Business confidence in the small business sector remained subdued in the last quarter of 2013 even though overall sentiment was marginally better than in the previous quarter, according to the latest findings of the Nedbank Small Business Index (NSBI) fourth-quarter survey results released last night.
In the fourth quarter confidence improved marginally to 48,1 from 46,6 in the third quarter, but it was still below the 50 mark, reflecting the impact of the challenging economic environment.
Dennis Dykes, Nedbank Group chief economist, explains: “This result ties in with events at the time, with economic growth having slowed in the third quarter to a disappointing 0,7% on a quarter-on-quarter seasonally adjusted and annualised basis as strikes in the automotive sector took their toll. However, it then improved from that low base to 3,8% in the fourth quarter.”
The findings of the NSBI survey are based on business owners’ views on their current financial situation, operational costs and support from the private sector and the government.
Nedbank launched this survey-based index in 2013, aiming to provide a clearer measurement of the state of the small-business sector, a deeper understanding of the challenges that small businesses continue to struggle with and regular insights that small businesses can use to make more informed decisions.
According to Dykes the main areas of concern for business owners during the fourth quarter were the struggle to obtain new business, the rising cost of materials, fuel and electricity, labour disruptions, high wage demands and cash flow problems.
Businesses that were particularly affected by financial pressures were those that had invested in their businesses over the past 12 months and that are now forced to downscale their operations slightly.
“The challenge around cashflow is highlighted more by older companies (10 years and older) than by younger companies (younger than two years), which feel more positive about the health of their cashflow,” Dykes says.
Access to finance remains an issue, with four out of 10 respondents indicating that it is difficult to obtain finance. However, of the 47% of businesses that tried to obtain finance in the past 12 months, 60% were successful.
“Those that did obtain finance also felt that it was relatively affordable (5,6 out of a possible 10). Younger and smaller companies perceived it to be more difficult to obtain finance than older, larger companies,” Dykes says.
“In addition, most businesses still obtained their financing through commercial banks (86% in the fourth quarter), although there was an increase in the usage of government grants (10% in the fourth quarter compared with 2% in the third quarter and 1% in the first quarter),” he says.
Dykes says it is encouraging that, despite the challenges faced by small-business owners, at least 53% of those surveyed planned to make capital expenditure over the next 12 months on additional equipment, business growth and infrastructure upgrades.
“At least 37% of the businesses plan to increase their staff complement over the next 12 months, while 11% intend to reduce their headcount in response to the affordability of wages and salaries, changes in the economy and rising operating and overhead costs,” Dykes says.
“Businesses planning to increase their headcount either want to support business growth or boost employment growth. This is significant because Nedbank believes small businesses are key to job creation in South Africa,” Dykes says.
