Is a wait-and-see approach holding your business back?

While for many it may seem like a different lifetime, only 2 years and 6 months have passed since South Africa lifted the national COVID-19 lockdowns. Since then, life has generally returned to the way it was before the global pandemic – with a few exceptions.

Hybrid working policies and workplace flexibility have become a widely accepted standard, semi-gration patterns continue as an increasing number of people move from big cities to coastal regions or smaller towns, and various South African businesses have remained in a wait-and-see mindset due to the large-scale unpredictability the pandemic caused.

From procrastination to business optimism

In 2024, the outcome of the national general elections created another period of uncertainty for both local businesses and foreign investors. Consequently, this wait-and-see approach many businesses had adopted were prolonged until the ballots were counted and the results announced.

With a global pandemic, several weather disasters, years of high-level load-shedding, and a high-pressure national election behind us, South Africans are starting to look towards the future with renewed optimism.

One of the ways in which this optimism is reflected is the continuation of our country’s economic momentum. The BankservAfrica Economic Transactions Index (BETI) was 0,5% higher in Q3 than Q2, indicating positive economic spending and growth.

Markets have also been reacting positively since the formation of the Government of National Unity (GNU), which led to favourable movements in the rand, bond yields, and credit default spreads. Consumer spending has also recovered and steadily increasing, which can be attributed to the improved confidence in the country (Source: Naamsa report, September 2024).

Although businesses made what might have been the right decision to adopt a wait-and-see approach from 2020 until now, it would be a mistake to continue with this growth-limiting mindset.

Why cash isn’t always king over renting

Often the basic principles of personal finances are replicated within the business environment. However, there are several drawbacks to this approach. What many businesses fail to understand is that there is a cost tied to capital.

A cash-only approach actually increases a business’s risk profile when it comes to purchasing assets. Delaying upgrades and improvements on infrastructure, or running the business with outdated equipment are all results of a cash-based business approach to assets.

Technology is an area where the consequences of this can be seen first. The Windows 10 announcement is a practical example. Businesses still running Windows 10 on their computers, which was two-thirds of users at the end of 2023, will need hardware to meet specific requirements for the Windows 11 upgrade. With only one year until this deadline, around 400 million enterprise workstations will be affected. This Windows update not only creates an IT headache for businesses but a cashflow problem as well.

Less risk, more benefits

Apart from unforeseen technology upgrades, such as Windows 11, businesses also need to take the effect of outdated equipment on their productivity levels and the associated cybersecurity risks. Simultaneously, the drawbacks of a cash-based approach need to be weighed against the benefits of alternative solutions, such as IT asset finance solutions.

With IT asset finance solutions, businesses can improve the three critical areas that determine long-term success, namely financial efficiency, operational efficiency, and effective asset management.

These benefits are over and above the improved cybersecurity and POPIA adherence that is possible with up-to-date IT equipment. Another area of improvement is when the IT equipment reaches its end-of-life phase, the refreshment cycle is a lot more hassle-free and less resource-intensive, as the upgrade process can be automated.

These benefits also extend beyond the business itself. Shareholders can expect to see better returns on their investment with an IT asset finance solution. If all of these business efficiencies and improvements are taken into account, it is clear that now is the time for South African businesses to stop investing their cash in depreciating assets and start utilising cash for their core business and future growth.