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Johannesburg - The global economic slowdown has forced South African small businesses to innovate or die - and many learnt some critical lessons from 2010.
"I think a lot of businesses have emerged from the recent financial crisis a lot more focused and smarter with regards to the running of their businesses," said Brenton Booth, head of business finance at Sasfin Bank.
Booth adds: "From the several businesses I have engaged with, there is a greater focus on new technology to improve efficiencies and reduce labour costs."
Chris Delport, a portfolio manager at funder GroFin, concurs: "In a sense, 2010 and the difficulties associated with it also brought to the fore the real entrepreneur.
"This is someone that is passionate about his or her business, who will do anything to succeed. In 2010 flexibility was crucial to adapt to the changing market and its needs, to ensure that a business remained sustainable."
Both Delport and Booth believe small business owners had to be "brutal" in their approach to running their firms. This meant cutting unprofitable lines and clients, and looking for ways to use technology to make their businesses smarter.
If entrepreneurs show they can adapt to difficult circumstances and keep tight control over their firms, Booth says, they become a better quality lending risk for banks.
While more sophisticated clients might operate in the space where you would find a bank like Sasfin, it is at grassroots level where lack of education continues to hold back entrepreneurship in South Africa.
"Education has consistently been identified as a primary inhibitor of entrepreneurial activity in South Africa," notes the Global Entrepreneurship Monitor report released in May 2010.
The report has been arguing since 2001 that entrepreneurs need to learn basic business skills such as how to keep records, budget, manage cash flow, maximise trade credit and write a business plan.
Strong rand a boon to imports
Yusuf Randera-Rees, who heads up the Awethu Project, believes a major factor contributing to this debate is that many small businesses still do not know who to turn to for assistance.
The Awethu Project aims to invest in entrepreneurial individuals from under-resourced backgrounds in South Africa.
"I don't think there is any shortage of (funding) resources in South Africa for SMEs (small and medium enterprises), but many just don't know who they can speak to for assistance," says Randera-Rees.
While 2010 has continued to be a difficult year for entrepreneurs and small business owners in South Africa, positive signs are emerging.
"It seems that companies are also taking a more positive medium- to long-term view on the economy by making investments in machinery and equipment," says Booth.
"From an import perspective, we are seeing a general increase in volume from both local manufacturers and importers of completed product who own various international agencies in South Africa, as they take advantage of the strong rand."
Delport agrees: "Overall there has most definitely been a positive change in activity, with enquiries and applications showing a general increasing trend."
With regards to specific areas which have seen the most action, he points to the retail sector as well as the food and hospitality industry, which have shown the most interest.
However, Delport cautions that the failure rate in the hospitality sector - most notably restaurant operators - is extremely high, which does not contribute to sustainable employment creation. One thing he would like to see more of in 2011 is the establishment of more manufacturing-type businesses.
- Fin24
"I think a lot of businesses have emerged from the recent financial crisis a lot more focused and smarter with regards to the running of their businesses," said Brenton Booth, head of business finance at Sasfin Bank.
Booth adds: "From the several businesses I have engaged with, there is a greater focus on new technology to improve efficiencies and reduce labour costs."
Chris Delport, a portfolio manager at funder GroFin, concurs: "In a sense, 2010 and the difficulties associated with it also brought to the fore the real entrepreneur.
"This is someone that is passionate about his or her business, who will do anything to succeed. In 2010 flexibility was crucial to adapt to the changing market and its needs, to ensure that a business remained sustainable."
Both Delport and Booth believe small business owners had to be "brutal" in their approach to running their firms. This meant cutting unprofitable lines and clients, and looking for ways to use technology to make their businesses smarter.
If entrepreneurs show they can adapt to difficult circumstances and keep tight control over their firms, Booth says, they become a better quality lending risk for banks.
While more sophisticated clients might operate in the space where you would find a bank like Sasfin, it is at grassroots level where lack of education continues to hold back entrepreneurship in South Africa.
"Education has consistently been identified as a primary inhibitor of entrepreneurial activity in South Africa," notes the Global Entrepreneurship Monitor report released in May 2010.
The report has been arguing since 2001 that entrepreneurs need to learn basic business skills such as how to keep records, budget, manage cash flow, maximise trade credit and write a business plan.
Strong rand a boon to imports
Yusuf Randera-Rees, who heads up the Awethu Project, believes a major factor contributing to this debate is that many small businesses still do not know who to turn to for assistance.
The Awethu Project aims to invest in entrepreneurial individuals from under-resourced backgrounds in South Africa.
"I don't think there is any shortage of (funding) resources in South Africa for SMEs (small and medium enterprises), but many just don't know who they can speak to for assistance," says Randera-Rees.
While 2010 has continued to be a difficult year for entrepreneurs and small business owners in South Africa, positive signs are emerging.
"It seems that companies are also taking a more positive medium- to long-term view on the economy by making investments in machinery and equipment," says Booth.
"From an import perspective, we are seeing a general increase in volume from both local manufacturers and importers of completed product who own various international agencies in South Africa, as they take advantage of the strong rand."
Delport agrees: "Overall there has most definitely been a positive change in activity, with enquiries and applications showing a general increasing trend."
With regards to specific areas which have seen the most action, he points to the retail sector as well as the food and hospitality industry, which have shown the most interest.
However, Delport cautions that the failure rate in the hospitality sector - most notably restaurant operators - is extremely high, which does not contribute to sustainable employment creation. One thing he would like to see more of in 2011 is the establishment of more manufacturing-type businesses.
- Fin24
