Will the mini-budget bring certainty to SMEs?

There’s an elephant in the room. 

Any sized elephant would make it a little difficult to focus on the upcoming medium-term budget policy statement, but when the elephant is as big as the problems inflicted upon the economy by Eskom, it’s even tougher to ignore. It’s tougher still for you, me or any small or medium enterprise (SME) to think about it being business as usual.

Despite the annoyance, one of the most common complaints about the erratic power supply, or absence of a load-shedding schedule, is that people are unable to plan. From a personal perspective, it is not uncommon to go to sleep on one level, just to wake up on a different level, sending the day’s original plans out the window.

Anyone living in South Africa can relate to this – not knowing what the next few hours will bring, never mind the next day of the week, is terribly inconvenient. This not only affects the route you drive to work, your device battery status, or home routines like cooking dinner or doing homework, it affects your ability to visit restaurants or pay in certain stores, making South Africa one of the toughest trading environments globally for SMEs.

As a South African SME business funding provider, my company has its finger on the pulse of the sector, across industries. Because of our business assessment and payment behaviour analysis, we have access to the real-time trade performance of South African entrepreneurs. This gives us a front-row seat to the various industries and sectors in which entrepreneurs find themselves trading.

It is important for South Africa to know that, without any fear of contradiction, load-shedding and the associated ripple effect is the single biggest threat to the growth of the SME sector in this country. As soon as load-shedding occurs, we see substantial dips in business turnover across the board, in real time.

Of course, there are various reasons for this, mainly centred around the lack of backup power supplies. Not only does it affect the ability to manage transactions, internet connectivity and payments, but it also affects consumer behaviour as customers avoid the traffic jams associated with power cuts. 

We have also seen an increase in home delivery of take-out and groceries mainly because patrons often find themselves uncertain of whether restaurants or venues are able to keep the lights (and ovens) on.

With the spending frenzies associated with Black Friday, the festive season trade and New Year celebrations, the peak season is rapidly approaching for most industries. The biggest tragedy is not the aftereffects of the global pandemic, but that the demand for growth capital is at an all-time high at the coalface of these tumultuous trading conditions. 

Most business owners don’t require capital to make ends meet; they rather have a need to invest in their business in order to fuel their growth plans and take advantage of opportunities by financing stock, equipment or digital technologies.

Small business owners in South Africa are nothing if not resilient. At a time when employment is at an all-time low, business confidence and growth are a necessity. At the very least they require a degree of certainty from the government to plan, procure and scale. 

If Covid taught us anything, when businesses couldn’t trade and the economy all but came to a standstill, it became clear that either as a result of the regular “family meetings” or legislation (or both), SMEs adjusted and started trading through the pandemic, in many instances better than they were prior to 2020.

This is what the SME sector needs from the government now. There is a growing sense of frustration and a feeling that we don’t really know what is happening. Sure, there is a vague warning that load-shedding will be with us for 18 months or two years, but how often, when, and at what stage? Even if SMEs were told the “bad” news that the country could go into permanent stage one load-shedding, at least there would be certainty, and this would allow business owners to plan. 

Although most entrepreneurs have accepted that some level of load-shedding will become the new normal, it is not clear to what extent, or for how long. In order to do comprehensive contingency and scenario planning, they need and deserve a more predictable load-shedding to be in control of their destiny and not at the mercy of unexpected, erratic, rolling power cuts.

To be clear, this is not a reference to the president’s recent turnaround plan. That may well be the blueprint for long-term power sustainability. What SMEs need is to have certainty about what is happening between now and then, so that they can plan accordingly.

And so, when the finance minister delivers his speech, the country will obviously be interested in cost overruns and which adjustments will be made. They’ll assess the general tone and conclude whether it fuels positivity or pessimism. 

However, the entire SME sector will be nervously waiting for a sign that there will be a genuine effort by the government and Eskom to take them into their confidence, and give them a little more certainty, even if it is bad news. At least then, small business owners will be able to plan.

Miguel da Silva is the managing director of Retail Capital.

The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian.