SMEs and independent contractors could fuel SA’s economic turnaround

This is a predictable reaction to what can best be described as the natural biorhythm of the economy, the writer says. File image.

This is a predictable reaction to what can best be described as the natural biorhythm of the economy, the writer says. File image.

Published Feb 29, 2024


By Gary Silbermann

Finance Minister Enoch Godongwana presented the Budget in what can best be described as a depressed economy.

There is no doubt that the perfect storm of stagnant growth, the high cost of borrowing and price pressures putting strain on consumers, is forcing all businesses, especially small and medium enterprises (SMEs), to cut costs.

This is a predictable reaction to what can best be described as the natural biorhythm of the economy.

When times are good and there’s an abundance of opportunity, businesses tend to invest in growth and resources. When the wheel turns, they pursue an efficiency model that most often results in cutting jobs.

This is a misunderstanding of efficiency. SMEs are missing a huge opportunity by perpetuating the status quo.

Efficiency, at its core, means using resources more productively; it means aligning resources in the best possible way.

Cutting costs to achieve efficiency doesn’t work. It saves money, but saving money doesn’t make money. Businesses need to maintain a momentum of making money even in tough economic times like now.

Consider this: If an SME makes a quarter or half its staff redundant, what is happening to the remaining employees?

They are taking on more responsibilities, increasing pressure on their shoulders, which risks delivery.

Beyond disillusionment, the SME faces the possibility of contracts not being renewed, consumers being dissatisfied with products or services and losing out on innovation opportunities.

Seen this way, it is clear why an efficiency model that focuses on cutting costs and jobs, rather than eliminating wastage and using resources more productively, becomes a self-fulfilling prophecy.

When the economic cycle turns, the businesses don’t have the means of taking advantage of the new opportunities and need to start hiring again from scratch.

On the other hand, viewing efficiency differently can make a marked impact on the country and can finally unleash the promise of SMEs driving job creation in the country.

This is because maintaining a good efficiency model has to create new jobs. Efficient businesses that continue to deliver, and that have the levity to focus on research and innovation, to explore new markets – they get to a point where they need to hire more people.

One SME hiring 10 new people may seem like a drop in the ocean but what if 10 000 SMEs hired 10 people each? That could change the prospects of industries and the country.

Fully staffed teams enable smooth and consistent delivery without interruption, leading to increased levels of productivity and growth.

Fully staffed SMEs have the opportunity to drive widespread growth and job creation. The alternative is continued reliance on tge government and large corporations, who by their nature are inefficient.

An SME owner might ask: “In the pursuit of efficiency, where do I find wastage to discard when it’s all hands on deck to fill crucial positions to turn the ship around?”

SMEs often greatly underestimate the negative time and cost impact of trying to fill open roles with permanent resources.

The cycle almost immediately takes away from time spent on efficiency gains.

It takes, on average, 50 business days to fill a vacant role with a permanent resource. That’s 50 business days of compromised efficiency across delivery, growth, innovation and the ability to create employment opportunities. That’s hard to ignore.

While attaining efficiency requires strategic planning, knowing where to automate and where to optimise, maintaining efficiency is knowing where your weak points are in real-time and how to fix them quickly.

This is essential to reducing waste and maintaining continuity without dramatically impacting the bottom line.

The smartest way to avoid wasting 50 business days for each unfilled role, and footing the bill for this, is to hire independent contractors.

This is not a new concept at all – some industries have mastered the approach with great success.

Think about the medical industry, a locum slots in and keeps the practice afloat.

The patients are seen and the business doesn’t lose money. Legal firms often bring in temporary lawyers or paralegals to handle caseloads during busy times or when full time staff are not available.

The concept of substitute teachers has kept the learning going in classrooms for generations.

Independent contractors are the catalyst for internal efficiency. Not only can they be deployed at speed, but they can also expedite tasks and projects which bolsters productivity from day one.

Take a moment to reflect on how vastly different that is from going through the formal recruitment process for a permanent resource who may or may not stay for any length of time.

Independent contractors are primed to deliver because their reputation and livelihood depend on it.

They can be contracted when they’re needed and for as long as needed, and most importantly, businesses can get the level of experience they need almost immediately.

The productivity, the delivery, the space and bandwidth for innovation and growth, will result in a healthier business and necessitate creating more jobs. When the going gets tough, investing in independent contractors, especially in the skills-scarce IT environment, is the ticket to breaking the cycle of job losses every time the economy struggles, and replacing it with a cycle of job creation.

Gary Silbermann, co-founder and innovation director at One Degree