Against the backdrop of a weak economy and negative sentiment, 2016 brings a range of challenges but also opportunities for entrepreneurs. Here are some of the trends.
The National Budget will be a tightrope performance of balancing prudence with competing demands for limited resources. As the Rand experiences one of its most volatile years in recent history, it is expected that the Reserve Bank will maintain its stance of leaving the value of the currency to be determined by market forces. However, the central bank will respond to the inflationary effects of the weak Rand through interest rate hikes.
Local government elections will dominate the political agenda. The greatest show-downs between citizens and the state have been at local level, and the selection of ANC councillors will demonstrate the extent to which the party has taken on board its resolutions at the 2015 National General Council, which include ridding the party of corrupt representatives and improving delivery of basic services. The EFF, known for its positions on national matters such as nationalisation, the minimum wage and land expropriation, will have to fashion a compelling vision for local governance in its election manifesto. The DA will continue to fight for relevance in this more robust political landscape.
The next terrain of protest and debate will be on the issue of free tertiary education. The year of the student (2015) has also revitalised civil society. Expect to hear more from other segments of society, including the churches, other segments of the youth and increasing levels of activism from the middle class.
Over the past few years, South Africans have adopted peer-based services developed in other parts of the world such as Uber and Airbnb. Expect to see more South Africans start-ups emerge or refine their positions in this space; one of the few areas of buzzing entrepreneurial activity in South Africa. These innovative businesses will place some pressure on the pricing power and margins of incumbents, though South Africa will remain a highly concentrated, high-cost economy for some time.
A weak economy does not mean the lack of significant deals in the corporate landscape and mergers, acquisitions and joint ventures might be a way to cope with the tough environment. The stage is set for the take-over of SABMiller by Anheuser-Busch InBev to play itself out in South Africa. However, the direction of investment is likely to flow outwards in 2016, as local companies and funds intensify their efforts to seek opportunities abroad.
Frustration with the 'absentee investors' of the early waves of black economic empowerment initiatives has created the need for a new generation of operationally involved entrepreneurs. The policy response includes the 'black industrialist programme', backed with government funding and procurement. For aspiring black entrepreneurs, this will mean greater support for operational businesses, something that has been difficult, according to research from the dti. The black industrialist programme might also provide opportunities for white owners seeking to exit their businesses for retirement and other reasons.
Africa is still rising, though there are some steep hills to climb. The 'Africa Rising' narrative, which has seen the continent painted as the 'next frontier' for wealth creation, has become more muted. Yet, the vitality of African economies is not as dependent on commodities as in the past. It is still wise to seek exposure to the continent's fast growth markets. Some, like Kenya and Nigeria, will be familiar to South African investors, though hard lessons have been learned over the years. Others, like Ethiopia and Côte d'Ivoire, promise to become increasingly attractive and significant, but require a more cautious approach.
BRIC partners are down but not out. Recent data show that the South Africa's BRIC partners are each facing significant challenges. China is undergoing major shifts, Russia and Brazil are in recession, and though India has continued to score respectable economic performance after Narendra Modi took office in 2014, he has not delivered economic growth beyond 2%. Nonetheless, Brazil, Russia, India and China are too significant to be written off. They will stumble in the near-term, but it is clear that they are important drivers of the global economy in the future.
"Entrepreneurs face a challenging year. In our experience, however, adversity fosters innovative thinking from the entrepreneur, as difficult times call for unique solutions," notes Karl Kumbier, CEO of Mercantile Bank.
"Our tough economic climate will most likely not change anytime soon. Therefore, entrepreneurs need to ask themselves 'how do we make money in a tough environment?' For example, bringing in a new business partner with complementary skills can boost your business in terms of innovation, new markets and products and diversification without having to invest significant amounts in capital expenditure.
"Secondly, in a tough environment, entrepreneurs will cut costs and look for ways of becoming more efficient, ie do more with less. Lastly, entrepreneurs will look to enter new markets such as in the rest of Africa, to sell their products and services. Mercantile Bank continues to facilitate and bring together like-minded entrepreneurs who may be looking to collaborate to take their businesses in new directions. Entrepreneurs are an important source of the economic activity needed for growth and job creation, and we will continue to support them with appropriate products and services to help them grow their business," concludes Kumbier.
