From a small and medium enterprises (SME) perspective, the current economic environment in South Africa is more conducive to growth and opportunity than it was a year ago.
This is according to Ben Bierman, managing director of South African risk finance firm Business Partners, who says 2016 saw a shift in terms of global politics and economic issues, specifically in South Africa.
This, he said, brought about stronger cooperation between the private sector, government and civil society, which will increase the chances of success for SMEs in 2017.
In the year ahead, according to Bierman, SMEs can expect better economic growth, less severe inflation, and an interest rate environment that will at worst not show dramatic increases in the prime rate.
“These improved conditions should provide a more solid platform for local SMEs to grow and pursue their objectives in their respective sectors,” he said.
Bierman said economic growth on both a global and local level is forecast to accelerate moderately this year, thanks to factors as varying as higher rainfall expectancy in South Africa and the fact the commodities cycle is picking up. Business confidence levels are also up from last year, according to the December 2016 Business Confidence Index (BCI) released by the South African Chamber of Commerce and Industry.
“December saw a reverse of the severe year-on-year decline of 10 index points in 2015, with a year-on-year increase of 1.6 index points in December 2016. This is the first time since February 2015 that this BCI has improved on a year-on-year basis, which means local businesses are more bullish about their prospects,” Bierman said.
“Confidence levels are an essential pre-requisite for growth in investment. With 13 out of 19 indices showing improvement on the broader confidence indices being published, we can look forward to improved levels of investment and growth.”
Bierman warns, however, that there are still some dark clouds on the horizon.
“The sustainability of South Africa’s social grant system is dependent on accelerated economic growth, increased job creation and the resultant broadening of the tax base. Without a concerted effort to grow our economy, the ability of government to sustain the current levels are questionable,” he said.
Other threats lurk in the prospect of a downgrade, which has not completely disappeared.
Yet the South African consumer has the capacity and the financial well-being to increase consumption and support growth through increased demand. Levels of indebtedness have, meanwhile, remained manageable, and the consumer’s good performance in servicing the debt obligations are signs that there is capacity for demand-led growth.
“The South African consumer, despite all the headwinds of 2016, continues to be well positioned to stimulate economic growth through increased consumption and, in turn, stimulate small business growth,” Bierman said.
He said the fundamentals are in place for local SMEs to have a much better year in 2017, provided all stakeholders in the economy play their part.
“We need to continue with the initiatives to improve the framework within which SMEs operate, namely business-friendly policies and improved access to markets from both the public and private sectors. The reduction of unnecessary red tape must also continue in order for the SME ecosystem to be conducive for business formation and growth,” Bierman said.
“Furthermore, all stakeholders need to believe in a positive future for South Africa and take a leap of faith by investing in South Africa’s growth as this will be the first step in ensuring a positive virtuous cycle that will lead to further local growth and improved confidence. We have the capacity and the potential to turn things around in 2017, we just need to take appropriate action.”