Budget Speech 2020 Hits Retailers Hard

Growing your business in a barren economy

In the lead up to the Budget Speech on Wednesday 26 February, the outlook for both consumers and retailers looks bleak. The primary balance adjustments are expected to fall short of previous estimations in combination with South Africa’s weaker nominal GDP growth, could mean an inevitable downgrade to junk status by ratings agency Moody’s.



In the lead up to the Budget Speech on Wednesday 26 February, the outlook for both consumers and retailers looks bleak. The primary balance adjustments are expected to fall short of previous estimations in combination with South Africa’s weaker nominal GDP growth, could mean an inevitable downgrade to junk status by ratings agency Moody’s.

In fact, this particular budget speech is arriving at a time when two of the country's most prolific state-owned enterprises (SOEs), Eskom and SAA, are placing immense pressure on the countries’ economy and increasing state debt to dangerous levels.

Eskom alone is in such a precarious position currently that the Congress of South African Trade Unions (COSATU) is proposing a debt reduction of R250bn through the use of state funds, sourced particularly from the Public Investment Corporation and other state institutions. Unfortunately, further details as to whether government has accepted or considered this detail are not yet available.

With all of this in mind, one expects the SME sector to be hit hard and the continued tax pressures only continue to grow without much hope of reprieve. Realistically, if we don’t see an increase in corporate tax, government may have to increase tax revenue in other areas like VAT and PAYE on high income earners. This in turn has its own effect on SME’s, whereby it decreases the overall spending power of the consumer base itself and increases on the shelf costs.

This leaves retailers and other SME’s in a position where they have to prepare themselves for these eventualities and strategise new methods of increasing profit generation. This could mean something as simple as taking advantage of major wholesaler bulk buys before price increases, installing generators and solar systems to continue trading during load-shedding, upgrades to your site for more foot traffic or even purchase fuel before a substantial government mandated price increase.

Essentially, you have to innovate, now is the time to start outsmarting your competitors and make moves to ensure your continued success in an economy like this. There is one thing you can be sure of, all of this requires urgency and more than anything - it requires capital.

This is where instant working capital solutions, like Capital Connect will come in to assist in ensuring you keep growing and expanding your business. Cash Connect Capital is a business funding offering designed with the retailer in mind. It is a fast cash injection, providing retail merchants with operating capital in just 24 hours. The most appealing part of this kind of financing is that it is unsecured, it can be paid back in small daily instalments and is hassle-free in that no audited financial documents are required. The access to quick, reliable funds, is an opportunity retail merchants simply have to take advantage of, in order to grow and their businesses and maximise their earning potential in a tough economy like ours.

Steven Heilbron, CEO of Cash Connect Management Solutions, says “We encourage business owners to consider finance options, like Capital Connect, that will give them a cash injection with which to invest in extra stock, make bulk purchases at discounted rates, or even make store renovations to ensure their success in the difficult financial year ahead.”

Business finance from Cash Connect Capital can be used for just about anything that will help you ensure you never miss an opportunity for growth in a variety of spaces:

  1. Stock up – especially for peak trading season (e.g. Easter, Black Friday, Festive Season) – which are all opportunities to boost profits.
  2. Purchase bulk stock at discounted prices – increase margins.
  3. Renovate a store – so it’s more attractive for customers.
  4. Add a new store – e.g. a car wash if you’re a fuel retailer.
  5. Pay off a shareholder’s loan for example.
  6. Buy new equipment or fix equipment / appliances.

While the current state of the South African economy is a challenge to the SME community, they themselves are the answer to growing the economy. This means the success of retailers is critical in the SME space to ensure further success of the country and it’s GDP growth. Retailers must look for the gaps that will allow them boost their profits. Now is the time that you need to think quick, be agile, innovative and take advantage of reliable cash flow options.