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Current economic climate shines light on opportunities for SMEs

While the current economic status continues to paint a gloomy picture for the business environment, now is the time for small and medium enterprises (SME) to capitalise on the gaps in the market that this changing environment is creating.
Christo Botes
Christo Botes

This is according to Christo Botes, executive director at Business Partners Limited (BUSINESS/PARTNERS), who says that larger corporations' tighter internal structures hinder the ability to adapt timeously to the changes in the market, thereby creating gaps for smaller businesses to fill. He points to an analogy that is fitting the situation - "Big ships take long to turn, whereas smaller ones are able to turn quicker and move swiftly along."

"Smaller businesses are agile and have the ability to quickly overcome various obstacles to establish and attain longevity. Compared to bigger corporations, smaller businesses are easily adaptable to movements in the market due to their size," says Botes.

Looking at the current economic climate, Botes says that global economic statistics reveal that the South African economy is weak, facing gradual rate hikes, a tighter fiscal policy, and plummeting commodity prices. According to the latest International Monetary Fund (IMF) findings, sub-Saharan Africa's growth has slumped to its lowest levels in six years due to the drop in commodity prices. The IMF also predict that things could worsen should the global economy continue to struggle.

Botes says that entrepreneurs are increasingly becoming the driving force behind the growth of the country's economy, and that they should be using the current economic climate as a chance to seek new business ventures and opportunities. "Entrepreneurs have the ability to create new, competitive markets through innovation and creativity."

With the weaker currency, Botes says that there are certain industries that SMEs should be researching the opportunities available to capitalise on in the current economic climate, such as the exporting and tourism industry. "SMEs trading in the export industry are currently faring well given the weak Rand, and it is therefore increasingly becoming an attractive industry that should not be underestimated.

"The South African tourism industry, a large contributor to the country's GDP, is another area of potential growth especially following the recent relaxation of visa rules. This industry is similar to exporting as it guarantees an inflow of foreign currency into the economy."

The National Planning Commission reported that approximately 90% of jobs will be created in small and expanding firms, and that export growth, with the appropriate linkages to the domestic economy, will be critical in boosting growth and employment.

Botes adds that SMEs that can focus on import replacement should start doing so now. "It is becoming increasingly expensive to import. This creates a gap for local entrepreneurs to look at ways of sourcing or creating such commodities locally instead of importing from foreign markets."

He says that the edu-care sector is also a viable industry that is rapidly expanding, especially nursery and aftercare services and transport services specifically tailored to this sector. "In many cases both parents need to have full-time jobs to make ends meet in this challenging economic environment, and are therefore seeking after school care for their children. This creates demand for more nursery and aftercare facilities."

Botes concludes: "Entrepreneurs need to unleash the thinking and can-do attitude they are known for and capitalise on the opportunities the market is providing. Entrepreneurs have the ability to create good news stories despite the economic conditions of the country."

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