Cash-strapped SMEs gloomy about state support

2014-06-19 16:38

Business confidence among small and medium enterprises has declined, according to the first-quarter results of the Nedbank Small Business Index.

The results reflect increased concerns about the South African economy, which grew at its slowest pace since 2009 in the first three months of this year, and the consequent negative impact on business activity, according to the index report.

The index dropped by 2.8 points in the first quarter of this year. It is based on the business owners’ views of their current financial situation, operational costs and support from the private sector and government.

Among the main areas of concern of small businesses are the slow economy and a climate that is not conducive to generating new business.

“Issues such as high prices and costs were among their fears, particularly with regard to the increase in taxes, petrol prices and electricity, all of which are impacting on input costs and cash flow,” said Busi Radebe, an economist at Nedbank.

“Small businesses also noted that the health of their cash flow fell from 5.3 in the last quarter to 4.9 in the first quarter of 2014 – the lowest level since the inception of this survey. This is impacting on expectations among small businesses regarding their capital expenditure over the next year.”

Radebe said small business owners had grown increasingly pessimistic about government support with a score of 2.1 – down from 3.0 in the same period last year – where zero is “much worse than expected” and 10 “much better than expected”.

“However, they have listed the improvement of the economy as one of the main areas in which they would like more government support alongside factors such as a reduction of red tape and tax rebates for small businesses,” said Radebe.

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