The growth of small and medium-sized enterprises – SMEs – is crucial to the health of any economy, and given our tough economic climate, the country is increasingly looking to SME businesses to promote growth.

On the African continent and in other markets, SMEs drive economies and contribute significantly to GDP growth. Nigeria, as an example, is one of the biggest economies on the continent and has more than 17 million SMEs versus 1.2 million corporations. Moreover, Nigeria’s SMEs contribute almost half of the country’s GDP (about 49%).

While the notion of SMEs has always existed, it has now become increasingly prevalent. A worrying trend with SMEs, however, is that research shows most of these fail within the first three years of starting out. Given our difficult economic environment, it is now more important than ever for big businesses to play their part in helping them grow. A start would be for corporations to include SMEs in their supply chain through enterprise and supplier development programmes.

Through an enterprise development programme launched last year, the JSE aims to drive the sustainable growth of black stockbroking businesses, which – in the longer term – will assist to grow our capital markets. One-third of the equity trading and membership fees paid by the brokers was paid out to 14 black member firms in 2016. Firms used the disbursements in different ways to boost their businesses. These included investments in technology; training and skills transfer programmes; while one started a research unit.

While there are several stumbling blocks for SMEs, another obstacle for these businesses is access to working capital. Finance remains a challenge that hinders expansion for many businesses, and this is where a listing on AltX can be an exciting opportunity for smaller businesses to raise capital.

The JSE launched AltX as a platform for smaller businesses preparing for the next step on their growth path but not yet fulfilling all the requirements of a Main Board listing. Companies listing on our AltX Board require no profit history, as well as a 10% shareholder spread versus 20% on the Main Board.

There are currently 52 companies listed on AltX, with a market cap of more than R20 billion. Research conducted among AltX executives strongly indicates that their listings have helped them meet their business objectives.

A good example of this is Interwaste Holdings, which listed on the AltX Board in 2007 and migrated to our Main Board in 2014. Interwaste began as a small husband and wife-managed business with just one truck in its fleet. The initial listing of Interwaste and subsequent capital raising allowed the company to develop into a holistic environmental service provider throughout the SADC region. Interwaste’s story is a good case study of how a small company can become a significant contributor to SA’s economy.

Zeona Jacobs
Director of Marketing and Corporate Affairs

October 2017
Image: Athiyah Cader