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South African SMEs See Light At End Of COVID Tunnel, Index Reveals

Following a year of unprecedented challenges, South African small and medium enterprises (SMEs) appear to have seen a glimmer of light at the end of a long, dark COVID-19 tunnel.

This is according to the third quarter 2020 Business Partners Limited SME Index – a quarterly measure of the attitudes and confidence levels of South African SME owners – which revealed a unanimous quarterly uptick across broad business confidence indicators.

Commenting on the index results, David Morobe, Executive General Manager for Impact Investing at Business Partners Limited (BUSINESS/PARTNERS), says that local SMEs conveyed an average confidence level of 54 percent that the South African economy will be conducive for business growth in 2021. “This represents a 15 percentage point quarter-on-quarter increase and is even 5 percentage points up from the third quarter of 2019, before COVID-19 had hit.

“SMEs’ confidence levels that their clients will pay them on time also rose significantly, up 12 percent from last quarter,” he adds.

In line with this improved optimism around payment collection and a more conducive environment, respondents’ confidence levels that their businesses will grow within the next 12 months jumped up 16 percentage points from last quarter to 72 percent, reports Morobe.

“While the South African economy experienced some major blows this year, the increase in confidence across the board suggests that SMEs believe the economy may have ‘bottomed out’. Based on this belief, SMEs are learning to adjust to their environment, and are putting plans in place for the next 12 months,” he explains.

However, with SMEs indicating that cash flow is expected to be their biggest challenge over the next six months, Morobe urges business owners to keep their finger on the pulse. “The economic recovery is not going to be smooth sailing. We are living in volatile economic times, and SMEs need to learn to expect the unexpected or, at the very least, ensure that they are in a financial position where they can ride out a similar scenario in the future.”

That said, the quarterly increases observed in the index results for almost all areas of importance provide a clear indication of areas where SMEs need assistance. “Importance levels of access to finance, as well as receiving SME-specific resources and support, increased by 4 and 6 percentage points, respectively, from the previous quarter.

“Considering that 11 percent of SMEs surveyed were still waiting for feedback on their applications for COVID-19 relief finance, it is imperative that financiers not only finalise reviewing applications received, but also look into making finance for working capital available to SMEs that are ready to resume business operations.”

The increased quarterly confidence levels is very encouraging, notes Morobe. “The uptick illustrates the positive mind-set that SMEs have – to take risks, grow their businesses, and play their role in reviving the South African economy; creating new job opportunities at a time when they are desperately needed.

“Now is therefore the time for Government, big business and other stakeholders to commit to the promotion and facilitation of entrepreneurship and growth within the SME sector. In addition to reducing the red tape that still complicates business compliance matters and offering further relief in the form of tax breaks; these SME stakeholders need to work together to make the business ecosystem as conducive as possible for SME growth,” Morobe concludes.

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