Based on the responses, only 52% indicated an expectation of increased profits and said they were investing more in areas of digital/IT and would focus on reducing operational costs. The survey also found that 60% of companies plan to increase their digital investment in the next 12 months.
Inflation is a key concern for the mid-market, with pressures from rising wages, increased costs from vendors, transportation costs and rising energy costs. Rising energy costs and falling optimism are notable trends. According to Stats SA, the inflation rate increased from 6.5% in May 2022 to 7.4% in June 2022, primarily due to rising food and transportation costs.
This is the highest rate since the 8% rate in May 2009. Between May and June 2022, the Consumer Price Index (CPI) increased by 1.1% (Stats SA).
The war between Russia and Ukraine has resulted in high costs and supply chain shortages being critical impediments to the success of mid-market businesses. Businesses have begun to realise that the traditional way of running a business in this volatile, complex and ambiguous world is not reeling in results. This has created opportunities for companies to be agile and use lean strategic thinking methods - Neridha Moodley, Director – People & Culture
During the pandemic, mid-market businesses rushed to digitalise business processes to stay relevant. In many cases, these changes were not properly aligned with long-term digital strategies and the business models that underpin them. As mid-market businesses continue their digital transformation journey, they will need to ensure alignment between business strategy, digital strategies, enterprise architecture, data and analytics strategies to ensure that the benefits of this journey are fully realised.
Some mid-market businesses may see this as an opportunity to reinvent themselves and pursue new goals. For others, envisioning the future may be more difficult. Investing in automation, robotics, machine learning, and other emerging technologies will be critical because these technologies will boost productivity by lowering output costs and allowing businesses to deploy manpower more efficiently.
Mid-market businesses that survived the effect of COVID-19 lockdown are now facing the distressing impact of rising costs and inflation. Yet again, leaders of mid-market companies must do what they do best, i.e. adapt to the prevailing conditions. Our proposed ‘Essential action plan for managing inflationary times’ should assist business leaders, at the very least, to assess, innovate and develop relevant and appropriate plans to continue insulating their businesses - Oupa Mbokodo, Head of Advisory.
