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 Poor economic conditions impact confidence levels of SA SMEs

 

 Local small and medium enterprise (SME) owners continue to be apprehensive about the regulatory and economic challenges facing the sector and country as a whole. This is according to the fourth quarter 2014 Business Partners Limited SME Index (BPLSI), which measures attitudes and confidence levels among local SME owners.

SMEs conveyed an average confidence level of 53% that the South African economy will be conducive for business growth in 2015 – a 2 percentage point quarter-on-quarter (q/q) and year-on-year (y/y) decrease.

Ben Bierman, the CFO of Business Partners Limited (BUSINESS/PARTNERS), says that the current issues facing the economy, such as the slow economic growth, rand volatility and load shedding, are impacting business owners’ confidence levels. “Business owners continue to operate in a tough environment, and while they are resilient by nature, recent developments continue to erode their confidence. When surveyed on the factors that impacted their confidence levels, corruption within Government and political instability were also listed as significant factors.”​

In addition, the latest BPLSI revealed a 2 percentage point q/q and 1 percentage point y/y increase in SMEs average confidence levels (40%) that the current labour laws are conductive to the growth of SA businesses. Bierman says that while there is a slight increase in confidence levels, this remains an area of concern for SMEs.

Respondents in the BPLSI listed regulatory requirements as not favouring SMEs and that more should be done to review these to aid business well-being and growth.Government should seek to implement less onerous labour laws for SMEs with a turnover of less than R2 million per month or exempt SMEs from complying with the full ambit of current labour laws. For example, small business could be excluded from current collective bargaining outcomes which are usually controlled by big business. SMEs are not represented at the bargaining table, but are then compelled to pay a minimum wage which they often can;t afford.”

SMEs’ average confidence level that Government is doing enough to foster SME development in South Africa was measured at 34% – a 3 percentage point year-on-year increase. “Government seeks to drive entrepreneurship, and has already put measures in place, such as the introduction of a dedicated ministry. We are confident we will continue to see commitment to this sector given small business was identified as one of Government’s nine strategic priorities to be pursued this year,” says Bierman.

When surveyed on how confident SMEs were that the Ministry of Small Business Development will aid SMEs, an average confidence level of 43% was recorded. This is a decrease of 3 percentage points from the third quarter (46%), and down 6 percentage points from the second quarter (49%) of 2014. Renewed optimism was evident in the SME sector upon the creation of the ministry, and it is likely that business owners were hopeful the results and actions would be immediate, but processes need to be put in place as it is a newly established department. We expect small business will start to see some impact from the ministry during the year, especially as the department was allocated R3.5 billion in the 2015 Budget for mentoring and training support of small business.”

Aid and support for entrepreneurs – both financially and non-financially – also continue to be focal points for SMEs, says Bierman. “Funding was listed by respondents as the number one form of assistance from Government that would most benefit and grow their business.”

SME owners surveyed reported an average importance rating of 82% when asked how important access to SME specific information, resources and support are for the development and growth of a business – up 3 percentage points q/q and y/y. Access to a mentor to advise on the development and growth of a business also ranked high with an average importance level of 80% (up 2 percentage points q/q and 4 percentage points y/y). “Non-financial support is invaluable to business owners, as it is needed to keep their businesses running, turning profits and creating jobs.

To bridge the gap between industry-specific skills and the information needed to run a successful business, BUSINESS/PARTNERS recently launched its Entrepreneurs Growth Centre, a facility providing free support. “The response from entrepreneurs has been overwhelming and highlights just how much more needs to be done to support entrepreneurs in South Africa,” concludes Bierman.

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