Considering that political change and government formation often result in destabilised business confidence, David Morobe, the executive general manager for Impact Investing at Business Partners Limited, said the cautious optimism shown by SMEs was encouraging. File photo
The lifeline of South Africa’s economy, small businesses, has shown resilience and maintained confidence in the future after the national elections this year.
This was one of the key findings of the Q2 2024 SME Confidence Index.
Considering that political change and government formation often result in destabilised business confidence, David Morobe, the executive general manager for Impact Investing at Business Partners Limited, said that the cautious optimism shown by SMEs was encouraging.
“The formation of the government of national unity (GNU) seems to have boosted SME confidence here, with 60.96% of SMEs surveyed expressing the belief that the inclusion of more political parties in government will make South Africa a more attractive place for investors, potentially stimulating business growth.”
Most SMEs described the business landscape as stable, with 51.78% noting that it offers an opportunity for improvement.
A smaller portion, 15.84%, viewed the landscape positively, while only 5.87% perceived it as unstable.
The index also reflected fluctuations in confidence levels across several critical areas.
The confidence that businesses will grow in the next 12 months remains high at 81%, although this represents a slight decrease of 2-percentage points from the previous quarter.
Despite this, the year-on-year (YoY) comparison shows a significant 15-percentage point increase, indicating that SMEs are more hopeful about their growth prospects over the coming year than they were during the same period last year.
Confidence in the South African economy being conducive to business growth stood at 68%, a small decrease of 1-percentage point from Q1 2024, but an increase of 6-percentage points YoY.
SMEs have confidence levels of only 46% that the government is doing enough to support SME development, a significant decrease of 13-percentage points YoY and a 4-percentage point decrease from the previous quarter.
Confidence in the private sector’s support for SMEs also fell to 54%, a decrease of 6-percentage points from the previous quarter and 8-percentage points YoY.
The impact of load shedding, though suspended, continues to affect SMEs.
More than 45% of respondents reported that the suspension had led to decreased operational expenses and improvements to their bottom line.
However, 33.63% indicated that while expenses had dropped, their businesses’ financial performance had not significantly improved.
A further 20.75% of SMEs reported that their businesses remained financially constrained due to previous investments in alternative energy solutions during severe load-shedding periods.
The index also identified cash flow, economic conditions and funding as the top three challenges facing SMEs in the next six months.
This marks a shift from previous concerns, with crime, once a top concern, no longer featuring among the primary challenges.
The shift suggests that SMEs are prioritising financial stability and adapting to the evolving business environment and might also indicate that SMEs are seeing promising results from crime fighting efforts.
In addition to the findings, the survey highlighted the importance of access to finance, information and mentorship for business growth.
Despite a slight decrease in the perceived importance level of access to finance from the previous quarter, it remains a critical factor with SMEs expressing importance levels of 84%, a significant 15-percentage-point increase YoY.
Access to SME-specific resources and support is also highly valued, with SMEs citing importance levels of 84%, reflecting a 16-percentage-point increase YoY.
The role of mentorship in business development also received an importance level of 84% from respondents, a 17-percentage-point increase YoY, despite a small quarterly decrease.
Social media continues to be viewed as an important tool for marketing, with SMEs acknowledging an importance level of 87%, up 19-percentage points from last year.
For the first time, the index explored the impact of recent catastrophic weather events on SMEs.
Nearly 20% of respondents reported business loss or disruption due to severe weather, while an additional 14.97% indicated that their business partners or suppliers were affected. However, a significant portion of SMEs either reported that their operations were not impacted by the events (32.98%) or that although they experienced severe weather, their businesses had not been impacted (32.62%), highlighting the varied effects of climate-related disruptions on businesses.
Morobe further said: “The resilience of South African SMEs is not just a testament to their adaptability, but also a reminder of the critical role they play in our economy. It is essential that all players in the SME eco-system continue to support and invest in these businesses as they navigate both challenges and opportunities in the months ahead.”