Why SMEs Need Governance, Not Just Growth

Tebogo Moraka
Feb 7, 2023
2 min read

For many small and medium-sized enterprises (SMEs), growth is the singular focus - increasing revenue, expanding customer bases and raising capital. But growth without governance is like building a house without a foundation. It may stand for a time, but cracks eventually appear. Governance provides the structure, transparency and accountability that allow SMEs not only to grow but to thrive sustainably.

The State of SMEs in South Africa

SMEs contribute roughly 34% of South Africa’s GDP and employ about 60% of the workforce.
Despite this, studies show that 80% of SMEs fail within the first five years, with poor governance and weak financial management as leading causes.
Many SMEs operate informally, without clear decision-making frameworks, succession planning or compliance systems - leaving them vulnerable to shocks, disputes and missed opportunities.

Why Governance Matters for SMEs

Investor & Lender Confidence: Strong governance signals stability, improving access to funding and capital. Investors want assurance that financials are transparent and risks are managed.
Risk Management: SMEs often underestimate legal, reputational and operational risks. Governance frameworks help identify, monitor and mitigate these risks before they escalate.
Strategic Clarity: Governance creates discipline in decision-making. Clear structures reduce conflict, align management with strategy and prevent “founder dependency.”
Scalability & Succession: Without governance, growth becomes fragile. SMEs need succession planning, board advisory input and accountability mechanisms to scale sustainably.
Compliance & Market Access: As supply chains professionalise, corporates increasingly demand suppliers who meet governance standards - from tax compliance to ESG disclosures.

Growth Without Governance: The Risks

Chasing growth alone can create dangerous blind spots:

Cashflow and compliance failures.
Key-person dependency (if the founder exits, the business collapses).
Missed partnerships due to lack of formal governance structures.
Exposure to fraud or reputational harm.

Without governance, growth becomes unsustainable, exposing SMEs to risks that can undo years of progress.

The Practical Way Forward

Start Small: Governance doesn’t mean replicating corporate bureaucracy. Begin with basic policies, a clear organogram and financial controls.
Advisory Boards: Even a two-person advisory board brings external perspective and discipline.
Training & Capacity Building: Equip management teams with governance literacy.
ESG Alignment: Embed environmental, social and governance practices early; they’re becoming requirements, not optional extras.

My Perspective

SMEs are the backbone of South Africa’s economy - but too many fail because they confuse growth with resilience. As an advisor, I believe governance is not a cost but an investment in the future of any enterprise. True growth is measured not by how fast you scale, but by whether your systems, people and values can support that scale.

Conclusion & Advisory Invitation

Growth is exciting, but without governance it is fragile. SMEs that integrate governance early are more likely to attract investment, survive downturns and expand sustainably.

At Kulima Capital, I support SMEs in building governance frameworks that are practical, not bureaucratic. As a world-class African millennial, Masters-level, entrepreneurially experienced female advisor, I bring insights from working across diverse industries and business models to help SMEs grow with integrity, resilience and impact.

If your SME is serious about thriving beyond growth, let’s work together to build governance that lasts.