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 Deflated SME confidence levels result of economic uncertainty


 In the current economic landscape, South African businesses find themselves fighting to overcome one headwind after the next. This constantly changing environment is negatively impacting small and medium enterprises (SMEs) and business owners’ growth projections for 2016. As a result SMEs’ confidence levels about economic and business growth declined significantly in the last quarter.

This is according to Ben Bierman, Chief Financial Officer of Business Partners Limited (BUSINESS/PARTNERS), who was commenting on the overall sentiment of business owners and the findings of the latest Business Partners Limited SME Index (BPLSI), which measures the attitudes and confidence levels of South African SME owners.

The Q4 2015 BPLSI revealed a significant decline in confidence levels that the South African economy will be conducive for business growth in the next 12 months – a decrease of 6 percentage points from the third quarter to a recorded confidence level of only 51%.

“In 2015 SME owners faced challenges such as load shedding and the implications it brought about. As if the drought and water-shedding was not challenging enough, the broader economic events such as the firing and re-hiring of the Finance Minister, and a number of international developments – such as sluggish growth in global markets, adverse exchange rates and the lack of exports – all had a notable impact on SME owners’ confidence levels as they started preparing for 2016,” says Bierman.

The BPLSI also revealed a sharp decrease in business owners’ confidence levels relating to the ease of access to business finance in the next 12 months – a decline from 51% in the third quarter to 44% this quarter. Confidence levels are also down 9 percentage points y/y.

Bierman says that this drop in confidence is a real concern. “From a broader economic perspective, it appears as if credit extension from financial institutions will be under pressure as a result of increased interest rates as well as the high levels of uncertainty in the economy. A vital part for any SME’s growth and sustainability is access to funding, and these confidence levels reveal that the average SME owner is concerned about being able to access bridging capital or financing to ensure that their business can ride out this economic storm in the next six to nine months.”

The other noteworthy concern that the BPLSI fourth quarter report highlights, is SME owner’s ability to find staff with the right skills-set and experience to facilitate the growth of their business, with the average confidence level decreasing significantly by 8 percentage points from the third quarter to 55%. “This could be attributed to the debates which were taking place in December 2015 regarding the Annual National Assessments (ANAs) and the anticipated Matric results , combined with a general uncertainty in the ability of the country’s universities to adequately prepare and equip students for the jobs available in the market,” says Bierman.

Business owners have average confidence levels of 38% that the current labour laws are conducive to the growth of South Africa businesses – a decline of 8 percentage points q/q. “While there hasn’t been any amendments to labour laws to suggest this decrease in confidence, the broader economic uncertainty and the Government’s perceived ability to facilitate growth in the SME industry is weighing on SME’s minds.

“We hope that the upcoming Budget Speech will provide clarity on these matters, especially with regards to the role that Government will play in uniting business and labour behind an economic plan that will prevent a ratings downgrade and maximise our economic potential.”

However, amidst the concerns and waning confidence, Bierman suggests that SMEs concentrate on strategically riding out this proverbial storm. “When you find yourself in extremely stormy waters, the natural instinct is to drop sails and wait for the storm to pass. By doing this, you lose control especially the ability to navigate out of the storm or situation. SMEs should therefore continue to manage their businesses pro-actively, plan for the adverse headwinds that they might face and choose a direction to steer their businesses toward. It is especially important to carefully estimate their cash flow to ensure they know in advance whether they need additional capital to face the challenges successfully,” concludes Bierman.




SMEs remain positive about growth but hesitant to hire more staff remain positive about growth but hesitant to hire more staff
Load shedding impacts SME confidence levels in SA shedding impacts SME confidence levels in SA
SMEs remain upbeat despite increasing economic woes remain upbeat despite increasing economic woes
South African SME confidence slowly on the mend African SME confidence slowly on the mend

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