Why SMMEs need our support more than ever

By Yanush Singh, Head: Niche Markets at Sanlam

South Africa consistently ranks amongst the countries with the highest unemployment rates in the world, with 7.7 million people unemployed. And with the public sector under pressure to reduce its wage bill, there is a greater responsibility on private sector businesses, particularly SMMEs, to drive job creation. For this reason, we’ve made it our mission to support these businesses to make more informed financial decisions so that they can grow and flourish. 

Unemployment is both a cause and a symptom of many of our socio-economic problems. It was undoubtedly one of a multitude of factors that contributed to the wave of civil unrest that rocked KwaZulu-Natal and parts of Gauteng in July 2021. However, these violent protests, which included the looting, burning and vandalism of thousands of businesses that provided employment, only served to exacerbate the unemployment crisis. According to Stats SA, the two affected provinces shed almost 250 000 jobs in quarter three of 2021 and by the end of the following quarter, we recorded the highest unemployment rate in our nation’s history. Significant job creation is therefore essential if we are to stand any chance of breaking this vicious cycle.  

Rather than creating jobs, however, the public sector (which includes government departments, state-owned enterprises and municipalities) is in the process of contracting its workforce in an effort to reduce the bloated public sector wage bill. Furthermore, corruption and mismanagement in the public sector continue to frustrate infrastructure investment and development and consequently, job creation. Not to mention South Africa’s recent grey-listing by the International Financial Action Task Force, which is likely to discourage foreign direct investment. 

Greater responsibility for arresting and reversing rising unemployment must therefore be assumed by private sector businesses, more than 90% of which are small, medium and micro-enterprises (SMMEs), which include professionals in private practice. These SMMEs are the backbone of our economy, employing about 60% of our country’s workforce and accounting for more than one-third of our GDP. However, this sector is still reeling from the impact of the July 2021 riots as well as the ongoing, debilitating effects of the COVID-19 pandemic and load-shedding. Regrettably, funds that were earmarked by some SMMEs for expansion and job creation are instead being used for solar systems and generators. 

Against this backdrop, our industry has a greater responsibility to support SMMEs. This includes ensuring simple and affordable financial solutions to help them manage risks and providing the necessary education and advice to support them in making informed financial choices that will position them optimally to navigate their challenges. In addition, as the business climate changes, SMMEs will need products and services that can adapt to their changing needs – so we also have the responsibility to remain innovative in the solutions we bring to market. Furthermore, I believe it is beneficial for financial services institutions to prioritise the business market, including SMMEs, as a specialised niche focus, to ensure they receive the tailored attention they deserve. 

We’ve placed particular emphasis on structuring our business to do just this. By assisting SMMEs to mitigate risk, we believe we play a pivotal role in ensuring they remain in business so that their staff may remain in gainful employment. We appreciate that sustainable businesses are more likely to grow and thereby expand their workforces. We believe that by supporting SMMEs, we are meaningfully contributing towards the fulfilment of Sanlam’s purpose, which is to empower future generations to be financially confident, secure, and prosperous.

The primary mechanism by which we empower business owners to make informed financial choices is through consumer financial education (CFE), including seminars, webinars and market-leading, explainer videos. We supplement our CFE with expert business assurance advice and a host of risk mitigation and succession planning solutions designed to ensure that:

• The commercial assets of businesses are properly insured;
• The remaining shareholders retain control of businesses when shareholders exit;
• The personal estates of shareholders, who stand surety for business debts, are protected; and
• Businesses have the necessary funds to:
  • Repay loans owed to shareholders who exit; 
  • Cope with the loss of key persons; and
  • Replace equipment through investment.

Recent developments, including the pandemic and the riots, have shone a spotlight on the importance of being properly covered. Business owners, who are undeniably the unsung heroes of our society, need our support more than ever before. In fact, our nation’s future could depend on it.