With the rand continuing to strengthen and heightened political stability as a result of the now formalised Government of National Unity, the small business sector in South Africa continues to show improved confidence.
On the back of South African Reserve Bank cutting repo rates by 25 basis points yesterday (19 September), thousands of SMEs in South Africa are celebrating how lower interest rates in an already improving business environment could benefit them.
South African fintech iKhokha this week surveyed 1000 of their merchants, with 71% feeling better about the current state of their business compared to earlier this year, and 90% saying that they feel more confident about their business’s prospects heading into the festive season.
Ninety percent of those surveyed reported that recent improvements in South Africa’s economy, such as the formation of the GNU, easing of loadshedding and the stronger Rand, is making them feel more positive about the future of their business. Seventy-four percent said that their business had seen a significant increase in sales since these positive changes started taking effect, with 79% reporting that interest rate cuts could further stimulate growth in their business.
The cut in the repo rate, marks the end of the highest interest rates cycle of the last 15 years, creating a more favourable trading environment for small businesses. iKhokha says that they have already observed a positive trend over the past few months, noting a 24% increase in uptake on their cash advance product in July and August when compared to May and June.
iKhokha, in partnership with TymeBank division Retail Capital, is now distributing around R1-billion in working capital on an annualised basis into South Africa’s SME ecosystem. Designed to provide SMEs with quick access to working capital with no fixed terms, iKhokha’s Cash Advance is available to merchants who have been trading for three months or more.
Eighty-six percent of merchants surveyed this week share her sentiment, saying that they are planning to expand their business or invest in new products or services in the next six months.
iKhokha also notes that lower cost pressures and increased consumer spending as a result of both lowering inflation and interest rates should see boosts in the tourism, hospitality and retail sectors this festive season, with a large portion of the over 2,6-million micro, small and medium enterprises in South Africa servicing these sectors.
“Yesterday’s interest rate cut, followed by a probable second cut in November, ends a 15 year high interest rate cycle and thankfully signals the beginning of a much needed easing of financial pressure for both consumers and small businesses as we approach the final quarter of 2024,” says iKhokha CEO, Matt Putman.
He says that iKhokha, along with partner Retail Capital, are optimistic about what the fourth quarter of 2024 will bring for SMEs in South Africa. “We are hoping to put even more much needed working capital into the hands of SMEs to help them build stock levels and invest in staff, equipment and premises to maximise returns as our economy starts to recover.”