Over One-Third of Small Businesses Struggle with Cost of Alternative Energy Solutions
The ongoing energy crisis in South Africa is taking a toll on small and medium-sized enterprises (SMEs), with 34% of businesses unable to afford the expenses associated with installing backup power supplies or alternative energy sources. This financial burden is impacting SME business confidence and hindering the country’s economic growth.
A recent report by Business Partners Limited reveals that 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 showing resilience as they prepare for the upcoming busy season.
David Morobe, the executive general manager for Impact Investing at Business Partners Limited, acknowledges the negative impact of the energy crisis on small businesses. However, he encourages entrepreneurs to take advantage of the support available to them. One positive development is that business owners are now 66% more confident that their clients will pay within the agreed-upon time frame compared to last year.
A significant step forward in supporting small businesses is the “Pay in 30” initiative, launched in 2020 by Business for South Africa (B4SA) in collaboration with various industry bodies. More than 50 major corporations committed to paying their small business suppliers within 30 days. As confidence in prompt payment increases, Morobe urges SMEs to implement strategies that enhance their invoicing systems and promote a culture of timely payment.
Effective Cash Flow Management Crucial for SMEs
The report highlights that effective cash flow management remains the biggest challenge for local SMEs. Economic conditions and access to funding are also significant concerns. However, the issue of crime has dropped out of the top three challenges compared to the previous quarter.
Morobe notes that despite a slight drop in business confidence compared to the same quarter last year, business owners remain optimistic about their growth prospects. The survey shows that 71% of SMEs believe their businesses will grow in the next 12 months.
The SME Index reveals a mixed outlook on confidence levels. On a positive note, SMEs are more confident about finding staff with the right skills and experience to support their ventures, and there is an expectation of improved access to business finance in the coming year.
However, confidence in the South African economy’s ability to foster business growth has declined. Only 56% of SMEs surveyed expressed confidence in the country’s economic progress, compared to 77% a year ago.
Energy Crisis Impacts SME Confidence
Morobe attributes the decline in confidence to the intensified energy crisis, which has left many small businesses grappling with an unreliable power supply. Grid collapse is a major concern for 45% of SMEs, with many perceiving it as an inevitable possibility.
While some SMEs have managed to install backup power supplies and alternative energy sources, a significant number cannot afford the associated costs. Only 18% of survey respondents reported having solar energy solutions, 26% had generators, 17% relied on inverters, and just 6% had access to other energy sources such as geothermal, wind, or biomass.
Morobe emphasizes the urgent need for alternative energy solutions and a transition to greener, more renewable energy. Currently, 45% of SMEs express interest in investing in green energy, but their focus remains on keeping their businesses operational, even if it means relying on diesel-powered solutions.
Business Partners Limited is actively working to make its Energy Fund more accessible to help small businesses navigate the challenging energy landscape and strengthen their resilience.