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Opportunities for SMEs in underexplored sectors

18 January 2021 Andiswa Bata, FNB Business Regional Head - Gauteng South West

Out of crisis comes opportunity. COVID-19 has dealt the South African economy a severe blow, but it has also radically reshaped our world and opened up opportunities for those equipped to take them.

The businesses that will survive – and even thrive – in a post-COVID-19 world are those that are able to remain alert for gaps in the market, and ready to take advantage of emerging consumer demands and new ways of working.

Even before the pandemic there were sectors of the South African economy that were underexplored by Small and Medium Enterprises (SMEs), and some of those gaps have only grown. I will examine several sectors that might be ripe for entrepreneurs and small business owners who are looking for new opportunities in a constrained economy.

Manufacturing

There are pockets of opportunity if you find the right niche. The mass import of COVID-related PPE showed the potential for local manufacture of medical equipment, while technology is moving fast enough that the sub-sector is not at capacity. There is also opportunity in items tailored to the local market, such as clothing for babies and infants – particularly clothing that goes beyond the everyday to celebrate special occasions. People want the best for their children, and they’re willing to pay for it.

The same can be said of pet owners. There have been some breakout success stories in local dog-food manufacturing, but there is still potential for locally produced healthy, ethically manufactured pet food.

Education

The world of education has changed, perhaps irrevocably. Many institutions are unlikely to go back to an entirely physical learning model, instead embracing some sort of hybrid between online and physical learning. There are numerous opportunities for the savvy entrepreneur in this space. For example, parents feel as though they lack control of their kids’ online learning. Easy-to-use, helpful learning-management tools are unlikely to go out of fashion.

Delivery services

An easy win might be in the provision of local delivery services. Grocery deliveries are still thriving, even in Alert Level 1. And there is room for maturation in the segment. A value-adding service in this area is personalised or bespoke shopping, encompassing recommendations and curated baskets. There are also under-targeted market segments, including elderly and vulnerable people, especially given uncertainty in terms of how long COVID-19 will be with us.

Renewable Energy

Government has announced long-term plans to further opening the energy grid to renewable energy, and there will be increased opportunities in the construction and management of renewable energy facilities, whether on a commercial, residential or industrial scale. With more people than ever working from home, there is an increased demand to make homes more sustainable (especially solar powered), and to reduce the risk of inconsistent electricity supply. In a similar vein, the provision of backup water supply (for example, storage tanks that harvest rain water) is also becoming increasingly important for households and businesses alike.

Funeral Services

A deeply regrettable effect of COVID-19 has been the high death toll. With South Africa currently battling through a second wave, the need for the funeral services has also spiked. There are reports of operators in the broader funeral/burial services value chain being inundated, creating opportunities for other SMEs to step in and help.

For example, SMEs that were historically in the events business may have underutilised tents, chairs and carpets which may be leased to families or funeral service providers. Gig economy photographers, videographers and those who have sound equipment may find demand for services at this time. Transport providers may find use for their dormant vehicles. Carpenters who were heavily impacted during 2020 could now redirect their efforts towards making coffins. There exists a multitude of potential opportunities from safe/accredited refrigeration storage facilities to provision of flowers. SMEs that can pivot towards the places where there is greatest societal need may just find the formula to keeping their business going.

If you’re looking for more information on starting and running an SME, from incubating a business idea to growing your business, check out Fundaba, a learning resource for small business owners. Fundaba is available for free on the FNB App.

Quick Polls

QUESTION

Covid-19 may accelerate certain industry trends. What are we likely to see?

ANSWER

Adoption of contactless technologies and digital experiences will likely be accelerating emerging technologies further
The consumer will expect safety and precautionary measures, driving the need for enhanced surveillance policies and technologies, which may pose potential privacy concerns
Rising activism among consumers and employees could drive an increased focus on corporate purpose
Value chain disruption is likely to lead to an increase in creative partnerships, which may in turn cause organisations to further invest in developing the mindset and agility to collaborate across sectors in the ecosystem
Cost management will be a critical priority to ensure business continuity based on cash flow requirements, to manage lower margins and revenues during a downturn
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