Why rising inflation doesn’t have to mean restricted business growth

Rising inflation, interest rate hikes and higher fuel prices offer little reprieve for South Africans in the coming days. On top of this, the government has warned that our country may face a possible fifth wave of COVID infections. Consequently, it is crucial to remain realistic and protect your business growth and profitability by being proactive. One way is to turn away from costly asset purchases towards cashflow-friendly rental solutions. And that’s where RentWorks steps in.

The South African Reserve Bank’s (SARB’s) decision to hike the Repo rate (March, 2022) by 25 basis points to 4.25% is further exasperating the situation, despite pushback from citizens and labour unions. According to BusinessTech, commentary surrounding the increase indicates that steeper hikes could be on the way. With steep petrol and diesel hikes pencilled in from the start of April, the future is looking bleak.

This means now is the time to be proactive. It has become critical to conserve cash for core activities and operational requirements within your business. If you have traditionally paid cash for your IT and other business assets, you may want to consider renting your assets over their useful lifetime.

Stop paying cash for depreciating assets

When renting, you don’t have to pay the full cost of the asset upfront, so there’s no need to acquire funds that can place additional financial strain on your budget. As our interest rates on monthly rental costs are usually fixed, it is also easier to forecast your cash flow.

Renting also allows you to keep up with the rapid change in technology. This will give you access to a higher standard of equipment, which you may not have been able to afford otherwise, leaving your business ahead of the technological curve – even during tough economical climates.

At RentWorks, we specialise in finding the right rental solutions for every business to replace their redundant or outdated equipment. From procuring to insuring to tracking, upgrading and disposal, we can assist with your every IT rental need. What’s more is that after you enjoy use of the latest equipment, you can choose to return, replace, or upgrade. It’s a win-win scenario for you, your business, and your pocket.

Looking ahead
The Quarterly Projection Model (QPM) continues to reflect a steady rise of the repo rate and hikes are likely to continue into the next year. According to Nedbank, the QPM shows increases of 25 bps at each of the remaining meetings in 2022 and hikes totalling 100 bps in 2023 and 50 bps in 2024. The tightening would take the repo rate to 6.75% and the prime rate to 10.25% by the end of 2024.

Companies should look at alternative ways to ensure their financial sustainability during these periods of economic headwinds. Those that adopt a depressed attitude and approach, or assume that the crisis will blow over, are at the highest risk for collapse. It is in your best interest to develop a long-term solution by keeping a keen eye on your cash flow.