SA is on an upswing, but caution is still needed as massive electricity price hikes loom

Eskom’s appeal to Nersa (The National Energy Regulator of South Africa) for a 36% electricity price hike for the 2026 financial year seems a slap in the face for businesses and consumers who were still basking in the glow of last month’s interest rate cuts and the month-on-month declining fuel price. Contentious as it is, Eskom backs up its application, attributing the tariff hike to rising operational costs, the increased cost of coal, municipalities’ arrears debt and the cost of the carbon tax.

Fortunately, government has stepped in, with Electricity and Energy Minister Kgosientsho Ramokgopa suggesting a ‘policy intervention’ may be on the cards. Its aim would be to protect South Africans financially while maintaining the interests of Eskom. It’s a nail-biting situation.

While this plays out, it’s go, go, go for SMEs involved in seasonal trade (tourism, hospitality, retail, etc.). This as Stats SA recently reported a surprise uptick in retail sales in Q2, pointing to what could be a bumper summer season.

With this in mind, here, Miguel da Silva, Managing Executive of Retail Capital, a division of TymeBank, shares what he believes are the opportunities and challenges SMEs need to be aware of this October.

Take a Sho’t Left this Summer – local & international tourism boom a boon for SMEs

As they say, local is lekker and no truer is this than in the results of South African Tourism’s Sho’t Left Travel Week (SLTW) initiative. Focusing on affordability and access to unique travel experiences, its website saw a substantial 130% increase from 102 000 visitors in 2023 to 235 000 this year, while domestic bookings rose from 9 800 in 2023 to 14 000 in 2024 – a 30% y-o-y increase.

Following the success of SLTW, South African Tourism (SAT) is gearing up to launch its #Gimme Summer campaign to further drive travel during the festive season.  Working with tourism providers and agents, SAT intends to make this a come-back summer following the past few years of the country’s back-to-back crises.

And it’s not just locals who are travelling across Mzansi either; international travel is looking up too: between January and March 2024, 2.4 million international tourists arrived in SA, representing a whopping 15.4% increase compared to the same period in 2023. Of significance, 74.5% of these travellers were from across the African continent, with visitors from Zimbabwe and Ghana travelling the most.

This boom is also supported by Oxford Economics as it predicts that by the end of 2024 SA will receive 10.7 million international visitors, surpassing pre-Covid years.

If they haven’t already, SMEs in the travel and tourism industry – and significant supply chain – must get ready for a bustling season. Our advice as an SME funder is to invest in product development and production to ensure there is enough stock on the shelves to last many summer months. Injecting some additional funds into their businesses now can spike growth and scalability multiple times over, resulting in heavier bottom lines and increased performance.

Ride the retail wave

It’s not only those in the travel industry that will be positively impacted this coming season, so too will retailers. Marking the start of the sales season is Black Friday, now more commonly referred to as Black November. While last year’s biggest shopping day of the year was a flop financially due to the downward pressure on consumers’ finances, this year is expected to be the opposite. So believes Bob Group’s head of product, Jaco Roux. Further, even though brick-and-mortar retailers suffered at the hands of the economy in 2023, online sales still increased, and this is a trend that is likely to remain in 2024. Developments in technology and logistics will also play a role in this year’s eCommerce sales, says Roux.

Of course, with international players like Temu and Shein, and more recently Amazon, adding their muscle to the retail madness, local SMEs are strongly advised to invest strategically in their online offerings. Ensure the basics such as loading times, easy-to-use navigation bars, cart conversions and fair delivery fees are in place. Delivery can make or break repeat business so it’s key to keep the pulse on the time it takes a consumer to press pay to the parcel arriving at their given address.

Besides the Black November opportunity, consumers are focused on the basics and are keeping their eyes open for specials and promotions. While in years prior items like big screen TVs may have been shoppers’ splurges, today it’s more about everyday items wooing consumers.

Will SMEs feature in this year’s Mini Budget?

The irony of both the National Budget Speech and Medium-Term Budget Speech (MTBS) – which is coming up on 30 October – is that the engine rooms of the economy, our SMEs, are seldom mentioned nor allocated much funding. In 2023’s MTBS they did not feature once.

It has repeatedly been shown that SMEs are not expenditure priorities and have largely been ignored for the past 20 years. Independent political analyst Dr Dale McKinley is reported to have said that “SMMEs are simply not taken very seriously as an economic driver, and this is consistent with the government’s preference for large scale businesses and big projects.” Of course, this was said when the ANC was in power. Now, with the formation of the GNU, it will be interesting to see if there is any change in stance towards SMEs.

SMEs have high hopes for the GNU, and many believe that Godongwana will do the right thing and allocate a portion of the country’s budget towards this essential sector’s growth. But there is likely a long way to go if we are to see government support SMEs as they should be. With limited funds in the pot (approximately R7.4 trillion for the 2024/5 and 2026/27 period), and a multitude of other areas of need – e.g. social grants, the contentious NHI, education, crime-fighting etc. – funding projects that impact SMEs are often last on the list, if on the list at all.

With sales figures on the up and a new spark of confidence in the economy by SMEs, big businesses and organisations, we hope to see a continued economic recovery and improved investment from international financiers, impacting FDI, repositioning South Africa as an economic gem on the global stage, which is only good news for our SMEs.