OPINION: SMEs could do with access to support, funds
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JOHANNESBURG - When South African business owners gear up for their financial year-end next month, many will be tallying the spiralling costs that come with surviving load shedding.
One of these business owners is Ockert Cameron. Cameron is the owner of Raw Food for Pets, an online retailer based in Gauteng.
The crippling power cuts that spread through the country last year have sent Cameron’s expenses ballooning.
He’s had to fork out R130000 to manage the impact of load shedding on his business.
Cameron is one of hundreds of business owners who have been sharing their stories over the past few weeks.
Their stories convey the challenges of building a thriving business around uncertain access to power.
And their stories reveal the urgent, desperate need for easy access to business funding in a time of crisis.
“Load shedding is something we dread.”
At Lulalend, we’re running a countrywide survey of small and medium-sized enterprises (SMEs) to gain a deeper understanding into the needs of South African business owners. We know that to best serve SMEs we must understand them.
Early results from hundreds of business owners show more than 60percent of businesses are struggling with losses due to power cuts.
Listening to Cameron, it’s obvious the situation is dire.
“For small business owners, load shedding is something we dread. We’ve been lucky, we had some of our own funds when we started the business. Businesses are closing, there’s loss of revenue if this isn't fixed, the SME market will implode,” said Cameron.
Companies are spending money on generators, increased storage space and overtime.
Everyone knows it’s tough running a business. Entrepreneurs grapple with risk and uncertainty every day. Studies into SME sustainability show businesses close mainly because they struggle to gain access to finance and become profitable.
But it’s even harder when you're battling to operate without a reliable energy supply.
It’s a perfect storm that can force a small business to shut its doors, plunging scores of people into unemployment, poverty and an uncertain future.
The challenges SMEs face when they try to access finance are well-established:
An assessment by the World Bank’s International Finance Corporation found the funding gap - the shortfall between the amount requested by SMEs and the funds dispersed by financial institutions - stood at $5.2 trillion (R75.67 trillion) in southern Africa.
For its part, the banking industry has acknowledged the problem. A 2018 report by the Banking Association South Africa concluded there had been no “meaningful improvement in access to finance” over the past few years.
Together, these forces collide with load shedding to make access to funding an urgent priority.
When the money can’t come soon enough, having the ability to access cash quickly can mean the difference between operating sustainably and closing down.
In December last year, small businesses were hammered by the deepest power cuts yet.
For the first time, South Africa experienced Stage 6 load shedding. An analysis by the Bureau for Economic Research found these outages sent manufacturing and business activity plummeting throughout the country. That’s when we announced the launch of the SME Load Shedding Task Force.
This unit set out to accelerate applications from businesses that have been hampered by the impact of load shedding.
We knew we needed a serious intervention if we were going to be of real service to SMEs. That was true then, and it's still true now, as ongoing power cuts are forecast for the rest of the year.
But all’s not lost.
Despite load shedding and projected economic growth below 1 percent, most businesses tell us they don't believe the future is bleak.
Preliminary findings from our survey show an overwhelming vote of confidence, more than 80percent of businesses surveyed tell us they're positive about the year ahead.
What's exciting is that more and more investors and financial institutions are seeing the power of fintech to meet the needs of SMEs.
A PWC report estimates fintech investment into Africa will reach $3billion this year. Most of these funds will pour into South African and Nigeria-based fintechs.
So, South African businesses are excited about this year.
And we have a lot riding on their success: the National Development Plan has set ambitious targets for SMEs, forecasting that 90percent of new jobs will be created by “small and expanding firms”.
It’s time we got out and gave SMEs easy access to the support and funds they need to grow.
We have an obligation to do more for all businesses, to stand by their side as they forge a path toward a better future in the year ahead.
Trevor Gosling is the Lulalend co-founder and chief executive.