Almost half, or 49%, of small and medium-sized enterprise (SME) business owners who responded to the Fourth Quarter 2023 SME Confidence Index by specialist SME financier Business Partners said they were concerned that the imminent risk of economic turbulence and protest action during the election season would impact their operations.

While the SME owners said the social climate ahead of the May elections was cause for concern, about 33% of the respondents said the elections would bring about much-needed change, said Business Partners impact investing executive GM David Morobe.

"Elections can be disruptive, add a degree of uncertainty and pose some risk to small businesses on the ground, as investments by governments, private sector and even SMEs themselves are postponed in the run-up to elections," he said.

The quarterly survey, which is now in its eleventh year, showed that SME confidence had been fluctuating throughout the course of 2023.

SMEs’ confidence that their businesses would grow in the next 12 months saw a 14-percentage-point increase year-on-year, but only a 0.7-percentage-point increase quarter-on-quarter, he said.

Similarly, a four-percentage point increase was seen in SMEs’ confidence that the economy would be conducive to business growth in the next 12 months compared with 2022, and showed a five-percentage point quarter-on-quarter increase.

“General sentiment among small businesses has been tentatively optimistic in the face of many challenges in the economic landscape. However, with the fast-approaching election day, this optimism will most likely become subdued,” said Morobe.

Further, linked to this dampened opinion is the fact that, in the last quarter of 2023, SMEs expressed less confidence that the government is doing enough to foster SME development.

At 42%, this indicator saw a decrease of nine percentage points year-on-year and, interestingly, was the only indicator surveyed to show a downturn when compared to the previous year, he highlighted.

“These findings may very well be linked to the challenges faced by many small businesses as a direct result of the prolonged economic downturn, exacerbated by pressing issues such as persistent and worsening loadshedding,” he added.

LOADSHEDDING IMPACT
Meanwhile, only 17% of SMEs surveyed stated that they were able to recover some profits during the slight reduction of loadshedding and rolling blackouts during the fourth quarter of 2023.

A further 22% said that they were able to save money, but only marginally, and 32% reported breaking even in the lead-up to the end of the year, said Morobe.

The SME Confidence Index showed that loadshedding has adversely impacted on the operations of at least 60% of SMEs and, despite attempts to recover State-owned Eskom’s power capacity and implement emergency solutions, the damage had evidently already been done, he noted.

The top three challenges faced by SMEs are all financial in nature and are cashflow, economic conditions and fundings, the survey showed.

Additionally, in terms of sustaining SMEs, 83% of owners said the level of access to finance for the growth and sustainability was most important, which is a 15-percentage-point increase from 2022.

Further, 84% of respondents highlighted the importance of SME-specific information, resources and support for the development and growth of a business, which is a 16-percentage-point year-on-year increase.

The findings of the survey confirmed the vital role that lenders played in providing the SME ecosystem with the financial grounding they needed to achieve long-term success, Morobe said.

“There has never been a more critical time for financiers across both the traditional and non-traditional spheres to find ways to cast their net wider and support more entrepreneurs in realising their goals,” he concluded.