Making the most of scant opportunities
THE economic outlook might look gloomy, but things are looking up for entrepreneur Ludwick Marishane, with export sales of his soap powder up 30% over 2015.
The weak rand and the drought led to an increase in demand for his product, DryBath. It could not have come at a better time after his company Headboy Industries recently switched from the unreliable Post Office to using more costly private couriers.
Marishane is not alone. Analysts say despite the Reserve Bank’s forecast of zero growth for SA in 2016 and less than 2% growth for the subsequent two years, there are still opportunities in the economy for those business owners that seek them out.
Absa has seen a steady increase in the number of applications for finance, says the head of small and medium enterprises for Africa at Barclays Africa, Iqraam Abdul Haq. Approvals have remained constant at about 75%.
Financier Business Partners says that applications from small businesses for finance have not dropped off. Early indications are that the company is on track to match the nearly R1bn it disbursed in the past financial year.
But its MD, Ben Bierman, says in the past 18 months, an increasing number of entrepreneurs who received approval opted not to take the finance. Many of these entrepreneurs sought expansion finance for the acquisition of new machinery, vehicles or a new property.
Business Partners has also seen more entrepreneurs looking to consolidate their debt by restructuring their balance sheets. While the financier is placing a watchful eye on those sectors linked with discretionary consumer spending, such as restaurants or catering, Bierman says the depreciation of the rand has begun benefiting some specialist manufacturers, who are enjoying a cost advantage against importers.
The low growth forecast for the country in the next two to three years remains “scary”.
Mike Schussler of economists.co.za says the loss of almost half-a-million jobs in the first half of 2016 may be a “bloodbath”, but there are still opportunities in export sectors, such as wine and food manufacturing, with the expansion of retailers into the continent in recent years.
If the government ensures that unnecessary visa rules do not get in the way again, tourism could be a money spinner. In July, the Department of Tourism said the number of overseas visitors was up 19% in the first five months of 2016 compared to the same period in 2015.
Schussler says sectors that rely on commodity prices will remain under pressure, including the agricultural sector, with the expectation of surplus food production in the coming years.
SA Franchising Warehouse CE Kobus Oosthuizen reckons that franchisors in the business-to-business sector are arguably doing better than those in the retail and food sector. Beauty, training and hardware store franchises are “under pressure”.
However, certain high-end food franchises are doing well, while opportunities still exist for people willing to service township consumers.
Aurik Business Accelerator CE Pavlo Phitidis says entrepreneurs who are focused on growing their businesses will “eat their rivals” in a nogrowth economy.
His Johannesburg-based accelerator is working with 64 companies across a range of sectors that have an average annual turnover of R18m.
In the year to June, these companies have seen average growth of almost 65%, says Phitidis.
The Industrial Development Corporation (IDC) is backing companies in energy storage, fuel cells, gas beneficiation, renewable energy inputs, medical devices, natural products, additive manufacturing and nanotechnology.
IDC head of new industries Christo Fourie says these industries have the potential to create tens of thousands of jobs and to make a meaningful contribution to economic growth in SA.
His unit has so far made one investment — funding for an undisclosed sum of a feasibility study being undertaken by energy company Bushveld Energy for the use of vanadium redox flow batteries to store energy.
The IDC aims to make R250m in investments in 2016 and is assessing a further 12 deals, says Fourie.
The IDC will amend its list or add new sectors to it each year if need be. “The whole idea is to produce opportunities that will provide economic growth.”
The lower growth outlook could be a good time for entrepreneurs offering solutions that offer better value for money to steal market share away from those sitting cosy in the market, says Allon Raiz, CE of business incubator Raizcorp.
For entrepreneurs with a good value proposition, there is never a bad time to start a business, he says.
Starting up in tighter economic times, Raiz adds, might help a business owner to create a leaner business, while instilling ways to use resources more sparingly, which will stand them in get stead even after a downturn.
For entrepreneurs with a good value proposition there is never a bad time to start a business