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Africa|Business|Consulting|Environment|Road|Service|Services|Technology|Water|Infrastructure
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Recovery from Covid-19 hinged on private sector growth

8th April 2021

By: Donna Slater

Features Deputy Editor and Chief Photographer

     

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Strategy consulting and market intelligence firm Frost & Sullivan says the economic growth prognosis for South Africa in the next five years is not all “doom and gloom”, as the private sector has the ability to grow and create jobs.

For the private sector to flourish, however, it needs to function and operate in an open environment, the firm states.

In June 2020, Statistics South Africa conducted a business impact survey of the Covid-19 pandemic in South Africa, with its findings revealing that about 80% of businesses were trading below normal turnover, and 26% had to lay off staff.

Small, medium-sized and microenterprises (SMMEs) were the worst affected owing to the Covid-19 Alert Level 5 lockdown restrictions, with 96% making less than 75% of their usual turnover.

Seventy per cent of SMMEs were not able to operate at all during that period, leading to about 30% of SMME staff being retrenched.

The keys to success in recovering from the negative impacts of the pandemic on business will require proper information for all participants, effective but not restrictive regulations, access to technology partners, stability of the domestic currency, sound fiscal fundamentals and controlled input costs, according to Frost & Sullivan.

The firm notes that while the road ahead for South Africa will not be an easy one, there is still significant opportunity for businesses to grow and even expand.

As such, the opportunities for growth lie in adaptation and implementation of new technologies or business models.

The first group showing great growth potential comprises small businesses in the services, hospitality and trade sectors, states Frost & Sullivan. These businesses were hit by the brunt of the lockdown restrictions, but since these were lifted, many were able to post promising growth.

Meanwhile, taking advantage of digital platforms will be crucial for small business moving forward, as this will provide a platform to gain greater access to customers for their product or service, the firms notes.

There is also an opportunity for support services to the SMME sector that will create new business opportunities, as the various levels of lockdown have created a shift in customer preferences that has drastically increased the need for e-commerce, says Frost & Sullivan.

However, there is no “magic bullet” for increasing private sector investment in South Africa, and reforms need to involve fundamental principles of increasing investor confidence, improving domestic credit ratings and sustained commitment from government, the firm suggests.

Frost & Sullivan also highlights that the government has committed to expanding investment in road infrastructure by 27% from 2020/21 to 2023/24 and investment in water infrastructure by 5% over the same period.

“The outlook for increased investment that will support growth remains positive if government remains committed to the needs of the private sector.”

Further, with the rollout of Covid-19 vaccines globally, there has been a significant increase in business confidence levels, the firm states.

It adds that a more widespread rollout of vaccines in South Africa, in the second half of this year in particular, should see a noticeable change in business sentiment in South Africa.

Further, if the South African government stays the course with its commitment to promoting private sector investment, new opportunities will open for the economy as these positive benefits spill over into the rest of the economy, the firm notes.

“Private sector value chains are functioning efficiently and are primed for an injection of activity,” states Frost & Sullivan.

With sustained government commitment, low interest rates and an effort to keep supply-driven inflation down, South African businesses will be well-placed to post consistent growth in the next few years, the firm concludes.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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