Funding for Women-owned Businesses in South Africa

19th ,September, 2022
SME Guides

While the country has made some gains in supporting women entrepreneurs, access to funding for women-owned businesses in South Africa, continues to be a challenge.

Female entrepreneurship continues to be on the rise with many South African women rising to the challenge of launching their own ventures, while also contributing to the development of their communities.

The South African results of the latest Mastercard Index of Women Entrepreneurs Index (MIWE), shows that South Africa moved up nine places (a 7.1 percent increase) from 2019 to rank 23rd globally and 1st in Africa on the 2020 Index. The index measures how supportive entrepreneurial conditions are as enablers or constraints of women business ownership.

Despite this, women continue to face greater difficulties in becoming and succeeding as entrepreneurs and continue to be in the minority in South Africa’s entrepreneurship landscape. Research by Facebook in partnership with the World Bank and OECD, shows that while women make up half of the country’s population, only a third of businesses in South Africa are women-led. Across Sub- Saharan Africa female participation in (business) ownership averages over 25%, according to a report by the African Development Bank, ‘Affirmative Finance Action For Women In Africa‘.

Many of the benefits that are to be gained from female entrepreneurship are lost as a result. According to a report by the African Development Bank, “unlocking investment in African women holds incredible returns and transformational impact potential”.

In an interview with SME South Africa, Irene Ochem, founder and chief executive officer of Africa Women Innovation and Entrepreneurship Forum (AWIEF), a pan-African women economic empowerment organisation, highlighted the following advantages.

“Unlocking the economic potential of women makes economic and social sense.

“It increases women’s bargaining power, positively affects economic growth and national incomes, makes for greater job and wealth creation and ultimately benefits the greater economy leading to a more inclusive and prosperous Africa.”

Ochem’s organisation works to unlock opportunities for women-owned and women-led businesses whilst driving the agenda for women entrepreneurship in Africa.

According to research by Development Economics, women-owned businesses established between 2018 and 2022 may generate about R175 billion a year and create close to 1 million jobs. Globally, a McKinsey Global Institute study found that advancing women’s equality could add $12 trillion to the global economy by 2025.

Women Entrepreneurs And The Funding Gap

The gender gap means women continue to face challenges of disproportionate number and scale when compared to their male counterparts.

Some of the gender-related structural and social obstacles that women face, highlighted by economist, entrepreneur, and writer, Trudi Makhaya, in the article ‘The Reality Of Being A Female Entrepreneur In SA’ are:

  • A lack of capital and assets
  • Fewer business-oriented networks in their communities
  • Lower status in society
  • Higher levels of domestic responsibility, and
  • Culturally-induced lack of assertiveness and confidence in their ability to succeed in business.”

Where the gender gap is most evident is with the lack of access to financing, which affects women’s ability to take advantage of economic opportunities and access resources to enable them start, build and grow businesses.

According to the African Development Bank report, female entrepreneurs have limited access to finance in comparison to their male counterparts.

“[Women] find it difficult to secure financing from banks and other financial institutions due to inherent biases in the system, such as the lack of appropriately designed financial products, weak institutional capacity and lack of incentives within banks to target and lend to women.”

The same report estimates that the total financing gap for women in Sub-Saharan Africa is USD 42 billion. Startups and micro businesses, which are dominated by women, are the most underserved in the formal business market and represent the largest funding gap (the Finfind ‘SA SMME Access to Finance Report’). According to the Small Enterprise Development Agency (SEDA), 72% of micro-enterprises and 40% of small enterprises are currently owned by women.

Read more: Access the Funding for Women-owned Businesses in South Africa Round Table featuring some of the country’s foremost thought leaders, investors, CEOs, founders, and other ecosystem stakeholders.

Part 1 – Get insight into network exclusion and gender-bias challenges faced by women entrepreneurs. Read more

Part 2 – A look at the innovative ways female entrepreneurs are navigating the obstacles they face accessing financing and what’s needed to change the status quo including more women-focused models of funding and female decision-making investors. Read more

Download Sme South Africa’s ‘female Entrepreneurship & Funding’ Case Studies

Learn more about the funding journeys of 4 local women entrepreneurs who are behind some of the country’s most Bankable, Scalable and Future-fit businesses.

What’s inside:

  • The strategies they used to secure funding.
  • The impact of business funding on their businesses’ growth.
  • How they navigated the challenges they faced during the application process.
  • Their advice for other female entrepreneurs.
Institutional Support

To close the gender gap in the economy, women need more public and private sector support. Some of the interventions that have been identified are more women-focused lending institutions and inclusive financing models, gender equity at fund management and deployment level and more female-focused government and private programmes and funds.

