Four lessons for SMEs from the events of the past two years

COMMENT

Very few businesses can thrive during uncertainty and chaos. Business, by its nature, requires a stable environment. Small and medium enterprises (SMEs) are no different, meaning that when there is stability for an extended period one finds there’s investment and growth, in other words, there are boom periods. The opposite is true when the environment is categorised by instability.

Let’s cast our eyes back over the past two years. The pandemic is probably the biggest, most sustained global disruption any of us will see in our lifetimes. Beyond that, our country suffered the social unrest in July last year which wiped billions from the economy, while protests are a common sight. 

Most recently, fires at parliament, the Waterkloof Air Force base and St George’s Cathedral, the release of the first two instalments of the state capture report, Judicial Service Commission interviews characterised by chaos and anticipated political contestation ahead of the ANC’s elective conference at the end of the year have caused many to suggest we are in for a rough year.

What does this mean for SMEs, which the government singled out in its National Development Plan (NDP) as being vital for job creation and economic growth? The NDP envisions a world in 2030 where 90% of new jobs are created by SMEs. 

How, then, can entrepreneurs ensure that they run small businesses that employ people and contribute to economic growth rather than being hamstrung by so much instability?

The first step is to find perspective and acknowledge the positives. This may sound trite but it is absolutely essential, especially in a climate where there is an inordinate focus on what’s going wrong. 

Growing transparency

While there is much cynicism about the perpetrators of state capture being held to account, we must recognise that the corruption has been exposed. That in itself is a good thing. It is being reported vigorously, every day, including the report on the state’s failure during the July unrest, but instead of being caught up in that frustration and anger all the time, business owners would do well to at least acknowledge one thing: there is a growing transparency. 

Much of the instability we read about is said to be a direct result of a kickback from this transparency, and so it could be said that our democracy is, for lack of a better word, growing up and the temper tantrums are part and parcel of this process. 

While the fourth wave did occur, think about how it ended compared to how it started. First, the world went mad and shut borders. It seemed as though Omicron would be the nail in the coffin of small businesses. However, the positive to be found is that our president and his team of advisers had learnt from the first three waves and did not totally shut down the economy.

While every death is one death too many, the severity of the Omicron variant proved to be far lower than previous versions of the disease. People flocked to the coast and businesses that were starved of customers started to look more like their former selves. Just that  — that small period of some semblance of stability  — saw new businesses being opened, and certainly from an SME financier perspective, we saw a noticeable uptick in investment in the sector compared to previous years.

And so, when we look back at Covid-19  — the biggest source of instability  — we can appreciate that as long as our government keeps its level-headed approach, the fifth wave, which is predicted to hit around May, won’t necessarily be the end of business. In hindsight, our government probably handled the pandemic better than most. This gives SMEs a glimpse of runway to make the investments and take on the opportunities they see.

Equally, when we look at the political infighting and posturing that dominates the headlines of our country, we understand that it is part of the machinations of political power contestation, precisely because the stakes are so high after the ruling party took a massive blow in the local government elections. Read against the backdrop of democratic institutions that are holding despite the kickback, business owners may not feel the need to react with as much panic when another crisis hits, because they know the country is evolving.

Looking at the macro environment with this new lens, with an opportunity lens, is the surest way for SMEs to thrive. For all the talk of business confidence being at an all-time low, this is not reflected in the movement we see in SMEs using funds to invest in new opportunities.

As business owners chart their flight paths for 2022 and beyond using this new lens, there are a few lessons from the past few years that they can take with them to mitigate the inevitable turbulence.

Digitise

The pandemic supercharged this process, and it has become abundantly clear that businesses benefit from the cost savings and ability to reach and service customers digitally.

Relationships 

Again, we have the pandemic to thank for holding a magnifying glass over the importance of good relationships with suppliers, landlords and other stakeholders. If shocks happen, you’ll be able to handle them because of being able to negotiate better terms, whether short or long term. 

Stable power

Eskom is one of the biggest risks to our economy in general and to SMEs in particular. Businesses should be looking at UPS systems, or if they can, based on where they operate and the buildings they use, investigate renewable energy installations to provide protection, electricity back-up and even the ability to become independent from the grid. 

Access to cash

One of the biggest lessons is that the road is long, it will be bumpy and there will be surprises around the corner. In the case of the pandemic, that surprise lasted more than two years. It’s vital to have reserves and the safety net of fast access to cash. Be prepared to handle shocks. Beyond that, it provides businesses with a green light to take advantage of opportunities to grow and become more competitive.

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Miguel da Silva
Miguel da Silva is the managing director of Retail Capital

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