The increase in interest rates will put more strain on the profit margins of small businesses that are already struggling due to factors such as the drought, rising inflation and the depreciation of the rand.
This is according to Sanjeev Orie, CEO of Business Value-Adds at FNB Business.
He adds that SMEs that import goods or components for their final products can expect even slimmer margins in the long-term.
All these factors will have a direct impact on the disposable income of consumers that are finding it difficult to make ends meet. “We are likely to see businesses facing cash flow challenges as they struggle to service their debt commitments,” Orie comments.
“It is imperative for SMEs to place an emphasis on their annual cash flow forecasts as the year begins and regularly review them as business conditions change.
“Furthermore, businesses should focus on managing costs and variables under their control, while planning for those that they cannot control, by focusing on products and services that meet real customer needs, and that can outlast these tough economic conditions.”