SME owners struggling

Mentorship can play a crucial role in surviving low-growth

BUSINESS confidence increased for the first time this year in the third quarter, but this could be short-lived as South Africa’s low-growth economic landscape and recent ratings downgrade could make it tougher for businesses to survive, according to Siphethe Dumeko, chief financial officer at Business Partners Limited.

He was commenting on the latest third quarter 2017 Business Partners Limited SME Index, a survey measuring the attitudes and confidence levels of South African small and medium enterprises ( SME) owners.

Dumeko said the average importance levels of access to finance for the growth and sustainability of a business had increased to 81% points, up three percentage points from the previous quarter.

Dumeko said despite the quarterly up-tick, these same confidence indicators reported a year- on- year decrease, which raised concerns around whether this showed that the slightly more positive outcome during the third quarter might be short-lived, considering the country’s low growth economic landscape and recent ratings downgrade of South Africa’s foreign currency debt to junk with a stable outlook by S&P Global.

He said the other notable result was on how much SME owners attributed the average importance levels of having a mentor when it came to the development and growth of a business, which decreased by 11 percentage points when compared to the third quarter last year.

“The greater need for funding indicated by respondents in the third quarter of 2017 is testament to the cash-flow challenges being experienced by some SMEs, but the fact that the perceived importance of mentorship has drastically declined both quarter-on-quarter and year-on-year is more concerning.

“SMEs often consider accessing additional financing as the fastest way to rescue a struggling business, however if they don’t possess the necessary technical skills, for example, specific management functions such as budgeting, credit control, cash flow management, to use this funding effectively in their business, they mind find themselves in either the same situation or worse off than before as they will have accumulated additional debt.”

Dumeko said funding became most powerful to an SME and its success when finance was combined with the correct, well-planned and structured mentorship or technical assistance.

He said Business Partners had also found over the years that good mentors are rare to find as they are not necessarily produced by business schools but are forged rather through years of experience in the business trenches.

Dumeko highlighted an independent assessment conducted on the Business/Partners Mentorship and Technical Assistance Programme, which reported that businesses who coupled finance with technical assistance showed a 26% increase in job creation, a 32% increase in turnover and a 79% increase in profit.

“Running a small business requires a varied skill-set that is not always possible for one person to possess. Often, prob- lems within a small business could have been avoided completely if the right mentorship or technical assistance was utilised. Similarly, the right advice can go a long way in minimising the impact of these challenges.”

Dumeko said considering the low-growth economic climate SMEs were expected to operate in, mentorship could play a pivotal role in not only navigating the economic head- winds impacting or hindering business performance, but also identifying other opportunities the SME owner might not be aware of.

“An improvement and turnaround to South Africa’s economy is critical in order to support Moody’s latest ratings decision to keep the country at investment grade pending the Budget Speech in February 2018. The role SMEs can and must play in this turnaround cannot be overemphasised.”

Meanwhile, John Lucas, a country manager of DHL Express sub-Saharan Africa, said effective supply chain management strategies were essential for the growth of SMEs and included finding the fastest and most efficient ways for enterprises to clear their goods with customs and cutting down customs-related risks in the region.

“This can, however, be unwieldy for those not in the know and customer success stories have shown that companies engaging in trade in sub-Saharan Africa that partner with well-networked logistics companies tend to see swifter customs clearance.”

joseph.booysen@inl.co.za

‘The role SMEs can and must

be overemphasised’