South Africans are starting businesses but closure rates remain high

Updated on 14 July 2016

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Today's top entrepreneurship and business stories (14 July)
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FNB revealed that there about 75 000 new businesses created each month. “This could be close to one million new businesses each year,” said Sanjeev Orie, CEO of FNB Business Value Adds at a media briefing in Rosebank yesterday.

While South Africa is entrepreneurial, up to 40% of new businesses don’t make it past the first two years, Orie said.

“The closure rates for businesses are high.

“South Africans are very entrepreneurial, but even though they are entrepreneurial, they are not successful at being entrepreneurs,” he explained.

However, this should not be the end for these entrepreneurs, said Orie, who says more entrepreneurs need to heed the message “fail fast, fail often, recover even faster.” Orie said entrepreneurs normally succeed after their third or fourth attempt, adding that small businesses are still a hotbed for job creation.

To overcome the challenges Orie said there was a need for advisory and administration services.

De Beers launches diamond beneficiation mentorship
South African diamond cutting businesses, particularly for BEE entrants to the sector, face competitive challenges both locally and internationally. Therefore De Beers, the government and the South African diamond cutting industry have launched an enterprise development project for diamond beneficiators, which will work with selected black South African-owned diamond cutting businesses.

The programme has both a transformation aspect and a growth of the sector objective.

It includes: interventions to improve industry and business knowledge; fostering opportunities to gain experience in rough diamond purchasing; manufacturing (cutting diamonds); and marketing and distributing finished product into the polished diamond market.

Barend Petersen, chairman of De Beers Consolidated Mines (DBCM), says: “For beneficiation to succeed here there is a need to involve multiple stakeholders who will bring innovative thinking, skills and resources to ensure that South Africa remains a competitive player in the global diamond industry.” (Bizcommunity)

May retail sales – consumers are changing the composition of their spend
May retail trade sales registered growth of 4.5% year on year, well ahead of FNB’s and market expectations.

FNB reports that on a month-on-month basis, sales accelerated 3.4% from a -1.5% contraction in April. Year-to-date, sales are up 3.3% on last year.

The growth was driven by a 4.5% year on year increase in general dealer sales which accounted for 1.8% of the improvement. This was contrasted by a -4.7% and -8.7% year on year contraction in food and beverage and furniture sales respectively, which shaved a collective -0.8% off the total number.

“Pharmaceutical sales improved 5.2%, clothing by 6% and hardware by 7.5%. Our take on this is that consumers are changing the composition of their spend, redirecting cash that would, in better times, have gone to paying off a new car or other durable purchases. The poor performance in vehicle sales and furniture, which contrasts with the strong growth in general dealer sales give credence to this, but also suggest that retail margins are coming under pressure as retailers are forced to offer discounts in order to maintain revenue momentum,” reports FNB.

With inflation threats abating somewhat, and in the context of weak domestic growth, FNB expect that the South African Reserve Bank (SARB) will leave rates unchanged at its next Monetary Policy Meeting (MPC), which will provide some much needed relief for consumers. Moreover, much of the impact of previous rate hikes are yet to be fully felt by consumers. We remain of the view that household consumption expenditure will expand at just 0.2% this year after a large -1.3% contraction in the first quarter of 2016.

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