The time has arrived for capital markets that are open to all
South Africa, which has navigated a tough period of crippling load shedding, high interest rates, ballooning costs and teetering on the edge of a technical recession, has turned the corner. The mood has shifted after this year’s elections and the negotiated government of national unity (GNU).
The lights have been on for months, interest rates are coming down, the Rand is more stable than it has been in a long time, and according to Rand Merchant Bank and the Bureau of Economic Research, business confidence rose by five points in the second quarter, and then by another three in the third. If ever there was a time to be positive, it is now.
Yet, despite this tangible sense of optimism, entrepreneurs at the helm of some of the country’s most exciting, high-potential businesses struggle to find an easy way to raise capital to fund their growth. This is a common problem, growing companies need capital to scale up faster, but where do they get it without taking their eye off the ball? After struggling to secure a loan from the bank, many believe they have only two options left: The public markets or private investment. The former most often takes too long and is too costly to bear and the latter is beset with liquidity challenges and insider clubs.
Traditional capital markets are notoriously slow, costly and full of red tape that is just too onerous for many businesses in their scale-up phase to contemplate. This isn’t a criticism of South Africa. This is just the way capital markets work anywhere in the world. The barriers to entry are too high. Don’t take it from me, ask any entrepreneur who is stuck in the “missing middle” – no longer a startup but too small to list and seen as too risky for a loan.
Attention then turns to the venture capital or private equity sector. This sector is crucial to the growth of many good businesses, but the ecosystem remains largely unplatformed and the cost of capital is high, which reduces the attraction for broad segments of investors.
If only there were another way to raise capital, a business owner might lament.
Well, now there is.
It is clear that the capital markets should be open to all participants. In order for capital markets to be open to all, they need to keep pace with digital advancements. We live and work in a deeply digitised world. If entrepreneurs want to attract modern investors at scale, they need markets that aren’t stuck in a pre-digital age. How does this look in practice?
We are moving into the era of Finance 3.0, which signals a shift towards a more inclusive and efficient financial system, made possible by digital platforms, tools and channels that make raising capital easier and more transparent.
As a licensed Financial Services Provider, Mesh.trade is a digital capital markets platform that enables businesses to raise capital by issuing fully compliant, tokenised financial assets, such as equity or debt, directly from investors, through a primary market issuance. Beyond this, it enables secondary market trading of assets to stimulate liquidity, and it automates the management of the asset’s corporate actions throughout its lifecycle, such as maintaining an up-to-date asset register and executing regular dividend or coupon payments. All of this capability is built on the blockchain meaning it’s quicker, more secure, and it comes at a fraction of the cost of the traditional markets.
And so, as the country basks in the glow of cautious optimism, and high-growth potential businesses investigate ways to break out of the missing middle, a modern, open capital markets platform such as Mesh provides the opportunity for entrepreneurs to issue tokenised, real world financial assets to a pool of investors hungry for growth. That’s what open to all means.
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For more press information, please contact:
Connie Bloem, Product owner of Mesh:
hello@meshtrade.co / +1 604 671 4515