Siphethe Dumeko Following two consecutive declines in GDP, sending the South African economy into a technical recession in early June 2017, current sentiment about economic growth prospects remains strained. Despite this negative sentiment, there are sectors within the economy that present a number of opportunities for small and medium enterprises – and could contribute to the economic growth that the country is desperately seeking. This is according to Siphethe Dumeko, Chief Financial Officer at Business Partners Limited (BUSINESS/PARTNERS) , who says that the past few months have proven difficult for many small and medium enterprise (SME) owners. “We have seen evidence of this reflecting in the increase in net credit losses in our financial results for the year ended 31 March 2017.” SMEs play a crucial role, not only in job creation, but also in enabling diversification through the creation of new sectors and markets that play a key role in driving growth. Dumeko says that, i...

The do’s and don’ts when it comes to investing in commercial property In light of National Savings Month, which aims to promote debate around the key aspects and benefits of saving, Jeremy Lang - regional general manager at Business Partners Limited (BUSINESS/PARTNERS) - says that traditional savings vehicles may not always be the best option for small and medium enterprises (SMEs), and that investing for growth may be more beneficial than sitting on a lump sum of cash. Lang says that in the current economic environment, investing in property may be a viable option for SME owners to consider as a long-term savings mechanism. “In 2016, industrial property was the top performing sector in the South African property market, with a total return of 13.6%. Over the last 10 years, it has proven to be a relatively stable and resilient asset class in terms of generating positive returns over the medium to long-term,” says Lang. “As such, both commercial and industrial property are good inve...

Jeremy Lang As South Africa’s newly appointed Finance Minister Malusi Gigaba continues to engage with international investors in an attempt to salvage the country from a third credit rating downgrade, local businesses brace themselves for the inevitable ripple effects caused by a low growth economic environment and the increased burden placed on domestic banks. Jeremy Lang, regional general manager at Business Partners Limited (BUSINESS/PARTNERS), says that in order to maintain their financial health in this challenging economic environment, South African businesses – particularly small and medium-sized enterprises (SMEs) – need to stay on top of their financial information and proactively manage their relationships with debtors, creditors and funders. “As local businesses will now likely face greater challenges in obtaining and servicing loans, the ability to keep up to date with financial obligations and payments will, for many, become strained. This will further hinder the pro...

For most small and medium enterprises (SMEs), business growth almost always means acquiring a business vehicle. The question is how to optimise its value to the company when the vehicle is new, and then to determine just when it needs to be replaced, says Datsun South Africa . Both questions about buying and replacing a delivery vehicle are critical to SME owners who need to keep a wary eye on cash flow. It is important to ensure that, despite fluctuating fuel prices and the reducing value of the rand, that costs for a business vehicle are kept under control, says Des Fenner, General Manager of Datsun South Africa. “When buying a new delivery vehicle, questions should be asked about three different types of costs. These are the initial price of the vehicle, maintenance intervals and costs, and what expenses can be expected if repairs to the body or engine are required.” Some key considerations to ensure that these are manageable is by: Matching the panel van to its purpose. Conside...

Business Partners Limited SME Index first quarter 2017 results While South Africa prepares for what will likely be a rollercoaster period, it is once again evident how big a role economic and political uncertainty can play in the minds of local business owners, and the extent to which this impacts small and medium enterprises’ (SMEs’) confidence levels and their ability to do business. The first quarter 2017 Business Partners Limited SME Index showed that for the first time since the fourth quarter of 2015, all business confidence indicators reported a sharp decline. When surveyed on whether government is doing enough to foster SME development in South Africa, business owners reported an average confidence level of 37% (down by three percentage points from the previous quarter). Ben Bierman, managing director at Business Partners Limited (BUSINESS/PARTNERS), says that the country’s recent downgrade announcements by ratings agencies, Fitch and Standard & Poor’s, and reports...

Bobby Madhav SMEs that have made it locally and are ready to attain the next level of growth by venturing into the export market should avoid making costly mistakes that could potentially harm their businesses.     Bobby Madhav, Head of Trade and Collateralised Trade Finance at FNB Business says, businesses entering the export market for the first time often mistakenly assume that merely doing research and having a good concept and value proposition are enough to guarantee success. “In spite of these important factors, without the relevant experience, guidance and partnerships, small businesses are bound to fall victim to costly export errors,” says Madhav as he shares ten common export mistakes that businesses should aim to avoid. •    Not willing to learn from others – SMEs that consult experienced exporters, within their sectors, learn a great deal from their past failures and successes. This form of advice is usually free and can save a busine...

