Economic turnaround holds opportunities for SMEs

Economic turnaround holds opportunities for SMEs

The SONA speech by President Cyril Ramaphosa and his commitment to supporting small business and entrepreneurship has been welcomed by Tony Da Fonseca, FASA’s Chairman who in 2017 met with the chairperson of the Parliamentary Portfolio Committee for Trade & Industry.  “We are encouraged by the President’s promise to increase co-operation with business and look at ways to encourage entrepreneurship, training and job creation. We are confident that the franchise sector can play a pivotal role through innovations like the development of social and micro franchising which hold enormous and largely untapped potential for the development of the economy and improve service delivery.”

These new developments echo a posting by Ben Bierman, MD at Business Partners Limited, who confirmed that the South African economy is showing early signs of turning the corner after a couple of years of disappointing growth and high volatility.  2018 holds promise of increased opportunities for local small and medium enterprises (SMEs) who can consider shifting from survival mode to a more opportunity-seeking stance.

Bierman’s optimism stems from the first signs that the new leadership of the governing party may be able to put a stop to the widely reported mismanagement of the economy, which has led to what he calls a ‘triple deficit’. “The first is the government budget deficit of an estimated 4.3% of GDP, the highest since 2009. Underlying it is the second deficit, South Africa’s economic growth rate, which is far below its potential and that of its peers. The third is a lack of confidence in the South African economy, a result of the first two, and exacerbated by political turmoil and the mismanagement of the economy.  Bierman says this triple deficit has severely impacted SMEs, who have had to face diminishing growth in their markets, sluggish sales performance, interest rate hikes and rising bad debts over the last few years.

However, he is hopeful that SMEs will see two of the three deficits narrowing in the year ahead, with GDP growth set to rise from an estimated 0.9% in the current financial year to 1.4% in the next financial year according to the Reserve Bank. “Hope of a good year ahead for the South African economy is also driven by increased global growth, particularly in the US and China, as well as an improved outlook for commodity prices.”

Bierman explains that 2018 may provide a unique opportunity for the forging of a new consensus between government, labour and business. “While such processes are way beyond the control of any SME, now is a good time for small business owners to join a local chamber or business association in order to add their voice to that of civil society – which has grown stronger over the last few years.”

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