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The backbone of our country’s frail economy is weakening

Now is the time for small business owners to look at how they can recover and rebuild in new ways for a post-pandemic business environment.
Image: Shutterstock

With a record high unemployment rate of 43.2% recorded in the first quarter of 2021, and lockdown destroying 42.7% of small businesses in South Africa, it is a clear signal that the backbone of our country’s frail economy is weakening.

Read: Unemployment: No light at the end of the tunnel

Now is the time for small business owners to look at how they can recover and rebuild in new ways for a post-pandemic business environment, in order to retain employment and set course for growth.

Small business globally is seen as the engine of job creation, but South Africa lags behind, with a high failure rate of SMMEs meaning we are still far short of the National Development Plan (NDP) target of small businesses creating up to 10 million new jobs by 2030.

The short-term outlook for small businesses most definitely varies depending on the industry, with some industries closed for the foreseeable future, however there are many that can still recover and consider action plans to rebuild their businesses.

Seraj Toefy, Custodian of Entrepreneurship at the University of Stellenbosch Business School (USB), says that amidst the uncertainty of not knowing how long the recovery will take, it’s imperative for SMMEs to reconsider and reimagine their business models.

Embrace the changes

If your business is still yet to boom again, there is no doubt you need to make some serious changes to survive. What you don’t want to do is bounce back to pre-Covid routines. Rather embrace the changes and create a new norm.

Go back to basics and relook your business model – interrogate why you did things in a certain way, and whether you could do things differently. Most businesses grow organically with very little time spent on critical assessment. Investigate the changed consumer behaviour landscape and ask yourself how relevant your business still is, how can you adapt your service or product, attract a completely new consumer group, or use your skill set to start an entirely new business.

Side-hustles are very often overlooked as potentially fledging full-time businesses. If you started a side-hustle to keep things afloat, consider whether this could not steer your business into a new direction either as an addition to or a completely separate business.

Reassessing your staff complement is essential in reimagining a business. Consider how you can adapt job descriptions to keep overheads lower, upskill your star employees in taking on new responsibilities or diversify their tasks. By investing in your staff and making them part of your growth, they will be, in many cases, the reason for long-term, sustainable, success.

Collaborate

Isolation is the death of many small businesses. By collaborating you can potentially grow faster. Share expenses, resources, leads and staff, even if only as a temporary measure.

For too long, we have viewed competition in a binary way. I win, you lose. We need to move past that and realise that the real competition at the moment is lockdown and a struggling economy.  If forming collaborative partnerships with your immediate competition is too much of a stretch, then look to see how you can collaborate with suppliers and complementary products or services.

Rising tides raise all boats, and working together makes that easier.

Milestones

Set yourself reasonable milestones for your growth.  It will be tempting to think that you will be able to bounce back to pre-pandemic growth figures, but expecting that could be frustrating. Reset your targets, set mini milestones that will keep you moving forward and motivated. Build a runway of at least 6 to 12 months until you can safely be looking at pre-Covid levels.

Stay connected

Brand awareness is your way of letting your consumers, customers and suppliers know that you are either back in business, have expanded your business or at the very least, that you are still around.

Strengthen or re-establish the bond by communicating regularly and excite them with your offering. Clean-up your database and use email and social media to advertise your offering or share new developments in your business. Re-skin your website and ensure it visually portrays a sense of dynamism. And never underestimate the power of a phone call. A short call to your suppliers could result in new, better ways of working together.

Seraj Toefy, Custodian of Entrepreneurship at the University of Stellenbosch Business School (USB).

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“lockdown destroying 42.7% of small businesses in South Africa…” so true. If then the big boys of the private sector knows this, why are they in bed with Ramaphosa and the rest of his cronies? Are they not therefore also responsible for the above reality?

