Confidence soars in SMEs post Ramaphosa
Putting new concepts, products on market
RENEWED business confidence in South Africa’s small and medium enterprises (SMEs) following a change in the political landscape, is set to boost the country economy and employment prospects.
According to Karl Westvig, chief executive of Retail Capital, this is shaping up to be an excellent year for the SME sector partly owing to increased positivity since the appoint of President Cyril Ramaphosa.
He said small to medium-sized businesses were taking more risks and feeling more confident in putting their concepts and products on the market.
“People are investing in their businesses far more than towards the end of last year. On the back of positive business sentiment from the Cyril Ramaphosa election as president and the new cabinet, with visible signs of anti-corruption and policy certainty, we have seen hugely increased levels of applications.”
The Franchise Association of SA said it welcomed Ramaphosa’s commitment to supporting small business and entrepreneurship, in response to the State of the Nation address in which he confirmed that the growth of the economy will be sustained by small businesses, and undertook to set aside at least 30% of public procurement for SMMEs (small, medium and macro enterprises), co-operatives, township and rural enterprises to “grow this vital sector”.
Tony da Fonseca, chairperson of the association, said franchising was poised to play an even bigger role “as a sector that already contributes 13.3% to the country’s GDP (gross domestic product), generating an estimated R587billion through its 845 franchise systems, 40 528 franchisees and employing 343 319 people.”
Westvig said demand for finance from July to September last year was subdued because of seasonal downturns, especially through the negative political sentiment leading up to the ANC elective conference.
By October up until December, however, applications for finance volumes were up by 70% which he attributes to businesses needing to restock ahead of a busy peak season.
Westvig said regionally, the Western Cape and Gauteng had increases of 80%, but KwaZulu-Natal had an increase of just 35% and the most notable change came from the restaurant, food and beverage industries, with a 100% increase in applications for funding around the festive season compared to the previous quarter.
He said these levels of applications had continued into the new year to March, however, he expected to see further positivity and growth in the months to come.
“The volume growth from the fourth quarter of 2017 to the first quarter of 2018 decreased by just 1%, during a time where we normally witness a much larger decrease after the festive season. Retailers are definitely trading up and are reinvesting in their businesses through increased stock levels and business expansion, refurbishing and renovating,” said Westvig.
“With South Africa’s unemployment rate at 26.7%, it stands to reason that more and more people are taking the entrepreneurial route and launching their own products and businesses,” said Westvig.
Ben Bierman, managing director of Business Partners Limited, commenting on the latest Business Partners Limited SME Index released last month, said SMEs should plan for increased growth this year.
Bierman said the 2017 fourth quarter index showed SMEs were confident that the South African economy would be conducive for business growth in the next 12 months.
“Confidence levels have risen to 64%, an 11 percentage point increase in comparison to the third quarter of 217, and the most substantial change recorded since the index was launched in 2012,” he said.
IT’S THE MOST SUBSTANTIAL CHANGE RECORDED SINCE THE SME INDEX WAS LAUNCHED IN 2012