SA SMEs optimistic about survival – report

Despite various challenges, such as high prices and rolling blackouts, that make it increasingly difficult to run a successful business in South Africa, SMEs are optimistic about their survival.

Small and medium businesses are working harder to adjust to rising costs, but the shadow of rolling blackouts make it difficult as it is expensive to find alternative power sources.

According to recent research conducted by Sage for its Small Business, Big Opportunity Report, small and medium-sized enterprises (SMEs) are hopeful that they will survive despite the risks posed by inflation and rolling blackouts.

Sage partnered with Strand Partners to survey 12 000 SME leaders worldwide in February 2023, including 1 111 in South Africa, to assess their long-term outlook.

The report indicates that 83% of business decisionmakers are confident their companies will be successful 12 months from now, an increase of 76% from 2022. More than a third (41%) say that working more efficiently is increasing business confidence, the highest percentage out of all the countries surveyed.

High costs presented a significant barrier for South African SMEs last year and more so than for any other country surveyed, with over three quarters (77%) citing inflation as a drag on their business outlook.

This trend was especially evident in businesses from Johannesburg and Cape Town, where 81% of SMEs in Johannesburg and 80% in Cape Town reporting a drag on their confidence due to inflation.

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SA SMEs more likely to add new products

The report also shows that South African SMEs are more likely than their global peers to add new products and services to overcome barriers and 82% of participants said they are satisfied with current productivity levels.

Another interesting trend was that adoption of technology is regarded as critical for business success, although SMEs may suffer from low investment commitments. Technology is seen as a crucial component in future success, with nearly half (47%) intending to increase their technology investment.

South African SMEs also want to implement cutting-edge technologies during the next three years, such as 5G (23%), artificial intelligence (21%) and robotics (19%). Despite this, South African business leaders expect to increase their technology investment by only 14%, a decrease from 2022 and below the global average. Participants say a lack of budget and difficulty in understanding the best tech options are the top barriers to higher investment in technology.

“South African SMEs showed remarkable agility in navigating multiple crises from Covid-19 to load shedding over the past three years. They invested in talented teams, boosted their productivity and confronted costs head-on,” Pieter Bensch, executive vice president for Sage Africa & Middle East, says.

ALSO READ: Cost of rolling blackouts exceeds R1.2 trillion, small business suffers most

Do not take small businesses for granted

“However, we should not take them for granted, given their contribution to South Africa’s economy, their central role in communities and their potential to create jobs. With utility costs rising, an uncertain power supply, slow economic growth and global inflation more must be done to help our SMEs to survive and thrive.”

Bensch says government can play an important enabling role by fast-tracking economic reforms and keeping SMEs front of mind in decision making. “It is especially important to accelerate efforts to end the crisis of rolling blackouts and support SMEs with the resources and opportunities they need to exploit technology at scale, given the existing barriers around further investing in tech.”

Andrea Graham, accountant and owner at Quality Accounting Complete Reporting, says their family-run business moves into the future with confidence and optimism. “With the right technology platforms in place, we are on top of our finances and able to plan for growth and success.”

Heidi, office manager of Highveld Fire Safety, which provides services to small and large enterprises such as Mines in Africa, expressed a similar sentiment. “With the Covid-19 pandemic behind us, business is returning to normal. We endured the challenges of the past few years in partnership with our customers, putting their needs at the centre of our business. Adopting a customer-centric approach will sustain SMEs.”