Latest news with #2023GlobalRiskSurvey
IOL News
2 days ago
- Business
- IOL News
Challenges and opportunities for SMEs for the year ahead
A crucial factor in the success of many of these businesses was having a proactive plan to address the challenges they encountered. Image: Pexels South African small and medium enterprises (SMEs) have had a tumultuous few years, affected by a broad spectrum of political and economic issues. Despite these challenges, many business owners managed to keep their businesses afloat, and some have even found opportunities for growth and development. A crucial factor in the success of many of these businesses was having a proactive plan to address the challenges they encountered. This was according to Jeremy Lang, Managing Director at Business Partners Limited, who unpacks the four major challenges SMEs continue to face and must find ways to navigate this year: Supply chain disruptions The 2024 national general election results were painted as a democratic milestone but brought, and continue to bring, uncertainty and fears of political instability. Geopolitical conflict also continues to affect supply chains, impacting global sentiment and lowering confidence levels among local SMEs. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad Loading According to the PwC 2023 Global Risk Survey, supply chain disruptions were identified as the primary external contributor to company risk, a trend that persisted in 2024. The backlog at the Port of Durban, a key logistics hub, serves as a notable example of the significant delays affecting local rail and port operations. The recent increase in tariffs on South African exports to the United States will affect many South African SMEs in that value chain. 2. Loadshedding While South Africa has enjoyed a prolonged period of (mostly) uninterrupted power supply, power outages were an ongoing issue up until the second quarter of 2024 with a daily average of 2.5 hours without power. Major retailers like Shoprite reportedly spent a monthly R100 million on diesel when the country was experiencing Stage 6 load shedding. With recent, sporadic blackouts being implemented by Eskom in quarter one of 2025, there are concerns that the ability to meet the energy demand is still very much in doubt. Persistent rolling blackouts last year contributed to a reduced growth forecast by the International Monetary Fund (IMF). The South African Reserve Bank estimated that loadshedding reduced GDP growth by between 0.6 and 2% between 2023 and 2024. 3. Rising inflation Rising food and fuel prices, coupled with a weakening rand and increased debt-servicing costs, pushed inflation to a high of 5.6% in February 2024. These conditions, combined with a prime lending rate of 11.75%, meant rising operational costs and reduced profitability. Many SMEs had to choose between passing on price hikes to customers and risk losing market share or absorbing increased costs and eradicating profit margins. Although the interest rate is currently on a decline, it will still take a while until it is at pre-Covid-19 levels. 4. Limited access to funding Only one in five SMEs manages to secure the financial support they need to grow their businesses. In South Africa, 87% of small businesses have never accessed credit due to traditional lending practices like reliance on collateral and rigid credit scoring systems creating financial exclusion. This exclusion is particularly pronounced among small and early-stage enterprises which make up the 'missing middle' of SMEs and don't fit traditional financiers' one-size-fits-all requirements. The truth is that funding is available, SMEs need to demonstrate that they are well-managed businesses with growth potential. SMEs must approach funders aligned to their funding needs. Funders want to invest in operations that show viability, scalability and a good return on investment for both the SME and the financier. 5. Turning obstacles into opportunities Lang believes that 2025 may offer more innovative and forward-thinking business owners the chance to transform some of these ongoing challenges into opportunities. Love local As geopolitical tensions persist across the globe, businesses are increasingly sourcing materials and products locally. SMEs can capitalise on this shift by integrating into local supply chains of larger corporations. The South African Revenue Service (SARS) also strengthened this incentive by placing a 15% VAT as of 1 September 2024 in addition to its existing flat 20% customs rate on imports from foreign ecommerce retailers like Shein and Temu that have reportedly exploited tax loopholes and the de minimis tax rule, which used to allow small online purchases under R500 to be taxed only at a flat 20% customs duty, without VAT. This initiative is aimed at protecting local industries and improving revenue. Leverage green tech The growing demand for sustainable alternatives presents an opportunity for SMEs in the renewable energy sector. Businesses can adopt renewable energy to cut costs and reduce operational disruptions should load shedding resurface, as well as provide affordable and reliable solar solutions, battery storage systems, or energy-efficient appliances. Either of these approaches would make an operation attractive to green-conscious customers and investors. Inflate value When costs go up, customers tend to seek out products and services that are cost-effective. SMEs can capture market share by addressing inflation-driven concerns and providing high-quality, affordable solutions to their customers. To tackle these issues, SMEs may need to conduct research or even implement technological solutions such as artificial intelligence in their operations to improve internal processes, resolve customer problems, and reduce production costs. According to the Q4 2024 Business Partners Limited SME Confidence Index, when asked if their businesses had ever collaborated with other small businesses to cross-sell each other's products or services, 42.56% of SMEs responded that they had not, while 37.57% indicated that they had successfully collaborated. Partnering with other SMEs is another effective way to provide value for customers. Get funding-ready Both the challenge and the key to financial resilience during challenging economic times is gaining and maintaining access to capital. Funding enables SMEs to overcome the impact of inflation, load shedding, and supply chain disruptions; and to invest in alternative energy solutions. It supports cash flow which in turn allows entrepreneurs to invest in initiatives that help them to manage rising costs and maintain competitive pricing strategies. 'By embracing innovation, addressing operational challenges head-on, and securing the necessary funding, South African SMEs can build resilience and position themselves for sustainable growth,' says Lang. 'With the right strategies, these businesses can not only overcome current hurdles they are facing this year, but also unlock new opportunities to thrive in an ever evolving economic landscape,' he said.
