SMEs News South Africa

Business confidence increases as SMEs focus on rebuilding

After an 8-percentage point decrease in Q4 2020, the business confidence level among small and medium enterprises (SMEs) owners is on the increase again, albeit minor. This is despite various challenges and the difficult economic landscape that SMEs are facing as a result of the Covid-19 pandemic - as well as the various levels of a nationwide lockdown that lasted most of 2020. In addition to this positive indicator, recent reports suggest that local SMEs are now prioritizing the rebuilding of their operations to return to pre-Covid levels.

This is according to Mark Paper, chief operating officer of Business Partners International (Business/Partners), commenting on the results of the Q1 2021 Business Partners Limited SME Index - a survey measuring the attitudes and confidence levels of South African SME owners - which highlights some noteworthy changes in business confidence.

He says that it’s positive to note the slight increase in SMEs' confidence levels that their business will grow in the next 12 months, from 64% in the final quarter (Q4) of 2020 to 65% in the first quarter (Q1) of this year, particularly because of the 8% point drop in Q4 of 2020. “Over half of those surveyed also feel confident about their business prospects for the year. This is despite the drop in confidence levels that the local economy will be conducive for business growth in the next 12 months (decreasing to 43% from 45% in Q4 2020).

“Added to this, the index shows that confidence levels in both the private sector and Government’s ability to support SME development are low. This may be indicating that the detected level of optimism from business owners and entrepreneurs is not rooted in the economy or external factors, but rather in their own ability to navigate the challenges in their operating environment.”

Businesses are adapting

The index findings also suggest that businesses are slowly adapting to the effects of the various Covid-19 related events of 2020. When asked whether the Covid-19 pandemic and national lockdown had a negative impact on their business confidence, 55% of business owners responded that it had, but their business should be alright going forward (7 percentage points up from last quarter), with 28% of respondents (down by 8 percentage points) concerned that they might not survive due to the pandemic.

When asked about the reintroduction of electricity load shedding, 50% said that while it had a negative impact on business, they were able to work around it.

Looking ahead, the survey reveals that fewer SME owners believe that their ability to access business finance will improve over the coming year. At the same time, respondents are also placing less importance on access to finance being crucial to the growth and sustainability of their businesses, with importance levels decreasing by 5 percentage points.

Meanwhile, confidence in the rollout of vaccines and resulting prospects of easing business challenges this year is low – with around 49% of respondents believing that the rollout is too slow to make a difference in 2021. This is according to David Morobe, regional manager of Business Partners Limited, who points out; “Still, there is cautious optimism that it will eventually have a positive impact on business, which is encouraging,” he adds.

More self-reliant

Morobe says that SME owners seem to be shifting their focus to more practical challenges to improve the ease of doing business. “Where funding used to be top on the list of support that SMEs want from Government, the biggest needs are now less red tape and direct business flow from Government. This may indicate that while SMEs are becoming more self-reliant in terms of finance, they still recognise that there is a need for Government and other stakeholders to continuously improve the SME eco-system.”

In closing, he notes that SMEs are clearly seeing a silver lining and opportunity to rebuild in 2021, despite recognising that the economic landscape will still present many real challenges. “The general attitude of finding solutions to work around these challenges is a good sign – indicating a positive and resilient mindset.

“This goes to show how robust and adaptable SMEs truly are, and why it’s vital for all stakeholders in the SME eco-system to pave the way for these businesses to thrive. What the SME sector really needs now, is practical barriers such as red tape, access to finance, markets and upskilling opportunities to be removed,” he concludes.

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