Finance Minister Tito Mboweni painted a grim picture of the current state of South Africa’s economy in his most recent medium term budget policy statement, with economic growth slashed from 1.5% to 0.5%. Add to this the fact that the unemployment rate is at its highest in 11 years, at 29.1%.
Moody’s Investors Service is the only ratings agency that has maintained an investment-grade rating for South Africa. Even so, we hover just above junk status, with a negative outlook. This means a ratings downgrade is still very much on the cards unless we urgently look at the opportunities available to us.
Small, Medium and Micro-sized enterprises (SMMEs) are earmarked as the future of the economy, representing about 40% of all business in South Africa. The National Development Plan estimates that by 2030, 90% of all new jobs will be within SMMEs. When SMMEs are able to focus on developing their business, they can actively contribute to growing the economy.
During an economic recession or downturn, these enterprises are often hit the hardest. Budget constraints, reduced spending power and inadequate preparedness for a recession can make it nearly impossible for a small business to survive.
In many cases an economic downturn causes companies without adequate support to be unable to continue operating. In other situations, however, small businesses show remarkable flexibility and find creative ways to survive a downturn. When facing an economic crisis, it is important to maintain a “back to basics” approach.
The following steps can help your business flourish even in an economic downturn:
- Be the best in your industry. Distinguish yourself from your competitors by adding value to your service offering and customer service. This will attract clientele.
- Focus on sales and your sales strategy to get people to buy your product or service. This is where your revenue comes from. Business people are sometimes too focused on branding and marketing and they fail to pay enough attention on the sales aspect of the company.
- Ensure continuous improvement and growth. Even if your growth is slower during an economic crisis, make sure there is systematic progress. Get out of your comfort zone, otherwise you will stagnate. Continuous improvement is a mind-set and needs to filter through the entire structure of the company.
- Adapt to changing circumstances. We live in a society where technology is infiltrating all areas of society including business. If you don’t adapt or adjust to the ever-changing environment and customer demands, you will run into further challenges. Take time to analyse changes such as technology and how it impacts your business so that you can adapt and thrive.
- Focus on compliance - the silent killer. Lack of due diligence could sink flourishing companies. Business owners tend to think you can deal with compliance, which includes accounting, tax and payroll, at a later stage. Your compliance needs to be 100% correct from day one otherwise it could mean the death of your business.