Jeremy Lang Even in a period of looming recession, accessing capital to fund a business venture or grow a business is necessary. This is according to Jeremy Lang, Regional General Manager at Business Partners Limited (BUSINESS/PARTNERS) , who says that whether it be capital to start a new business, to fund growth of an existing business or to support a viable business during trying economic times, there is always a need among small and medium enterprises (SMEs) for financing. He stresses however that SMEs should assess whether it is in fact a good idea to source additional funds given current trading conditions. “There are many reasons as to why a business needs to apply for finance. Whatever that reason, business owners should ensure that sufficient research is conducted to assess the feasibility of the credit to avoid placing the SME in a poor financial position.” Lang says that SMEs are increasingly feeling the impact of the economic downturn, and are under financial strain as a...

Gerrie van Biljon The ailing South African economy, exasperated by rising government debt and the weakening rand, poses a unique set of challenges for small and upcoming businesses. We have also seen in the last few years the number of South Africans interested in starting a business has halved since 2010. However, trying economic conditions don't necessarily mean a death sentence for smaller companies. This is according to Gerrie van Biljon, Executive Director at Business Partners Limited (BUSINESS/PARTNERS) who says that by employing simple strategies, such as better expense and cash flow management, customer centricity and the streamlining of processes, not only can smaller businesses survive during these tough economic times, but they can thrive. “Having recently revised its GDP down to 0.4% from 0.6% for quarter 4 of 2015, economic growth in South Africa has slowed down, and the inflation rate and unemployment figures remain ominously high. While this kind of economic cli...

Bobby Madhav With the South African Reserve Bank (SARB) having revised its economic growth outlook to 0.6% from 0.8% for the year, it is evident that the economy will continue to contract. For SMEs, this means that doing business will be even harder as profit margins get squeezed and consumers start cutting back on spending.  “However, this may also be the perfect time for small businesses to expand their offerings to foreign markets, in order to grow, while diversifying and minimising the risks of a weakening domestic economy,” says Bobby Madhav, Head of Trade and Collateralised Trade Finance at FNB Business . Notwithstanding the challenges associated with exporting, there are many benefits for SMEs that can get this right. Madhav says the common question that SMEs often ask is ‘when is the right time to start exporting?’, the simple answer is now; considering that the entrepreneur has a solid business concept and management structure, consistently grows revenue and i...

Graeme Parsons Business credit cards are increasingly gaining popularity as transactional tools for small business owners that want to conveniently manage finances while saving on costs during tough times. Graeme Parsons, Head of Business and Corporate Credit Card at FNB , says when used responsibly business credit cards can be a great source of revolving credit for short-term business needs. Moreover, they are no longer just seen as debt instruments, but have become good financial management tools for start-ups that are still finding their feet and need to stay on top of business finances. He shares six reasons why small businesses should frequently use business credit cards:   Tracking expenses – using a credit card for all business expenses helps SMEs to store information in one place. This makes it easy to pull data and statements for tax and auditing purposes. No collateral needed – unlike other forms of credit, business owners do not need collateral to secure cre...

Elize Giese As SMEs reflect on the National Budget Speech, the focus should now be on implementing long term strategies to deal with challenges imposed by the ever-changing business environment. Elize Giese, Head of Investments for FNB Business, says given the current economic landscape, SMEs should constantly look for ways to reduce operating costs and use the savings to cater for unforeseen business expenses and emergencies. One way that SMEs can cut costs is through tax competence.  Although the National Budget Speech did not provide tax relief for small businesses, entrepreneurs can save or manage costs by improving efficiencies. Giese shares a few guidelines for small businesses:   Constantly track business expenses – small businesses should keep record of all expenses regardless of their value. SARS provides deductions for a range of business expenses such as entertainment, travelling, gifts for clients and common office expenses, amongst others. ...

Gerrie van Biljon December and January tend to be challenging months for small and medium enterprises (SMEs) in South Africa and in certain cases, can even make or break a business.  This is according to Gerrie van Biljon, executive director of BUSINESS/PARTNERS, who says that depending on the industry in which these businesses operate, they may find themselves either lacking enough work to cover costs during the period, or struggling to keep up with the demands of the so-called silly season and potentially drowning from the workload. He warns that while both experiences can be challenging for entrepreneurs and their ventures, it is critical that entrepreneurs put measures in place to navigate – and even benefit – from the months of extremes. “In the case of retailers and tourist businesses, whose businesses spike over the December holidays, capitalising on the frenzy seems obvious given heightened spending habits due to end-of-year bonuses, and tourism districts being ...

