to work with fintech entrepreneurs who have the
digital infrastructure to help the Government achieve its goal of saving small businesses and
getting the economy to get back on track faster.
While South Africans applaud the Government’s work to help SMMEs cope with the
liquidity and demand crisis created by the COVID-19 pandemic, more financial support and
incentives are needed to help startup companies.
The Innovators and tech CEOs are planning layoffs in the coming weeks. They are ineligible
to receive government support under the current programs.
COVID-19 is a momentum and capacity building killer. It’s especially disheartening to the
startup community which has been scaling-up and capturing global attention, attracting
capital and talent, investing in new resources and infrastructure, and building national
confidence and pride.
For some startups, the pandemic may expedite the growth of their business but for most, it
will be a disaster. As it stands, in a few short months we are at risk of losing an entire
generation of early-stage companies who are too small to attract institutional venture capital
and whose survival cannot only depend on the pocketbooks of friends, families, and angel
The risk of losing this collective private and public investment and the cost of rebuilding (if
at all possible) would be more expensive than providing the required support to bridge
companies and the economy to better times.
From an investor perspective, the sharp falls and volatility in equity markets have resulted in
greater investor conservatism with less appetite for riskier, early-stage companies that are
best positioned to create the jobs of tomorrow. While a lot of work would have to be done to
get back to normalcy, the smoothest and cost-effective way to assist small economic players
would be through Fintechs! The same experts who have worked in bigger financial
institutions provide consultative advice to Fintechs, resulting in market confidence.
The sheer magnitude of the economic and financial crisis requires a comprehensive and
complementary suite of measures to enable smaller, earlier-stage companies not only to
survive the present situation but also to be fully equipped to move into high gear as soon as
the current global lockdown subsides.
Fintechs have frontline insights on the pain COVID-19 is inflicting on small businesses and
entrepreneurs. These Fintechs can help to distribute financial support more quickly and cost-
effectively, complementing the bigger financial intermediary players.
Inclusion of Fintechs in the distribution of financial assistance to small companies and
startups would mean more players in the finance distribution sector or the sharing of the
finance industry cake. Power control in the financial sector will cease to be in the hands of a
few established players.
Our Fintechs have digital infrastructure to identify demand, verify identity and financial
suitability, approve investments, and make efficient and secure digital payments. Fintechs can
provide a range of financial options (equity, loans, and other forms of credit) to support
consumers, startups, entrepreneurs, and SMEs.
The government should support and recognize Fintechs as a key part of the financial solution.
The sooner we understand that our regulation and policy frameworks need to holistically
include the value that new fintech models and digital infrastructure brings, the faster the
economy will get back on track. The government should lead in demonstrating the fair
distribution of wealth between established finance houses and Fintechs.
There is an immediate opportunity for the Government to partner with fintech to solve the
funding crisis that COVID-19 has forced upon all of us.
Working together, Fintechs can deliver the government’s financial resources using a resilient
and efficient electronic platform. It's time for the Government to work with Fintech
entrepreneurs and seize this opportunity to work together to protect the South African
It is strongly suggested that the government implement the following recommendations
1. Work with Fintechs to distribute and manage small business loans quickly and cost-
effectively. Online lenders can process loan applications quickly, onboarding, and evaluating
borrowers electronically, while proactively identifying risks and monitoring borrowers.
2. Establish a Capital Raise Funding Program to improve access to capital for SMME through a
Matching investment program where the Government should match investments into early-
stage and smaller companies raising capital through equity crowdfunding platforms. These
companies would not generally qualify for Bank loans due to their Financial Standing. The
rescue of these entrepreneurs and innovators is critical as we emerge from the Covid 19
3.Tax Relief for Equity crowdfunding investors similar to the EIS/SEIS programs in the UK.