SMME Focus: How SA banks are rethinking SMME finance in a cash-first economy
South Africa's small, medium and micro enterprises (SMMEs) are punching well above their weight. They contribute to around 34% of GDP and employ roughly 60% of the labour force, according to the Banking Association of South Africa.
Regardless of their economic muscle, SMMEs – especially those in townships and the informal sector – remain financial outsiders. The formal banking system often misses the mark in a country where cash is still the currency of trust.
'In the battle between cards and mobile money, who is winning? Cash. I think cash is still winning,' said Wiza Jalakasi, director of African expansion at payments partner, EBANX.
The R5-trillion sector running on rands and cents
The MSME (micro, small, medium enterprises) sector has an estimated turnover of R5,29-trillion, with 72% of SMMEs operating informally and remaining largely cash driven, according to FinScope's MSME 2024 survey.
Townships and rural SMMEs often exist outside the formal banking system, leaving them vulnerable to theft, limited growth and a lack of credit history.
'Physical cash being handed to a merchant and being translated into a digital currency or an instant deposit into a transaction account – that makes businesses work,' said Chris Wood, Absa's executive of product. '[Banks] have got to be sitting there at the crossroads.'
South Africa's banks are showing up to that intersection. But rather than forcing SMMEs to go digital, they're starting by meeting SMMEs where they are.
Lending on a swipe
At Capitec's annual financial results presentation this week, the company's CEO, Gerrie Fourie, said the bank sees huge potential in the informal market. 'There's about 3 million spaza shops out there, 70% of them in the informal market. How do we capture that market and actually unlock the potential in South Africa?'
Capitec's solution analyses a business's daily takings and tailors credit accordingly. 'We say you need to look at the cash flows. They haven't got assets,' Fourie said. 'So you need to lend against the cash flow. And that's the model we've built.'
Capitec's dynamic loan model deducts payments as a fixed percentage of a merchant's inflows – whether from cash, card, or EFT. '[The customer] repays his loan as their business is performing,' he said.
In a year, the bank's small business base has more than doubled from 28,000 to 63,000. It has also issued more than R1.2-billion in scored loans to small businesses.
The card machine cartel
A major barrier to digital inclusion is the hardware itself.
Traditional card machine rental models, costing around R500 a month, are out of reach for micro enterprises. Fourie noted that Capitec has shifted towards a model where businesses can buy a device from R1,499.
'I think the rental model is ridiculous,' Fourie told Daily Maverick. 'The average rent is just below R500. If you buy your machine it's R2,000. So in four months, you've repaid (the cost of) your machine.'
Competitors such as Yoco offer similar hardware from as little as R750. Although, it isn't just upfront costs that need to be considered. Transaction commission fees typically range between 2% and 3.5% per sale, depending on the provider, which adds up quickly for high turnover, low margin businesses.
Tap, type, swipe
For banks such as Absa, getting merchants online means giving them options. 'We've got to make sure that where our merchants are, they are able to accept more,' Wood said.
'It could be QR codes, it could be pay by link. And that includes cash,' Wood said. 'That convergence of physical cash and what would always typically have been a merchant card machine, is getting closer and closer.'
The real banking role is systemic: getting cash safely back into the banking system. 'We want to make cash safe and make sure our customers are getting that cash into their transactional accounts sooner,' Wood said.
The SMME arms race
Across the sector, banks are rushing to build trust and relevance with SMMEs.
Standard Bank has launched a township entrepreneur initiative, focused on financial literacy and tailored products. Nedbank, named South Africa's Best SME Bank in 2024, now supports more than half a million businesses through digital tools and a free business development platform.
Meanwhile, FirstRand Bank secured a $150-million (about R2.8-billion) loan from the International Finance Corporation (IFC), earmarked for SMME lending, particularly for women-owned businesses.
FNB announced on 24 April that it is strengthening its lending muscle with more than R4-billion in SMME-lending capacity through two funding streams: a R1.8-billion risk-sharing facility, backed by the International Finance Corporation (IFC) and the EU; and a R2.5-billion social bond issued by FirstRand Bank. The funds will target women-owned businesses and rural sectors such as agriculture and healthcare.
What this means for you as a small business owner
Banks are starting to speak the language of small businesses.
By offering services such as cheaper card machines, loans based on a business's daily takings, and converting cash into credit history, the tide is turning towards financial tools that work in practice and not just on paper.
