Johannesburg: AfricUpdate – News Desk
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.
“The private sector plays a key role not only in providing capital, but also in driving innovation and market access. Emerging partnerships with non-bank finance actors such as equity, crowdfunding, and venture capital – are promising and must be scaled to close the MSME funding gap,” the Deputy Minister said on Monday in Johannesburg. In South Africa, MSMEs represent 91% of formal businesses, provide 60% of jobs, and contribute up to 34% of Gross Domestic Product (GDP).
“Their impact is clear, and so is our responsibility to create an environment that enables their success. The informal sector also holds potential to address unemployment yet remains excluded from adequate support. It contributes 6% to GDP and 17% to employment but continues to struggle with growth and productivity,” Sarupen said. He was addressing the Global SME Finance Forum – an official side event of the G20 Global Partnership for Financial Inclusion Working Group.
“In line with the G20/ Organisation for Economic Co-operation and Development (OECD) Principles on SME Financing, we must support diverse instruments, enhance transparency, improve financial literacy, and promote timely payments. Together, we can build ecosystems that are inclusive, sustainable, and future-ready,” he explained. South Africa’s efforts include the National Treasury’s Financial Inclusion Policy, approved in 2023, which sets a framework to build a more inclusive financial sector. It 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. Diversifying sources of finance makes MSMEs more resilient, especially high-potential firms and start-ups that may not be suited to traditional debt. Supporting MSMEs through platforms like the Johannesburg Stock Exchange (JSE) is key,” Sarupen said. He identified Sweden’s Nasdaq First North as a model that South Africa can learn from for SME capital raising.
“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) are crucial in expanding access to finance, particularly for businesses that are unable to secure commercial credit. Beyond finance, MSMEs face challenges in accessing markets, acquiring skills and technology, and navigating complex regulations. Operation Vulindlela Phase 2 is helping address these through structural reforms. Unlocking MSME potential requires a holistic approach – combining capital, skills development, digitalisation, and supportive policies,” the Deputy Minister said.
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, and it will run through to November 2025, under the theme: “Solidarity, Equality, Sustainability.” It has placed financial inclusion at the centre of the G20 agenda. The National Treasury’s focus is on advancing individuals from access to usage – ensuring that financial tools are used regularly and effectively to build resilience and inclusion.
According to the Deputy Minister, 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, with a strong emphasis on underserved groups – women, youth, small businesses, and informal workers.
“The Paper identifies critical areas for action, including improving financial literacy, strengthening consumer protection, and designing products that meet the needs of the communities we serve. This work is coordinated through the Global Partnership for Financial Inclusion (GPFI) Working Group, which falls under the G20 Finance Track. Through this deliverable, the National Treasury is not only setting a policy direction but laying the foundation for MSMEs’ inclusive, sustainable growth that is measurable and impactful.” he said.
South Africa is also actively supporting the Implementation Framework of the G20 Global Partnership for Financial Inclusion Action Plan for MSME Financing. This has led to collaborations with both G20 and non-G20 countries to share insights, innovations, and challenges in advancing MSME finance.
