SMEs feel threat to survival

Over a third (35%) of South African SMEs have experienced a threat to their survival over the past year, according to a new survey.

The SME Growth Index, published by business environment specialists SBP, collected data from a panel of 500 SME operators.

It found that the majority of firms (51%) had increased their turnover, with 22% reporting that they had stayed the same. The balance, as many as 27%, said they had seen a decline in turnover over the past year, in 2012.

SBP asked the panelists to assess the business environment, in terms of whether it had become easier of more difficult to operate an SME in South Africa over the past year.

Nearly three quarters of respondents, some 74%, agreed that running an SME had become more difficult. A further 19% felt that conditions had not changed, while a little over 6% felt that it was easier to operate an SME.

Points of concern

Those panellists who felt that operating an SME was more difficult cited a wide
range of factors. The overall state of the economy featured strongly across the Panel. Simply stated, there was not enough work available.

A number cited governance factors. These included steep rises in administered prices and municipal accounts, uncertainty about the supply of services and the bungling of visa applications.

The political climate, giving the impression – rightly or wrongly – of state weakness, confrontational rhetoric and the potential for violence, was also noted. Lastly, legislation and regulations (“red tape”) were repeatedly raised.

Looking ahead

Over 60% of panellists indicated that they intended either introducing new products and services or seeking new markets.

A further 20% intended opening new locations, and a further 18% intended opening
a business in a new industry.

“These responses suggest a response to economic circumstances predicated on adaption in order to remain in business. Considering the difficult economic circumstances, this is encouraging,” SBP said.

However, 9% intended selling their business; 1% closing it; 8% disposing of assets; and
7% retrenching staff.

The top concern for the panel was municipal governance – the costs it imposes
through rates and service charges and the quality of governance it provides. Some
38% of panellists ranked this issue as their top concern.

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SMEs feel threat to survival