Johannesburg: The Deputy Minister of Finance, Ashor Sarupen, has emphasised the importance of governments, the private sector, development finance institutions, and multilateral partners working together to create an enabling environment for Micro, Small and Medium Enterprises (MSMEs) to succeed. Addressing an official side event of South Africa’s Group of Twenty (G20) Presidency, Sarupen highlighted that MSMEs are the backbone of every economy – accounting for over 90% of businesses globally.
According to South African Government News Agency, Sarupen stated that the private sector plays a crucial role in providing capital, driving innovation, and facilitating market access. Emerging partnerships with non-bank finance actors, such as equity, crowdfunding, and venture capital, are promising avenues that need to be scaled to bridge the MSME funding gap. In South Africa, MSMEs represent 91% of formal businesses, provide 60% of jobs, and contribute up to 34% of the Gross Domestic Product (GDP).
Sarupen noted the significant impact of MSMEs and the responsibility to create an environment that enables their success. The informal sector, contributing 6% to GDP and 17% to employment, holds potential to address unemployment but remains excluded from adequate support due to growth and productivity challenges. He addressed these issues during the Global SME Finance Forum, an official side event of the G20 Global Partnership for Financial Inclusion Working Group.
Aligned with the G20/Organisation for Economic Co-operation and Development (OECD) Principles on SME Financing, Sarupen stressed the need to support diverse financial instruments, enhance transparency, improve financial literacy, and promote timely payments. He advocated for building ecosystems that are inclusive, sustainable, and future-ready.
South Africa’s efforts include the National Treasury’s Financial Inclusion Policy, approved in 2023, which establishes a framework to build a more inclusive financial sector. This policy focuses on deepening inclusion for individuals, expanding access to MSMEs, and diversifying financial channels. Since its adoption, the policy has improved coordination among stakeholders and highlighted the need for legislative reforms and alternative financing instruments to reduce information gaps.
Sarupen pointed to Sweden’s Nasdaq First North as a model for SME capital raising that South Africa can learn from. Mechanisms like the Khula Credit Guarantee Scheme and institutions such as the Industrial Development Corporation of South Africa Limited (IDC) and National Empowerment Fund (NEF) play crucial roles in expanding access to finance, particularly for businesses unable to secure commercial credit. He also highlighted the challenges MSMEs face in accessing markets, acquiring skills and technology, and navigating complex regulations, which Operation Vulindlela Phase 2 aims to address through structural reforms.
Operation Vulindlela Phase 2 is a joint initiative between the Presidency and National Treasury to accelerate the implementation of structural reforms to enable economic growth and job creation. South Africa assumed the G20 Presidency on 1 December 2024, running through to November 2025, under the theme: ‘Solidarity, Equality, Sustainability’. Financial inclusion is central to the G20 agenda, with the National Treasury focusing on advancing individuals from access to usage, ensuring financial tools are used regularly and effectively to build resilience and inclusion.
The Deputy Minister emphasized that South Africa’s G20 Presidency Priority Paper, ‘Moving from Access to Usage,’ provides valuable insights into innovative approaches to enhance the use of financial services across payments, savings, credit, insurance, and remittances. The focus is on underserved groups, including women, youth, small businesses, and informal workers. The Paper identifies critical areas for action, such as improving financial literacy, strengthening consumer protection, and designing products that meet the needs of communities.
South Africa is actively supporting the Implementation Framework of the G20 Global Partnership for Financial Inclusion Action Plan for MSME Financing, leading to collaborations with both G20 and non-G20 countries to share insights, innovations, and challenges in advancing MSME finance.