Recession-proof businesses

Security, death care services and education are among the safest start-ups.

South Africa is out of the technical recession. We believe already established small and medium enterprises (SMEs) will have more to gain from continuing to conduct business, introducing initiatives for improving efficiency instead of trying to recession-proof their operations with measures such as downsizing staff.

Entrepreneurs who want to start up new businesses during this period of poor economic growth and low business confidence will face an uphill battle.

Procuring capital is predicted to become difficult, as funding institutions adopt an increasingly risk-averse stance. Finding crucial first customers could also prove more challenging.

Certain business sectors have been known to weather periods of low economic growth well.

They include: Commercial and private asset owners become more risk averse during times of economic uncertainty.

In spite of the continued under performance of the economy, private security has become a R45billion industry with a growth rate of 15% per annum, making it among the largest in the world.

South Africa has already seen a substantial increase in the number of start-ups in this market, and providing tech-savvy solutions and efficient support in this sector may prove lucrative.

Similarly, the realm of cyber security is seeing increasing threats and heightened demand.

Required skills remain scarce, so businesses that can bridge this gap could see an increasing number of opportunities. The estimated value of the funeral industry is between R7.5 billion and R10 billion.

Morbid as it may sound, businesses that offer funerals, cremations, burials and memorials are usually almost recession-proof. Death care services usually have a steady stream of business, regardless of the economic climate. This market can become price sensitive, though.

Financial services related to the funeral industry also see increased interest. It is estimated the funeral insurance market is worth more than R7 billion annually. Private education is growing and the demand for better alternatives to the under-performing public education sector has increased significantly. Businesses that offer accredited online training platforms have especially seen increasing interest.

The inherent advantage for SMEs is they have flexibility and are often in the best position to find new and innovative solutions to existing demand challenges.

In a recession, this usually means finding ways of stripping down vital services and making them quicker and more affordable.

Siphethe Dumeko is the chief financial officer at Business Partners Limited (BUSINESS/PARTNERS)