Economic revival lies in buying local

Local SMEs hold the keys to unlocking South Africa’s prosperity.
Image: Moneyweb

When President Cyril Ramaphosa announced the country’s move to level one restrictions one could almost hear the cheers of small and medium enterprise (SME) owners who so desperately need the economy to return to some degree of normalcy.

Of course, “some degree of normalcy” or the “new normal” does not mean that our lives will go back to where they were a year ago, but it does mean that barring a rapid surge in Covid-19 infections all the pieces are in place to kickstart our economy. The surest route to economic recovery and prosperity in our new normal is to support local – we need to light the fire under our immense SME potential.

There is no hiding from the fact that businesses have taken a hammering, just like their counterparts around the world. The country’s recently released economic data put numbers onto what we already know – that year-on-year it has been nothing short of a rout.

South Africa’s heightened inequality and socioeconomic challenges mean that many millions of poor people have truly borne the brunt of the pandemic. Families who have been victims of company closures or retrenchments have endured indescribable hardships. However, despite where we find ourselves, we stand at the cusp of great opportunity.

In order to understand the potential we can unlock, one needs to take a step back and consider a few facts. The first is that SMEs are a huge source of employment for South Africans, because by all estimates they make up well over 95% of businesses in the country. The health of SMEs are therefore vital to South Africa’s GDP and integral to any economic turnaround.

And so, when the pandemic hit, the first to feel the pain were small businesses, with the requisite economic implications. However, if we take a look at the SMEs that either survived or thrived against the odds we find a recurring pattern.

They evolved rapidly. Where a door shut, they immediately opened another. Businesses that were built on hot food suddenly became proficient at cold meals, while importers of Chinese goods sourced local goods – all the way from lights, to clothes, to gym and exercise equipment.

Therein lies a blueprint to add another tool into our economic recovery toolkit. Buy local.

In our network of businesses, we noticed that those which were able to pivot and support local – both upstream and downstream, suddenly found themselves able to service their own customers, but also reignite the prospects of South African suppliers. With a newfound demand, many of these producers were able to rise to the challenge.

This is all good and well but what happens when the borders reopen and the market is flooded with cheaper imports? Opening the borders completely is an essential component of a free and open economy, but it need not be the death knell of local industry – and we are not scratching the surface of protectionism either.

By supporting local wherever possible, we recalibrate our lens to see the bigger picture. Our prospects are all intricately linked – if your side of the ship starts taking on water, chances are it is only a matter of time before mine does too. If the ship takes on too much water, we all sink together.

As businesses scale, and move from startups into fully fledged businesses, they are able to service the needs of their customer base more efficiently.

One of the forced outcomes of the pandemic has been the need for everyone to embrace digital transformation in some form or another. Automation of business processes such as HR or accounting, for instance, allows SME business owners to move away from being jacks of all trades and focus on the core tasks of running and growing their businesses.

Digital capabilities also mean that businesses can find one another, compete with one another and very importantly, find and listen to their customers.

But how do we get there? The single biggest obstacle to SMEs scaling to sustainable levels is lack of access to funding, and so as funders we understand the vital role we play at the coalface of the SME engine room.

The most appealing side effect, then, of an economic recovery built on the foundation of a buy-local mindset, is resilience. Resilience in the face of economic dips, resilience in the face of another global catastrophe and resilience in the face of very stiff competition from international players and their exports to our shores.

As we celebrate heritage day, let’s take a moment to reflect on how far we have come as a country. Six months ago we had no idea how badly this pandemic would hurt us, or what the aftermath would be. Like all hardships, it came at a great price to families who lost loved ones and businesses, but it also brought communities together.

What a beautiful story it would be if we, as South Africans, took this legacy of pulling together into 2021 and beyond by thinking creatively and supporting the driver of our country’s potential prosperity: South African SMEs.

Karl Westvig is CEO of Retail Capital

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Buying local is always good for local economics, but true economic revival lies in dealing with corruption decisively and retrieval if stolen monies.

Well between unions and the Government BEE policies many industries in SA has become largely uncompetitive. Buying local might sound very patriotic but it is quite the opposite.

It is just part of ANC socialist rhetoric and a com.

SA needs to become competitive or just close shop. The unions need to understand this.

I AM NOT GOING TO FLOG A DEAD HORSE LIKE PRAVIN GUPTE WITH SAA.

And when Donald Trump says these things he’s a Xenophobic Nationalist?????

Trump fan, I presume? Can your hero perhaps run his “buy local” campaign without Fox News and own race hate narrative…
Besides, imagine the US coming up with its own platinum and uranium (and one or two other mined commodities) in sufficient quantities….

Very well observed! Bunch of hypocrites.

We in the townships have been buying local all our lives eg.

– kos (food)bought from motjie
– groceries from chitcha
– veggies from kaatjie and brei-ma
– clothes were made by pang
– alcohol was purchased from smokkie/house on prairie
– dine out was bunny chow/gatsby

Errr ….not really. These locals are only distributors. The reality is:

Kos & Groceries – via Makro ingredients ex-China, Far East and global
Veggies – the Epping market from the Cape Flats and the rest of the country
Clothes – Pep and Jet stores ex-China, Vietnam and Bangladesh
Alcohol – Distel and AB InBev
Dine Out – Any amount of ex-USA fast foods.

