In order to address the issues of inequality and poverty, we need to grow businesses – especially small businesses.
With the NDP calling for 11-million jobs to come from the small and medium enterprise (SME) sector, this area of business is particularly important.
Sage today released the results of its fourth Business Index, measuring the trends among SME organisations around the world.
Ivan Epstein, co-founder of Softline and CEO of Sage AAMEA (Australia, Asia, Middle East and Africa), points out that there is generally little correlation between the macro economic climate and the success of SMEs – in fact SMEs often succeed during bad economic times.
Rob Wilkie, chief finance officer of Sage AAMEA (Australia, Asia, Middle East and Africa), says the research shows that business confidence in the global economy is improving, but SA businesses are less optimistic on the South African economy.
Business in South Africa predict lower growth and less investment, he adds.
Mobility is expected to positively impact productivity, and businesses anticipate increasing activity through smartphones and tablets.
Meanwhile, South African businesses are looking to neighbouring countries as growth opportunity.
Confidence is important for small businesses, Wilkie says. With confidence, SMEs are prepared to take risks and this increases the opportunities for success.
South African SMEs have consistently remained confident in their own prospects, even though they believe the country’s economy is declining – they are still positive. “This talks to SMEs’ resilience,” Wilkie says.
In other markets, confidence is improving both in their own prospects and in the country’s performance.
In terms of risk, 50% of all SMEs describe themselves as rick-seeking rather than risk-averse. In South Africa, 50% of businesses are still risk-seeking, with 18% neutral and just 32% risk-averse.
When it comes to growth, 65% of South African SMEs anticipate turnover growth – although they expect it to grow at only 4%; so less than the 6% inflation growth.
About one-third of business will grow by increasing their service/product portfolio (36%), reducing operating costs (35%) and increasing customer loyalty (34%).
On the negative side, they are not going to increase turnover via employment or investment.
SMEs will only employ an additional 2,8 employees in the next year, which isn’t going to make a big dent in unemployment figures, says Wilkie.
Barriers to growth are overwhelmingly government bureaucracy and legislation and government handling of economic challenges. But SMEs also cite a lack of a skilled workforce and access to capital and funding.
At least 50% of businesses are now using smartphones and tablets to communicate with customers and suppliers, they are also doing their banking and for finding directions.
What’s interesting, says Wilkie, is where the mobility growth will come from. As well as the existing uses, SMEs plan to use their mobile devices to book travel, present information, billing and payments, sharing files, software apps specially designed for the business, accounting and/or payroll, tracking orders and deliveries; and reviewing business performance data.
Currently, two-thirds of respondents say that mobile has had a positive effect on their work:life balance, with only 13% saying it’s had a negative effect.
And small businesses don’t find that the infrastructure in South Africa affects their ability to work 24/7 effectively.
Exporting is surprisingly high for South African SMEs, with 41% of businesses involved in export. Most of these exports are to neighbouring countries, with Namibia and Botswana top of the chart, followed by Mozambique, Zimbabwe, US, UK, Zambia, Australia, Nigeria and Angola.
Not surprisingly, South African SMEs plan to increase their exports into these markets during the next 12 months.
The barriers to exports include exchange rates and logistical costs, with competition in international markets also coming up as a challenge for South African SMEs.