Sanjeev Orie Sanjeev Orie, CEO of Business Value Adds  Given the tough economic conditions that SMEs are already facing, the increase in interest rates will add more pressure by making debt more expensive. Profit margins are also likely to be impacted in the long term due to a lower demand from consumers that will tighten their belts as disposable income decreases.  For most of the middle class consumers, a rate hike typically means an increase in mortgage and vehicle repayments. This means that businesses that are highly geared and operating on low margins may struggle to service their debt commitments.  As a result, small businesses may run into cash flow problems, making it difficult for them to manage running costs and payments to staff and suppliers for goods and services. Moreover, the possibility of further interest rate hikes next year will require SMEs to place more emphasis on their annual cash flow forecasts and regularly review them as business con...

Christo Botes While the current economic status continues to paint a gloomy picture for the business environment, now is the time for small and medium enterprises (SME) to capitalise on the gaps in the market that this changing environment is creating.  This is according to Christo Botes, executive director at Business Partners Limited (BUSINESS/PARTNERS), who says that larger corporations’ tighter internal structures hinder the ability to adapt timeously to the changes in the market, thereby creating gaps for smaller businesses to fill. He points to an analogy that is fitting the situation - “Big ships take long to turn, whereas smaller ones are able to turn quicker and move swiftly along.”  “Smaller businesses are agile and have the ability to quickly overcome various obstacles to establish and attain longevity. Compared to bigger corporations, smaller businesses are easily adaptable to movements in the market due to their size,” says Botes. Looking at the curre...

Annelie Smith The risks facing businesses are greater than ever. Each day a business and its executives are exposed to a vast array of risks - both internally and externally - that have the potential to negatively impact a business’ cash flow, operations, reputation and ultimately the success of the business. According to Annelie Smith, Corporate Executive at Risk Benefit Solutions (RBS) , often businesses, and in particular small and medium enterprises (SMEs), don’t know the true extent of the risks impacting their business, or have measures in place to protect themselves from the consequences of these risks.  She adds that when implementing a risk management plan, businesses need to identify all possible threats against their business. “Often businesses obtain insurance for the more ‘obvious’ risks such as fire and perils, theft and damage to property. There are however so many other lurking risks which could be harmful to a business if the necessary protective measures...

While there is general agreement that SMEs are a key driver of employment and job creation in South Africa, and play a vital role in achieving the National Development Plan’s Vision 2030, Kenneth Fisher CEO: Business Finance SME at the Real People Group says SMEs continue to face numerous challenges making it difficult for this sector to prosper. “Access to credit remains a major obstacle for SMEs, particularly in the current economic climate where credit providers have tightened their belts when it comes to granting loans.”  “Only 25% out of 84, 4% of loan applicants are successful and out of the 25% of successful applications, 85% of applicants that have accepted the loan, only 18% go on to actually get the loan (NCR, 2011),” says Fisher. In addition to accessing finance, Fisher says adequate training and lack of skills is another area where SMEs fall short.  “It is commonly known that eighty percent of SMEs fail within the first two years, which in many instanc...

2015 Sanlam/Business Partners Entrepreneur of the Year® finalists announced  Christo Botes After much deliberation and debate, the judges for the 2015 Sanlam / Business Partners Entrepreneur of the Year® have announced the 15 finalists who will advance to the next round of the competition, with the overall winners to be announced at an awards ceremony in September 2015. According to Christo Botes, spokesperson for the 2015 Sanlam / Business Partners Entrepreneur of the Year® competition, the finalist judging process was extremely challenging this year due to the number of high quality entries received. He says that the entrants have once again provided the judges with a vast variety of thriving businesses to select finalists and winners from.  “The judges were seriously impressed by the quality of entries received this year, which have set a precedent in terms of entrepreneurial talent and success in South Africa.”  Botes says that they received entries fro...

SA SMEs SEEK MUTUAL RELATIONSHIP WITH GOVERNMENT  Christo Botes Despite challenging economic conditions, South African entrepreneurs remain determined to make their respective businesses a success, but what if Government played a bigger role and consulted more widely in improving the chances of success by working more closely with small and medium enterprises (SMEs), in order to better understand the direct implications of policies on business owners. Imagine the potential of entrepreneurship in the country with a mutually beneficial relationship between the private and public sector? This was the general consensus from an alumni gathering of over 50 seasoned South African business owners who have won various categories in the Sanlam / Business Partners Entrepreneur of the Year® Competition over the last few decades. While entrepreneurs were vocal about the challenges within the country’s entrepreneurial environment – such as power cuts, labour unrest, insufficient infrast...