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Cape Town - Small to medium-sized businesses (SMEs) are taking more risks and feeling more confident in putting their concepts and products on the market, according to Retail Capital CEO Karl Westvig.
He believes this is partly due to increased positivity in the sector since the appointment of President Cyril Ramaphosa.
“We are definitely seeing an increase in confidence in the sector. People are investing in their businesses in 2018, far more so than towards the end of last year,” says Westvig.
“On the back of positive business sentiment flowing from the Cyril Ramaphosa election as president and the new Cabinet, with visible signs of anti-corruption and policy certainty, we have seen hugely increased levels of applications.”
From July to September last year, Westvig says demand for finance was subdued due to seasonal downturns – “especially through the negative political sentiment leading up to the ANC elective conference”.
By October through to December, however, applications for finance volumes were up by 70%, which he attributes to businesses needing to restock ahead of a busy peak season.
Regionally, the Western Cape and Gauteng had increases of 80%, but KwaZulu-Natal saw an increase of just 35%.
The most notable change came from the restaurant and food and beverage industries, with a 100% increase in applications for funding ahead of and around the festive season compared to the previous quarter.
These levels of applications have continued into the new year from January to March, however, and Westvig expects to see further positivity and growth in the months to come.
Volume growth
“The volume growth from the fourth quarter of 2017 to the first quarter of 2018 decreased by just 1%, during a time where we normally witness a much larger decrease after the festive season.
"The building and construction retailers were down 20% and restaurants were down 16% in funding applications, but the wellness sector increased by 53% on the last quarter,” says Westvig.
“Retailers are definitely trading up and are reinvesting in their businesses through increased stock levels and business expansion as well as refurbishing and renovating. This also has a knock-on effect of hiring more staff which is positive for the economy.”
He further attributes the rise of confidence in the sector to more people becoming entrepreneurs in a bid to combat the country’s unemployment rates.
“With South Africa’s unemployment rate at 26.7%, more than a quarter of the population, it stands to reason that more and more people are taking the entrepreneurial route and launching their own products and businesses,” Westvig explains.
While the state of the economy cannot be changed overnight, Westvig believes the country is in a far better place for the growth of the SME sector.
“Now is the time to invest and take risks. If you’re smart about your business, it will pay off in the long term,” he says.
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