2015 was a challenging year for South African businesses and, unfortunately, 2016 is expected to be an even tougher one. An economic forecast by FocusEconomics suggests that South Africa will experience the slowest growth of all the major economies in sub-Saharan Africa over the next few years.
However, it’s not all doom and gloom for South African SMEs.
Challenges for SMEs
Among the factors contributing to South Africa’s economic woes are the ever-weaker rand, comparatively high labour costs, an on-going electricity crisis, tough competition from other emerging markets, low investor confidence and widespread drought – resulting in increased inflation.
The weak rand, high inflation and a spike in interest rates are all factors that will have a knock-on effect on the purchasing power (and survival) of businesses. A higher interest rate also makes it more expensive for companies to borrow, potentially resulting in widespread cash-flow problems.
Business opportunities in 2016
Despite the challenges, there are opportunities for South African businesses, both online and off.
More and more SMEs are moving their operations online, and there’s corresponding growth in the percentage of South African consumers who shop via digital devices. This is thanks to the availability of cheaper, faster connections throughout the country. Those operating in the “global village” may manage to bypass some of the constraints facing other South African businesses.
South Africa is also experiencing a surge in technology start-ups, with opportunities for local businesses that develop mobile apps or offer access to newer technologies, like 3-D printing or virtual reality applications.
Offline, certain niche markets are expected to thrive. For example, South African consumers are becoming more environmentally aware, and demand is growing for energy-efficient, eco-friendly products and services. Demand for certain health products is also surging.
Worldwide, there’s greater emphasis on people coming together and collaborating in clever ways to save cash and boost profits. A need for tightening of the belts might accelerate this process in South Africa, with local businesses discovering the benefits of strategies like sharing office space, pooling knowledge and combining their buying power to save on bulk purchases.
If the going gets tough…
If your small business is strapped for cash, there are options for obtaining funding.
One alternative is a short-term, asset-based loan. You can use an asset, such as a paid-up vehicle, to secure the cash you need to tide your business over, without the red tape associated with a bank loan. There’s no unnecessary paperwork and no waiting period – and once you’ve repaid the loan with the agreed interest, the asset will be returned to you.
With spiralling costs and a prediction of tough economic times ahead, it’s likely that asset-based loans will play an increasingly significant role in helping both small businesses and individuals make ends meet.
For more information about using an asset to secure a short-term loan, contact Lamna on 086 111 2866 or simply complete and submit our online application form.
ILLUSTRATIVE EXAMPLE
Client borrows R10,000 for 90 days.
Loan Amount | Repayment Period | Monthly Interest | Total Cost of Loan | Initiation Fee | Monthly Fee | APR |
---|---|---|---|---|---|---|
R10 000 | 3 months | R500.00 | R2 914.50 | R1 207.50 | R569.00 | 60% |
Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.