Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
02/08/2019
9th ROGE
Conference Presentation
02/08/2019
FINANCIAL MANAGEMENT CHALLENGESFACING
SOUTH AFRICAN SMALL BUSINESS
AND INFORMAL RETAILER’S IN THE TOWNSHIP RETAILING
ENVIRONMENTbyMaphelo Malgas
Cape Peninsula University of Technology
-Retail Business Academic
Why this research?
“There are about 2.4 million people working in the informal sector.
If every 3 years each person were able to gain a new co-worker,
South Africa’s unemployment problem under the expanded
definition, could be solved in 10 years.”
Peter Attard Montalto, 2014
Agenda
Questions, Context & Literature
Methodology
Research Findings
Recommendations
Conclusion
• What is the South African small business retailers understanding of financial
management factors in small business retailing?
• How can the South African small business retailers improve their understanding of
financial management and control factors?
Research Questions?
02/08/2019
Context &
Literature
▪ The South African economy slumped sharply in the first three months of 2019,
contracting by 3,2% (Stats SA, 2019)
▪ The youth aged 15–24 years are the most vulnerable in the South African labour
market as the unemployment rate among this age group was 55,2% in the 1st quarter
of 2019 (Trading Economics).
▪ Projected GDP growth for 2019 is 0% - while inflation is expected to be 4.5% (Trading
Economics)
▪ Small business is a driver of job creation (Anthony Farr, 2010)
▪ Less dependency on the State leads to a stable political and investment climate
(Anthony Farr, 2010)
So what is our current economic situation in South Africa?
▪ The South African retail sector makes up 15.1% of GDP and contributes 23% to employment.
▪ Number of large malls in South Africa is estimated to have passed 2000 by now since there
were about 1959 shopping malls by 2017.
▪ The National Development Plan suggests that about 90% of jobs could come from small, micro
and medium enterprises (SMMEs) by 2030. Thus, about 70% of new jobs by 2030 will be created
by small retailers (W&R SETA)
▪ Small business development plays an important role in employment creation and poverty
alleviation.
▪ When large retailers enter the townships and rural areas, there is an erosion of the small
business market share.
South African Retail industry is growing
▪ The informal sector entrepreneurs in South Africa have limited ability to generate income due
to their low business skills and low capitalisation of start-up and this reduces small business
entrepreneurs to permanent survivalist business owners (Rolfe, Woodward, Ligthelm &
Guimarães, 2010).
▪ Even though entrepreneurs struggle with external factors in their entrepreneurial endeavours,
such as competition and rising costs of doing business in the small business micro-enterprise
sector, they need to take ownership of their own development (Fatoki, 2014).
▪ Entrepreneurs, even though they need training, but they must also be prepared invest their
own financial and human resources in the business they intend to start (Frid, Wyman and
Gartner, 2015).
▪ Ayandibu and Houghton, (2017) noted that South African small business owners also face
challenges that affect their growth and survival just like their counterparts in other African
developing countries.
▪ The South African market also face a unique challenge in that it has a large number of
Literature Review
02/08/2019
Research
Methodology
The sample consisted of:
Local Traders
55 Migrant trader
• 45 Delft
• 10 Eindhoven
Research Instruments
▪ Questionnaire
▪ Observations
Desktop Literature Review
• Local SA Traders
Sample profile of Respondants
02/08/2019
Research Findings
Table 4.1 Depicting How Local Trader Funded Their Start-up Business
Frequency Percent Valid Percent
Cumulative
Percent
Bank Loan 4 7.3 7.3 7.3
Other – Family &
Rentals
6 10.9 10.9 18.2
Own Funds 45 81.8 81.8 100.0
Total 55 100.0 100.0
Table 4.1 above indicates that 81.8% of South African small business retailers mostly use their own funds tostart a small retail business while very few (7.3%) use bank loans to start a business. Funding is viewed as astumbling block for start-ups in small businesses. Potential new entrants might be discouraged to start asmall business retail
Table 4.2 Depicting Whether Traders Rent or Own Their Business
Premises.
Table 4.2 above, indicates that the majority, 61.8%, of local South African small business retailers
own their stores. This means that they do not pay rental which is usually paid by those store owners
who rent their business premises. So the local traders have some form of advantage when it
comes to rental as the majority own their stores.
Frequency Percent Valid Percent Cumulative Percent
Neither 2 3.6 3.6 3.6
Own 34 61.8 61.8 65.5
Rent 19 34.5 34.5 100.0
Total 55 100.0 100.0
Table 4.3 Depicting the Bank used by the Local Trader.
Table 4.3 indicates that the majority, 36.3%, of local South African small business retailers do use
any form of banking for their businesses. This is a lost revenue for South African economy as
banking requires formalisation of the ownership of the small businesses. The table also shows that
among those small business retailers who use a bank, the majority at 27.3%, prefer to use Capitec
bank. In South Africa Capitec is a bank that has the lower income earners as its target market with
very low banking fees.
