South African small and medium enterprises (SMEs) confidence declined according to the SME Confidence Index by Business Partners released on Monday.
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South African small and medium enterprises (SMEs) confidence declined according to the SME Confidence Index by Business Partners released on Tuesday
Business Partners have attributed the dip in confidence in the second quarter to the surge in fuel prices due to Middle East tensions.
“This was reflected in declining confidence levels, with SME confidence in the South African economy being conducive to business growth falling by 6 percentage points to 63%, while confidence in their own business growth declined by 4 percentage points to 77%.”
Jeremy Lang, Managing Director at Business Partners Limited, said that these findings suggest a clear shift among SMEs away from growth and expansion towards short-term survival, cost management and operational resilience.
“Rising fuel costs and global uncertainty are undoubtedly constraining growth ambitions, but local SMEs remain focused on building the resilience needed to sustain their businesses and position themselves for future opportunities.”
Lang added that these latest findings highlight the extent to which South African SMEs remain exposed to global economic shocks.
“This year, we’ve seen international geopolitical developments increasingly shaping the cost structures, profitability and day-to-day operational realities of small businesses across the country,” he said.
Lang said that more than 90% of SMEs had reported some level of operational pressure due to recent fuel price increases.
“Fuel costs influence far more than transport expenses alone.For many SMEs, rising fuel prices affect every part of the value chain, from procurement and logistics to customer deliveries and day-to-day operations,” he said.
Lang noted that 8% of respondents said they had taken significant action, while 47.4% reported implementing minor adjustments to cope with increasing fuel prices.
“This suggests that nearly 70% of SMEs are no longer waiting for economic pressures to fully materialise before responding. “Instead, they are actively building greater operational resilience into their businesses and adjusting strategies to manage future shocks.”
Lang said that the measures adopted by SMEs reveal the extent to which businesses are being forced to rethink their operations.
“Nearly half of respondents (45.9%) reported adjusting the pricing of their products or services, making it the most common response. A further 38.7% said they had reduced operational expenses, while 29.6% reviewed or adjusted their supply chain and logistics arrangements. In addition, 25% secured stock earlier to delay the impact of future cost increases.”
Lang added that these findings highlight the difficult balancing act facing SMEs. “Businesses need to protect profitability and absorb rising input costs, but excessive price increases risk placing additional strain on already financially pressured consumers. This can ultimately weaken demand and limit growth opportunities.
Access to finance remains one of the most important factors for business sustainability, with an importance rating of 84%, up 2 percentage points year-on-year. The importance of mentorship increased to 85%, while social media as a marketing tool rose to 87%.”
“SMEs are adapting to a more challenging operating environment by planning ahead, managing costs more carefully and strengthening their operational foundations. While confidence has softened, the willingness of businesses to proactively respond to uncertainty demonstrates the resilience that continues to define South Africa's SME sector,” he said.
PSG senior economist Johann Els said that he agrees with the findings. “The steep increase in fuel due to Middle East tensions would have definitely impacted. I do however feel that confidence will rebound in the next survey due to the drop in international oil prices and the fall in local petrol prices which we saw in July. We can also expect another decrease in fuel prices at the beginning of August.”
Els added that he doesn't expect it to have a permanent impact on confidence.
Efficient group Chief economist Dawie Roodt said it's no surprise that confidence levels are falling. “We definitely attribute this to higher oil prices caused by Middle East tensions. However business conditions have not been good in South Africa and SME’s are basically in survival mode. I suspect looking at these numbers the second quarter’s economic growth numbers might not be so good.”
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