7
Nedbank Small Business Index Nedbank Small Business Index | Q4 2016 | Executive Summary
Nedbank Small Business Index
Nedbank Small Business Index | Q4 2016 | Executive Summary
Nedbank Small Business Index
Nedbank Small Business Index | Q4 2016 | Executive Summary
The Nedbank Small Business IndexTM (NSBI) is an ongoing half-yearly survey-based index providing an assessment of the small-business sector.
The NSBI sheds light on the world of small business in South Africa, indicating the sector’s level of resilience to current economic conditions. Equally important is the report’s contribution to broadening our understanding of the small-business psyche: perceptions of business positioning and growth, implications of changing economic contexts for business survival, and the decision calculus informing small-business responses to harsh economic realities.
The NSBI underscores the bank’s primary objective of building a unique, reliable and scientifically sound index. Using numerous globally accepted research methodologies, the index has produced critical insights into the perceptions, behaviour and expectations of South Africa’s small-business sector over the past four years.
The index follows trends and issues affecting small businesses in South Africa with a view to:
Monitoring small-business activity (especially with respect to financial behaviour)
Gauging the small-business sector’s expectations of government and the private sector
Exploring the difficulties small-business owners face and how these impact their businesses
Nedbank’s vision for the index is a widely referenced index that enables key stakeholders in the private and public sectors to engage on issues pertaining to the small-business sector. The index should also serve as a tool for small businesses to guide their business decisions.
The index is based on survey data, collected on an ongoing basis. The survey is conducted through telephonic and web-based interviews among a representative sample of small-business owners with a turnover of between R500 000 and R20 million across all industries.
The index comprises various factors, including businesses’ financial situations, cashflow, operational costs and support from government and private sectors.
Understanding and tracking the confidence and behaviour of the South African small-business sector
Nedbank Small Business Index
Nedbank Small Business Index | Q4 2016 | Executive Summary
N E D B A N K S M A L L B U S I N E S S I N D E X
With reference to the graph above, it is evident that Q2 2016 marked a historical event for the NSBI in that it recorded its lowest index score ever. The NBSI has been on the decline for the past year.
Having a closer look at what is happening in South Africa’s economy, Guchshina (2016) reports that the South African GDP shrank 0,20% year on year in Q1 2016, following a downwardly revised 0,5% growth in the previous period.
This is the first contraction since Q4 2009, which was due to the slump in the mining and quarrying, and manufacturing sectors. Smith (2016) states that the persistently severe drought, coupled with the hike in interest rates, has drastically worsened South Africa’s economy.
As a result, many South Africans are crippled by debt.
According to News24Wire (2016), the consumer price index (CPI) has surpassed the upper limit for South Africa by accelerating to 6,2% year on year in January 2016.
This score reflects what is happening in South Africa’s economy.
Nedbank Small Business Index
Nedbank Small Business Index | Q4 2016 | Executive Summary
How would you rate your current financial situation compared to 12 months ago?
How will your financial situation be like in the next 12 months, com-pared to now?
As shown in the graph below, the current financial outlook worsened significantly from that recorded in H1 2016.
Small businesses predict that their liabilities will increase or their assets will diminish over the next 12 months. The drop from H1 2016 to H2 2016 is significant.
Viljoen (2016b), a financial risk manager at KPMG, reports that the agricultural, forestry and fisheries sector has the bleakest outlook due to the drought. Furthermore, local manufacturers‚ wholesalers and retailers will be unable to continue stemming food price inflation‚ with the projected 11% year-on-year rise in food prices during the fourth quarter suggesting the highest rate of food price inflation since Q4 2011.
According to Eyewitness News reporter Essop (2016), Gauteng remains the only province not to have been declared a drought disaster area.
2013H1
2013H2
2014H1
2014H2
2015H1
2016H1
2016H2
2015H2
57.3 57.9 57.9 61.1 58.7 57.0 58.2
50.8
38.6 38.8 40.044.8 42.3 41.0 42.5 41.2
How would you rate the health of your business’ cash flow, compared to 12 months ago?
2013H1
25.0
37.5
50.0
62.5
75.0
2013H2
2014H1
2014H2
2015H1
2016H1
2016H2
2015H2
50.652.5 50.5
52.550.2 50.6
47.6 47.7
All industries (with the exception of electricity, gas and water supply) named South Africa’s slowing economy as the major challenge contributing to cashflow problems.
Viljoen (2016a) reports that the South African economy’s projected growth of a mere 0,6% in 2016 is insufficient to cover funds borrowed since 2009.
Electricity constraints limited output, while general business investment plummeted, further exacerbated by lower commodity prices and subdued domestic demand. Global economic volatility resulted in weaker confidence at home and weighed heavily on trade consumption and investment.
The rate of growth in South Africa’s broad M3 (money circulating in the economy) slowed to 10,25% year on year in February. All of the above explains why the cashflow rating for H1 2016 is the lowest recorded to date (as seen in graph below).
