Top 5 Sectors that Hold Opportunities for SMEs in 2019
Better times could be on the way and this will impact which sectors South African entrepreneurs choose to enter. This is according Byron Jeacocks, regional general manager at Business Partners Limited.
“The GDP data for the third quarter of 2018, recently released by Statistics South Africa, revealed that the economy has grown by 2.2 percent, quarter on quarter, indicating that the country is gradually starting to move out of its recessive state,” he says.
Entrepreneurs are in a good position to take advantage of this.
“This positive uptick is expected to boost entrepreneur confidence in the country particularly those operating in business sectors already showing more opportunities for small businesses and startups,” says Jeacocks.
While they will not be without challenges for the foreseeable future, the following five industries are likely to offer the best opportunities for small and medium enterprise (SME) owners to grow their enterprises in the coming year:
1. Tourism – “Relaxing of restrictive regulations should boost sector”
With over 8 million tourists visiting the country each year, South Africa’s tourism industry has traditionally been quite robust. However, just like many other sectors it has also experienced setbacks. With the recent drought in the Western Cape leading to harsh water restrictions, and stricter visa regulations for children entering the country being put into effect, the loss of potential revenue for the tourism industry has been significant.
Recently, however, government announced that the restrictive visa regulations for foreign nationals traveling with their children would be revised, and as of 1 December, these regulations have been relaxed. It has been estimated that simply relaxing this regulation would again boost visitor numbers by as much as 20%.
2. Manufacturing – “Greater demand for more manufacturing capacity”
It is currently projected that the manufacturing sector in Africa will be almost double its current size by 2025. In line with this, in South Africa, the demand for more manufacturing capacity is showing no signs of slowing down. In fact, Government has made a concerted effort in recent years to stimulate small business growth in this area.
Initiatives such as the Black Industrialist Programme and the recently finalised SA Automotive Masterplan are expected to drive this job creation and business opportunities. Businesses in the manufacturing sphere could therefore likely see significant opportunities in the form of outsourcing contracts and new partnerships with large corporates.
While it is true that manufacturing in the country recorded over 7000 job losses this year, Statistics South Africa also attributes this industry with being the biggest driver of growth in the country’s gross domestic product (GDP), having expanded by 7.5 percent since September.
3. Infrastructure – “Opportunities in sub-contracting agreements or as participants in public-private partnerships”
While South Africa remains in dire need of infrastructure investment, with the country’s rail, water, electricity and road frameworks facing significant challenges, the good news is that the funding for construction and upgrade projects are being made a priority in the coming year.
President Cyril Ramaphosa is expected to announce the establishment of a cabinet task team to work on a five-year plan for Eskom, meaning that the start of projects to repair the current electricity grid and increase generation capacity is imminent. This is in addition to the planned infrastructure spending at 57 priority pilot municipalities as per the President’s Economic stimulus and recovery plan.
With this in mind, we believe that all forms of infrastructure offer significant opportunities for small businesses, either in the way of sub-contracting agreements or as participants in public-private partnerships (PPA).
4. Agriculture – “Opportunities in rural and underdeveloped regions”
There is no denying that the debate around land expropriation has occupied most of discussions in the agricultural sector in 2018 with some questioning growth prospects of this sector going forward. However, this industry still has a lot growth ahead of it as demonstrated by the 6.5 percent over the last three months and South Africa’s National Growth Plan has identified agriculture as an industry with high growth potential.
With our agricultural industry already taking significant advantage of seven climatic regions, the export of a wide variety of high quality fruit and vegetables, as well as a growing exotic meat industry, has already increased substantially.
For SMEs, the most significant opportunities in agriculture are most likely in the rural and underdeveloped regions, where the need for resources like efficient transport, state-of-the-art cold storage, better irrigation and private power generation will be key to making agriculture projects more productive and competitive in the export market.
5. Data and information technology – “Becoming a high priority”
Connectivity and information technology infrastructure are both crucial to business and employment growth in South Africa. With many municipalities and the Western Cape government committing to providing all of its residents with free data as part of a plan to expand public Wi-Fi network access, it is clear that this is also becoming a high priority on a state level.