Public-private sector action needed to boost SME confidence

Gerrie van Biljon

Economic conditions continue to strain the operating environment for small and medium enterprises (SMEs), and unless the private sector and Government work more closely together to create a more conducive business environment, confidence levels amongst business owners will continue to lag.

This is according to Gerrie van Biljon, Executive Director at Business Partners Limited (BUSINESS/PARTNERS), who was commenting on the company’s latest SME Index results, which reveal that business owners’ confidence levels remain depressed.

The first quarter 2016 Business Partners Limited SME Index – which measures the attitudes and confidence levels of South African SME owners – revealed an average confidence level of 51% that the South African economy will be conducive for business growth in the next 12 months. This is unchanged from the previous quarter, and a decrease of 9 percentage points when compared to the first quarter of 2015. 

“Following the events of the firing and rehiring of the Finance Minister – now known as Nenegate – in the fourth quarter of last year, we expected improved confidence levels given the country’s subsequent fiscal consolidation flowing from the 2016 Budget Speech. However, according to the respondents who participated in this quarter’s index, the majority of business owners continue to possess a negative view when surveyed on various indices.”

Only 35% of respondents believe that the local economy will be conducive for business growth in the next 12 months – a decrease from 45% of respondents as reported in the first quarter of 2015.

79% of respondents believe that access to finance is important for the growth and sustainability of their business, but only 26% - down from 37% the previous year - are certain they will be able to access business finance in the next 12 months. This resulted in a drop in business owners’ average confidence levels relating to the ease of access to business finance in the next 12 months – a decrease from 51% in the first quarter of 2015 to 44% in the first quarter of this year.

A very small percentage of respondents (17%) reported feeling confident that Government is doing enough to foster SME development in the country. Business owners were also surveyed on the 2016 Budget Speech, and whether they believe that the R475 million allocation to the Department of Small Business Development is sufficient to benefit the small business sector. This survey questions reveals that the large majority (72%) didn’t feel it is adequate.

Van Biljon says that the announcement this week by the private sector to set aside R1.5 billion to help small and medium enterprises survive the tough economic climate with an invitation for Government to also contribute to the fund is one such example of required public-private sector collaboration.

“Despite the uncertainty in both the economic and political climate, the private sector and Government should ensure that affordable funding and technical assistance is available for SMEs, as without this South Africa can’t gear itself for growth. We also need to ensure that procurement opportunities are continuously passed on to SMEs,” says van Biljon.

He says that when comparing the first quarter of 2016 and 2015, it shows concerning drops in confidence levels. However, he says, 71% of business owners surveyed were confident that their business will grow in the next 12 months, despite their negative views on  economic conditions.

“While the average confidence level for business growth in the next 12 month also reported a year-on-year decline of 6 percentage points (81% to 75%), this figure remains very positive.”

He says that given the recent positive statistics released in the first quarter surrounding the tourism and trade industries – both of which are sectors that SMEs play heavily in – he is hopeful next quarter’s index will report an increase in confidence levels.

Van Biljon points to the recent tourism statistics, which reported a 15% and 18% year-on-year increase in tourism arrivals for January and February this year. Similarly, in March 2016, South Africa recorded a trade surplus of R2.9 billion – this from a deficit of R1.2 billion the previous month. “While the country has been facing dark economic clouds, there is a silver lining and SMEs should continue to seek out opportunities, such as the openings in export and tourism industries, which are both benefitting from the weakening Rand.”

Van Biljon concludes: “Given the current political risks and uncertainty – and the effect thereof on the business environment – it is vital that the private sector, big business and small business continue to reach out and cooperate with Government so that the country can once again stimulate and obtain inclusive growth.”