According to Nazeem Martin, MD of Business Partners Limited, business
owners remain confident that their businesses will grow in the next
year, displaying average confidence levels of 73%, an increase of 2%
when compared to the previous quarter. He says that confidence levels
with regards to growth have remained steadily high over the past 15
“SME business owners have an intimate knowledge of their own
businesses – suppliers, customers, markets and staff – and are therefore
confident in their ability to shape, control and grow their businesses.
Although rising fuel and electricity costs and above-inflation wage
demands and settlements are adversely impacting SMEs, it is encouraging
to see business owners rising above the gloomy atmosphere. Despite dim
economic conditions over which they have no control, these business
owners believe that they have the ability to shape and positively
influence their own businesses.”
Business owners also remained moderately confident that the SA
economy will be conducive to business growth in the next 12 months (53%,
compared to the 51% of the previous quarter) and that they will find
employees with the right skill sets and experience to grow their
businesses (53%, compared to the 49% of the previous quarter).
Business owners surveyed indicated higher confidence levels (48%)
that the ease of access to finance will improve in the next 12 months
than in the previous quarter (44%). This improvement in confidence
levels may be indicative of the perceived increase in competition
amongst traditional lenders (banks) and amongst non-traditional
financiers (angel investors, development finance institutions, private
equity and venture capital investors) for SME business.
Other areas where SME business owners were not confident (where
confidence levels were below 50%) are as follows: Labour laws being
conducive to business growth (36%), and whether government is doing
enough to foster SME development (32%).
Martin says that average confidence levels with regards to current
labour laws being conducive to the growth of SMEs remain low, despite a
5% increase since last quarter. “The average confidence level of 36%
displayed by SMEs may be related to the difficulties business owners
face with respect to the
effort and cost to comply with South Africa’s modern and sophisticated, but often complex labour laws.
At the 26th annual Labour Law Conference held in August 2013, Reserve
Bank governor Gill Marcus highlighted the fact that “South Africa has
not seen the growth amongst SMEs as one would expect from a developing
country largely due to its inflexible labour regime not living up to
According to the index, respondents have very low confidence levels
of 32% that government is doing enough to foster SME development. “This
may be due to the perceived disjointed nature in which government – via a
plethora of departments and agencies – deal with SMEs.
“It may also be related to labour and related issues. We believe that
government should loosen the grip of bargaining councils on small and
medium businesses, exempting businesses below a certain size from all
labour laws apart from health and safety, strengthening the exemption of
a probationary period from dismissal rules, ending closed-shop
agreements and creating special economic zones where labour laws are
less onerous. Such a display of political will to address the challenges
which our sophisticated labour regime places on business would go a
long way towards raising SME business owners’ confidence levels in these
two areas,” says Martin.
When asked what form of assistance from government would benefit them
them most, 30% of respondents indicated that direct funding would be
most useful, while 25% opted for government cutting red tape, and 20%
indicated that tax breaks would help. Martin says that a step in the
right direction might be the recently established guidelines by the
Department of Trade and Industry (the dti) to reduce municipal red tape
for small businesses.
When asked about the biggest challenges that SMEs will face going
forward, economic conditions were on top of business owners’ lists with
34%, followed by cash flow (26%) and funding (16%).
Martin says these results prove that SMEs face increased challenges
related to labour law and red tape. “These responses also highlight the
fact that businesses need additional assistance from government in the
form of funding or reduced bureaucracy, which will essentially assist in
stimulating SME growth and development, and ultimately result in job