The Citizen
3 days ago
- Business
- The Citizen
Challenges and opportunities for SMEs in 2025
2025 may offer more innovative and forward-thinking business owners the chance to transform ongoing challenges into opportunities. South African Small and Medium enterprises (SMEs) have been negatively affected by political and economic issues of the past months. SMEs play a crucial role in the country's economic growth and job creation. However, many owners managed to keep their businesses afloat, while some have found opportunities for growth. Before finding these opportunities, entrepreneurs had to devise a proactive plan to address the challenges they encountered over time. Jeremy Lang, Managing Director at Business Partners Limited, unpacks four challenges that business owners might encounter this year and how to navigate them. ALSO READ: Five tips for SMEs to build resilience in 2025 1. Supply chain disruptions 'The 2024 national general election results were portrayed as a democratic milestone, but they have brought, and continue to bring, uncertainty and fears of political instability. 'Geopolitical conflict also continues to impact supply chains, affecting global sentiment and eroding confidence levels among local SMEs,' said Lang. According to the PwC 2023 Global Risk Survey, supply chain disruptions were identified as the primary external contributor to company risk, a trend that persisted in 2024. The backlog at the Port of Durban, a key logistics hub, serves as a notable example of the significant delays affecting local rail and port operations. The recent increase in tariffs on South African exports to the United States will affect many South African SMEs in that value chain. 2. Load shedding He added that, despite South Africans enjoying long periods of uninterrupted power supply, the second quarter of 2024 was marked by frequent power outages, with a daily average of 2.5 hours without power. 'With recent, sporadic blackouts being implemented by Eskom in quarter one of 2025, there are concerns that the ability to meet the energy demand is still very much in doubt. 'Persistent rolling blackouts last year contributed to a reduced growth forecast by the International Monetary Fund (IMF). The South African Reserve Bank estimated that load shedding reduced GDP growth by between 0.6 and 2% between 2023 and 2024.' ALSO READ: Here are the dangers of loan stacking for SMEs 3. Rising inflation Lang said rising food and fuel prices, coupled with a weakening rand and increased debt-servicing costs, pushed inflation to a high of 5.6% in February 2024. These conditions, combined with a prime lending rate of 11.75%, meant rising operational costs and reduced profitability. 'Many SMEs had to choose between passing on price hikes to customers and risking losing market share or absorbing increased costs and eradicating profit margins. 'Although the interest rate is currently on a decline, it will still take a while until it is at pre-COVID-19 levels.' 4. Limited access to funding He said only one in five SMEs manages to secure the financial support they need to grow their businesses. 'In South Africa, 87% of small businesses have never accessed credit due to traditional lending practices like reliance on collateral and rigid credit scoring systems, creating financial exclusion. 'This exclusion is particularly pronounced among small and early-stage enterprises, which make up the missing middle of SMEs and don't fit traditional financiers' one-size-fits-all requirements.' Lang said funding is available, SMEs need to demonstrate that they are well-managed businesses with growth potential. 'SMEs must approach funders aligned to their funding needs. Funders want to invest in operations that show viability, scalability and a good return on investment for both the SME and the financier.' ALSO READ: Political uncertainties that will impact SMEs in the coming months Turning obstacles into opportunities He believes that 2025 may offer more innovative and forward-thinking business owners the chance to transform some of these ongoing challenges into opportunities. 1. Love local Lang said that as geopolitical tensions persist globally, businesses are increasingly sourcing materials and products locally. SMEs can capitalise on this shift by integrating into the local supply chains of larger corporations. 'The South African Revenue Service (Sars) also strengthened this incentive by placing a 15% VAT as of 1 September 2024 in addition to its existing flat 20% customs rate on imports from foreign e-commerce retailers like Shein and Temu.' These retailers have reportedly exploited tax loopholes and the de minimis tax rule, which used to allow small online purchases under R500 to be taxed only at a flat 20% customs duty, without VAT. This initiative is designed to protect local industries and increase revenue. 2. Leverage green tech He added that the growing demand for sustainable alternatives presents an opportunity for SMEs in the renewable energy sector. Businesses can adopt renewable energy to reduce costs and minimise operational disruptions in the event of load shedding resurfacing, as well as provide affordable and reliable solar solutions, battery storage systems, or energy-efficient appliances. Either of these approaches would make an operation attractive to green-conscious customers and investors. ALSO READ: How SMEs can leverage cross-border e-commerce opportunities 3. Inflate value Lang added that when costs go up, customers tend to seek out products and services that are cost-effective. 'SMEs can capture market share by addressing inflation-driven concerns and providing high-quality, affordable solutions to their customers. 'To address these issues, SMEs may need to conduct research or implement technological solutions, such as artificial intelligence, in their operations to enhance internal processes, resolve customer issues, and reduce production costs.' According to the 2024 Business Partners Limited SME Confidence Index in the fourth quarter, when asked if their businesses had ever collaborated with other small businesses to cross-sell each other's products or services, 42.56% of SMEs responded that they had not, while 37.57% indicated that they had successfully collaborated. 'Partnering with other SMEs is another effective way to provide value for customers.' 4. Get funding-ready Lang added that both the challenge and the key to financial resilience during challenging economic times are gaining and maintaining access to capital. 'Funding enables SMEs to overcome the impact of inflation, load shedding, and supply chain disruptions, and to invest in alternative energy solutions. 'It supports cash flow, which in turn allows entrepreneurs to invest in initiatives that help them to manage rising costs and maintain competitive pricing strategies.' NOW READ: SMEs' growth absent in Budget 3.0. Here's what entrepreneurs expected
