Small business owners are more confident

Executive General Manager for Impact Investing at Business Partners Limited, David Morobe.

The challenging socio-economic factors prevailing in 2023 set the stage for a difficult year for small businesses in South Africa. Executive General Manager for Impact Investing at Business Partners Limited, David Morobe, highlights some of the key findings from the latest quarterly SME Confidence Index, and how despite the numerous challenges faced by entrepreneurs, small business owners are gaining confidence in public and private sector initiatives aimed at creating a more enabling and supportive business environment. Picture: Supplied.

Published Jan 13, 2024

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In particular, the latest results revealed that confidence in government support for SME development increased by 12 percentage points from the previous quarter, while confidence in the private sector increased by seven percentage points quarter-on-quarter.

Tough socio-economic conditions in South Africa heading into 2023 were indicators that the previous year would be an exceptionally difficult one for small businesses. Now, as we kickstart the new year, the impact of load shedding and low growth economic trajectory on small and medium enterprises’ (SME) confidence is apparent.

SME confidence that their businesses will grow in the next 12 months went down by 5 percentage points in Q2 of 2023 from the previous quarter and by four percentage points year-on-year. Fears that clients will pay within stipulated time remained stable at 65%, down by one percentage point both year-on-year and quarter-on-quarter.

Despite the very evident dampening of spirits with regards to the ability to grow, survey respondents reported confidence levels of 62 % that the local economy will be conducive for business growth in the next 12 months, a seven percentage point increase from the previous quarter.

Even amid mounting pressure, SMEs around the country have reported feeling more confident in several key areas. Overall, the latest survey results paint a picture of an SME community that is gaining some confidence in initiatives implemented by both the public and private sectors during the period to create a more enabling business environment. As always, these results illustrate the sector’s unwavering resilience and the determination of local entrepreneurs to push through whatever challenges they encounter.

SMEs’ confidence levels that Government is doing enough to foster SME development increased. At confidence levels of 59 percent, this area saw a significant 12 percentage point increase from the previous quarter, and a 4 percentage point increase year-on-year.

Aligned to this, SME confidence that the private sector is doing enough to foster SME development went up by 7 percentage points quarter-to-quarter and up by 3 percentage points year-on-year to 62%.

The positive sentiments regarding Government may very well be linked to the introduction of the National Small Enterprise Amendment Bill (the Bill), announced earlier on in 2023 by Minister of Small Business Development, Stella Ndabeni. Amongst other regulatory changes, the Bill proposes that a dedicated ombud for small businesses be established to help SMEs resolve issues at an expedited rate without the need to incur exorbitant legal fees. The new Bill should go a long way in addressing the regulatory improvements that SMEs are yearning for.

The call for a more enabling regulatory environment for SMEs has long been on the wish list for local businesses. In Q2 of 2023, the need for greater access to funding dropped out of the top three challenges facing local SMEs. Instead, the need for regulatory change and support entered the top three list of challenges for the first time in several years – a significant shift for the SME Index.

The Bill will also disestablish the Small Enterprise Financing Agency and the Co-operative Banks Development Agency, as well as the Small Enterprise Development Agency. In their place, the Small Enterprise Development Finance Agency (SEDFA) will ensure that the consolidated entity will be better positioned to offer a one-stop service comprising of finance, business advice, development services, business facilitation and incubator support.

This development is a promising indication that the government is consolidating its initiatives to bolster the sector and provide it with much-needed support. The state has a vested interest in ensuring that small businesses have the resources they need to thrive. As key enablers of economic growth, the state of the SME community in South Africa is one of the most effective yardsticks for measuring what is, and predicting what is to come.

It is therefore encouraging to see these movements in the SME landscape. We anticipate that with this more consolidated approach to fostering SME growth, private sector players and other industry stakeholders will have a better sense of direction, and a clearer blueprint on how they can contribute towards a pro-growth economic environment.

The framework for a more empowering regulatory landscape will undoubtedly be shaped by the forthcoming Bill, as well as the outcomes of the BRICS Summit, hosted in August 2023. Leading up to the Summit, a series of events, forums and conferences provided an important starting point for discussion, debate and cooperation amongst key industry players including SMEs.

One of the most pressing issues addressed at the Summit included how to ensure that intra-market laws and regulations between BRICS nations work together to promote a thriving import-export environment.

In tandem with matters relating to the regulation of the sector, investigating the ways in which SMEs are obtaining funding also topped the agenda at the Summit.

As one of the most established small business financiers, we have a detailed overview and an in-depth understanding of the SME ecosystem’s needs. The expansion of funding opportunities for SMEs based on BRICS trade agreements is a welcome development and for us, a positive indicator that despite many obvious hurdles, the sector is set to surge forward positively into 2024.

Executive General Manager for Impact Investing at Business Partners Limited, David Morobe.

Saturday Star