Johannesburg – Entrepreneurs have had to contend with some of the most challenging economic conditions in recent history. It would seem there is no respite for small and medium-sized enterprises (SMEs).
SMEs have had to contend with the constantly rising price of fuel over the past few months. The knock-on effects of the constant increase cannot be understated and have put pressure on the profit margins of SMEs.
The Department of Mineral Resources and Energy (DMRE) has made the announcement that as of Wednesday, February 1, the price of both grades of petrol will increase by 28c per litre, 500ppm diesel will increase by 9c per litre, while 50ppm low-sulphur diesel will decrease by 1c.
Load shedding has only served to compound the pressure as businesses lose out on valuable productivity. So far in 2023 South Africa has experienced load shedding every day of the year.
This has had a negative impact on the economy. Large and small businesses have been severely affected by the unreliable power supply. It is estimated power cuts cost the country over R400 million daily in lost productivity.
There are various other ways in which load shedding affects small businesses. It is inconsequential what the primary function of the business is or the industry it operates in, load shedding almost certainly has an effect on the day-to-day running of most business.
Andiswa Bata, co-head of SME at FNB, said while SMEs have shown resilience by absorbing costs in the short term, it is inevitable that businesses will have to pass some of their costs on to consumers.
“Fuel, and load shedding will continue putting significant pressure on the bottom line of SMEs. However, there are steps businesses can take that will make a big difference in how SMEs will emerge from the current tough economic conditions,” Bata said.
Bata unpacks five simple strategies that SMEs can consider in managing these mounting pressures exerted by rising costs:
- Every cent counts. So, use the stuff your business can access for free, for example, low or zero monthly fee bank accounts, speed point devices with no upfront purchase cost or monthly rental fee, as well as free accounting and payroll solutions that save you money and time.
- Given the costly impact of an interest rate hiking cycle on the ability of small businesses to borrow and service their debt, they stand to benefit from the Bounce Back Loan Scheme that is currently available to businesses at a more favourable interest rate than what most may be able to access funding at elsewhere.
- Eliminate any unnecessary vulnerabilities by cutting non-essentials, streamlining business processes, sharing costs with other businesses (for example, truck hire for deliveries) where possible, reduce redundant physical space you are occupying (especially if your business has a strong online or digital presence and your staff are working from home).
- Understand the direct costs that go into producing your business’s products and services. This helps to determine if the business can continue to make a profit in the event of rising input costs. Know how much pressure your profit margins can take and push back where you can, to help you stay competitive.
- The upfront cost may seem high, but there has never been a better time to pursue a green energy solution like solar. It will lower your future monthly electricity costs, and limit downtime from load shedding, not to mention the added benefit of protecting the environment.
vusi.adonis@inl.co.za
IOL Business