Jeremy Lang, Chief Investment Officer at Business Partners, said on Tuesday that the outlook for small businesses in 2024 is positive, but there are certain requirements for companies as the country heads into electing a new government.
Lang said that there needs to be more government support and a conducive operating environment for small to medium enterprises (SMEs).
According to the most recent Business Partners SME Confidence Index (SME Index), the biggest increase in small business confidence was seen in the realm of government support.
At 59%, SMEs’ confidence levels that the public sector is doing its part in fostering small business development increased by 12% points when compared to the previous quarter, according to a statement.
Lang argues that this confidence could be attributed to movements on the legislative front.
“The National Small Enterprise Amendment Bill has put forward a few instrumental changes that bode well for small businesses in South Africa. Among these is the proposed establishment of the Office of the Small Enterprise Ombud Service, which will be mandated to adjudicate and mediate disputes and matters between small enterprises, their customers, and South African consumers. This could go a long way in preventing unnecessarily long and cost-intensive legal proceedings,” he said.
Lang also said that small businesses depend on improved infrastructure such as bridges, rail, and roads. Top of their wish list for 2024 is to see government roll out the National Infrastructure Plan to improve the country’s struggling infrastructure.
The SME Index asked respondents if they think their businesses will grow in the next 12 months.
“Confidence levels saw a decrease of 5 percentage points, with SMEs expressing confidence levels of 66% in this regard,” according to the index.
The main reason for this decrease was the worsening energy crisis, which hit record highs in 2023.
SMEs want viable and sustainable solutions to the energy crisis, according to Lang, and he noted that it was encouraging to see the significant strides that have been made towards getting the National Transmission Company of South Africa (NTCSA) up and running. The NTCSA is expected to be fully operational by April 2024.
“What this means for SMEs is that alternative power supplies and backup generators will likely not become a thing of the past over the course of this year. “However, with the plans in place to roll out operations by the NTCSA, hope is on the horizon that ‘business as usual’ can resume,” he stated.
In 2023, Nedbank released a report on the impacts of load shedding on small businesses and specifically on the township economy.
According to the research, over 60% of township small businesses stop operations during load shedding, and almost 66% mentioned they have shed jobs because of load shedding.
“Only 17% of businesses improvise (by improvise we mean find hacks to operate without using alternate sources of energy, for example by finding alternative business venues, performing other tasks, or rescheduling appointments), while 19% use alternative sources, such as generators, inverters or backup batteries, gas, paraffin, or solar,” according to the research.
FREE AND FAIR ELECTIONS
Lang argued that over the course of the year ahead, an air of optimism could be restored if small businesses see free and fair elections and decisive and tangible movements economically and infrastructurally.
He said that all eyes will be on the outcome and political climate of the upcoming national elections.
One need only look at the looting that took place in 2021 as an example of the real cost of civil unrest, especially for the SME sector.
In Durban alone, estimates put the total loss in stolen stock and damage to property and equipment at R16 billion, with 45,000 businesses negatively impacted as a result, according to the Index.
Lang noted that SMEs want and need the election process to run safely and smoothly.
“We know that many small business owners experienced concern around growing levels of crime last year. In 2024, given the highly charged political environment, the state needs to prioritise safety measures to guard against this risk,” he said.