Successfully running a business, regardless of the industry you’re in or where in the world you’re based, is hard. Successfully running a business in South Africa, where you’re also pitted against unique challenges like load shedding, a precarious political climate and the threat of no water (#DayZero, anyone?) is an entirely different kettle of fish. We’ve rounded up the top five threats that South African businesses of all sizes face, according to the Allianz Risk Barometer 2019.
1. Business Interruption
Unsurprisingly, business interruption was ranked as the number one risk facing not only South African businesses, but those across the globe. Defined as any physical, virtual or reputational incident or occurrence which directly results in a loss of income, business interruption has posed a threat for roughly 3000 years. While business interruption isn’t new, the nature of business interruption threats have evolved alongside our increasing dependence and use of technology. Cloudflare’s recent outage is one such example. While the server was down for a mere 30 minutes, thousands of websites were rendered useless – resulting in the disruption of businesses around the globe and a substantial loss of income. Closer to home, Eskom’s woes and the resulting rolling blackouts, is another example of business interruption facing SA businesses today.
2. Cyber Attacks
Increasingly linked with business interruption, cyber attacks now pose the second biggest threat to South African businesses. In addition to Cloudflare’s failure mentioned above, phishing scams and compromised IT networks due to insufficiently trained staff are fast becoming more of a threat to businesses big and small. Data breaches are also increasing in frequency. Last May, the “personal records of 943 000 South African drivers, allegedly from online traffic fine website ViewFines” were leaked, prompting an investigation by the Hawks, the State Security Agency and the Information Regulator. Mimecast’s The State of Email Security 2019 found that almost half of South African businesses reported “an increase in targeted spear-phishing attacks using malicious links or attachments over the past year.” Small and medium businesses are most at risk, as they have less capital to invest in robust IT security and cyber-fraud prevention training for staff.
3. Changes in Legislation and Regulation
The contentious Land Expropriation bill, coupled with the effects of the ongoing trade war between the US and China, sees ‘changes in legislation and regulation’ rise to become the third biggest threat facing SA businesses today. While South Africa is not directly involved in the trade war, it is adversely affected – more so than stronger, established markets. “Rising interest rates in the USA, is leading to a weaker South African rand against the US dollar, which will affect the price of imported goods, final manufactured goods such as cars and machinery…” reports Bizcommunity. Add a fragile political climate to the mix (which further weakens the rand) and it’s obvious why this is such a concern for South African businesses across industries.
4. Market Developments
Foreign investors are becoming increasingly sceptical about investing in the South African economy due to negative growth in the last quarter and a turbulent political landscape. What’s more, the tightening of purse strings across the nation means South Africans are foregoing luxury purchases and leisure activities in order to stretch their budgets. The result? Cost-cutting across the board which directly impacts small and medium businesses in particular.
5. New Technology
The way we do business is fundamentally changing. Almost all business functions are reliant on technology, and often, these programmes and apps are not affordable for small and medium businesses. As a result, SMEs struggle to keep up with competitors who can afford to shell out for new tech. Think of the way that mobile payment solutions like Snapscan have changed the way businesses accept payments. Consumers are forgoing carrying cash, as almost every day-to-day purchase can be done electronically. The businesses who’re not equipped to handle mobile payments are at a distinct disadvantage compared to businesses who are. Along with the affordability of new tech, another area that SME struggle with is a lack of IT training and know-how.
Special Mention: Lack of a Skilled Workforce
One of the biggest risers in the Allianz Report was a lack of skilled workers available to South African businesses. Despite an inordinately high unemployment rate, SA businesses are struggling to find human resources who have adequate training for the job. The result? Their positions go unfilled, or are filled by employees who lack the necessary knowledge to adequately perform. Businesses then suffer due to more time being spent on training workers, as well as sub-par performance which directly impacts their bottom line.