F I N A N C I A L O U T L O O K
Nedbank Small Business Index
Nedbank Small Business Index | Q4 2016 | Executive Summary
Government SupportPrivate Sector Support
Over the past year the appropriateness of financial support received from the government sector has declined steadily, though not significantly (see graph below).
However, the appropriateness of financial support received from the private sector has shown a significant decrease.
The construction industry perceived the appropriateness of financial support from the private sector as the lowest, with a significant drop from H2 2015.
Percentage of businesses that acquired finance have increased from 2015, although there was a decline in the second half of 2016. Those that have acquired finance still rate the ease of obtaining it at lower levels, but no difference was observed over the past two years.
A significant decline, however, was observed in the last measure regarding the affordability of finance – which may contribute to the decline health of the businesses’ cash flow.
Furthermore, businesses have acquired finance more from government grants and private investors than last year, although they still predominantly approach commercial banks (in 88% of the cases).
2013H1
0.0
25.0
50.0
75.0
100.0
2013H2
2014H1
2014H2
2015H1
2016H1
2016H2
2015H2
57.357.9 57.9
61.1 58.7 57.0 58.2
50.8
38.6 38.840.0 44.8 42.3 41.0 42.5 41.2
26.4% 35.2% 42.7% 40.9% 41.0% 34.3% 42.3% 37.9%
% Businessess Acquiring Finance Ease of Acquiring Finance Affordability Acquiring Finance
B U S I N E S S F I N A N C E T R E N D S
15.025.0
35.0
45.0
55.0
65.0
75.0
85.0
2013Q1
2013Q2
2013Q3
2013Q4
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
29.8
48.0
21.7
49.1
25.5
52.0
22.5
51.4
21.3
49.8
20.4
51.8
22.7
50.7
22.8
50.0
18.9
50.3
19.9
48.5
19.2
47.8 48.2
19.8
46.5
18.2
45.0
20.2 20.4
47.8
19.4
Nedbank Small Business Index
Nedbank Small Business Index | Q4 2016 | Executive Summary
23
5621
Maintained staff count
Decreased staff count
P A S T Y E A R
865
27 Maintain staff count
Decrease staff count
Increase staff count
C O M I N G Y E A R
Increased staff count
In terms of head count, sentiment remains largely unchanged, with the 56% of businesses surveyed having maintained their existing staff head counts over the past 12 months, 23% have decreased in head count and 21% have expanded. At 65%, the majority of businesses do not forsee a change in head count in the coming year, while 27% expect to expand and only 8% foresee a decline in staff numbers.
E M P L O Y M E N T O U T L O O K
I N T E R N A T I O N A L V I E W
Setting up an international office
Imports
Investing
Exports
Other
2015H1
2016H1
2016H2
2015H2
12%
15%
39%
36%
10%
47%
31%
13%
41%
11%
29%
63%
26%
8%16%
19% 13%
15%11% 17%
Despite the sluggish economy, the extended period of the rand’s weakening late in 2015 allowed enough time for small businesses to prepare and get their exports started.
The chart below shows that exports have grown by 6% from H2 2015 to H1 2016. However, with the weakening rand/US dollar exchange rate, imports have also shrunk by 6% over that period.
Businesses seem more inclined to expand on consulting and training opportunities.
The decline seen will negatively influence the trade account of South Africa and may be a point of opportunity.
Nedbank Small Business Index
CONTACT [email protected]: 0860 116 400
Nedbank Ltd Reg. No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16)
Bibliography
Essop, R. 2016. Eight provinces declared disaster areas due to drought. http://ewn.co.za/2016/06/10/Eight-provinces-declared-drought-disaster-areas
Guchshina, Y. 2016. South Africa GDP Annual Growth Rate.http://www.tradingeconomics.com/south-africa/gdp-growth-annual
Lamna. 2016. Millions of South Africans Facing Poor Credit Records.http://www.lamna.co.za/blog/2016/01/millions-of-south-africans-facing-poor-credit-records/
News24Wire. 2016. Inflation shocker for South Africa.http://businesstech.co.za/news/government/113009/inflation-shocker-for-south-africa/
You Magazine. 2016. Interest rate hike: why it’s not all bad news.http://www.you.co.za/news/interest-rate-hike-why-its-not-all-bad-news/
Viljoen, C. 2016. South African economy not the second largest in Africa anymore.http://www.sablog.kpmg.co.za/2016/05/south-africa-slips-to-third-largest-economy-on-the-continent/
Viljoen, C. 2016. Why are South Africans paying so much for food?http://www.sablog.kpmg.co.za/2016/02/why-are-south-africans-paying-so-much-for-food/
Smith, C. 2016. Consumers in for a tough time with rate hike. http://www.timeslive.co.za/local/2016/01/28/Consumers-in-for-a-tough-time-with-rate-hike
