Over a Third of Small Businesses Struggle with Costs of Alternative Energy Solutions
The ongoing energy crisis in South Africa is taking a toll on small and medium-sized enterprises (SMEs), with at least 34% unable to afford the expenses associated with installing backup power supplies or alternative energy sources. This is further dampening business confidence and hindering the country’s economic recovery.
According to the Business Partners Limited SME Confidence Index for the first quarter, 37% of SMEs do not have access to financing programs that could help them invest in alternative energy solutions. Despite these challenges, business owners are demonstrating resilience as they prepare for the upcoming busy season.
David Morobe, the executive general manager for Impact Investing at Business Partners Limited, acknowledges the impact of the energy crisis on small businesses but also highlights the progress being made to support entrepreneurs. He notes that business owners are now 66% more confident that their clients will pay within the agreed-upon timeframe compared to last year.
One positive development is the success of initiatives like ‘Pay in 30’, which encourages large corporates to pay their small business suppliers within 30 days. With growing confidence in prompt payment, Morobe urges small business owners to focus on improving their invoicing systems and promoting a culture of timely payment.
SMEs Must Prioritize Cash Flow Management
Effective cash flow management remains a significant challenge for local SMEs, according to the most recent SME Confidence Index. The top three challenges identified in the first quarter were cash flow management, economic conditions, and access to funding. However, the issue of crime dropped out of the top three compared to the previous quarter.
Morobe suggests that ongoing unrest and illegal activities in certain areas may impact these rankings in the future. Despite this, business owners are generally optimistic about the end-of-year rush, with 71% expressing confidence in their business’s growth over the next 12 months.
The SME Index also revealed a split in confidence levels when comparing quarter-on-quarter and year-on-year data. Confidence in finding skilled staff members and access to business finance both showed positive increases compared to last year.
However, confidence in the South African economy’s ability to support business growth over the next 12 months experienced a significant decline. Only 56% of SMEs surveyed expressed confidence in the country’s economic progress, down from 77% a year ago.
Energy Crisis Contributes to Decreased SME Confidence
The intensified energy crisis is the main reason for the drop in SME confidence, according to Morobe. Many small businesses are struggling with the effects of an unreliable power supply, with 45% expressing concerns about grid collapse. However, the costs associated with installing backup power supplies or alternative energy sources are prohibitive for many SMEs.
Only 18% of survey respondents reported having solar energy solutions, while 26% have a generator, 17% rely on an inverter, and just 6% have access to other energy sources such as geothermal, wind, or biomass. This highlights the financial pressure faced by SMEs and their inability to invest in greener, more renewable energy options.
Morobe emphasizes the urgent need for alternative energy solutions and highlights Business Partners Limited’s efforts to make their Energy Fund more accessible to small businesses. The aim is to support SMEs in navigating the challenging and volatile conditions while strengthening their resilience.