Busi­ness/Part­ners see pos­i­tive in­vest­ment ac­tiv­ity

The Star Early Edition - - NEWS - Sizwe Dlamini

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.

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