Teaming up to bridge the gap
To close the IFC's estimated $30-billion (R550-billion) SMME financing gap, banks are teaming up with fintech players.
A notable alliance is Mastercard's partnership with Johannesburg-based Sava, which provides small businesses with digital bank accounts and expense-tracking tools. This hybrid model could help informal businesses become creditworthy.
'Consumers are getting more and more comfortable with the way we're doing digital payments,' said Meagan Rabe, Visa's senior director for sub-Saharan Africa fintech. 'In South Africa specifically, 70% of consumers are wanting to be digital.'
That shift is already playing out in numbers – at Capitec, at least. 'When we started 20 years ago, 80% of our transactions were cash and 20% was electronic. Now we're 13% cash and 87% card,' Fourie said.
The Reserve Bank, he added, is also laying the groundwork for a more digital economy, taking cues from countries such as India and Brazil. DM
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Daily Maverick
4 hours ago
- Daily Maverick
The consultants who supported CEF's Sapref oil refinery gambit
Consultants downplayed previous warnings given to the Central Energy Fund about the purchase of Sapref's oil refinery in South Durban, which has serious implications for the state and the public. When the Central Energy Fund (CEF) purchased the South African Petroleum Refinery (Sapref) refinery from fossil fuel giants Shell and BP in May 2024, major red flags were raised about the viability of the purchase. CEF bought the refinery anyway, and on a problematic 'clean break' principle. This let Shell and BP off the hook for the significant environmental and other liabilities that come with the refinery. Now, CEF and the broader public are on the hook instead. In the first article in this series, we showed that CEF's decision to go ahead with the purchase seemed to ignore important parts of the due diligence that CEF initially received in 2021 and the risks that had substantially increased since the devastating floods in KwaZulu-Natal in 2022. Now, we turn to the consultants that gave CEF advice and appear to have pushed the transaction over the line: CLG (formerly the Centurion Law Group) and Mazars. Their later advice downplayed previous warnings given to CEF about the purchase, which has serious implications for the state and the public. Given these implications and risks, the question at hand is why the board of CEF did not heed the earlier warnings. CLG and Mazars' advice in 2023 The documents provided to Open Secrets by the Organisation Undoing Tax Abuse (Outa) reveal that CEF initially received advice from Mazars, the lead transaction adviser, as well as Ceris Engineering and law firm Fasken. Together, the advice highlighted the significant liabilities that any purchaser of Sapref would take on and warned against allowing Shell and BP to walk away without paying towards these. These were discussed in detail in the first article. However, the transaction advice provided by Mazars and CLG after the KZN floods told a different story. For instance, the 2021 due diligence undertaken by Certis Engineering estimated decommissioning costs of the refinery were around $374-million (R6-billion). Its advice was that 'the Buyer [CEF] should ensure that at least $374m is provided for before giving the Seller a clean break ' (emphasis added). The 2021 advice from Mazars also used this figure as the estimated decommissioning liabilities. In 2024, Shell and BP paid just R335-million to cover some employee and operational costs as part of the final deal and walked away with a 'clean break', exempting them from any decommissioning costs. We asked Shell and BP what they had estimated as the decommissioning costs of the refinery, as well as the amount that they ended up paying to CEF, but they declined to comment, citing confidentiality. Without any explanation, the 2023 transaction advice from Mazars and CLG suddenly estimated that the total liabilities associated with the refinery were only R1.6-billion – including both soil and groundwater remediation, and decommissioning costs. There is nothing in the documents explaining how the full liabilities were now only around 25% of the initial 2021 estimates of only the decommissioning costs. We asked Mazars to explain the change in the estimates, but they did not respond to Open Secrets' questions. This is particularly confusing given the extensive damage done in the 2022 floods. However, using this figure allowed Mazars to state that the purchase would result in a net asset value (NAV) of R1.1-billion. The other notable difference in the 2023 advice from Mazars is that there is much less detail provided about the economic risks facing the future of the refinery sector, including the threats posed to its viability by the electrification of the transportation sector. This is a notable omission because, in the intervening period, the South African state had made new energy vehicles (NEV) a 'priority area' in terms of South Africa's Just Energy Transition Investment Plan (JET IP). The initial due diligence said any significant shift to NEV vehicles risked making Sapref a stranded asset very quickly. The advice received in 2023 aligned more closely with CEF's existing narrative – focusing on the strategic value of reducing fuel imports to South