Presented by Sage

The Resurgence: Sage research shows small South African businesses are ready to try again

Sage, the market leader in cloud business management solutions, has conducted research between March 2020 and March 2021, showing that nearly all (96%) of small South African businesses expect to return to profitable trading once the pandemic is over, before unrest broke out across the country.

Data gathered from 1,947 South African small businesses, including 262 accounting firms, painted a picture of a vibrant, resilient small business community.

Of the small businesses surveyed, 18% anticipate they will be more profitable post-pandemic, 36% expect to return to trading as before, and 42% expect to be less profitable.

That’s despite the serious toll COVID-19 took on their businesses in South Africa, with surveyed companies reporting a 31% financial decline between March 2020 and March 2021.

Viresh Harduth, Vice President: Small Business at Sage Africa & Middle East, says: “COVID-19 resulted in the biggest disruption the world has seen in decades. Moreover, the recent unrest in Gauteng and KwaZulu-Natal has further challenged the small South African business community.”

“These seismic events have highlighted just how fragile supply chains, customer loyalty, and social systems are – and how quickly and easily they can be disrupted.”

“With that in mind, it’s heartening to see just how hopeful, buoyant and determined the small business community is.”

“The results of our survey indicate that small businesses in South Africa have learned the hard lessons from the pandemic and are focusing on building their adaptability, capability and ability to withstand and recover from disruptions to continue to play the critical and essential role they have been, in the reconstruction of the economy.”

Lessons learned from the pandemic

Most small businesses and accounting practices in the survey admit they were not well prepared for a pandemic. However, they have learned valuable lessons and were optimistic about their ability to withstand future disruption.

Among the steps they are already taking – or planning to take – to increase their resilience are reducing operational costs (82%); better managing and motivating their workforces (80%); and adopting new technology or digital capabilities (77%).

Other ways small businesses and accounting firms plan to increase their resilience include launching new sales, marketing, and advertising strategies (42%); selling in new markets (42%); accessing cheaper or better short- and long-term finance (40%); and improving the management of their supply chain (37%).

Business owners bear the financing burden

Most business owners are not expecting an easy ride in the months to come. As they find their footing in the new reality, their concerns include more COVID waves (27%); increased competition (23%); cash flow and liquidity problems (22%); and significantly reduced demand from customers (20%).

They also report facing major hurdles in implementing change and driving resilience: a lack of time (43%); reduced workforce capacity (42%); and a lack of financing (40%).

When it comes to the financing pressures that small businesses and accounting practices face, business owners are emerging as flag-bearers for the economy.

Nearly half of small businesses (46,5%) were personally funded by their directors during COVID-19. Other sources of finance included government loans (24%), bank loans (22%), credit cards (21%), and overdrafts (18%).

Technology as a lever for growth and survival

While most (78%) respondents say technology is essential in their day-to-day operations and 70% believe technology will be crucial in restarting their businesses post-COVID, 75% agree they are not investing as much in technology as they should be, because they don’t have the money to do so. A quarter (25%) say they don’t have the time to consider technology investments.

Harduth says: “South African entrepreneurs and small business owners, in their determination to keep going through hardship and adversity, are showing incredible grit. They are persevering through harsh environmental and market stress for the good of their families, customers, employees, and communities.”

“Their optimism in the wake of COVID is heartening. Nonetheless, the road ahead will be challenging, and the impact of the unrest on the small business community is uncertain. During these times, we should be celebrating their determination to continue and supporting them at every level, from government and big business to consumers.”

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The Resurgence: Sage research shows small South African businesses are ready to try again