Economic pressure placing SMME growth at risk
Economic activity at the start of the third quarter of 2015 is leading to serious questions about whether small and medium enterprises (SMMEs) can survive or flourish under the current climate.
Signs that the local economy remains under strain were acknowledged when the South African Reserve Bank (SARB) increased the repo rate by 0.25% to moderate risks of a weaker Rand and rising inflation. Significantly, possible retrenchments in key sectors indicate that South Africa could continue to face tough economic times in the short-term.
“The prevailing conditions are likely to restrain the potential growth of SMMEs, posing a serious challenge to the country’s goal to build a flourishing sector. Even though SMMEs have a key role in boosting our economy, we still need a desirable ecosystem to stimulate such growth. However, this will be difficult to achieve if large industries are unable to withstand the current economic pressure as evidenced through potential job losses,” says Heather Lowe, Head of Enterprise Development at FNB Business.
“The imminent challenge for South Africa is to strike a balance between supporting major industries that are feeling economic pressure while continuing to stimulate job creation in the SMME sector,” she adds.
Even though rising inflation and the unstable Rand are some of the contributing factors to the country’s challenges, the impact of energy constraints cannot be overlooked. Over the last two years, businesses have had to find alternative energy solutions to sustain their growth. More importantly, intermittent energy supply has been highlighted as one of the reasons the country’s economic outlook has been revised down.
Lowe says despite the current challenges, it is important for South Africa to continue focusing on economic stability and job creation by supporting both small and big business. “Society needs both sectors because big business has to retain existing jobs while small business should be creating new jobs,” she concludes.
