It’s estimated that SMEs make up 91% of formalised businesses in South Africa, provide employment to about 60% of the labour force, and their total economic output accounts for roughly 34% of the country’s GDP. But the reality is that the overwhelming majority of small businesses fail: more than 70% within the first two years, and 96% fail to see 10 years in business.
Thomas Pays, the CEO of South African digital payments platform Ozow (formerly i-Pay), says many South African SMEs are battling to keep their heads above water as they struggle to maintain consistent cash flow. According to the Experian Business Debt Index (BDI), released in August, the overall debt situation for SMEs deteriorated in the second quarter of 2019, with outstanding debtors’ days rising to a record 66.4.
“Cash flow is the lifeblood of any small business. It’s the fuel that runs the business, and is a major reason why the staggering majority of small businesses fail within their first couple of years of operation,” said Pays.
“The success of any business lies in its ability to bring in revenue. By digitising their payment systems, South African SMEs have the opportunity to not only bring down their debtors days, but dramatically increase their share of a R14bn online retail market, and grow their businesses in the process.” Read more on Accounting Weekly.