More than three-quarters of South African small and medium enterprises (SME) owners believe that 2017 will yield greater growth for their businesses than 2016.
This is according to the fourth quarter 2016 Business Partners Limited SME Index, which surveyed the attitude and confidence levels of South African SME owners across various sectors of the economy.
The survey found 77 per cent of South African small business owners expect 2017 to be a good year, while for the first time in about two years all seven of the survey’s broader confidence indicators reported improvements compared to both the previous quarter and the same period in 2015.
“In 2016, the private sector, and particularly the SME sector, experienced how political uncertainty and noise can negatively impact an already struggling economy,” said Ben Bierman, managing director of Business Partners.
“Political uncertainty however stabilised somewhat towards the end of 2016 and the country narrowly escaped a ratings downgrade. This, coupled with various positive economic prospects in the current environment – such as good rainfall and improved commodity prices – has improved SMEs’ confidence for business growth in the year ahead.”
The survey revealed an average confidence level of 59 per cent that the South African economy will be conducive for business growth in the next 12 months, an increase of three percentage points year-on-year and an increase of four percentage points compared to the third quarter of 2016.
Bierman said the working relationship between the public and private sector has gained traction over the past year and is inspiring confidence amongst SMEs. A confidence level of 40 per cent that government is doing enough to foster SME development in South Africa in the fourth quarter of 2016 represents an increase of one percentage point quarter-on-quarter and six percentage points year-on-year.
SMEs also reported a confidence level of 47 per cent that the ease of access to business finance will improve in the next 12 months, up nine percentage points compared to the same period the previous year.
“While these confidence levels remain below 50 per cent, the perception is that government has over the last 12-18 months taken necessary measures to address the classic barriers for business formation and growth – namely access to funding, restrictive labour laws and red tape – and that SMEs are starting to see the impact of these changes, and in turn, feel more confident,” Bierman said.
He stressed that now, more than ever, an environment where SMEs can thrive needs to be created in South Africa, as this is the most effective vehicle to stimulate economic growth and job creation.
The Business Partners Limited SME Index revealed 47 per cent of SMEs in the 2016 fourth quarter reported that they hired new employees in the last year.
“If we can continually improve the entrepreneurial eco-system to be more conducive for business growth, supported by an improving economic environment, this percentage can only improve,” Bierman said.
He said SME funding needed to be a priority in 2017, and encouraged financiers to adopt a more positive outlook towards South Africa’s future and consider taking more calculated risks.
“Viable and sustainable SMEs that survived a very difficult period last year are potentially still feeling the aftermath and may be struggling, as many don’t tend to have a financial safety net to sustain them through tough periods. As confidence levels improve for the economy and businesses, we hope to see an increased ease of access to finance for SMEs,” Bierman said.
“SMEs largely reflect what is happening in a broader economy. When confidence levels improve, this will positively impact on economic growth, leading to increased economic traction and business’ ability to create employment. This upward growth trend then further allows SMEs to do better. As long as we have this multiplier effect in action, SMEs should have a better 2017.”
