Micro business challenges keeping owners awake at night

*This content is sponsored by The Loyalty Specialists. Their Rewards, Your Growth, Our Speciality.

By Lauren Haworth*

South African businesses are faced with a plethora of challenges this year, some are unique to 2016, others are a perpetual challenge. I will outline some of the microeconomic challenges faced in this article, and if you return next Tuesday, the 14th, the macroeconomic article will be live. Finally, I’ll wrap all of this up with the opportunities we could consider amongst the chaos.

Microeconomic Challenges

microeconomic challenges image

Traffic and inflexible work-hours

For those of us who live in South Africa, Gauteng and the Western Cape in particular, traffic is an absolute nightmare. More and more people are moving into the cities, but the infrastructural growth is just not keeping up – so it’s becoming incredibly congested.

More than a personal inconvenience though, it’s an unabated waste of time and obvious source of reduced productivity. For some people, it can take (on average) at least 2 hours of productivity/family/personal time and absorb it into a black hole of naught.

A traffic-related delay has a direct impact on business, specifically regarding productivity within trading hours. Adding to this is the inflexible working hours that many companies still maintain. This combination is not a smart way to run your business in this country at this time.

Inflexible set work hours are an archaic productivity constraint. Businesses need to think about creative ways to eliminate wasted hours and make life more manageable for their employees.

The convenience imperative is very important.

Reputation management with social media

Lauren Haworth, Executive Head, The Loyalty Specialists
Lauren Haworth, Executive Head, The Loyalty Specialists

A few corporates have already made a few critical mistakes on social media, unquestionably damaging their brands. Assigning rookies to manage your social media could quickly bring the company to its knees through a comedy of errors. Once it’s out there, it will always be out there and often there’s very little damage control that can be done.

The people who are at the various touchpoints, interacting with your customers are critical to your business growth and retention. From sales and marketing to social media, PR and customer service – they all need to have one overall guiding voice/message/policy for interaction so that customers know what to expect from the brand across the board.

Hiring the right people for the job and creating a sound, clear social media policy is essential if you’re planning on having any presence in social media. It can be your greatest asset or your worst enemy.

Cybersecurity and hacking

Many small and medium businesses are so focused on cost-cutting that some vital aspects are ignorantly overlooked, like security against cyber-breaches/hacking.

PWC released The Global State of Information Security Survey 2016 insights which revealed that in 2015, 38% more security incidents were detected than in 2014. Theft of “hard” intellectual property increased by 56% in 2015.

If companies neglect cybersecurity, they risk to lose IP and associated financial losses.

Challenges Inside Businesses:

World Wide Worx conducted research last year (SME Survey) and its CEO, Arthur Goldstuck, had this to say, “For small and medium enterprises, the challenges inside the business were often as simple as providing for their families, but this particular concern was matched by the difficulty in finding the right staff. A third of respondents to our survey of 1400 business decision-makers (SME Survey 2015) said this gave them sleepless nights.

Aside from these two, only one other factor was cited by more than a fifth of respondents as keeping them awake at night: their companies’ lack of technical expertise. This is a fascinating one, as it shows that SMEs are aware of the need to keep up with business and other technology, but fear they are unable to do so.”

Transition to a Digital Economy:

Arthur Goldstuck added that, “the transition to a digital economy is likely to be the single biggest ongoing challenge facing smaller businesses in the coming years.”  The lack of technical expertise, power failures and general connectivity issues will undoubtedly fuel the struggle.

Higher Project Costs:

Ferdie Bester, Managing Director at ClickMaven says that, “the local political climate and the downturn in our economy (due to falling international commodity prices) has created a lot of uncertainty for business.

It’s much harder to predict the future which increases risk. With more risk, the projects need to yield higher returns but this inadvertently leads to less projects being approved.”

Stock-levels

Many South African businesses have cut right down on their stock levels. Non-consumption items are not as readily available on the shelves as they used to be. They are trying to absorb as much cost as possible because of the exchange rate.

In other words, if a company buys a battery at the R16 to USD exchange rate and suddenly the rand depreciates to R18:USD, they can sell the item for more than they bought it. However, if the rand appreciates to R14:USD, they lose money. In order to mitigate this, companies are just not ordering stock until they have a legitimate and immediate demand. This presents a variety of problems for the company and the potential customers.

Currency volatility is a major problem and therefore supply of these items.

Service levels and personal leave

The general state of affairs in most service departments are below average and outdated. From the unhelpful attitudes and long delays, to the insufficient preparatory information available for the public prior to arriving (which is often wrong or insufficient creating further delays). Renewing licenses, applying for passports and getting items fixed can take an entire day, which many people have to take personal leave for. Taking leave for menial admin is a major disincentive for employees (it takes a chunk out of the minimal leave they get as it is) and unproductive for companies.

Service-delivery protests are rife and will not likely dissipate in the near future, until government make some serious policy and attitudinal changes. Any companies relying on service delivery in these various state-owned sectors are directly impacted.

Labour unrest

Our country has been in a prolonged period where employees via trade union have been demanding pay increases well above their productivity improvements which cuts deeply into company operating margins. Companies resist wage growth demands well above the inflation rate which often results in bouts of labour unrest. When employees go on strike, a company’s productivity drops, production drops which reduces revenues and worsens the negative impact on operating margins, forcing companies to restructure their costs further than they would otherwise have done.

According to Stats SA, “South African consumers paid an average of 11% more for their food and non-alcoholic beverages in the consumer price index basket in April 2016 than they did in March 2015. This rise is the highest monthly year-on-year rise in food since February 2012.”

The standard of living in South Africa is becoming increasingly more expensive and since many are not getting annual increases or if they are, it’s often below inflation – they are actually earning less each year than they did before, in real terms. In a low growth economy, employees across the companies are feeling the pinch and struggling to maintain their lifestyles as the prices rise faster than their incomes.

Companies need to find ways to help their staff, perhaps with non-cash rewards if an increase is not an option, to ease the stress.

Summary

Companies face a plethora of micro-challenges, so it’s imperative that they offer creative solutions around them. Keeping your staff happy is paramount to continued business success through tough times. If your staff are happy and feeling appreciated, they will take care of your customers.

The next article will cover the macroeconomic challenges and a third will cover the opportunities for SA businesses in 2016.

  • Lauren Haworth is Executive Head of The Loyalty Specialists
  • Other contributors include Ferdie Bester, Arthur Goldstuck and Michael Haworth
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