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Dimakatso Leshoro | 3 May 2023

Small-to-medium-sized enterprises (SMEs) are buckling under the pressure of load shedding and liquidity challenges.

That’s according to last year's fourth quarter SME Confidence Index. It found that confidence has plummeted among SMEs as the 15-year long energy crisis in South Africa escalates.

Confidence had improved after the 2020 slump because of the Covid19 pandemic lockdowns, but the onset of stage 6 load shedding last year saw businesses hit hard by interruptions in power supply.

Executive general manager for impact investing at Business Partners David Morobe said the SME sector was being hammered by headwinds both on a national and global front. It was therefore not surprising that their confidence had taken a knock.

"In light of this, small businesses are now faced with the option of investing in alternatives to limit their reliance on the national grid. With load shedding expected to persist indefinitely, accessing a predictable source of power is imperative to business continuity and should be treated as a top priority, which might remain a challenge for 27% of the SMEs surveyed who indicated that their businesses could not afford to invest in alternative energy solutions,” he said.

SMEs are the heart of the economy and job creation, however, business owners confidence that their ventures will grow in the next 12 months dropped by 9% to 56%.

While confidence that the domestic economy will be conducive for business growth within the next 12 months also dropped 13% to 64%.

The survey found that SMEs were concerned about a lack of support from bigger private sector businesses, suggesting that big businesses themselves were under pressure from domestic and global factors such that support to grow the SMEs may not be there.

“It's a red flag given the critical role of the private sector in supporting the growth of small businesses.

Many SMEs rely on supplier agreements with the private sector and structure their business models around this demand.

Private sector players also provide small businesses with much-needed access to funding for kickstarting their ventures, purchasing assets and hiring talent.

As such, the return of the SME confidence in this area is a vital factor in creating an enabling environment for entrepreneurs, who are essential contributors to job creation, social empowerment and economic growth,” Morobe said.

He said cashflow retains its position as the most long-standing challenge identified by South African SMEs in the SME Index. While crime was reported as the second most pressing concern, followed by funding, which replaced "economic conditions" as the third biggest roadblock to success.

Cashflow challenges have been exacerbated by the increase in load shedding, with the national grid buckling under existing pressures. 41% of SMEs surveyed reported having suffered business interruption and 39% claimed to have experienced a loss in productivity as a direct result of load shedding.

"This was compounded by interest rate hikes which escalated significantly towards the end of last year – for 60% of local small businesses, this market factor contributed to increased financial distress,” Morobe explained.

Outside of load shedding, the SMEs were upbeat that government was doing enough to foster small business development and that the red tape unit in the presidency may help in this regard.

Other key developments for the SME sector include the exemption of these businesses who employ less than 50 employees from the annual reporting requirements in terms of the New Employment Equity Act.

Meanwhile, there are proposals to amend the National Small Enterprise Act (1996) to level the playing field between government, big business and the SMEs and to create a statutory body to resolve SMEs-related issues.

DA’s Henro Kruger welcomed the move saying the lack of adequate legislative support for the SMEs had long been a concern.

“The amendment of the Act is necessary because of the apathetic government and the department of small business development, which have been painfully slow in providing the necessary legislative support for small businesses to thrive.

The lack of urgency displayed by these entities is unacceptable., and this amendment seeks to address it effectively,” Kruger said.

‘Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER’.


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