This is what we said would happen at the beginning of lockdown. But no-one listened

One of the main hurdles small business face is organic growth. Large companies borrow money at very low intertest rates- typically a few per cent. In dollar terms most of these real rates are negative. A major mining company may, for example, develop a copper mine with an internal rate of return of 50% while issuing bonds that pay 5% to fund the venture. A small South African entrepreneur will pay an interest rate of somewhere between 10 and 20 per cent or more depending on their collateral- if they can get finance at all. There is a market for debt. People and banks use this opportunity to swap capital for income and vice versa. Why then are interest rates so high? The answer lies in the bond market. Despite what the SARB would have you believe, interest rates are a market phenomenon determined by the bond rate. There are consequences to having an ANC regime. The interest rate is the rate at which lenders are prepared to lend. With the ANC in power, this is sky high especially when measured in real terms (inflation adjusted). The ANC is by borrowing, in effect, diverting scarce capital from the productive private sector to the parasitic public sector. Its borrowing is crowding out the private sector.

One must remember that the marginal productivity of capital is the interest rate. Should interest rates rise further, this will either idle erstwhile productive capital and prevent preclude investment that would have taken place at lower interest rates.

Some of the backbone of South Africa’s frail businesses is actually doing reasonable ok. Overseas that is. Perhaps creating a level playing field might be an idea whose time has come before more able people say “Addio” to the communist ANC’s flavor of appalling racism and discrimination.

cANCer killed the backbone of our economy.

The government and their FAILED POLICIES are the ruination of the economy!All the fraud that has perpetuated the country’s SOE’s falling into shambles is quite evident. In Puerto Rico they had a power outage and they called it catastrophic problem. Here, it’s been reduced to “load shedding.”The amount of “stalwarts” and names in government that cannot operate their functions is ridiculous!! So they move them around. The biggest failure Tina Joematt Petersen. This country has on the job trainees’ that are hurting the people of this country, under the guise of helping. If that’s not 3rd world I don’t know what is. And the under-educated people keep voting for the T shirt and lunch box.

I hope you include “arbitrary, inconsistent and harmful lockdowns” as one of the failed policies of the recent past…

An ornithologist telling birds how to fly…

The fact that our economy turns the formal economy into an informal economy and formal jobs into hand labour can only come as a surprise to those who do not read. The process has been described by economists of the Austrian School.

We should realise that the ANC with its populist economic policies prohibits entreperneurship by incentivizing the victim attitude and by punishing risk taking, saving and investments. Rational people act on incentives and the incentives are destructive in a socialist system.

I have this year seen how government helps small business.

Since Feb each tenant in our complex has had two visits from the Department of Labor to catch and issue fines. For Monty Python stuff – the tenants don’t have open spinning blades and electrical arcs…

Signs! Must have a little SABS logo on or it is a potential killer (even if it hasn’t killed anybody in the past 70y). That’s another R170,000 wasted expenditure. Three jobs versus new signs.

Government also decided that a 1m x 1m x 1m goods hoist that moves wine bins 3m between floors could transport people. (Short ones). The hoist must therefore be re-certified as a lift, get buttons inside, get lights, get lights inside the shaft, get buttons on top in case somebody rides on top, and a list of about 30 other entirely illogical irrelevant features. That R120,000 could have employed two people, but no, at least any vertically challenged workers will be safe if they confuse the hoist with a lift.

I can go on forever. From January 2020 until end of this year I will have spent at least R800,000 on stuff that a rational engineering assessment would find zero risk reduction in after the change. But I comply and the officials are beaming.

Regulated to Extinction!

But business confidence at highest levels since 2019 as reported by FIN24 a few days ago. Biggest resources boom in decades if not a lifetime. Liberty reporting super strong sales volumes and foot traffic at Sandton City? Lower end residential property booming? So some are making money.

As an economic force, South Africa is finished. It has become a ‘stationary state’ – a term coming from Adam Smith:
“In a country too, where, though the rich or the owners of large capitals enjoy a good deal of security, the poor or the owners of small capitals enjoy scarce any, but are liable, under the pretence of justice, to be pillaged and plundered at any time by the inferior mandarins, the quantity of stock employed in all the different branches of business transacted within it can never be equal to what the nature and extent of that business might admit. In every different branch, the oppression of the poor must establish the monopoly of the rich, who, by engrossing the whole trade to themselves, will be able to make very large profits.” – Adam Smith

End of comments.

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