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SMEs make massive pandemic recovery

Nearly two-thirds of South African SMEs reported growth over the last year, but still face challenges, according to new research from Xero and World Wide Worx

Despite the challenges of operating through a pandemic, 87 percent of South African small businesses are optimistic about their outlook for 2022 and nearly two-thirds (62%) reported growth over the last year.

This is according to new research from Xero, the global small business platform, in its fifth annual South African State of Small Business report, conducted with World Wide Worx. Businesses are gearing up for growth in the next 12 months, with a third (34%) preparing to expand into new markets – compared to just 15% last year – and 85 percent investing in boosting tech and cloud skills. 

“It’s great to see the entrepreneurial spirit and optimism that has long defined South African small businesses on the rise,” says Colin Timmis, Xero South Africa country manager. “Not only are they feeling positive, they are actively investing in key areas like technology, expansion and skills development to fuel future growth. This is great news for our economy and will give our small business community greater scalability and resilience.”

Technology: a lifeline for small businesses

According to the research, two-thirds of small business owners say that technology has become more critical to them since the pandemic began. More than half (51%) have adopted cloud technology in the last two years, and a third (31%) say that adopting cloud technology has simplified their financial processes specifically.

Almost a third (30%) of small businesses say that tech has enabled them to reach new customers or expand into new areas, and a quarter have leveraged the latest software to streamline their processes.

Eighty five percent of firms have invested in improving their employees’ tech and cloud skills in the last year – a 35 percent increase from 2020.  Of this group, 95 percent have trained their staff using online or physical courses in tech or cloud skills development.

Over a third (38%) plan to invest in training for staff over the next 12 months, and almost all business owners (96%) said they no longer struggle to hire talent with the right skills.

“Investing in technology alone is not enough, small businesses need the skills to match,” says Timmis. “Despite the challenges of the last two years, there has been a 35 percent increase in cloud skills development. Those that invest in upskilling in these areas now, will see a big pay-off in future.”

Reality check: challenges remain

Despite strong optimism, businesses still face challenges. A majority (85%) reported that future Covid-19 lockdowns are still a concern, followed by political and economic instability (43%), and crime, poverty, or civil unrest (39%). 

Late payments are still a threat to business survival too. Over a quarter of small businesses are currently owed money outside of their payment terms. Of this group, nearly half (45%) are owed over R100 000. 

Arthur Goldstuck, CEO of World Wide Worx and principal analyst on the research, says: “The overall conclusion from the research is that small businesses have come to terms with technology as both an enabler and a survival mechanism. It is also clear, however, that many SMEs are ready for the next step, which is to use technology as a springboard for growth.”

Other key findings in the report include:

  • 68% of business decision-makers believe that their accountants can help support economic growth in South Africa.
  • 27% of small businesses need help moving their operations online this year.
  • 54% of businesses plan on allocating training budgets to upskill their teams in technology use.
  • Two thirds (65%) of businesses have their technology challenged by loadshedding.

For more information, read Xero’s State of South African Small Business 2022 report here.

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