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This month we review whether SA’s economic turnaround holds any opportunities for SMEs; we meet square pegs Martin and Ronel Jessen and Peter Flint.
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Economic turnaround holds opportunities for SMEs

The South African economy is showing early signs of turning the corner after a couple of years of disappointing growth and high volatility. 2018 holds promise of increased opportunities for local small and medium enterprises (SMEs). This is according to Ben Bierman, MD at Business Partners Limited (BUSINESS/PARTNERS), who says that although this turnaround is by no means a certainty, SMEs can consider shifting from survival mode to a more opportunity-seeking stance. 

Bierman’s cautious optimism stems from the first signs that the new leadership of the governing party may be able to put a stop to the widely reported mismanagement of the economy, which has led to what he calls a ‘triple deficit’. “The first is the government budget deficit of an estimated 4.3% of GDP, the highest since 2009. Underlying it is the second deficit, South Africa’s economic growth rate, which is far below its potential and that of its peers. The third is a lack of confidence in the South African economy, a result of the first two, and exacerbated by political turmoil and the mismanagement of the economy.  Despite the recent leadership changes at Eskom, the possibility of a debt default at Eskom continues to present a systemic risk to the South African economy,” he continues.

Bierman says this triple deficit has severely impacted SMEs, who have had to face diminishing growth in their markets, sluggish sales performance, interest rate hikes and rising bad debts over the last few years.

 
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Year planning too important to end up in the bottom drawer

In the current slow-growth economic conditions, business owners are either going to win market share, or have market share taken away from them, says Jeremy Lang, regional general manager at Business Partners Limited.

He urges business owners to use planning for the year ahead not only as an opportunity to reflect on the performance of their business itself, but also on the wider context in which it operates - where it fits into the market and how to win market share.

Lang’s advice is do year planning as a proper exercise, and not merely as a bit of light day-dreaming. “Take a day or two out of your business. Sit to one side, where it is quiet. Focus and document your thoughts. This is too important an exercise to end up in the bottom drawer,” says Lang.

When you are ready with your plan, sit down with your team and start working on their buy-in. Do it with an open mind and accept some of their sensible suggestions, he says. A plan cannot be fully implemented without the collaboration of the whole team.

 
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January 2018 / Vol.9.1

IN THIS ISSUE:

Elevator business on its way to the top

Martin Jessen’s business started with his experience of being confined to a wheelchair for a few years just as he was starting school. The needs of people with disabilities and the importance of access and mobility were imprinted on his mind. Little did he know it would lead to a formidable business, and one that is today competing successfully in an industry dominated by multinational players.

Martin grew up in Denmark where he studied commerce and marketing. To satisfy his wanderlust and a yearning to pioneer and develop new projects, he asked Danfoss, the Danish engineering firm where he was working, for a posting elsewhere in the world.

He remembers having to do quite a bit of research when he was told that his destination was Johannesburg, which in 1995 was opening up to the world after apartheid-era sanctions. Danfoss wanted to re-establish its presence in South Africa and for Martin the challenge of helping to build the company’s systems from scratch was the perfect job.

 
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Focus on training drives company’s fast-paced growth

If a business doesn’t grow, it dies, says Peter Flint of Armcoil Afrika, an electric motor and transformer business based in Roodepoort whose exponential growth over the past sixteen years shows that it is in pretty rude health.

Peter remembers doing a turnover of R45 000 in the first month of running the business that he started with the assets of an insolvent company in 2001. Today, the company does close to R8 million per month.

What is remarkable about the growth of Armcoil Afrika is that it far exceeds the growth of the transformer industry in South Africa, which has gone through stages of stagnation or decline. At one stage South Africa had the largest number of medium voltage motors in the world, but with the decline of the country’s mining industry the number has fallen sharply.

Furthermore, new insulation technology introduced in the 1980s made motors much more robust, decreasing the need for repairs and servicing.

 
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