As the world continues to recover from the pandemic, our country’s economic outlook remains lacklustre. For SMEs, the best way to prepare for the year ahead is to remain agile – be ready for “plan A” but keep “plan B” (and C) in your pocket so that viable alternatives remain close at hand should you need them. In short, SMEs are urged to buckle up for a bumpy ride. And as always, stay true to the reputation of the proudly South African brand of entrepreneurship, which has proven to be decidedly resilient.
Caught between recovery and recession
Experts remain conflicted about what 2023 will hold for South Africa. The topic of recession seems to feature in the minds and conversations of economists, who predict that the knock-on effects of the unstable geo-political climate, tensions in Europe, and load shedding will sour South Africa’s chances of post-pandemic economic recovery
Others are “cautiously optimistic,” pointing to the resilience of the local mining and manufacturing sectors as indicators that South Africa will continue its modest climb upwards.
However, as experts agree, there are many moving parts – the progress of energy self-generation, the state of freight rail infrastructure, decisions around the basic income grant and political developments in the lead up to the 2024 elections and their subsequent impact on the economy. These aspects of socio-economic development remain in limbo as the country waits for signs that positive change is indeed on the horizon.
However, there are a few certainties that will continue to make a positive impact on the SME sector in 2023 and for which entrepreneurs can reasonably prepare. These are the trends to keep an eye out for:
Rising costs will necessitate a strategic approach to pricing
Where the cost of production is concerned, SMEs will face headwinds from multiple directions. Rising interest rates will bump up the cost of credit and inflation will see the cost of living continue to climb, placing increased pressure on consumer budgets. Petrol hikes will also put more strain on SMEs, impacting both personal and business operations
For SMEs, the key to overcoming this hurdle will lie in strategic pricing – with customers becoming more cash-strapped, the price of goods and services has to strike the perfect balance between remaining competitive in the market and maintaining a healthy level of profitability. Now might be the ideal time to enlist the help of a business strategist or pricing expert to ensure that your product or service can withstand the prevailing cost pressures.
Tech-driven disruptors could usurp the place of traditional lenders
Banks and other traditional financial institutions will remain relatively risk-averse heading into 2023, given the challenges they face on the socio-economic front. But FinTech disruptors, independent lenders, and non-bank risk SME financiers will continue to provide SMEs with viable funding alternatives.
Small business owners should explore their options and weigh up the pros and cons of realities such as higher interest rates, profit-sharing transactions, negotiations that involve investors becoming part-owners, and longer, more flexible financing terms. The key is to brush up on your negotiation skills and invest time and resources into drawing up a business plan that is compelling and attractive to potential investors.
Social commerce will open doors for emerging small businesses
With social media platforms like Instagram and WhatsApp making substantial investments into bolstering their e-commerce functionality, social commerce will be the order of the day, especially for small businesses who may not have large marketing budgets.
SMEs will need to have a dedicated person or two for live interactions with customers via social channels or risk missing out on crucial conversations, and the chance to optimise client service and centricity. With the increasing integration of brick-and-mortar retail and various forms of online retail, taking an omni-channel approach to marketing and selling goods and services will be the best way to enhance your SME’s success for the new year.