Wed Oct 26 07:55:52 CAT 2016

Too little, too late

By unknown | Aug 15, 2008 | COMMENTS [ 0 ]

Tamlyn Stewart

Tamlyn Stewart

The Reserve Bank's Monetary Policy Committee's decision yesterday to keep interest rates on hold at 12percent was small relief to small businesses.

Since Nomsa Mbatha opened her Bronkhorstspruit, Gauteng, community pharmacy in May last year, the Reserve Bank has hiked rates six times.

Mbatha, co-owner of Kungwini Pharmacy, said the rate tightening cycle has made it difficult for her one-year-old business to stay afloat. "Sales have dropped quite a lot. In the pharmacy business, by this time of year most people's medical aids are already exhausted and people have to pay cash, and they don't have cash.

"People are no longer buying luxuries - they don't even have enough money to buy medication," she said.

Mbatha and co-owner Annelie Jacobs opened Kungwini Pharmacy in May last year and employ six people including themselves.

Their overheads include a loan from the Gauteng Enterprise Propeller [GEP], rent, salaries and wholesalers.

"We have to pay the wholesalers and medicine prices also went up, not just food and petrol. There's a lot we have to pay and there's no growth in the business," said Mbatha.

"Now I just think 'Did I make the right decision [opening this business]?'"

Prospects for Kungwini Pharmacy, and millions of other small businesses, would only improve once the Bank started to cut rates, said David Morobe of the GEP.

The GEP is a provincial government agency that provides both financial and non-financial support to small, micro and medium-sized enterprises in Gauteng. It currently provides financial support to over 100 businesses, and non-financial support to nearly 10000 businesses. There are over a million small businesses operating in Gauteng alone, said Morobe.

"Big business has the muscle to pass on what comes from interest rate hikes but small businesses, if they raise their prices, they risk losing considerable market share, so oftentimes they just absorb it.

"We are beginning to see businesses in difficulties. At the rate they are struggling we will soon see them going under," he said.


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