Frequency Percent Valid Percent Cumulative Percent
ABSA 5 9.1 9.1 9.1
CAPITEC 15 27.3 27.3 36.4
FNB 3 5.5 5.5 41.9
NEDBANK 7 12.7 12.7 54.6
NOT BANK 20 36.3 36.3 90.9
IMB / POST
OFFICE
1 1.8 1.8 92.7
STANDARD
BANK
4 7.3 7.3 100.0
Total 55 100.0 100.0
Table 4.4 Depicting the Local Trader’s Business Monthly Turnover.
Table 4.4 above, indicates that the majority, 96.4%, of local South African small business retailers
have a monthly turnover of less than R20 000. This means that even if these small businesses were
to be formalised, they will be exempted from paying any taxes as they are below the South
African tax threshold for small businesses. Monthly turnovers are used in South Africa to classify
businesses and this study reveals that township traders fall under the small business category.
Frequency Percent Valid Percent
Cumulative
Percent
Less than R20
000
53 96.4 96.4 96.4
R20 000 - R30
000
1 1.8 1.8 98.2
R40 000 - R60
000
1 1.8 1.8 100.0
Total 55 100.0 100.0
Table 4.5 Depicting the Number of Times the Local Trader does Budgets
for their Business.
Table 4.5 above indicates that the majority, 69.1%, of South African small business retailers do
budgets on a monthly basis. There are very few, 5.4%, small business retailers who do not do
budgeting at all for their small businesses. Budgeting should be the primary focus of managing the
finances of the business in order to also project growth target. Small businesses in retailing requires
a daily assessments of budget since they are likely to be doing daily and weekly orders.
Frequency Percent Valid Percent Cumulative Percent
Daily 4 7.3 7.3 7.3
Weekly 1 1.8 1.8 9.1
Monthly 38 69.1 69.1 78.2
Quarterly 3 5.5 5.5 83.7
Annually 6 10.9 10.9 94.6
Don’t Budget 3 5.4 5.4 100.0
Total 55 100.0 100.0
Table 4.6 Depicting if the Local Trader has a Financial Advisor in their
Business.
Table 4.6 indicates that the majority, 89.1%, of small business retailers do not have a financial
mentor or advisor to advise them on their business and finances. Business financing requires special
skill and formal business have highly qualified accountants to help manage the finances of the
business. However small business cannot afford to pay for outsourced financial management.
Frequency Percent Valid Percent Cumulative Percent
No 49 89.1 89.1 89.1
Yes 6 10.9 10.9 100.0
Total 55 100.0 100.0
Table 4.7 Depicting if the Local Trader has ever Received Business or
Retail Finance Training.
Table 4.7 indicates that the majority, 92.7%, of local South African small business retailers have
never been trained on financial management for business. This is an area that would require
urgent attention for traders because when business owners have not been trained on financial
management then they make use of an external financial management consultant, which small
business retailers cannot afford.
Frequency Percent Valid Percent Cumulative Percent
No 51 92.7 92.7 92.7
Yes 4 7.3 7.3 100.0
Total 55 100.0 100.0
Table 4.8 Depicting Is Local Trader Offers Credit Sales To Their Customers.
Table 4.8 indicates that the majority, 69.1%, of local South African small business retailers do not
offer any form of credit to their consumers. Credit can either help the traders to sell more to their
consumers but it can also destroy the business when the credit is not paid by the consumer.
Therefore, if credit is provided by small businesses it needs to be managed very carefully.
Frequency Percent Valid Percent Cumulative Percent
No 38 69.1 69.1 69.1
Yes 17 30.9 30.9 100.0
Total 55 100.0 100.0
02/08/2019
CONCLUSION
Conclusion• The study has found these small business retailers are lacking in
their understating of financial management control measures
used by small businesses.
• The major problem facing local traders is their retail financial
illiteracy which manifests itself in their lack of understanding on
the impact of financial decisions in their businesses.
• Retail financial literacy is the biggest part of running a small
business in the retailing sector and local traders need a
thorough training on it.
02/08/2019
Recommendations
How can the South African traders improve their understanding of
financial management and control?
Recommendations
• It is also recommended that the South African
government, through its wholesale and retail training
sector agency (W&R Seta) establish a targeted retail
finance training and development programme to train
local retailers on among other things budgeting skills,
cash flow management, stock management and
rotation.
Recommendation for SA Traders to Improve
Co-Curricula training
Incubation
Funding
Entrepreneurial Culture
Government Intervention
W & R SETATraining and
Incubation
Legislation
Enforcement
Small
Enterprise
Finance
Agency
Access to
Finance
Access to
Finance
Information
Sharing
Government
Funding
Formation of
Strong Business
Networks for Small
Business Retailers
Competitive Pricing Structure
and Long Term sustainability
of South African Small
Business Retail
Progress
Reports
Progress
ReportsResource
Management
Progress
Reports
Necessary
Resources
Progress
Reports
Progress
Reports
Training - 9
months
Application
for
incubation
- 3 months
Incubation
Independent
Application for funding
Business Case for SA Traders to Improve
THANK YOU