Nice try, no Cuban cigar – but perhaps a local ‘stop’ from the Transkei or Durban? That seems to be the local product of choice.

Unfortunately, the clothing trade was decimated by China; the “locals” in Cape Town were the backbone of the building industry, but who wants to be an artisan anymore? The only uniqueness you have now is the tourist industry and to use that as a product once this virus goes away.

How to compete with China is not the question but rather how can we milk them as tourists?

We are only unequal comparing ourselves to 1st world economies, comparing ourselves to 3rd countries we are fairly wealthy. A beer at a liquor store in 1st world country +-R35, in South Africa R10-12. Unequal comparisons can be tricky. Happy braai.

Hatchmet thats only true if u are buying everywhere with Rand .
If u are earning Foreign currency it a different story .

Nice idea, Karl. Why not pursuade Ramaphosa to shut down that wastefull Small Business department invented by Zuma to load the government wage bill further? That’s the department, along with DTIs agencies like SEDA, that have been making the most noise over many years about SMEs and SMMEs being critical to job creation, GDP growth and an even transformation.These are the loud-mouth government agents that take up limited media space and time to keep talking about “entrepreneurship,” failure rate of SMEs and new start-ups, horrible banks that don’t lend to SMEs, and so on, while AT the same time these waste-of-time government agencies Small Business Dept/Seda/DTI happily blunder on (on our taxes) without addressing the single biggest problem with SMEs and SMMEs that fold within two years; CASHFLOW!
Not just cashflow – cashflow shortage caused in most cases by the ANC government’s LATE payments to suppliers, many of whom are SMEs!
Talk about shooting yourself in the foot; like building a new dam for water provision (Zuma’s Small Business Dept) but simply ignoring the huge crack in cement from where the water streams from the dam to the sea (suppliers invoices paid long after three months, or deliberately disputed to delay payment.)
So SA consumers are far more likely to buy into the Buy SA or Proudly SA narrative IF the money wasted on above-mentioned gov agencies / deptments was redirected to a private sector trustworthy, reliable and honest trust or fund to support and tutor local small businesses.
Money saved would be from shutting down the Small business Dept and demoting its minister.There are many privately-run credible trusts/funds in support of business development, for example Business Partners linked to the Rupert family, universities – anything except government.
Delink Proudly SA / Buy Local from all government involvement (except western Cape’s Westgro) and I, friends and family will support the call.

Simultaneously the President should also have “recommended” that in order to recieve SA’s support great customer service is a requirement and don’t rip your customers off!

Brilliant and Dynamic article!

Buying local is but one aspect of reviving the economy; tax and macro-economics (government policy) and trade union involvement often wipes out anything positive consumers do. For instance, 2010 Soccer World Cup t-shirts ordered by the ANC or the sports department, were made and imported from China! That’s despite SA’s collapsed textiles industry that ironically was receiving financial intervention from DTI!

Pie in the sky. We have probably spent 8 months and uncountable man and woman hours trying to register a small business. The joke starts with a bank account – uncountable forms, all slightly different and updated (no one actually can guide you through the process correctly). Then SARS for VAT; double joke; tiny little nitpicking about forms and authority (all the members tax is squeaky clean), each time requiring a new appointment days forward and zero help from the SARS “staff” (just loafers finding reasons for doing as little as possible work).

Now to the Treasury CSD database; more forms “BEE” and tax certificates but we finally get there. Now the local municipal database. First it starts that their template does not have space for more than a few shareholders so that had to be changed. Now they want to see all the financial backup, certified by the accountants for the turnover amounts; the two “BEE” certificates provided are not enough. In short, a stupid, frustrating and unproductive circus that epitomises why the SA economy is where it is and will continue to slide downhill. Good luck with the SME theories.

Dear Karl. You are a highly respected entrepreneur having founded(and been very handsomely rewarded as a true capitalist a financial services firm for Michael Lewis. Your article however ignores something key, namely the DNA of the ANC which is socialist.

You are despised and in fact hated by the ANC/EFF .Everything about you is detested. You represent white privilege, capital etc.

SMEs are the backbone of employment creation in Germany, the USA-but not here-and it is not going to change soon with plans for EWC, NHI, SAA being bailed out etc. More than that -the average voter also shares the ANCs vision of socialism.

So, Karl, rather spend more time at the Mauritius or Portuguese mansion of yours and don’t think for one minute that the NC/EFF leadership or voters respects or want your views-they don’t!

Economic revival lies in:

– Govt backing off & REDUCE their interference into the private/business sector.

– Reduce red tape / stringent labour laws

– Bring back rule of law / get crime under control (Mexico seems safer..)

– Allow the business sector to thrive / Create the political conditions leading to investor confidence.

– Improve education for the majority

NO pie-in-the-sky 10-point plans needed from this ‘ANC central command’ type economy. Even China’s Communist Party interference less into their private sector…that’s shy they GROW and South Africa declines!

End of comments.

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