Economic downturn weighs on SMEs

THE PROLONGED effects of the economic downturn in South Africa have placed many small businesses under undue strain. The current cost-of-living crisis has cut into consumer spend and the dual effect of high inflation and rising interest rates has undermined the postpandemic gains of many businesses.

These are undoubtedly tough times for the estimated 2.5 million small and medium-sized enterprises in South Africa that play a pivotal role in supporting gross domestic product (GDP) growth and delivering essential services.

Although these conditions often warrant drastic cost-cutting to remain profitable, I warn against putting risk mitigation on the back burner.

While many businesses may be considering cancelling their insurance policies as a way of reducing their monthly expenses, now is not the time to take unnecessary risks.

Instead, insurance should be “reframed” in the minds of business owners as less of an expense and more of an investment into the future well-being and commercial viability of their ventures.

Times of economic and social volatility are unpredictable, and we’ve seen first-hand the devastation that can result from unexpected events. The civil unrest and looting in 2021, the severe flooding in KwaZulu-Natal in 2022, and just a year later, the floods in the Western Cape. These are all prime examples of why being as prepared as possible for all eventualities is vital to business continuity.

The good news is that insurance products are not one-size-fits-all solutions and should always be tailored to unique business needs.