Johannesburg - As the new year begins, Fin24.com's My Business has put together some predictions for the small- and medium-sized enterprise (SME) market in terms of what's hot and what's not in the light of the worsening global economic climate.
The downturn in the global economy has hit small businesses in many different ways.
Lack of capital and free cash flow has crippled many smaller businesses, while larger ones have begun the process of "downsizing" or, more politically correctly, "right-sizing". More people in the unemployed space tend to drive up competition for jobs and forces people to consider self-employment when jobs begin to dry up.
After interviewing successful entrepreneurs and consultants in 2008, My Business found an important theme to be the importance of being able to make prices as opposed to taking them. This gives businesses the best chance of survival.
To try and stimulate some discussion around the SME sector in South Africa, we've developed a list of industries we believe could fall out/come into favour over the next 12 months for aspirant entrepreneurs to consider:
No way, José:
Communications, branding and marketing: These industries are likely to face some serious pressure over the next 12 months. Of the public relations (PR) and branding practitioners we spoke to, only one said that he hasn't seen clients cutting their budgets. That is because the service he offers is very closely linked to return on investment as opposed to providing general branding, marketing consulting and PR - clients only pay commission on exposure they receive.
Technology: Technology is likely to show two very different sides. On the one hand, developers of quality proprietary software and IT security will always be in demand, particularly those able to develop and maintain decent online platforms.
Conversely, those involved in the "box-dropping" game - reselling of hardware for skimpy margins - are likely to come under increasing pressure as bigger competitors weather the storm using any pricing power options open to them.
Sports & leisure: Expect SA middle-class consumers to be very conscious of the money in their pockets. Take a walk through the likes of Cash Crusaders and you'll see more than your fair share of golf clubs that have been traded in; this will give you a hint of how the SA consumer is thinking.
With the 2010 World Cup around the corner, there remain opportunities for entrepreneurial South Africans to make a success. However, many of these opportunities are more likely to present themselves only when guests actually start arriving in SA and sector specific knowledge will make or break your venture.
Looking interesting:
Waste management and the carbon market: The world is becoming increasingly aware of the impact its inhabitants are having on the environment. We've seen rapid growth in the carbon credit market globally and waste management businesses have become increasingly profitable as legislation toughens up on business. While barriers to entry (particularly locally) are quite high in terms of costs and skills, opportunities abound here considering where SA is placed in terms of legislation and industry.
Food: There's an old saying that when the economy turns south, the safest places for business are in bread, beer and cigarettes. In 2008, SA became a net importer of food (currency fluctuations aside), meaning quite simply that despite our proud agricultural heritage we are unable to supply enough food locally for willing buyers. Admittedly, it's not the most glamorous or quickest turnaround sector be involved in, but with buyers outnumbering sellers, this sounds like an opportunity.
Corporate social responsibility projects: While traditional marketing is going to come under pressure, corporate social responsibility projects are likely to become increasingly popular with corporate South Africa.
In roughly a decade which has been highlighted by decadent behaviour and spending, many businesses - particularly those in the financial sector - are now working hard to convey the message that they are not led by greedy, money-grasping individuals. Spend here could also be pushed by government stimulus as the state attempts to deaden the impact of a sharp economic decline.
If you have the energy and enthusiasm to drive these kinds of projects and the ability to sell them into corporate businesses, you may find opportunities presenting themselves.
Electronic learning: We touched on proprietary software above and there would be overlap here. However, electronic learning platforms for schools and universities present an exciting technology likely to gain traction in countries like South Africa where institutions remain heavily understaffed. While it may be a few years before this technology comes into the mainstream, investment in the sector is on the up and if you can identify a niche and communicate its benefits, you may be in the forefront of a new technology wave.
Give us your thoughts on this list and other industries you believe could benefit.
Without question, 2009 is likely to be an extremely tough year for small businesses across the globe, but we should take heart that many of the most successful entrepreneurs have made great wealth when things have looked darkest.
- Fin24.com