"It will take us years to recover," AHI President Bernard Swanepoel said in a statement after the downgrade. "From a business point of view, it is going to make it difficult to hedge currency exposure and it’s going to make borrowing money more expensive. We will certainly see higher prices in a time where many consumers are already struggling with high levels of debt and input costs are rising," he added.With the lending rate set to rise, small companies will see their existing loans increase. As a result, they will have to manage their debt more carefully. For companies relying on imports, the cost of foreign products has increased. Consumers' wallets are also more strained, meaning that they will be weighing up any purchases they make. This can also affect small businesses, who don't have the same buying power as large corporations. Due to this lack of buying power, small businesses can’t always offer the best deals. And as the SA Consumer Satisfaction Index (SAcsi)'s recent report on supermarkets pointed out, a tough economy results in less consumer loyalty. This means that consumers will follow the best deal available, rather than paying more to support a company they like.
"The coming hardships are caused not by poor business decisions or reckless management, but by a government putting self-interest over national interest. This is government shooting itself in the foot," Swanepoel said.Possibly some of the worst news for businesses, however, is that an upgrade back to investment status could take years. The AHI added that Nedbank analyst Reezwana Sumad noted that it takes an average of five years to get back to investment grade.
"While faced with these uncertain times, it doesn’t mean that SMEs should suspend activity, or stop moving forward," he said in a statement.Paper notes that small business won't have to stop taking out debt altogether. But they must be more vigilant in the management of their loans. He says that business owners should consult financiers and also extensively research funding options. He suggests that small companies should also review their business plans in light of a tougher economy. This includes cutting down on unnecessary spending. The AHI also announced that it will be calling on the new Finance Minister Malusi Gigaba to ease burdens on small businesses.
"Without deliberate interventions by the finance minister where his jurisdiction allows, some SMEs will battle to survive,” AHI CEO Dr Ernest Messina said. "For instance, to tender a bid, businesses require tax clearance certificate." Messina said that this usually involves "protracted time and onerousness involved in getting tax clearance certificates".They are calling on government to work with SARS to prevent inefficiency in getting these certificates.