Business/Partners see positive investment activity
BUSINESS/PARTNERS created 12 395 jobs in South Africa in the year to March, the leading risk financier for small and mediumsized enterprises (SMEs) in South Africa and selected African countries said in its results released yesterday.
The company approved 327 investment transactions, amounting to more than R1.14 billion in the reporting period. Managing director Ben Bierman said the company’s financial results for the year to March showed positive investment activity, despite a period characterised by tough trading conditions for SMEs.
The results also indicated eroding SME confidence levels and increased concerns around the servicing of debt – if economic and political uncertainty continued to prevail.
“R1 147bn was approved for SME finance during our 2016/2017 financial year and while this is slightly under the target of R1.2bn, the investment activity represents a satisfactory achievement in comparison to the 371 investments amounting to R107.4bn which were approved in the 2015/2016 financial period,” said Bierman.
“We anticipated a challenging period for SMEs in particular, and business in general. The economic uncertainty and lack of growth required enhanced due diligence and prudence in making sound investment decisions. A commitment to client service and post investment support became even more important as it became clear that SMEs were facing increasing pressure. In summary, a satisfying result.”
Total income increased by 11.9 percent to R613.4 million from R548.2m in the prior year. The net profit attributable to equity holders of Business/ Partners for the year amounted to R207.1m, an 11.2 percent increase from R186.3m reported in the prior year.
“We continue to actively explore how we can further service black-owned businesses, so as to increase this number in line with our objective of responsible investing and the current national narrative of inclusive growth,” said Bierman.
“At the start of the financial year we were cautiously optimistic that the local economy was rebounding from Nenegate, and the subsequent economic fallout thereafter. Many indicators pointed to an improved economic environment for the following 12 to 24 months as commodity prices were on the increase, we had bullish expectations that the drought had broken and that the agricultural sector would again positively contribute to the local economy, and that politically, there was stability in the finance team,” said Bierman.
“However, the level of distress among our SME client base increased, which materialised in a sharp increase in credit losses. Net credit losses increased by 90.4 percent to R81m from R42.5m last year. Realised credit losses in the form of bad debts gained 87.5 percent to R63.9m from R34.1m last year,” Bierman said.
He explains that the material increase in the credit losses reflects the continued impact of slow growth, policy uncertainty and other adverse economic conditions prevalent over the past two financial periods.
“Credit risks and signs of distress were noticed from July last year and continued to deteriorate into the first quarter of 2017. However, this distress typically builds up over a three, six and potentially nine month period as many SMEs initially seek out alternative methods to adhere to debt payments.
“In the coming months, Busiuness/Partners will focus on assisting struggling SMEs with technical assistance to support specific management functions as well as business turnaround support, with the sole aim to aid business owners to overcome such periods,” he said.
Bierman said a further downgrade would probably result in the predicted recession, an increase in interest rates and would materially affect SME turnovers, cash flows, debt service costs and therefore the viability of a number of SMEs would become doubtful.