It’s challenging to be a business owner in South Africa right now: South Africa is currently stuck between recovery and a downturn and economists still don’t necessarily agree on what will happen in South Africa in 2023, with the topic of a recession on their minds. Word on the street is that South Africa's chances of economic recovery after the pandemic will be hurt by the knock-on effects of an unstable geo-political climate, tensions in Europe, upcoming elections, the state of the freight rail infrastructure, and load shedding. So the best way you as a local business owner can get ready for the year ahead is to remain flexible. Making sure you’re equipped with Plan A, B and C, just in case anything suddenly changes.
What can we plan for?
There are a few things that entrepreneurs can be sure will continue to be good for the SME sector in 2023 and for which you can plan. Here are some things to watch out for: Cost increases will require a strategic approach. When it comes to the cost of production, SMEs will be hit from many different directions. When interest rates go up, the cost of credit goes up, and when inflation keeps going up, the cost of living increases too. This puts more pressure on consumer budgets. Petrol price hikes will also make it harder for SMEs, which will affect both personal and business operations.
For SMEs, the key to getting over this barrier will be strategic pricing. Since customers are getting tighter on spending, the prices of goods and services need to find the perfect balance between being competitive in the market and making enough money to stay in business. Now might be a good time to hire a business strategist or pricing expert to make sure that your product or service can handle the cost pressures that are at play right now.
Traditional lenders could be replaced by tech start-ups
Banks and other traditional financial lenders will continue to stay risk-averse through the following year. But fintech disruptors, independent lenders and non-bank risk SME lenders will continue to offer viable ways for SMEs to get money, fast. SMEs should survey their options, and weigh the pros and cons of interest rates, profit-sharing deals, time frames and more flexible financing terms. The key is to get better at negotiating and put time and money into writing a business plan that investors will find compelling and interesting.
Social commerce will give new small businesses a chance to grow
With Instagram and WhatsApp putting a lot of money into improving their e-commerce features, social commerce will become the norm, especially for small businesses that may not have a lot of money to spend on marketing. Dedicated social media staff are fast becoming essential in every business. If you don't have this in place, you risk missing out on important conversations and the chance to improve customer service. Taking an omnichannel approach to marketing and selling goods and services will be the best way to boost the success of your SME in the new year.
The bottom line
Our economy is in a precarious position, still recovering from the Pandemic, amidst a difficult socio-economic climate. These factors are creating a skittish market. But SMEs have options and shouldn’t operate in a purely reactionary way. So carefully consider the year ahead and how you are going to protect your business from unnecessary stressors. Once you are clear on how to invest in the year ahead, contact Merchant Capital and fund your SME’s growth strategy in the next 48 hours.
