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Cape Town - Despite the current challenging economic conditions that small and medium enterprises (SMEs) have experienced over the past few months, many SME owners remain positive about trading conditions in South Africa.
This is according to the 2014 second quarter Business Partners Limited SME Index (BPLSI), which measures attitudes and confidence levels among local SME owners.
Business owners across various industries expressed average confidence levels of 75% that their business will grow in the next 12 months, an increase of 2% when compared to both the first quarter of 2014 and the second quarter in 2013.
Average confidence levels of 58% were recorded when business owners were questioned about whether the South African economy will be conducive for business growth in the next 12 months, a quarter-on-quarter increase of 6%, and year-on-year increase of 5%.
This is the highest recorded average confidence level that business owners have expressed in the South African economy since the BPLSI launched in the second quarter of 2012 and this against the backdrop of the International Monetary Fund (IMF) cutting South Africa’s economic growth forecast for 2014 from 2.3% to 1.7%.
Nazeem Martin, managing director of Business Partners, says the increase in confidence levels may be attributed to entrepreneurs’ eternally optimistic attitude for bucking the trend.
They are usually optimistic that their businesses, over which they have control, will prosper despite the generally adverse economic environment.
“Rather than focussing on the many negative conditions surrounding them, entrepreneurs instead tend to focus on factors they can control within their businesses, as well as what has improved for the better in recent months,” he explained.
However, he pointed out that the subdued economic environment that South Africa currently finds itself in can’t be ignored and there is no doubt that SME owners have felt the impact in recent months.
“We believe the increase in average confidence levels in the economy is reflective of certain issues that had begun to recede in the views of SME owners," said Martin.
"For example, the mining and manufacturing strikes seem to have subsided and with the May election and the investment hiatus that usually accompanies the period leading up to an election behind them, SME owners may be of the view that business can again continue as usual."
For exporters, the windfall gains due to the weaker rand, coupled with the various expansion prospects that many South African businesses may perceive in Africa, could also have boosted business owners’ confidence levels, according to Martin.
He added that, although the average confidence levels are positive, business owners are increasingly expressing concerns around the need for support and business mentorship.
“Though confidence levels are high, it seems as if SMEs are in dire need of support.”
SME owners surveyed displayed average importance levels of 83% when asked how important access to SME specific information, resources and support are for the development and growth of a business.
Furthermore, the index revealed that business owners reported average importance levels of 79% when it comes to having a mentor that is able to advise on the development and growth of a business. Both indicators have increased by 3% since last quarter.
“These two growing percentages indicate that it is tough and often lonely for entrepreneurs in their working environment, and that a sounding board, as well as assistance, is needed for them to continue making a difference in the country’s often fragile economy,” said Martin.
When surveyed on whether government is doing enough to foster SME development in South Africa, average confidence levels of 39% were recorded – a quarter-on-quarter increase of 8% and year-on-year increase of 7%.
Martin believes this jump in confidence can be attributed to the anticipated roll-out of government’s infrastructure development programme, which may benefit SMEs involved in the supply chain industry.
“The announcement of a Ministry for Small Business Development after the May elections and the generally positive pronouncements of newly appointed Minister Lindiwe Zulu could also have contributed towards the increased confidence levels, as SMEs may view this as a commitment from government to taking them seriously and to eradicating the many stumbling blocks which inhibit the establishment of new businesses and the growth and expansion of existing SMEs,” said Martin.
However, when SMEs were surveyed on how confident they were that the newly introduced ministry will aid small and medium businesses, an average confidence level of 49% was recorded.
“While SMEs acknowledge the role the ministry could play, they may doubt the benefits of the ministry and the sense of urgency with which it will tackle its tasks, as it was only established earlier this year,” said Martin.
- Fin24
