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This is a testament to their resilience, ingenuity, and adaptability in the face of uncertainties and rising costs. Yet our survey also recorded a slight decrease in confidence among SMBs (down from 84%), highlighting many business owners' concerns about inflation and relatively slow GDP growth in South Africa.
It’s encouraging that most business owners are optimistic about their prospects. This translates into ambitious plans for growth. Confident SMBs are more likely to make capital investments, expand operations, and create jobs. In turn, this helps to lift tax revenues, create further indirect jobs in the supply chain, and boost the economy.
Furthermore, SMB owners are taking their destinies into their own hands. They are using digital solutions to enhance productivity, streamline operations, and improve customer experiences. Nearly 69% of South African SMBs have integrated new AI technologies into their operations, reporting benefits such as more time to focus on higher-value work.
A laser-like focus on operational efficiency and the adoption of new technology is paying off for many of South Africa’s smaller businesses. Nearly seven in ten South African SMBs are satisfied with their productivity levels, while 44% cite improved efficiency as a key factor for confidence.
But their journey is not without its challenges. Financial pressures, including cash flow difficulties and rising operational costs, are barriers to growth and success. Many SMBs also face challenges such as supply chain disruptions, growing competition for customers, and difficulties in recruiting talent.
These challenges reinforce the need for continued support and intervention. The government and big business have an opportunity to harness SMBs’ positivity to drive economic growth. They can also help to foster confidence among the SMBs whose optimism has declined over the past year.
The government is an important enabler in creating an environment where SMBs can thrive. By promoting digital transformation and providing targeted support, the public sector can help SMBs overcome their barriers. Big businesses, meanwhile, should look to nurture SMBs as their partners, customers, and suppliers of the future.
There are many ways that these stakeholders could help boost confidence and capacity in the SMB sector:
- Support for workforce development and digital skills: Many smaller businesses face a digital skills gap that stops them from fully realising the benefits of technology.
Government-supported training programmes and private-sector skills transfer partnerships could help ensure SMBs capitalise on their investments in AI and other emerging technologies.
- Streamline cash flow: Big business and government can provide affordable financing solutions and incentives for digital investments to help SMBs manage cash flow challenges. Acceleration of initiatives linked to SARS modernisation projects for VAT can help streamline financial processes and improve liquidity.
The government and big businesses should ensure SMBs are paid within 30 days to improve cash flow and reduce financial strain, especially on smaller businesses.
- Increase sharing of knowledge between SMBs: SMBs could benefit from knowledge-sharing platforms and forums where they can learn from each other’s successes and challenges. This could include sharing resources on digital best practices, strategies for addressing cost increases, and effective methods for AI implementation.
Simplified regulatory processes: Reducing red tape in terms of government policy impacts and offering tax incentives can ease the burden on SMBs and encourage formalisation. This should remain a priority for the government.
- Access to affordable financing: Establishing and expanding low-interest loan programmes or credit guarantee schemes can help SMBs secure funding without excessive collateral demands.