There are, however, government and private enterprises with programmes and funds in place aimed at providing access to funding for women-owned business in South Africa

Some of the funding programmes for women-owned businesses in South Africa are:

  • Industrial Development Corporation’s Women Entrepreneurial Fund – provides access to entrepreneurial funds for women business owners.
  • NEF Women Empowerment Fund – empowers businesses owned and managed by black women entrepreneurs.
  • Business Partners Women in Business Fund – funds female-owned businesses (at least 50%) that are commercially viable with female owners active in the business.
  • Isivande Women’s Fund – aims to accelerate women’s economic empowerment by providing affordable, usable and responsive finance.
  • Enablis Acceleration Fund – funds black- woman owned businesses in all sectors, specifically ICT, transport, tourism, agriculture and the services industry.

ACCESS THE FULL list of funds and financial assistance programmes that provide funding for women-owned businesses in South Africa. 

Female Entrepreneurship Support Networks

We are seeing a huge number of female entrepreneurship support networks, both formal and informal, that enable women business owners to work together, expand and grow.

Networks can help entrepreneurs to access to funding and can be a good source of information about funding opportunities.

She Leads Africa is an entrepreneurial incubator aimed at advancing female entrepreneurship on the African continent and the diaspora. The organisation has grown to an impressive community of 400,000 upwardly mobile members across the continent

AWIEF is an award-winning women economic empowerment organisation that supports women entrepreneurs in Africa to grow their business

The Future Females platform helps women business owners to connect and collaborate with each other, and access the resources they need to succeed

Dream Girls Academy provides women and girls with access to opportunities, professional and personal development information as well as skills for the future.

Xtraordinary Women fosters a community of women entrepreneurs through events and educational resources.

Girlhype offers girls from disadvantaged backgrounds the skills to pursue careers in tech and build a long and lasting successful career or launch businesses in the tech industry.

Funding for Women-owned Businesses in South Africa | CASE STUDIES
Case Study #1
  • Sweepsouth
  • Website: Sweepsouth
  • Owner: Aisha Pandor

Aisha Pandor is a tech entrepreneur who launched Sweepsouth with co-founder Alen Ribic. The tech platform, that launched in 2014, provides on-demand cleaning services in Cape Town, Durban, Johannesburg and Pretoria.

In 2015 the founders were selected for the Silicon Valley-based accelerator programme, 500 Startups. As part of the experience, Pandor had access to other female startup founders from Silicon Valley and around the world.

She had the following to say about some of the challenges she has observed women startup founders navigate when raising VC funding.

“Not being taken seriously by male entrepreneurs and VCs, having to work doubly hard for the same results or recognition as males.

“Having to present to panels, to male VCs and face questions about their personal lives that male counterparts are never asked (about relationship status, family planning, balancing family life with startup responsibilities etc.).”

Despite these challenges, in 2015 Sweepsouth completed a series of seed funding rounds from a team of tech investors, led by Newtown Partners and including Africa Angels Network (AAN) and Identity Development Fund (IDF).

In 2019, Sweepsouth was the first tech startup to receive an R30 million investment from Naspers’ newly launched R1.4-billion venture capital (VC) fund, Naspers Foundry. The R1.4 billion startup fund is aimed at boosting the South African technology sector. In the same year the Michael & Susan Dell Foundation invested USD 1 million into the company.

Case Study #2

Stacey Brewer, together with co-founder Ryan Harrison, co-founded SPARK Schools – a network of private primary schools.

They deliver accessible, high quality education by using a blended learning programme, which combines traditional classroom teaching and online learning, to individualise education for all students. SPARK Schools has 10,000 enrolled students and 21 schools in its network.

Spark Schools has raised over R300 million from angel investors and impact funds to start and grow their network of schools.

Brewer says Spark Schools has been successful in raising capital from international investors.

“It is tough to raise seed capital in South Africa where everyone is looking for a proof of concept first, and generally, the risk profile of investors is very conservative.

“It seems that more international impact funds are willing to take a risk on an early stage business and want to ensure that it [achieves both] impact and returns as opposed to pure commercial returns.”

Brewer is a member of the Endeavor Network for high-growth entrepreneurs around the globe.

Case Study #3

Salamina Mosese is the co-founder of Sorele Media, together with Stephina Zwane. The film and TV production house raised R5,8 million from the Emerging Black Filmmakers Transformation Fund, managed by the Industrial Development Corporation (IDC), the Department of Trade and Industry (DTI) and the National Film and Video Foundation (NFVF).

With the financing, the company was able to successfully launch their film project, Baby Mamas.

Mosese’s advice for other women looking for funding is to prepare for the long process ahead.

“It is by no means an easy process; in fact, I am starting to believe that it does not get easier no matter how many times you do it.

“However, in the film industry, the government has tried to create avenues to get new players into the industry – something that you don’t find in other countries, so people must at least try to tap into this help offered and apply, apply and apply.”

She continues.

“Rejection is also a difficult by-product of the whole process. We were rejected twice for our film, Baby Mamas, and it was only on our third try that we finally got funded. So, one might need to keep going back to the drawing board. Try to not to give up until something gives.”