Challenges faced by South African businesses in 2015

| 9 December 2015

By Nafisa Akabor

With 2015 drawing to a close, it’s safe to say that it’s been a tough year for SMEs in South Africa, with various factors, such as load shedding and the recent water cuts, impacting businesses in a big way.

Research house World Wide Worx conducted telephonic interviews with over 1400 business decision makers from SMEs across South Africa – and the results are as follows.

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Family first
The biggest concern for SMEs in 2015 was not being able to provide for their families. Additionally, 44% of respondents indicated they were just about profitable, 8% were breaking even and 30% were ‘strongly profitable’.

Arthur Goldstuck, MD of World Wide Worx, says the tighter the economic times, the narrower the profit margins SMEs generate, as a result more stress is placed on ensuring basic needs are met. “The threat of the business not making a profit, and therefore the threat of not having an income for the family, naturally weighs heavily on the minds of small business owners.”

Goldstuck advises that both SMEs and families build a nest egg to allow them to maintain their living standards if income dries up for a period. “The standard rule of thumb is to build up to six months’ salary in the bank, but that, however, is easier said than done.”

Sourcing staff
Another major issue highlighted in the research was SMEs finding the right staff. “Hiring professional head hunters or recruitment service providers is often out of reach of SMEs. When profit margins are low, it is difficult for them to justify paying extra to recruiters.” The solution? Online job boards have become a cost-effective means for SMEs to recruit, says Goldstuck.

Rounding off the three major issues within a business is the lack of technical expertise. “It’s ironic that SMEs find skills a problem, but do not invest in training.” Goldstuck says their main concern is that once they train new people, the newly-skilled employees will find better work elsewhere.

“The key is to treat staff as well as possible, and not take them for granted, as many small businesses do. Broader strategies are a matter of what the resources of the business allow.”

Goldstuck adds that a 5-person business, for example, can’t be advised to offer bursaries. “The broader issue here is the destruction of the apprenticeship system by the government due to short-sighted economic policies. While there are attempts to resurrect the system, far more needs to be done by government to ensure it happens.”

Lights out
The biggest issue affecting the business environment this year in South Africa was power failures, due to load shedding. “Generators are appropriate for some businesses but not for all as it comes with cost, environmental and safety issues.”

Once again, SMEs shouldn’t be forced to invest in generators when government should be investing more strategically and aggressively, when skilled engineers have been laid off due to BEE requirements, and when integration of independent power suppliers into the grid remains a bureaucratic nightmare, says Goldstuck.

With regard to fibre, and it being more commercially available next year, Goldstuck says any SME that depends on its online presence as a key business resource, should consider moving to fibre just as they would have moved from dial-up to ADSL a decade ago.

“It is more scale-able, flexible and, usually reliable. At a certain usage level, it also becomes cheaper than ADSL. However, SMEs are advised to make price comparisons before jumping from the ADSL ship to fibre.”

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