How to survive tough times

Government and private sector need to help SMEs and reduce the red tape.

The additional fuel levies of 52c/litre and fuel increases that came into effect on April 1, as well as the electricity price increases approved by The National Energy Regulator of South Africa (Nersa), are expected to be a further burden on small and medium-sized enterprises (SMEs).

This is according to Christo Botes, executive director at Business Partners, who says these increases could present a cash flow challenge if not addressed.

“Consumer confidence is improving in the wake of more political and seemingly more policy certainty.

“Now that economic growth is on the increase and business confidence is also ticking up, SMEs need working capital to replenish their reserves in order to capitalise on the upswing.”

Botes says small business owners should review and rework their budgets for the year ahead to accrue for these increases.

“Start by recalculating the operational costs of the business and factor in that suppliers might pass on their own price increases to the business owners/SMEs.

“Once these additional increases are allocated in the budget, sensible ways should be considered on how these costs can be reduced.”

He says government and the private sector also have a responsibility in this regard. “We still need to urgently address red tape in both government and corporate business in the private sector.

“It should become easier for SMEs to do business, and every effort should be made to reduce red tape. Requirements and regulations need to become more user-friendly and better policed to ensure compliance by all businesses.

“Corrupt activities such as noncompetitive behaviour reported by the Competition Commission need to be rooted out relentlessly, so that the playing field can be levelled for all business activities.”

Botes says the strongest SMEs survived the recent period of economic uncertainty and low growth and demonstrated their tenacity and perseverance.

“We see some of the big drivers in the economy recovering, such as the agricultural and mining sectors which have their direct and indirect supply chain consisting mostly of SMEs.

“We therefore need to support SMEs to grow in this rising tide as these industries have the potential to contribute to growing revenue lines for SMEs.

“This support can come in the form of finance, technical assistance, market access and many other opportunities.”

Botes says it is now more important than ever for small business owners to keep a firm grip on the management of the business’ finances.

They need to find innovative ways of managing their cash flow without resorting to additional debt.

“Businesses will always be faced with unexpected increases.

“It is therefore imperative for small business owners to always understand the ins and outs of their businesses, plan for this potential risk and have mitigating initiatives to turn adversity into opportunity,” Botes says.