Is the economic climate hindering the growth of SMEs?
Small and Medium-sized enterprises (SMEs) have flourished over the years. However, it is evident that certain threats have and continue to place them at risk.
With the regulatory and environmental changes in South Africa, not to mention the stagnating economic climate and high levels of unemployment, it is important to ensure that SMEs are adequately looked after from an insurance point of view.
Bearing in mind that many SMEs in South Africa may have less capital to sustain themselves and possibly do not have insurance cover in place, in light of events happening against them they are often caught of guard and in some instances close off their businesses.
In a recent article on our website, a Zurich survey revealed the top South African SME concerns and FAnews chatted to William Surmon, National Head of Sales and Distribution, Zurich South Africa, about this and how the success and growth of SMEs can be achieved.
According to Surmon, insurance is essential to running a sustainable enterprise. As businesses grow, owners become more aware of what is required to protect their valuable investments. Insurance then becomes a necessity rather than a nice to have, especially when individuals have sunk their life savings or retrenchment packages into ventures that could potentially fail.
Trends in the sector
According to the survey done on 3 800 Senior Executive SMEs, high competition and the lack of consumer demand were rated as the biggest risks.
South African business owners identified high competition/dumping prices impacting sales margins; lack of consumer demand/overstocking; and customer or employee health and safety as their main concerns. This was followed by reputational damage, corruption and legal and fiscal problems. Interestingly, cybercrime and natural disasters featured low on the list of perceived risks.
From a global perspective, companies shared the same sentiments as South African SMEs, but ranked theft third overall. The findings showed that smaller companies around the world are mostly focused on risks that are likely to affect their bottom line rather than tail risks like supply chain or natural catastrophes that could destroy their businesses.
“Zurich’s SME survey also showed that SA business owners view new customer segments and sales channels as their top growth opportunities. Business technologies such as cloud computing and mobile innovations are also a particular focus area for small business owners in the country. While ‘tech-savvy’ businesses are more likely to succeed, the majority of SA businesses are not prepared for the potential onslaught of cyber liability risks, especially the financial and legal repercussions of a data breach,” said Surmon.
Identifying gaps to customise solutions
By identifying the trends and gaps in the SME market, business insurance offerings can meet the increasing demand for specialised, tailored insurance solutions for SMEs.
It is vital for SMEs to have proper risk management plans in place with the appropriate insurance cover. By enhancing the product offering and assessing the type of cover required, a wide variety of covers can be offered.
Surmon says insurance plays a key role in helping SMEs fulfil their ambitions by giving them the tools to manage the risks they face and thus the tools to pursue opportunities.
“It will be up to insurers to not only cater for these evolving innovations, but also to provide adequate cyber risk cover for companies so that they are able to guard their data and IT systems. In addition, insurers will have to cater for businesses that crop up in industries and sectors that never existed before. Insurers will need to innovate at a fast pace in order to provide products and solutions that meet the unique needs of these emerging companies,” he said.
“Ultimately, as SMEs position themselves for growth, all organisations in the sector – including insurers, governments and associations - have a role to play in educating entrepreneurs about protecting their businesses and mitigating risk. Only then can the economy truly reap the benefits of a vibrant entrepreneurial ecosystem,” said Surmon.
Surmon also mentions that Finance Minister Nhlanhla Nene’s, Budget Speech highlighted the need to prioritise measures aimed at generating employment, including increasing support for enterprise development. “In fact, R3.5 billion has been allocated to the mentoring and training of small businesses; vital to the successful growth and development of the sector. The speech also alluded to increased tax incentives for SMEs,” he said.
Editor’s Thoughts:
With the proper risk management plans and the appropriate insurance cover in place SMEs can grow and prosper. Do you agree with this? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.
