In September, Johannesburg hosted the Global SME Finance Forum 2025, a sideline event of South Africa’s G20-B20 presidency. The conversations on these platforms centred on the cost of capital for African small and medium-sized enterprises (SMEs) remaining too high.
Unless financing becomes more affordable, accessible and better matched to entrepreneurs’ realities, the continent’s growth story will not achieve its full potential.
A major factor in the high cost of capital is overestimated risk in Africa due to limited data availability compared to developed economies. Having rating agencies and investors engage more directly with African businesses can lead to fairer risk assessments. This improved understanding can reduce risk premiums and thus lower capital costs.
African SMEs face additional challenges that result in a higher cost of capital, which inhibits economic growth potential. That extends beyond high interest rates to hidden frictions such as compliance delays, currency volatility and fragmented trade systems that increase the effective cost of doing business. Addressing these invisible costs alongside lending rates is crucial in enabling African entrepreneurs to compete globally.
Operating across 54 countries with diverse currencies, legal systems and regulations adds complexity and risk for SMEs. Regional harmonisation efforts, such as regulatory alignment and tariff reductions in East Africa, along with technological innovation and access, have facilitated more efficient cross-border trade. Expanding such integration and technology-driven access continent-wide would enhance SME competitiveness and efficiency.
Access to broader supply chains and export markets is vital for SME growth. Export readiness programmes and trade corridors help entrepreneurs scale up by connecting them to the broader global and regional markets, particularly in Asia and Africa.
Another challenge for SMEs is a "one size fits all" approach in accessing capital. Finance must be tailored and the appropriate capital facilities made available depending on the stage of evolution of each entity. Too often SMEs struggle to scale up due to a mismatch between the requirements of the founders/business owners and the capital providers.
Supporting SMEs must go beyond financial products to include capacity development. Many exceptional business owners and entrepreneurs are required to have a broad set of expertise that does not relate to the core requirements of their businesses to scale and grow. The appropriate capacity and support to deal with these additional requirements efficiently may be a significant turning point in the growth of several SMEs.
Women-owned SMEs, despite strong performance, remain underfunded. True inclusion requires mentoring, procurement integration and policies to dismantle entry barriers. When women entrepreneurs succeed, positive impacts multiply across families and communities.
Sustainability is now essential, with more than R450bn targeted for sustainable finance mobilisation between 2022 and 2028. The recently launched Sustainability Academy equips SMEs with skills to measure environmental footprints, improve resource efficiency, and access green finance. Early integration of sustainability practices positions SMEs for future market access and growth.
Africa’s domestic capital pools, especially in South Africa, represent an underutilised resource. Banks, insurers and pension funds could play a larger role in funding infrastructure and enterprise growth, thereby reducing overall capital costs.
African entrepreneurs are ambitious and innovative but require affordable, appropriately structured capital, predictable regulatory environments, and ecosystems that reduce friction. Lowering both visible and hidden costs, aligning finance with business life cycles, and investing in capabilities, inclusion and sustainability will transform SME statistics into tangible growth and foster a more inclusive, resilient Africa.
• Blackie is the CEO of Standard Bank Business and Commercial Banking
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