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South Africa’s SMEs suffer as political, economic uncertainty lingers

Business owners’ confidence levels in South Africa have neared their lowest point in the last two years, according to the latest Business Partners SME Index report.

The drop in confidence levels for the third quarter of 2016 (56%, 2% less than in the previous quarter) has been blamed mostly on the political and economic clouds currently lingering in the country’s skies.

Finance minister Pravin Gordhan is on the brink of facing trial for alleged fraud, while an intense infighting seems to have shaken the solid foundations of the ruling party.

The economy is starring at the barrel of recession, as the currency bites the dust and credit ratings have been downgraded to junk status.

These unfortunate circumstances appear to be affecting small businesses, which experts say require a less volatile environment if they are to grow and continue creating employment opportunities.

“Entrepreneurs remain committed to this country. However, circumstances are particularly challenging for SME owners at the moment,” Ben Bierman, managing director of Business Partners, said.

“This is causing them to be less bullish and optimistic about their own growth and the economic growth that they anticipate in the future.

“This negative sentiment will only be exacerbated by the economic volatility caused by recent political uncertainty that would not have been incorporated into this quarter’s index results.”

But despite these challenges, Bierman said the SME sector remained committed and was still proving to be an effective tool in job creation.

The BPL report shows that with 49% and 27% of SMEs employed new staff last year and over the past quarter, respectively.

This translates, he said, to an average of four or five jobs created per business, supporting the view that SMEs were instrumental to addressing the unemployment crisis in South Africa.

The number of SMEs in South Africa is estimated at about five million, two million of which are believed to be registered. Reports said these SMEs, registered and clandestine, are believed to have created about 50% of the country’s total employment.

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