SMMEs from various sectors with profit margins ranging from R100,000 to R15-million per annum have all had to face the sudden changes brought on by the Covid-19 pandemic.
However, there is hope for them according to experts in the business field.
In a webinar hosted by the University of Johannesburg’s Business School, McKinsey and Company’s Agesan Rajagopaul and Shakeel Kalidas presented possible solutions for SMMEs to implement to stay afloat.
In his presentation, Kalidas listed several obstacles SMMEs faced which were compiled in report compiled by McKinsey.
“SMEs face several unique challenges,” he said
“These include limited access to low- and medium-cost funding is constraining business growth. Even when funding is available, low awareness of opportunities and a lack of financial knowledge remain barriers to SMEs accessing the required support,” he said.
“Owners and founders struggle to empower staff to lead and drive the business. Slowing demand has led to SMEs having to limit expansion plans and identify alternative channels to sell products.”
Kalidas said accessing the right markets to sell products was also a challenge, and liquidity and cash-flow management were limited.
He said there were four areas where SMEs could take action to mitigate these challenges.
“One way is to leverage technology to reach new customers or provide a distinctive value proposition. Digital and new technologies create an opportunity for SMEs to enhance their reach and efficiency at lower costs, overcoming the scale advantage they have relative to larger players,” he said.
“SMEs can also drive efficiency as well as sales. Most SMEs we worked with focus on increasing sales and managing cash as priorities.
“SMEs that also focus on operational efficiencies can drive further competitiveness to support sales,” he said.
Kalidas also said that SMMEs needed to develop clearer market access strategies and boost skills amongst their employees.
“SMEs can be more structured and holistic in developing their go-to market strategies to increase their market share and also reduce the risk inherent in concentrating their sales with one to three large customers.
“SMEs can also develop team skills and capabilities and empower leadership,” he said.
Rajagopaul told the webinar that sustainability was key to weathering the storm.
“We found that those SMEs that were better able to complete and position themselves to access new markets had a very good understanding of the big drivers of their costs, and how which part of those drivers are advantages compared to other competitors,” he said.
“They understood what their key areas of strength were from a competitive vantage, and they knew where their weaknesses were, allowing them to position themselves clearly based on that strength and what they needed to do to compete.”
SMMEs have been identified in many countries across the globe as the new job creators, including in South Africa.
The government wants 90% of jobs to come from SMMEs by 2030.
