Common Challenges Faced by Small Business Owners in South Africa

The commercial sector is the backbone of an economy and a contributing factor in its gross domestic product. T...

  • Common Challenges Faced by Small Business Owners in South Africa
    Manish Khanna Image Manish Khanna

    Common Challenges Faced by Small Business Owners in South Africa

    The commercial sector is the backbone of an economy and a contributing factor in its gross domestic product. The value of a thriving sector cannot be undermined and that is why governments welcome the introduction of new ventures and small set-ups that help to curb unemployment and pump money into the markets. In fact, small and medium-sized enterprises are the bedrock of most developed nations. The African continent has also seen a spurt in growth with the help of SMEs and an educated young population. This industry is generating thousands of jobs and paying a staggering amount in taxes every year. SMEs represent a considerable 40% of all businesses in South Africa and it has been estimated that by 2030, 90% of the jobs will be in this sector. So whether you are thinking of starting a small venture or planning to acquire an established small business for sale in South Africa, you are sure to enter a flourishing sector.

    The road ahead seems inviting as the confidence levels of SMEs regarding business growth in next one year increased to 64% in the last quarter of 2017. This increase is the highest since 2012 and indicates the changing attitude of small business owners. The OECD has revised the anticipated GDP growth rate to 1.9% for 2018 and 2.1% for 2019, keeping the positive outlook and economic gains in consideration. SMEs can carve a niche for themselves through innovation and technologically advanced products that outperform the competition. However, they need funding for their ideas to get realised into emerging endeavours, and backing from government institutions to take their first steps into the world of trade and commerce. These pre-requisites are not that easy to achieve in the country which is plagued by many challenges that shake up the work and life of a business owner. Here are the top few challenges of doing business in South Africa enlisted for you:

    Funding and Flow of Capital

    Finding a source of cash flow is the most onerous task for SMEs as the banks are wary of putting money into risky projects. Same is the case with lenders who are unwilling to help push these ventures off the ground. In such circumstances, most of the entrepreneurs are dependent on their personal savings or lending money from family and friends. An excellent way to escape from spending on this start-up investment is to buy a business for sale in Johannesburg, Gauteng. The asking price for established companies is way lesser than what is required to fuel up a new enterprise. You can invest in promising turn-key businesses which come with well-appointed property, stock, equipment, and employees. Thus saving a lot of money that goes into starting everything from scratch.

    Finding Customers

    An entrepreneur could come up with a groundbreaking new product, but it worthless in the market until it can attract customers. Finding new buyers and retaining them is the utmost priority of every company, and if it fails to capture the market, the organisation itself becomes defunct. There are inherent inhibitions in the minds of customers related to a new product or brand in the market, and they prefer to go with the big names or the established ones. The only downside of the existing brands is that they charge a higher price for their offerings, whereas the newcomers can gain a fan base by setting a lower price bracket for their goods and services. Again if entrepreneurs choose to buy a profitable business for sale, they will be well-placed than new companies. This is because a recognised name in the industry will have its own set of loyal and repeat customers and would not require spending on branding efforts.

    Generating Revenue

    The objective of every organisation is to become profitable and achieve a positive bottom-line. This may not be possible at the onset of the entrepreneurial journey but can become a part of it in the later stages of the business lifecycle. During the introduction stage, every venture has to bear the expenses without making any profits. The best way to seamlessly survive this period is through bootstrapping which means investing all the money coming in from the sales back into the business. The next step is to build a substantial customer base through a robust customer support system which provides prompt and proactive service through all the channels of communication and customer touch points. South Africa has diverse cultures and languages, and as an entrepreneur, you must market your business to the natives in their preferred language and give value to their traditions. This is a great way to enter the uncharted territories and make profits in an untapped market. Another way to make profits is to acquire a money-spinning business for sale to keep the balance sheets in check without putting in too much effort in marketing and creating awareness.

    Political Uncertainty

    Though the tables have turned since President Cyril Ramaphosa took office after Jacob Zuma stepped down due to corruption charges, political instability has hampered the growth of SMEs in the country. When the government is not stable, the economy follows suit, and it diminishes the confidence levels of investors who put a brake on their expansion plans. In such times there is more pressure on the population as taxes are higher and incomes are low. It creates a grim picture for the business sector. Nevertheless, things are looking positive for the current fiscal year with the change in administration and are likely to continue this way in the future.

    Red Tape

    Corruption remains a roadblock in the progress of SMEs in South Africa. Though the government is making the path easier for businesses by providing soft loans and tax rebates, movement of applications and files still takes a lot of time. There are not enough resources both online and offline that can help entrepreneurs to set up and run a business smoothly. This is the reason why many start-ups fail in their first five years in the country. The support received from the government is nothing close to what is needed by these growing companies. However, with the recent changes in the government, things are looking up, and investments are flowing in which are paving the way for a brighter future.

    Endnote

    The SMEs have been showing strong grit and determination in the past few months to succeed and make it big in the testing times. They are adapting to the changing economic scenario and leaving no stone unturned in relentlessly focussing on achieving their objectives. Thus, if you have intended to invest your money in a booming new business idea or willing to acquire a business for sale in South Africa, this is the right time to make your move.

  • Author Info Manish Khanna

    Manish Khanna is a serial entrepreneur, philanthropist and genuine Australian success story. In a decade he has built an online empire unlike any other. He is currently the Managing Director of more than 10 individual companies. These include the flagship Business2Sell which operates internationally in 6 countries. The others include CommercialProperty2Sell, Million Dollar Mansions, Netvision, BCIC Pty Ltd and Better Franchise Group, to name a few.

    With more than 21 years’ experience developing web applications plus very successfully creating, managing and growing start-ups, he is forging ahead to turn more of his innovative ideas into future success stories.