South Africa’s economy took a beating during 2022: a year of floods, strikes, soaring inflation and interest rates and record-breaking hours of load-shedding. One would have hoped that the worst was behind us. Unfortunately, South Africa’s economic outlook remains lacklustre as the most recent Thomson Reuters consensus forecast indicates that the country will experience a V-shaped growth path, starting from 1.8% during 2022, dipping to 1.2% in 2023 and then recovering to 1.8% in 2024.
To stay ahead of the curve, it is important for businesses to remain agile and prepare for the rough road ahead. Review business operations and focus on the following:
Create best and worst-case scenario budgets that help to better prepare for unforeseen challenges.
Manage cashflow. The timing of when money flows into and out of a business can make or break a company. When times are tough, cash flow challenges can be particularly difficult to overcome as expenses are higher than usual and revenue is lower than usual. Balancing the budget could feel a bit like walking a tightrope.
Evaluate and review expenditure items such as insurance, rental, bank charges, etc to determine if costs are market-related. It may be worthwhile to obtain quotes from competitors to gain leverage when negotiating better rates. Where possible trim excess costs.
Identify the business’s strongest income streams, and if necessary, focus on these income streams to optimise profits.
Cut products or services that do not generate strong profit margins for the business.
Create market-related pricing that accounts for high inflation rates but also yields adequate profits. Businesses need to be cognisant of the pressures faced by consumers and adjust their pricing accordingly.
Evaluate clients and their paying habits. Review payment terms and put measures and incentives in place to ensure prompt payment.
Use social media and other free marketing platforms to communicate and promote your business.
Explore online functionality to reduce costs and improve productivity.
Make data-driven decisions. Ensure that financial reports are accurate and updated timeously. Analyse the business’s financial trends and evaluate forecasts before making any changes.
Businesses cannot do much to control the direction of the economy. So, it is important to focus on what can be controlled. South African businesses are known for their resilience and ability to embrace challenges. Laying the groundwork early will increase the likelihood of a business thriving. This is the time for a steady, forward-looking leadership perspective to strategise and seek more opportunities.
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