Gerrie van Biljon – Executive Director Business Partners Limited

It takes a brave and very optimistic person to believe that the economic position will change for the better in 2012. There are just too many negative sentiments in the market to bet on a major economic turnaround in the New Year.

The global economic condition is by no means encouraging and country rescues are a common phenomenon. Consider the position in Greece and many other European countries only to realise that the economic meltdown has not turned the corner.

How does this affect the South African economy and the SMEs in particular? SA is a global player and we have not skipped the effect of the global economic condition. The effect in South Africa has been less severe, but these economic conditions resulted in many businesses closing down or in many cases, moved to survival mode.  The economy today is so integrated and inter linked that no industry was saved and no small business owners.  SMEs are dependent on mainly large customers (such as Government and Corporates) or the general public. These are all experiencing difficulties and the man in the street has less disposable income.

It is specifically those who are offering products or services in the category of discretionary spend that are vulnerable. This is where the customer has a choice to buy or commit but can do without it. Consider the drops in the level of luxury spend and it is clear that this market is severely affected. Consumers stick to basic spent and think twice before committing themselves.

Some industries are feeling the brunt more than others. Those in the tourism industry have been negatively affected and to ensure their existence tomorrow will require a very effective business model. This means customer service, an attractive product offering and an effective marketing strategy are non-negotiables to stay in business.

Each entrepreneur offering a product or service will be forced to revisit the business model. This is not all negative and it allows the opportunity to question what is done. The fact that the model worked for some time is not to say it is relevant going forward. It forces new perspective, a new look and approach to the business.

One can expect that cash flow will be tight. Difficult times force business people to focus, enforce discipline and ensure that controls are in place. The mediocre approach towards the running of the business may not be good enough. More focus will be on client care and only those who operate in a different class will remain standing.

Even in difficult times, business opportunities come about. With the right frame of mind, a positive attitude and an eye for business, chances are spotted. A major challenge for every business owner today is to retain good staff. It is a judgement call when to let a staff member go because of affordability and when to bite the bullet to have these skills in place when the economy turn. This is often a very difficult decision.