SA franchising sector fears economic disruption post-elections

The franchising sector says it was concerned and wanted to counteract this non-productive year by driving its own growth initiatives.

The franchising sector says it was concerned and wanted to counteract this non-productive year by driving its own growth initiatives.

Published Apr 18, 2024


THE Franchise Association of South Africa (Fasa) has warned that the possible “freezing” of posts and initiatives by the government in the run-up to the May 29 elections could have a detrimental effect on business confidence and growth.

Fasa - a trade association for franchisors, franchisees and the professional organisations - yesterday said it had worked tirelessly with different stakeholders in government and business for the past two years to forge partnerships that stimulate entrepreneurship, drive affordable and responsive funding initiatives, training and development projects which would ultimately help with job creation.

Fasa CEO Fred Makgato said at the end of last year they were on the verge of signing a Memorandum Of Understanding (MOU) with the Department of Small Business Development, as well as engaging with the Department of Trade and Industry and Competition with regard to the accreditation of the Franchise Industry Code and the establishment of the Franchise Industry Ombud.

“Whilst progress was made, albeit slowly, with the elections coming up in May and the uncertainty of what lies ahead, we fear we may be back to square one if we don’t pro-actively introduce initiatives and events ourselves to stimulate and keep our sector thriving and buoyant,” Makgato said.

“We, as the franchising sector, are concerned and want to counteract this non-productive year by driving our own growth initiatives based on the positive results of our Fasa/Absa Franchise Survey conducted in 2023.”

Fasa’s Franchise Survey released last year showed that the industry had increased its contribution to gross domestic product from 10% to 15% over the past decade through its over 700 franchise systems.

It also showed more than 45 000 franchise outlets, thereby making it a significant contributor to the South Africa economy, contributing in the region of R999 billion.

Some of the statistics from the 2023 Fasa Franchise Survey, sponsored by Absa, include that the unemployment rate in South Africa increased from 23.3% in the second half of 2020, just after the onset of the Covid-19 pandemic, to 32.9% in January last year.

The survey looked at the country’s dire unemployment figures, and then honed in on the role that franchising plays in providing employment - both directly to close to 500 000 people - and even more indirectly through its partners and suppliers.

Bureau for Economic Research (BER) chief economist Lisette IJssel de Schepper said the business environment was already tough heading into this year.

“Following a two-point decline in the fourth quarter of 2023, the RMB/BER Business Confidence Index ticked down by another point to reach 30 in the first quarter of 2024.

“This means that seven out of 10 survey respondents are unsatisfied with prevailing business conditions. Remarks about the negative impact of load-shedding, the state of the local ports, crime, and political uncertainty featured prominently in the feedback from survey participants,” she said.

“There seems to be a clear 'wait and see' approach by some respondents, where they are holding off on big investment outlays before the election. Some respondents also comment that this impacts demand for their products - as customers are doing the same.”