It's shaping up to be a good year for the small and medium-sized enterprises (SME) sector, with owners investing far more in their businesses in 2018 than they did towards the end of last year — and an expert says this may be attributed partly to the "Cyril Spring" effect.
Retail Capital CEO, Karl Westvig, who has observed SMEs taking more risks and putting their concepts and products on the market, says this confidence is in part owing to increased positivity in the SME sector since the appointment of President Cyril Ramaphosa.
"On the back of positive business sentiment flowing from the Cyril Ramaphosa election as president and the new Cabinet, with visible signs of anti-corruption and policy certainty, we have seen hugely increased levels of applications," Westvig said.
From July to September last year, Westvig says demand for finance was subdued owing to seasonal downturns, "especially through the negative political sentiment leading up to the ANC elective conference".
By October through to December, however, application for finance volumes were up by 70 percent, which he attributes to businesses needing to restock ahead of a busy peak season.
Regionally, Western Cape and Gauteng had increases of 80 percent, but KwaZulu-Natal saw an increase of just 35 percent. The most notable change came from the restaurant and food and beverage industries, with a 100 percent increase in applications for funding ahead of and around the festive season compared with the previous quarter.
These levels of applications have continued into the new year from January to March, and Westvig expects to see further positivity and growth in the months to come.
Retailers are definitely trading up and are reinvesting in their businesses through increased stock levels and business expansion as well as refurbishing and renovating.
"The volume growth from the fourth quarter of 2017 to the first quarter of 2018 decreased by just one percent, during a time where we normally witness a much larger decrease after the festive season. The building and construction retailers were down 20 percent and restaurants were down 16 percent in funding applications, but the wellness sector increased by 53 percent on the last quarter," said Westvig.
"Retailers are definitely trading up and are reinvesting in their businesses through increased stock levels and business expansion as well as refurbishing and renovating. This also has a knock-on effect of hiring more staff, which is positive for the economy."
Now is the time to invest and take risks. If you're smart about your business, it will pay off in the long-term.
Westvig further attributes the rise of confidence in the SME sector to a rise in entrepreneurs in a bid to combat the country's unemployment rates.
"With South Africa's unemployment rate at 26.7 percent — more than a quarter of the population — it stands to reason that more and more people are taking the entrepreneurial route and launching their own products and businesses," said Westvig.
"The fact that new businesses are being launched, and more and more businesses are expanding and growing, is promising for both decreasing the unemployment rate and for boosting the economy."
While the state of the economy cannot be changed overnight, Westvig says the country is in a far better place for the growth of the SME sector.
"Now is the time to invest and take risks. If you're smart about your business, it will pay off in the long term," he concludes.