Every July, South Africa celebrates National Savings Month, an important initiative led by the South African Savings Institute (SASI). This campaign aims to promote financial literacy across the nation, with a specific focus on entrepreneurs, emphasizing the critical importance of saving and investing for future security. For thirty years, Mastercard has been committed to helping businesses save and spend their money wisely across Africa. Supporting the thriving of small businesses is vital to our mission of promoting economic growth and prosperity throughout the continent.
According to the 2023 Deloitte South African Investment Management Outlook, only 0.5% of South Africans and businesses actively save for emergencies. This low savings rate emphasizes the crucial need for enhanced financial education and awareness. Regular saving enables small business owners to establish a safety net, protect their ventures from unexpected expenses, and ensure a secure retirement.
Furthermore, research from the University of Western Cape indicates that South African small businesses face a higher failure rate than their global counterparts. Approximately 70-80% of these businesses fail to survive beyond five years due to poor financial management. South Africa’s informal economy, which includes an estimated 3.3 million micro and informal businesses, faces many challenges from the high cost of living and unemployment to lack of financial literacy and high debt levels. While these challenges impede the ability of many SMEs to save effectively, simple and effective strategies can be employed to establish financial safety nets and make astute financial decisions.
Here are our five strategies to help small business owners save:
- Develop a comprehensive financial strategy: Establish a detailed financial plan that includes clear short-term, medium-term, and long-term financial goals. This plan should address cash flow management, expense tracking, and revenue projections. Regularly reviewing and updating this plan can help identify potential financial pitfalls and opportunities for savings. Tools like SAVA’s Payment Transaction System can streamline this process, providing real-time insights into financial health.
- Educate and empower through continuous learning: Invest in ongoing financial education for yourself and your team. Attend workshops, webinars, and courses focused on financial management and literacy. Staying informed about the latest financial trends and best practices can empower you to make informed decisions and adapt to changing economic conditions. Collaborate with financial advisors or mentors who can provide expert guidance tailored to your business needs. Mastercard’s free training platform for entrepreneurs provides an easily accessible forum for learning essential financial management skills to grow and thrive.
- Implement a robust budgeting system: Create a detailed budget that outlines all income sources and expenditures. Separating personal and business accounts is essential as it provides a clear understanding of the business’s financial standing. Additionally, having separate bookkeeping and financial records under the business’s name is vital, especially when required for credit applications. This budget should be realistic yet disciplined, allocating funds for essential expenses, savings, and emergency reserves.
- Leverage digital and financial technologies: Embrace digital payment solutions and financial technologies to streamline operations and reduce costs. Implementing tools like accounting software, automated invoicing, online banking, and digital wallets can enhance efficiency and security. Additionally, consider adopting fintech solutions tailored to SMEs, such as digital lending platforms and expense management software, to optimize financial processes and maximize savings.
- Cultivate a savings-oriented culture: Foster a culture of savings within your business by encouraging employees to contribute to cost-saving initiatives. Establishing a reward system for innovative ideas that reduce expenses can motivate staff to identify and implement savings opportunities. Additionally, regularly communicate the importance of financial prudence and savings to ensure that everyone in the organization is aligned with these goals.
Mastercard is committed to fostering and promoting financial resilience among small businesses which is key to driving economic development. By equipping SMEs with the tools and knowledge to save wisely, Mastercard contributes to a more robust and prosperous economy in Africa. Saving is not just a beneficial habit for small businesses, but a fundamental strategy for long-term success. By diligently managing finances and saving for the future, small businesses can thrive and achieve sustainable growth and enduring success.
Mastercard is a proud National Partner of the NSBC