SA small business to face tough 2016 if opportunities overlooked

South African small businesses can expect a tough 2016, but there remain opportunities for those willing to search them out.

In a presentation delivered yesterday at Property Point’s To The Point session, Small Business Insight’s Stephen Timm (pictured above), joined by policy expert Septi Bukula of Osiba Management, outlined some trends SMEs can expect next year.

Property Point is property group Growthpoint’s supplier development programme. The seminar was held at the Southern Sun Hotel in Hyde Park in Johannesburg.

Constrained outlook

The National Treasury last month said the economy is set to grow at 1.7% next year, after an expected growth of just 1.5% this year.

Amid weak business confidence and low household demand, small firms can expect to still battle electricity constraints (although in the last 100 days there was just a single controlled blackout lasting 2hr30mins) as new power stations still come on line.

In addition a drought, brought on by the worst El Nino in 15 years, is also threatening to raise food prices and stoke inflation.

Government spending will also be tighter, meaning possibly fewer possibilities for contracts with the state (although infrastructure work will continue) – with possible tax hikes on the cards still.

The latest Manufacturing Circle (for the third quarter) survey found that 45% of employers in manufacturing sector are looking at cutting jobs in next year. This, while a survey by the SA Chamber of Commerce and Industry (Sacci) in October found that trade expectations for next six months have entered a negative outlook for first time since mid-2009.

Business Partner’s latest index reported average confidence levels of 57% that the SA economy will be conducive for business growth in the next 12 months. This was the second successive quarterly decline since peaking at 60% during the first quarter.

In addition in Small Business Project’s (SBP) 2015 SME Growth Index, released earlier this month, just over one in five firms reported a decline in turnover from the previous year and a further 20% reported no growth in turnover in the same period.

Still some opportunities

It’s not all doom and gloom. Over the coming year and those to follow, business owners are likely to find a number of opportunities. Here are some:

• Favourable policy for small businesses include a promised 30% set-aside of state procurement for small businesses and increasing support for informal-sector firms.
• There is still likely to be plenty of infrastructure projects as part of the government’s drive to fix roads, schools, rail and other areas and promotion of locally-produced inputs in these projects (through increasing local content requirements).
• Those that develop mobile apps (particularly to serve e-commerce, solve social & economic problems or harness freelancers to serve customers) are likely to still see opportunities.
• The development of solutions and technology to address challenges in townships.
• Products and services that focus on green, healthy and alternative living (such as beauty, organic food and solutions to save natural resources).
• Products and services that focus on green, healthy and alternative living (such as beauty, organic food and solutions to save natural resources).
• Products that serve the growing African middle-class (with the gradual rollout of the Tripartite Free Trade Area agreement which was launched earlier this year).
• Solutions to help improve the public sector (such as those in training or in the development of e-government tools).
• Those coming off the Square Kilometre Array (SKA) telescope project — including big data, construction (to start in 2018) and those in the science field.
• Black-owned firms supplying corporates, with the increasing focus in the new BEE codes on supporting black suppliers, which came into effect in May.
• The development of new technologies such as virtual reality and 3D printing.

Where can you find data and trends?

Business owners are busy people. But it helps to set time aside to plot the longer-term opportunities or trends in your particular business sector. Getting hold of quality data is often a good place to start. Here are some ideas:

• Access the Census 2011 data, and then select your particular ward or municipality to focus in on trends on various subjects.
• Browse the annual reports of companies or government departments for their plans. Also read the budget vote speeches of ministers and view their respective strategic plans. A look at the Budget Review document also gives one a good insight into economic trends.
• Read the local economic development plan for your particular municipality of district, as these provide an idea what is being planned by authorities at a local level.
• The National Development Plan (NDP) as well as the Development Indicators provides plenty of ideas and insight into the challenges that South Africa faces. Have a look at the Medium-term Strategic Framework (MTSF) which provides an update on the government’s implementation of the NDP goals.
• Attend industry talks or conferences and read industry newsletters.
• Watch news shows and read as newspapers and magazines as often as you can.

All in all it will be a tight 2016 for many business owners, most of whom will just try to keep their head above water. Those that look for smarter ways to do things, particularly to address the many challenges South Africa faces, may be in good stead to thrive.

This article originally appeared on Small Business Insight, a Burn Media publishing partner, with the headline ‘South African SMEs to face tough 2016’. Stephen Timm writes on small business and is presently in Cape Town, South Africa. Click here to sign up to his monthly newsletter. Follow him on Twitter at @Smallbinsight and on Facebook.