Africa, noting that 'opportunity has arisen [for CEF] to become an influential player in liquid fuels'. It repeatedly stresses the growth in fuel imports and the strategic importance of securing supply locally. The document makes no mention of a 2022 warning from the South African National Energy Association (Sanea) that the arguments around security of supply were no longer applicable given the global refining market, also arguing that the refinery could become a stranded asset in as little as 10 years. There were also apparent errors in the 2023 advice. For example, it stated that the refinery's operations 'currently contribute R45-billion to GDP' and 'sustains 780 direct jobs' and up to 85,000 people through contractors, indirect, and induced jobs. It is not clear how these figures were calculated given the refinery had been shut down and underwater for several years. In fact, Sapref had undertaken mass retrenchments and no maintenance. Yet despite downplaying the economic risks and talking up the future positive impacts of the Sapref refinery, even the 2023 Mazars/CLG advice did not totally ignore the risks of taking on the refinery's liabilities on the 'clean break' principle. It labelled the risk of this as 'high' and noted that CEF should either obtain third-party insurance against possible future claims and liabilities or establish a dedicated separate fund for these future risks. In line with the earlier legal review from Fasken, Mazars noted that one of these risks was class action claims in the future by communities near the refinery. It warned the CEF that the claims could be 'exorbitant and far-reaching', citing the R5-billion silicosis class action case that was settled in 2016 and noting that BP and Shell had refused to include these types of claims in the sale and purchase agreement (SPA). Despite these warnings and the host of other concerns raised in the earlier due diligence, it was announced that CEF had purchased Sapref a mere month after Mazars and CLG presented this advice to CEF's board in April 2024. A problematic partnership seals the deal There is one other notable way that the Mazars transaction advice documents from 2023 differ from those in 2021. At the end of the slides provided in 2023, there is a contact person listed from another organisation; CLG, formerly the Centurion Law Group. The later transaction advice given to CEF by Mazars lists two contact people: Taona Kokera, a director at Mazars, and Oneyka Ojogbo, a director and lawyer from consulting firm CLG. Mazars acted as the lead transaction adviser from 2021 through to its completion, and there is only one other mention of CLG in the documents that Open Secrets has access to: in a number of comments made in track changes on the draft Sale and Purchase Agreement (SPA) between BP, Shell and CEF dated 2 May 2024, a couple of weeks before the purchase was announced. Founded by prominent oil and gas lobbyist NJ Ayuk, who has since stepped down as CEO, CLG is often referred to in the media as a 'South African legal firm'. However, it is not registered with the Legal Practice Council and is more accurately understood as a typical professional services firm that provides a broad range of consulting, legal and other services under one roof. CLG has 25 offices and more than 300 attorneys and 'business advisers', with major offices in nine African countries, including its Sandton office in South Africa. CLG describes itself as an 'undeniable leader' in oil and gas development. Its office at Suite 43, Katherine and West, in Sandton, is the same address linked to the African Energy Chamber (AEC), where Ayuk is chairperson. The AEC is overtly an oil and gas lobby organisation aiming to attract investment and build capacity in the oil and gas sector across Africa and hosts the annual 'African Energy Week' in Cape Town, focused on developing the oil and gas sector across the continent. There is also a notable South African political connection in the AEC. Nosizwe Nokwe-Macamo is on the advisory board, and sits on the 'Local Content Committee', 'Investment Committee', and 'Natural Gas Committee' of the advisory board. Nokwe-Macamo was the CEO of PetroSA for three years between 2012 and 2015, but was suspended and ultimately left after the state-owned entity posted a nearly R15-billion loss in 2015. In 2024, she made a return to state-owned oil and gas when she was appointed by Gwede Mantashe to the board of the brand-new South African National Petroleum Corporation (SANPC). It is unclear when exactly CLG was contracted to work on the project, but the advice that it contributed to was certainly more supportive of the decision to purchase the refinery and more bullish on the future of the oil refinery business. Their advice on this transaction also overlapped with the period Mazars and CLG were giving dubious advice to CEF's then subsidiary – PetroSA – on a separate oil and gas deal. In February 2025, amaBhungane revealed that Kokera had led the Mazars team that gave the green light to three dubious deals between PetroSA and Gazprom, and PetroSA and Lawrence Mulaudzi. Mazars was brought on to advise on the deal in September 2023 and provided a final due diligence report in October 2023. The due diligence labelled Mulaudzi as a 'low-risk' partner, despite publicly available information that he had been involved in