Executive Insights

6 ways SA small businesses can survive the dire economy - which may last until 2020

Business Insider SA

Small businesses need to prepare for dire economic circumstances all the way through to 2020, says Dr Sean Gossel, senior lecturer at the Graduate School of Business at the University of Cape Town. 

The country is currently in a recession after the economy shrank for the first six months of 2018. 

Gossel says credit will become tighter and interest rates are likely to rise. 

“Consumers will continue to have their earning power eroded and will spend less. Competitors will become more aggressive,” Gossel told Business Insider South Africa. 

READ: These are the 4 things government has promised to do to prop up the economy

“A recession, which brings with it flailing consumer confidence and declining disposable incomes, is likely the toughest of challenges an SME (small-to-medium enterprise) will ever face,” investment agency Wesgro’s economist Janine Botha says. 

Here are some of tips for small business owners on surviving the recession: 

1)Take advantage of the weakening rand to export more.

Wesgro’s Botha says the weakening rand offers the prime opportunity to export overseas. She advises that small businesses get in touch with their local economic development offices for help and assistance with export opportunities. 

2) Protect and maintain a good, positive cash flow.

Botha says it is important for small businesses to pursue smart, value-preserving cost-cutting measures to ensure a good cash flow.

“[But] avoid destructive or short-sighted cost-cutting, so as to ensure that business performance, especially relative to competitors, does not deteriorate.”

University of Stellenbosch Business Executive Development (USBED) director De Wet Schoeman says a business should “cut on costs wherever possible – and as soon as possible”.

“Be extra careful when selling on credit – during a recession the chances that you will not get your money back increase,” he says. 

3) Market extensively.


Marketing is one of the most important investments to make during a slowdown, as it creates a pipeline of customers or clients, says Botha.

Iit is important to market extensively – but also to review the effectiveness of marketing strategies, she says.

4) Maintain capital spending on innovation.

Image: Getty Images

It is important to find ways to improve efficiency: to deliver the same output with less effort and costs, but not to compromise on quality, Schoeman says.

“Keep searching for new opportunities, even in a recession, there will always be new gaps and opportunities for doing business.  This is what entrepreneurs do,” he says.

Botha says innovation spending will position a company for growth when economic growth returns. “Businesses that do not maintain and improve their operations tend to miss out on the early stages of the recovery."

5) Try to create new revenue channels.

Women taking the lead

Botha says companies should, in addition to focusing on the core business, consider exploring areas "adjacent" to the company’s core products or services. Examples include warranty or insurance options for products supplied.

A second option is considering investing in entirely new product offerings which will “position the company for growth” and a third is considering entering into new markets, Botha says.

“Also, consider offering digital products or services if applicable.” 

6) Take care of your customers.

Two women discussing business ideas

“It costs more effort and resources to find new customers than to retain existing ones,” Botha says. Existing customers are the most important key to surviving a recession, with a key survival strategy in a recession being to stay true to your customers.

“This is key when considering the implication of losing customers, which in economic downturns remains a reality with competitors often seeking to poach clients.”

But Schoeman says it is important to “have the guts” to cut customers who are bad players. 

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