The global economy has become ever more complex and consequently, fragile and susceptible to financial and economic uncertainty.
The 21st century has seen the fastest growth in human advancement in just about every sector, the World Wide Web is 25 years old, and the Internet itself is just 45 years old. The corner store is fast evaporating and global trends now have a direct impact on the local SMME.
On a local level, SMMEs account for over 90% of formalised businesses; they also provide employment to more than half the country’s labour force with an estimated 34% contribution to South Africa’s GDP. This makes the SME sector very important in resolving the high unemployment in the country. Leaders in this sector of society must be quick to act and flexible enough to adapt to the ever changing economic environments if we are to achieve the goals set out in governments National Development Plan.
Here are some key global insights that will have an impact on business and entrepreneurs:
China continues to move towards being a world leader economically and politically. The US, UK and the EU are struggling with their own domestic, economic and political issues. It has therefore become clear that there is a definite impact on businesses especially in emerging markets such as South Africa.
Exports and imports of businesses trading internationally will be affected due to the impact on the Rand. There would be a need for local businesses to be responsive.
China was very vocal about its support for globalisation at this year’s World Economic Forum in Davos. An increase in globalisation usually has a negative impact for small open economies. This puts added pressure on local businesses and upcoming entrepreneurs, as a result of increased competition. For small businesses to compete, that would mean that they find means of generating additional capital, which might be already difficult given strict lending requirements.
The concept of inclusive growth talks to the benefit of all citizens in an economy. The easing of current regulations is one way in which to achieve inclusive growth, creating more opportunities for entrepreneurs.
Education is important in terms of upskilling the workforce, improving entrepreneurial skill by means of accessible and affordable business incubations, as well as incorporating entrepreneurship in the schooling system – this all drives inclusive growth.
Fourth Industrial Revolution
There is ongoing talk about the Fourth Industrial Revolution (the fast moving rate of Artificial Intelligence (AI)) and the positive or negative impact it could have on humancapital. McKinsey’s prediction is that approximately half of the current jobs could be replaced by robots by 2055.
Given that a significant amount of job creation is expected from small business, there needs to be an understanding, on how to have a solid balance between increasing employment for the South African economy, the use of technology in business and our readiness to become more automated.