The flip side is that run-of-the-mill businesses offering ordinary products and services to the South African consumer are in for a very tough year. Part of the little consumer spending that there is remains characterised by extremely worrying trends in unsecured personal loans. Many consumers are borrowing to spend on daily expenses, predicting a difficult, problematic recovery.
This is bad news for any business relying on consumers’ discretionary spend. Luxury products or even relatively minor purchases such as eating out will remain under intense pressure. Businesses that sell essential items will be slightly better off, but not much. Even steady movers such as fuel are under pressure because consumers are more careful in planning trips and taking holidays closer to home, says Gerrie.
The numbers emerging from the residential home market paint a similar picture: it remains stagnant, with the only activity in the below-R1m price range. This has a major effect on all sorts of businesses ranging from contractors, maintenance services, short-term insurance sellers to swimming-pool service providers, all of whom should be ready for another year of no or very slow growth.
But Gerrie points to interesting exceptions such as the security industry. Installers of alarm systems, guarding services, fences, gates and security lighting can expect the usual solid market in 2013 because security purchases are based on emotional decisions rather than economic considerations.
He points to other positive areas that will characterise the year ahead:
- Specialist businesses in fast-changing industries such as IT and communications will still have many opportunities to pursue. The dynamism in these industries ensures constant growth for innovative players.
- Government spending and corporate outsourcing will remain the drivers in the economy in the year ahead. The economic slump means that corporates are increasingly focussing on their core business, and continue to outsource non-core functions that they previously kept in-house. Businesses that can position themselves well in these supply chains can look forward to a good year.
- Unfortunately, many of the opportunities in the present economy stem from the fact that so many businesses are sinking. Many operators occupying valuable market share are ready to throw in the towel. This is an opportunity for those entrepreneurs capable and resourced enough to take them over.
Because of the pressures, the South African franchising industry with its 570 franchisors and some 30 000 franchisees will see little growth in 2013, Gerrie believes.
Conditions have deteriorated so much that Business Partners Limited no longer sees franchising as a safer way for a beginner business owner to start up.
Gerrie says this has a lot to do with the unsupportive attitude of many franchisors who choose to milk franchisees with high management fees and royalties rather than being flexible and supportive to ensure survival.
Adding to the pressure are the large retail landlords who are showing no signs of accommodating smaller tenants through the difficult times. Rather than helping out with flexible rentals so that shopping centres remain fully occupied, the prevailing choice is to keep rentals high even if the centre stands half empty.
There is pressure on landlords to come down with rentals, but because they are mostly large institutional investors, they also face pressure from shareholders to yield a certain income stream.
Business owners’ reaction to the financial crisis of 2008 was first to absorb the drop in sales internally. After that, many started putting their personal assets and resources to use in the business. Then many started borrowing or selling off assets to keep afloat.
Most businesses have by now cut costs to the bone in an effort to survive, and chances are that little else remains to be done in the area of operational efficiency. Now is the time, says Gerrie, for business owners to think very hard about their product offering.
“You have to ask yourself: ‘Is my product still relevant? How can I change it, or add to it?’” he says. “Just because a product has done well over the past twenty years, there is no guarantee that it will remain that way.”
No matter how tough the conditions, astute entrepreneurs will always “move in between the cracks”, says Gerrie. “It has a lot to do with attitude. Those who retreat in sackcloth and ashes are never going to see the opportunities. You have to keep yourself motivated.”