Half of SA's small businesses risk closure in the next year

The Money Show's Stephen Grootes interviews Professor Deon Tustin, CEO of the Bureau of Market Research, which operates as an independent entity within the University of South Africa (Unisa).

South Africa’s small and medium-sized businesses are in trouble.

More than half of them could be forced to shut down within the next year, according to the Small Business Growth Index (SBGI).

The data reveals that 55.3% can survive just one year or less under the current cost inflation conditions without outside help.

The survey, conducted in March/April; involved Absa, the South African Chamber of Commerce and Industry (SACCI) and UNISA's Bureau of Market Research, as the research partner.

It also found that of the 1,600 enterprises surveyed, one third face critical risk, 'a clear warning sign of financial fragility'.

While the official statistics show low inflation, the lived reality can be very different for a consumer or business owner.

"You can see that these businesses are under huge pressure when it comes to their cash flow. They feel they are actually operating in a very high inflationary environment which of course puts them into the response mode of also planning to hike their prices."

Prof. Deon Tustin, CEO - Bureau of Market Research

"The survey shows that about 75% plan to increase their prices between 6-9% this year as a response to the higher costs they're experiencing, which will also be passed down to the consumer, who already is cash constrained."

Prof. Deon Tustin, CEO - Bureau of Market Research

The combination of rising input costs, constrained pricing flexibility and weak financial buffers is creating a perfect storm of financial vulnerability, the survey concludes.

At the same time, Prof. Tustin says, in the midst of these challenges there are some SMEs that expressed the hope that their circumstances WOULD improve in the near future.

For more detail, listen to the interview audio at the top of the article