Welcome to 2013

Feed on the positive SME entrepreneurs!

The Sanlam / Business Partners Entrepreneur of the Year® team welcomes you to 2013! May we feed on the positive this year and not allow the eternal pessimists to shape us into a negative frame of mind. May we celebrate entrepreneurs and their relentless drive to grow their businesses that are keeping our economy ticking and promote the successes of our heroes in the small and medium business world.

Although businesses are most likely to face challenges going forward, business owners / entrepreneurs shouldn’t blow these hindrances out of proportion and forget about the great strides they have made in continuing to grow, rendering goods and services to their target market, employing people, paying their taxes and contributing towards the wellbeing of their communities?

As we consider what the year might hold for South African businesses one realises that the only certain aspect is the economic uncertainty that prevails in the country and the world. If one however takes stock of what we have to be grateful for, there is much positivity to feed on.

The South African economy grew marginally by an estimated 2.5% (in 2012) and economists forecast growth of about 3.5% in 2013. Although this growth is not enough, it should result in demand for your services also growing marginally. This boils down to increased sales, which could be even more positive if businesses manage to outplay their competitors with better service and competitive pricing.

Entrepreneurs are more than likely to be experiencing the lowest interest rate environment they have encountered in the history of their businesses. Are you capitalising on this? In most businesses the cost of debt (interest) is amongst the three highest expense items on an income statement – now this cost has decreased down to prime lending rates of 8%. In a SME’s case the saving on the interest bill alone could be 50% or more when compared to four years ago.

In real terms the saving is even more and should be used to reduce the debt in the business, in other words, paying off more of the capital portion of loans or to fund the working capital needs of a business. SME owners could also consider paying creditors/suppliers sooner, but this should only be considered if they are able to provide early settlement discounts. This is another positive aspect to feed on!

The lower inflation environment experienced over the past few years should bring some stability in ensuring that prices do not run away. In order to embrace this, costs should be managed appropriately and negotiations with suppliers and other service providers to limit their price increases should be considered. South African businesses already have to contend with substantially higher than average inflationary electricity costs and cannot absorb more price increases. A lower inflationary environment is a further positive for SMEs.

Commodity prices are on the increase and with the weaker rand, the rand prices of commodities are increasing even more. With demand for commodities also picking up and mining strikes hopefully under control, mining activities should increase locally through higher output and a renewed drive to increase capacity through an increased capital expenditure programme. This is positive for direct job creation and will in turn increase the level of consumer spending as overall disposable income improves. Sub-contractors to the mining industry are mostly small and medium-sized businesses and their order books should hence benefit directly. This is a positive for SMEs operating in the mining service sector and/or servicing mining communities.

South Africa is playing a leading role in the Sub-Saharan economy. It is estimated that this region will grow nearly two and a half times faster than the advanced economies of the world as we head towards 2020. This fast growing region is economically viable and this is seen by other emerging giants such as China and India as an opportunity. These regions realise that they need South Africa as an entry point into the continent and that our country is the best place to settle in first, as we are the strongest economy on the continent, with the best infrastructure from which they can leverage. South African SMEs should view this as an opportunity as businesses can be grown by being these regions’ local agent and service provider. The opportunities clearly outnumber the threats.

SMEs and business owners should feed on the above positive pointers and develop strategies for the year ahead, which will also assist in a positive change of mind frame. Challenge yourself and be positive – also remember to not be all things to all people. As an SME, you should try to be an efficient niche player mapping out a future in a growing market that still has many opportunities just waiting for the real entrepreneurs to take up and run with them.

I wish you all great success in 2013 and know that as a real entrepreneur you will be able to capitalise on opportunities and create gaps for your business, even where there are not so many obvious ones. Good luck!

Christo Botes
January 2013