Three sectors where small businesses can still grow in a recession | Fin24
 
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Three sectors where small businesses can still grow in a recession

Dec 02 2018 17:06

There are still some opportunities for SMEs during a recession, as certain business sectors have been known to weather periods of low economic growth well, says Siphethe Dumeko, chief financial officer at risk finance company Business Partners.

"The inherent advantage for SMEs is the fact that they have a lot of flexibility and are often in the best position to find new and innovative solutions to existing demand challenges," says Dumeko.

"In a recession, this usually means finding ways of stripping down vital services and making them quicker and more affordable for clients."

Here are some of the industries that have been shown to offer the best opportunities in a recession.

Security

Whether it is real-world or cyber security, both commercial and private asset owners become significantly more risk averse during times of economic recession and uncertainty, says Dumeko.

While spending in most other sectors of business tend to decrease during a recession, security is one industry that tends to see increased interest.

"The evolution of the private security industry in SA also proves this point. In spite of the continued underperformance of the country's economy in recent years, private security has become a R45bn industry with a growth rate of 15% per annum, making it among the largest in the world," says Dumeko.

"SA has already seen a substantial increase in the number of start-ups in this market and providing new tech-savvy solutions and more efficient support services in this sector may prove lucrative."

Similarly, the realm of cyber security in SA is seeing heightened demand amid increasing threats. However, the required skills remain scarce in the country, and businesses that offer solutions that can bridge this skills gap could see an increasing number of opportunities in the coming years.

Death care services

The estimated value of the funeral industry in SA is between R7.5bn and R10bn.

"Morbid as it may sound, businesses that offer services related to death, including funerals, cremation, burial, and memorials, are usually some of the most recession-proof operations. Death care services usually have a steady stream of business, regardless of the economic climate," says Dumeko.

"With that said, this is still a market that can become price sensitive during tough economic times, and service providers like funeral homes often report that the demand for lower cost arrangements such as cremations usually increase."

Financial services related to the funeral industry also see increased interest as belts get tightened. It is estimated that the funeral insurance market in SA is reportedly worth more than R7bn in annual premiums.

Education

Private education is a growing market in SA, and even in the tough economic conditions experienced in recent years, the demand for more and better alternatives to the public education sector has increased significantly, says Dumeko.

It is also reported that SA is experiencing skills shortages in almost all of its sectors, emphasising the need for service providers that offer more effective, affordable and accessible adult education.

"Businesses that offer accredited online training platforms have especially seen increasing interest in SA, as well as on the rest of the African continent," says Dumeko. 

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