Business Partners Limited SME Index indicates 2% drop in confidence

Nazeem Martin

The index, which measures attitudes and confidence levels in the SME sector in South Africa from a range of industries, revealed that they expressed confidence levels of 31% that the current labour laws are conducive to business growth. This is a decrease in confidence levels of 2% since the last quarter.

Strikes knock confidence

According to Nazeem Martin, MD of Business Partners Limited, the drop in confidence levels is most likely related to the recent bout of strikes in South Africa's labour market. "According to recent reports 7,290,552 working hours were lost to illegal or unprotected strikes during 2012. It was also reported that during 2012, 99 strikes were recorded in the department strike data system. Out of 99 strikes, 45 strikes were classified as unprotected or nonprocedural."

He says that in addition to the labour unrest, SMEs' confidence levels are also influenced by the effort and cost to comply with South Africa's very modern labour legislation, which is often out of reach for most SME owners. "This legislation often inhibits SMEs from employing more people and, wherever possible, results in them mechanising instead.

"In relation to this, SMEs also expressed low confidence levels of 30% that government is doing enough to foster SME development in South Africa."

Skills sets lacking

The BPLSI also highlighted the fact that SMEs have declining confidence levels about finding staff that possess the correct skills set to facilitate business growth. SMEs expressed confidence levels of 49% that they will find staff with the right skills suited to their business. This is a decrease of 5% in comparison to the last quarter.

Martin says that these low confidence levels can be attributed to the South African education system, at both secondary and tertiary levels, which business owners do not believe equips people with the necessary skills for the world of work - especially in a modern, technology driven work environment.

"Mathematical and literacy skills, as well as general business acumen, are the areas in which secondary and tertiary institutions will have to do much work to prepare people for gainful employment in the modern day work environment."

Still confident in economic growth

When asked how confident they are that their businesses will grow in the next 12 months, SMEs expressed confidence levels of 71%, which is line with confidence levels recorded last quarter. This is a positive indication that SMEs continue to be confident, despite the negative sentiment that is widespread in many industries.

He says that according to the index, it seems that business owners are slightly more confident that the economy will be conducive to business growth in the next 12 months. "Confidence levels of 51% were recorded this quarter, an increase of 1% since last quarter. These increased levels may be related to the prediction that African economic growth is expected to accelerate this year and in 2014, despite the less rosy predictions for South Africa's economy."

Access to finance also down

SMEs expressed confidence levels of 44% that the ease of access to business finance will improve in the next 12 months, which is a slight drop from 45% since the fourth quarter of 2012. Martin says that this confidence level is inconsistent with recent announcements of increased funding allocated to SMEs through SEFA and the IDC by the Economic Development Minister. "This could however be attributed to red tape, which is often mentioned by entrepreneurs as a reason for not accessing available funding."

When asked about the biggest challenges that SMEs will face in the next 12 months, economic conditions placed first with 30%, followed by cash flow (25%) and funding (19%).

"The first quarter BPLSI highlights that local SMEs and entrepreneurs still have confidence in their own ventures, and are not necessarily letting external factors, which they cannot control, impact their confidence. This is positive going forward, as entrepreneurs need a positive attitude in order to succeed," he concludes.