alleged corruption in his own business dealings. The PetroSA deal fell apart in June 2024 after Mulaudzi and EquaTheza failed to provide the R227-million that was promised. Mazars has come under fire for its involvement in this deal for several reasons. The final due diligence report it provided was insufficient and left out crucial details it had identified in earlier due diligence about the risks associated with Mulaudzi, his company Equator Holdings, and the financial and technical capabilities that EquaTheza had to take on a project of this nature. Mazars has denied any wrongdoing. Additionally, Mazars was also accused of overcharging PetroSA for the work it did. Mazars had sub-contracted CLG in its work for PetroSA, and Ojogbo had billed as if she had worked on the project from 8am to 7pm every day of the week for two months, charging R4,160 per hour. PetroSA's internal audit team alleged that Ojogbo and Mazars had engaged in 'double dipping'. PetroSA has since written to Mazars, demanding a refund of just over R1-million, but it is unclear whether this has happened. Additionally, the audit team raised questions around Mazars' potential blacklisting by National Treasury for future business with the state if Mazars had, in fact, overcharged and underdelivered. PetroSA's internal audit team also pointed out that CLG had an obvious conflict of interest. In advising PetroSA, they would draft contracts and undertake due diligence on Mulaudzi and his companies. Yet Equator's bid to PetroSA listed CLG as its partner. Mazars and CLG – led by Kokera and Ojogbo – were thus advising CEF on its decision to purchase the Sapref refinery at the same time as providing advice to PetroSA which has since been called into serious question. Both Mazars and CLG failed to respond to detailed questions from Open Secrets regarding the due diligence, the discrepancies in the transaction advice provided to CEF in 2021 and 2023, and their views on the serious concerns raised by other firms in the due diligence process. CEF board signs off and then stalls Regardless of the motivations of those providing the advice to CEF, its board – chaired by Ayanda Noah – still had the responsibility to carefully apply its mind to all of the advice before making the decision to purchase the refinery and on what terms. The scramble to create the South African National Petroleum Company (SANPC), a merger of CEF's subsidiaries – PetroSA, Strategic Fuel Fund and iGas – to spur investment in the country's oil and gas sector has also been a large factor behind the acquisition of Sapref. While it is speculative, it may be that the desire to rapidly consolidate the SANPC and expand its operations led the CEF board to gloss over the very real consequences of purchasing a defunct refinery, taking on its enormous liabilities and the myriad risks identified in the due diligence phase. Despite the more positive tone of the later advice from Mazars and CLG, it still called for further due diligence and a 'comprehensive review of financial records, legal documents and environmental assessments'. Crucially, the CEF board motivated to proceed with the sale just one month after receiving this advice, insufficient time for a further comprehensive due diligence process. Open Secrets sent detailed questions about the transaction to both the Central Energy Fund and Department of Petroleum and Mineral Resources but received no response from either. Since the purchase, CEF and the SANPC (now officially in operation and staffed) have argued that the rehabilitation of the refinery is the answer to national energy security and job creation. They have repeatedly indicated their aim to increase the refinery's capacity from 180,000 barrels per day to 600,000 barrels (bbl) per day, to create a 'mega-refinery'. Yet there is no sign of any progress in this regard. In fact, in February 2025 reports arose suggesting that the state was realising it could not afford to rebuild the Sapref refinery nor expand its capacity to 600,000bbl on its own. Deputy director-general in the Mineral and Petroleum Resources department, Tseliso Maqubela, and Minister Gwede Mantashe told Parliament in February 2025 that they were looking to regional partners – including Angola's Sonangol or Botswana Oil – to help rebuild the refinery. The state thus now sits with a defunct and out-of-date refinery with enormous social and environmental liabilities. It may not have the capital to get it going again, and even if it does, many experts suggest it will be a stranded asset in the near future. Its former owners, Shell and BP, have disappeared into the sunset. All the while, the communities of South Durban continue to bear the disastrous health costs and environmental devastation caused by the refinery. DM Open Secrets is a nonprofit organisation which exposes and builds accountability for private-sector economic crimes through investigative research, advocacy and the law. To support our work including the investigations that go into the Unaccountable series visit Support Open Secrets
TimesLIVE
15 hours ago
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From turbulence to take-off: Transport minister reveals SAA is flying back into profit and expansion
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The Citizen
16 hours ago
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