Ben Bierman, the CFO of Business Partners Limited (BUSINESS/PARTNERS), says: “Despite tough trading and economic conditions, this is the highest average confidence level recorded since the inaugural BPLSI in the second quarter of 2012 and proves that local business owners remain optimistic in the face of strong adversity.”
Bierman adds that the small business tax relief announced in the 2015 Budget speech could have added to the confidence levels. It was announced qualifying businesses with an annual turnover below R335 000 will be exempt from tax, with the maximum rate being reduced from 6% to 3%. “The current confidence levels seem too high however we expect this confidence to decline in the second quarter as the cost of doing business rises due to an increase in electricity, water and fuel costs.”
The BPLSI also reported a 7 percentage point q/q and 8 percentage point y/y increase in SMEs average confidence levels (60%) that the SA economy will be conducive for business growth in the next 12 months.
“When respondents were asked what their main challenges are for the upcoming six months, the list ranged from load shedding issues, government credibility, challenging labour practises and regulations, a rising crime rate and the weakened Rand.
“However, despite the immense challenges the private sector is grappling with to survive, entrepreneurs understand the importance, and need, to remain positive to avoid the negativity from affecting their business’ performance.”
The average importance level of access to finance for the growth and stability of business moved up to 79% – a 3 percentage point q/q and 5 percentage point y/y increase and the highest percentage recorded since the index’s launch in 2012. SMEs’ average confidence levels that the ease of access to business finance will improve in the next 12 months revealed a 2 percentage point q-q decline from 53% to 51%.
He adds that respondents also listed funding as the key requirement needed by entrepreneurs from Government.
Bierman says that another positive point picked up this quarter’s BPLSI is SMEs’ confidence that their clients will pay them within the stimulated time, which he says is an on-going battle for small businesses operating within the private and public sectors. An average confidence level of 69% was recorded during the first quarter 2015 – a 7 percentage point increase from the fourth quarter 2014 (62%) and 8 percentage point rise from the first quarter 2014 (61%).
“Late and protracted payments by large corporations and state agencies put a SME under unnecessary pressure. While payment delays can be easily absorbed by larger companies with access to credit, late payments could have potentially devastating consequences for small firms, which struggle with cash flows and cannot easily secure overdrafts or bridging finance.
“It is encouraging to note SMEs being more confident about receiving payment from their clients. The government campaign to process payment within 30 days announced in 2013 could be bearing fruit and may have also encouraged the private sector improve on their processes as well,” concludes Bierman.