The 2015 National Small Business Survey released by the National Small Business Chamber (NSBC) revealed that 57% of small businesses listed insufficient funding & cash flow as the biggest obstacle preventing their growth, with poor sales as the second biggest obstacle at 52%. In light of these statistics, it is vital that more South Africans opt to support local businesses and manufacturers in the midst of the current economic conditions.
This is according to Simon Colman, Head of Commercial Liability Underwriting at SHA Specialist Underwriters, who states that in order for the country to reach its growth and employment targets over the next five to 10 years there simply has to be a bigger focus on local producers. “Importing products and services when the local currency is under strain, makes no sense when local, quality alternatives exist.”
During his keynote address at the annual Proudly SA, “Buy Local” summit in Johannesburg last week, Deputy President Cyril Ramaphosa also highlighted the need for the government and big businesses to buy locally produced goods to support our local economy.
“Evidently it is not just up to consumers to support local retailers and manufacturers but big corporates should also recognise their responsibility in this matter and aim to utilise entrepreneurs and independent local businesses in their own supply chains too,” states Colman.
However, he says that the survival of local enterprises does not only depend on funding and sales. “Small business owners also have to understand and manage the risks that are associated with being in business in the current economic environment. Most entrepreneurs and small business start-ups only really become interested in the commercial insurance market once they start accumulating assets and the financial institutions that may be financing those assets require the business to have insurance in place. Often exposures to litigation are not considered and discussed and unless the SME has a knowledgeable insurance broker, the business owners may never hear about liability insurance.”
According to Colman, South Africa’s business environment includes certain unique regulations and legislation, such as the Consumer Protection Act (CPA), the Labour Relations Act and the new Companies Act, to name but a few.”
“Whilst government has sought to protect smaller businesses through the R2 million annual turnover threshold in the CPA, this does not stop dissatisfied consumers from lodging disputes, or even litigating, against small businesses. Misinformation is the source of many problems for SMEs. Take the aforementioned turnover threshold as an example; some business owners tend to believe that if their turnover is less than R2 million, they do not have to comply with the CPA when in fact this merely means that they will get the benefit/protection of being classified as consumers when conducting business with other entities. They do not, however escape the risk of being held liable if one of their own consumers is injured or aggrieved.”
He states that it is vital for small business owners to have an understanding of their liability exposures in order to ensure the longevity of the business and lend credibility to the enterprise. “Many large retail groups will not do business with another enterprise unless there is proof that the enterprise has appropriate liability insurance in place. In some instances it will even be specified that more niche covers are required, such as product recall (to recall dangerous products) and professional indemnity (where professional design or advisory services are provided). Those small businesses that have these types of cover in place before they are contractually bound to have them, are definitely ahead of the game.
“When more people support local businesses, we will see increased economic growth in our country and improvement of employment levels. The future of the South African economy is dependent on job creation, and thus supporting local businesses should be a priority for all South Africans. SHA is a proudly South African financial services provider and a proud supporter of local businesses,” concludes Colman.