Downgrade survival guide

PLAN BETTER: BUSINESSES CAN SURVIVE

Small and medium businesses should brace themselves for further economic volatility following more downgrades of the country’s sovereign credit ratings.

Standard and Poor’s Global has downgraded South Africa’s local sovereign credit ratings to sub-investment “junk” grade, after the downgrades for the country’s foreign debt rating earlier in 2017. Fitch kept SA’s local and foreign currency ratings below sub-investment grade. Moody’s has placed SA’s local currency credit rating on review for downgrade in the next 90 days.

The results may include higher interest rates, a weaker rand and rising inflation. Businesses and consumers will have less money to spend but there are steps to ensure your business survives and even grows when economic conditions are tough.

Consider diversification or partnerships

Consider the assets, people and customers you have: is there some way you could use them to create new revenue streams? Can you move into new markets to earn forex?

Cut costs

A robust accounting solution can help you better understand your expenses so that you can find ways to cut costs.

Look at the world through your customers’ and employees’ eyes

How long can you absorb rising costs before you pass them on? How will customers react to a price increase? How are your employees managing as transport and food costs increase?

Thriving through a downturn

There is no need to stop investing in your business because of blips such as the downgrading of SA’s sovereign credit rating. If you’re planning to start a business, have a good business plan and a valuable product or service, there is no need to delay your launch.

General Electric, Disney, Microsoft, Revlon, FedEx and CNN are all world-beating companies that were founded during recessions.

Viresh Harduth is vice-president of new customer acquisition at Sage Africa & Middle East.