Johannesburg - South Africa’s small and medium enterprises (SMEs) faced one of the toughest years in decades due to low consumer confidence and tough economic conditions.
This is according to Gerrie van Biljon, executive director of Business Partners, which focuses on risk finance for SMEs in South Africa and selected African countries.
Van Biljon said what made this year particularly hard for entrepreneurs was the unstable environment entrepreneurs were exposed to.
“Looking at the fluctuations in the rand value, for example, this year the country has seen the direct effects of political instability and global factors on the exchange rate. Entrepreneurs need a stable environment in which to operate,” he said. Business Report spoke to Van Biljon to share his insights on the SME sector.
Kabelo Khumalo (KK): Briefly share with us the challenges faced by the SMEs this year and what the outlook looks like for 2017.
Gerrie van Biljon (GB): 2016 was indeed a tough year for business in general. SMEs in particular have been faced with challenges, a shrinking market, fierce competition and disposable income being under threat. Looking at 2017, with less than one percent economic growth expectations, it will be more of the same for entrepreneurs. But if business owners are innovative 2017 might well prove to be a good year for them.
KK: You mentioned innovation as being key to unlock new markets. How important, for example, are innovation hubs to SMEs?
GB:The innovation hubs are critical in growing ideas into practical business operations. They give entrepreneurs the support which includes the space to operate, funding and, more importantly, technical support. The public should be encouraged to visit these hubs as that will stimulate entrepreneurship. They must be better marketed.
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KK: How is access to funding and growth finance affecting SMEs on the ground and what is the solution?
GB: It is a big problem for entrepreneurs to get hold of finance to start and expand their businesses, mainly because financiers regard SMEs as high risk due to the high failure rate of start-up companies. There is a huge opportunity to promote entrepreneurship by providing affordable finance to people who want to start their businesses. The public sector can play an important role in micro-financing to informal business. The private sector must also offer venture capital, supply chain financing and also the technical support to help businesses grow.
KK: How crucial is the mindset of chief executives in running a successful business?
GB:Business leaders must approach 2017 with a positive mindset. This is absolutely important. What we have seen is that those businesses that have survived and thrived since the 2008 economic downturn are those who view the future positively. You cannot afford to plan for success from a negative mindset.
KK: You mentioned the shrinking market as one of the factors that had negatively impacted the sector. How, for example, can government procurement lift the sector?
GB:The government has in the past acknowledged that it needs to promote SMEs. But it should make it easy for them to do business with the government and actually pay them in time. The tender system must be simplified to let the SMEs play in that space.
KK: Share your thoughts on how the lack of skilled workers impacts on the SME sector.
GB:Productivity and skills go hand-in-hand. There is a desperate need to improve our technical skills. Companies must also have a continuing plan to upskill their workers.