Wednesday, 16 May 2018

SME Survey: Day Zero warning hits SMEs hard

Running a small business goes hand-in-hand with being kept awake at night, worrying about big issues and their consequences on the market and business operations. However, the biggest challenges tend to be magnified by the messages in the media. Rarely has this been as dramatic as in small- and medium-sized enterprise (SME) owners’ reactions to the announcement of ‘Day Zero’ in Cape Town, according to a research report released today.

The SME Survey 2018 shows that before the December holidays, just 8% of SMEs indicated that they were concerned about water shortages. But when the Survey resumed after the holidays, and in the wake of the announcement by the Cape Town city council that taps would actually run dry on a specific date, SME anxiety around the severe lack of water jumped to 44%. It was clear that the announcement sent a massive shock through the South African business world.

Arthur Goldstuck, MD of World Wide Worx and principal analyst of SME Survey, says, “It is quite astonishing to note the difference between the point when everyone knew there was a drought and the actual drawing of a line in the sand by local authorities in announcing a date when water would run out. This clearly had a massive impact on SME owners’ equanimity. Obviously, when looked at regionally, water shortage fears are less prominent in provinces like Gauteng (15%) and KwaZulu-Natal (9%), but it leaped to 71% in the Western Cape, raising the national average significantly.

“While it has become clear over the years that regional factors do affect SMEs, the biggest concerns about the broader business environment are structural. This is why, in the past, we have - for example - seen concerns raised around construction for the 2010 FIFA World Cup, which caused massive traffic disruption, as well huge anxiety about load shedding a decade ago. While predominantly a regional issue, we can say that water shortages are the load shedding of 2018.”

The number one concern for small business decision-makers, in the broader business environment, is still the competition (46%), closely followed by water shortages. The third biggest fear, one which has dropped significantly from previous iterations of the Survey, was crime, which only 16% of SMEs noted keeps them awake at night.

“In the same vein, fraud and corruption also feature, but not as heavily as one might expect”, says Goldstuck. He points out that only 11% of SMEs said they were kept awake by corruption, while just 8% were concerned about fraud.

“On the other hand, when asked if they were aware of corruption in their particular industry, one in four – 25% - stated that they were. However, only 10% claimed to have had to deal with it directly.”

“It is also worth noting the difference in perceptions prior to the ANC Elective Conference in December and those post-conference. Prior to the conference, 23% of SMEs stated they were aware of corruption in their sector, while 28% said they were aware of it post-conference. This could be attributed to the large-scale unravelling of state capture that has occurred since the beginning of 2018. A similar, but positive, trend was seen with corruption keeping them awake at night: pre-conference, 14% were worried about corruption, but after Cyril Ramaphosa was elected ANC president, the level of concern dropped to just 7%.”

Goldstuck adds that a similar path can be traced for fears about fraud, with 11% being kept awake by this concern before the elective conference, while only 5% named it as a worry in 2018. There can be no doubt, he states, that these results again demonstrate the importance of media coverage around, and exposure of, corruption and fraud.

“Of course, there are also internal fears that keep SME owners awake at night, and the number one concern about their businesses remains cash flow, with 39% of respondents anxious about this issue. A close second is the headache related to finding the right staff (34%).

SME Survey is the original and largest representative survey since 2003 to measure the forces shaping SME competitiveness in South Africa.

Media contact

Debs Whittaker (Coolcumba Communications)
M: +27 83 273 5337