Wherever and whenever you are going to start a new business or running an already operating one, there are business risks. And if you know those risks beforehand, you get the upper hand. You can change your strategy accordingly then. Also, you can manage to earn more profits with the risks still being there. Likewise, there are quite some business risks in South Africa, and this article is all about that.
In the next paragraphs, we will share the main factors affecting the South African industry.
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We will also include the challenges facing South Africa, and how you can overcome those challenges. We will discuss these along with the risks of doing business in South Africa.
Political risk factors and government
Politics is one of the most influential factors behind any business. And unfortunately, South Africa is one of those countries that have the highest influence of politics on every aspect of the country.
However, South Africa is now quite stable in its democracy. But needless to say, whenever an election takes place, there are risks of business failure.
And in South Africa, local government elections are going to be held. That is why, the business situation may get a little sporadic, leaving you out of water.
However, if we compare business risks in Africa with business risks in South Africa, South Africa will be far forward in the case of politics.
Maybe the South African government is the most liberal and democratic among the countries of Africa.
Nevertheless, if you are not static in your business position, your efforts may run dry. Just comply with different legislation from the government, and you will do just fine.
South Africa economy
Well, economic growth plays a vital role in the establishment of any business. Low economic growth may lead you to run your business completely on your own, without any indirect support from the government.
On the other hand, high or moderate growth will exert the opposite effect. Hopefully, South Africa has had a growth of 0.8% in 2018. But sadly, the growth fell to 0.2% in the next year, 2019.
Two repeated recessions at the end of 2019 caused it. When the economic growth falls to such an extent, we see its outcome in the per capita income.
The same has happened in the case of South Africa. And unfortunately, the increasing GDP growth of South Africa faced a downfall for the first time in the last five years.
To make things worse, there came COVID-19, affecting the entire economy of not only the country but the world.
As a developing country, South Africa faced a quite rough time due to COVID-19. The lockdown regulations and different other legislation made it harder for businessmen to continue their business.
The 7% contraction in business at that period in 2020 says it all. However, a 3.6% growth is estimated in 2021.
This estimation has been done based on the vaccination program and boom in the commodity price. Hopefully, South Africa can achieve that, and there will be no such business risks anymore.
Unemployment and underemployment
The unemployment problem is the biggest burden for the economic growth of any country. The sluggish growth of the economy facilitated this, as well.
On top of that, Coronavirus has had quite an impact on this already-existing burden of South Africa.
Experts assume that it will take years for South Africa to get out of this position of unemployment and underemployment.
The current rate of unemployment in South Africa lies at a massive 30%. This rate does not include the people who do not have a full-time job.
Also, after the global pandemic, a handsome amount of jobs have been shed in late 2020. The nationwide lockdown along with the pandemic in the year was the main reason behind it.
Although we hoped for the situation to be best in 2021, the ongoing outbreak of Coronavirus says something different. Hopefully, South Africa will come out of such high rates of unemployment in a very short time.
Lack of resource
The resource is the driving wheel of any company. If you have the necessary resources, your company may succeed. On the other hand, lack or insufficient resources may prove fatal for your company.
South Africa is lagging far behind in this aspect although they are one of the top countries in Africa.
Lack of resources in South Africa varies from human resources to lack of skills and natural resources. Although there is plenty of source of natural resources, there are not enough measures to uplift it.
One of the major lack of resources in South Africa is the water crisis. Water is an important resource for not only industries but also in every aspect of our lives.
It is called the other name of life. But unfortunately, the water crisis is very prominent in South Africa. It is not like that the water levels in South Africa are low.
The main reason is the aged, old water infrastructure. It results in an intermittent outage of water. As a result, the industries face quite a risk.
This simple risk leads to higher risks. The South African government should come forward quickly to ensure the proper management of this risk. Proper legislation should be established regarding the poor and old infrastructures.
Furthermore, this risk regarding poor water infrastructure affects the South African economy badly. Hopefully, once proper management is taken regarding this risk, the country will have a better economy.
Social instability
The first thing you have to understand before identifying risks is that South Africa is a developing country, which is still a fetus in terms of development.
As a result, there are some social risks of investing in South Africa. There are often strikes against the government or some other agencies or organizations.
Protests and demonstrations are very common in South Africa. No industry can guarantee to be risk-free from this instability.
Therefore, you also cannot expect your company to keep free from such public manifestations of protest.
As a result, an unpredictable situation is created. And you have no control over that situation. The South African government cannot do any confirmatory management about it.
A common thing to protest against in South Africa is the corruption at different stages of the government. The unemployment and underemployment problem has added more to it.
The proper management of these events can eliminate the risk. Otherwise, South Africa may become a bad choice for investment.
Critical infrastructure failure
We have already talked about one of the bad infrastructure failures- the water infrastructure.
Indeed, water is not the only requirement of proper management of an industry. The energy requirement, especially electricity, is also very important.
But unfortunately, South Africa is far behind in this aspect. There is intermittent load shedding. The load shedding problem has become a key risk for industries in South Africa.
Without the provision of the required energy demand, you cannot expect your company to run well. It may not run at all.
But still, South Africa is having a tough time in the proper generation and distribution of energy across the country. Hence, it is high time, South Africa did something to get rid of this risk.
Corruption at different levels
Corruption is nothing new in business sectors. It is the most common factor in the failure of every company. However, South Africa is among the top countries in corruption.
The other countries in Africa are worse than South Africa but they also do not have the same commercial structure as this country. Hence, investment here can be a little dramatic. However, once you identify the problematic parts, you can easily avoid them.
Corruption is one of the primary factors South Africa is still lagging in its economic growth despite the effort.
The tendency of not caring about the legislation has been proved fatal. Hopefully, the African country can overcome the situation soon.
Low level of education
Most African countries are still far behind in education. South Africa is quite forward among them, though. But still, the necessary level of education is absent. As a result, there is a high rate of unemployment.
Once higher education is confirmed, the risk of unemployment will be gone as well. The skillset is also very poor, which affects economic growth negatively.
Final thoughts
South Africa is a developing country with so many possibilities. However, there are some risks as well, which have been pulling the country backwards. Taking some necessary measures can get the country rid of such risks.
For example, a proper following of legislation will ensure less corruption at different levels of the state.
Hopefully, the African country will have better days in a short time. We have tried to include all the main factors affecting the South African industry. Hopefully, you have got the necessary information.
