What can Businesses do to Survive and Thrive in a Very Volatile Economy?

It is clear that domestically and globally the number of economic, political and social uncertainties have escalated dramatically since the beginning of this year. Contributing factors to such uncertainties include, inter alia, the USA tariffs and new socio-political-economic ideologies, escalating geo-political conflicts, volatile (jittery) financial markets in addition to new global economic, political alliances and realities.

In such an uncertain world with a wide variety of exogenous factors impacting businesses due to the prevailing volatilities, the question could be asked as to whether there are actions that businesses could take to mitigate such factors or even grow as a result.

Let us consider five of the most important exogenous factors negatively impacting businesses in South Africa as identified by business respondents in the Absa/SACCI/BMR Small Business Growth Index (SBGI) survey conducted during the first half of 2025. These five exogenous factors include:

• Increased competition.
• Limited access to finance and funding.
• Inflation, rising costs and reduced consumer spending.
• Load shedding and rising energy costs, and
• Infrastructure breakdowns.

It appears at first glance that there is very little that businesses, and here especially SMMEs, can do to mitigate or survive under the five exogenous factors mentioned above. It is, however, important to note that many small businesses are already mitigating the impact of these factors effectively and are even growing because of these interventions.

In this regard it is important to recognize that South African small businesses are operating in a very volatile environment marked by rising energy costs, inflation, exchange rate volatility, supply chain disruptions, political and economic volatilities nationally and locally in addition to shifting regulations, which are most probably here to stay for quite a while. Having acknowledged their presence, the plausible approach is not to avoid them because that is impossible, but rather to build resilience through:

• Diversification of revenue and supply: It is important to penetrate multiple markets instead of depending heavily on one major client or one geographic market.  By seeking new customer bases, risk is being distributed. As regards supplier resilience, having multiple suppliers (both local and international) cushions against supply shocks, like import bottlenecks or strikes at local ports.
• Financial Buffers and Flexibility: It is very important to build emergency reserves although it is indeed tough to do so, but even a modicum of savings buy time in a crisis. Furthermore, establishing good credit relationships with banks, Fintechs or stokvel-like savings groups gives breathing room when revenues dip suddenly. Businesses with foreign currency exposure can use forward contracts or simply diversify inputs to avoid being trapped by rand volatility.
• Technology and Innovation: Investing in solar generators and/or battery systems mitigates against load-shedding and high electricity prices. Some small businesses are even pooling resources to share backup infrastructure. Also, online platforms (for sales, marketing, payments) reduce dependence on physical disruptions like fuel price hikes. Furthermore, streamlining operations lowers overheads, so exogenous challenges hit a leaner cost base.
• Networks and Collective Action: Joining chambers of commerce, local business forums, or sector-specific bodies gives collective bargaining power, early warnings and shared lobbying efforts. Furthermore, cooperatives or shared-service hubs allow businesses to pool costs for logistics, storage, or even staff training.
• Strategic Risk Management: Scenario planning is of critical importance, i.e. even simple “what if” exercises help owners anticipate shocks, i.e. “If load shedding comes back tomorrow, what do we do?” It is not just planning that is important, but risk active mitigation as well. That includes insurance cover for property damage, business interruption and political risk. Although such insurance is not always cheap, it protects against catastrophic loss. Furthermore, staying up-to-date with regulatory changes avoids sudden fines or disruptions.
• Human Capital development: When disruptions strike, multi-skilled employees can shift roles to keep things moving. Investing in digital and financial literacy makes employees part of the resilience strategy. Businesses that empower employees to improvise during crises bounce back faster.

Conclusion
It is important to emphasize that exogenous challenges will not just go away. But small businesses that diversify, digitize, collectivize, network and cultivate adaptability tend to weather exogenous challenges like the five mentioned above much better. In South Africa, where volatility is inherently part of the business landscape, resilience itself becomes a competitive advantage.

This insight raises a very important question: “Should small businesses merely aim to mitigate exogenous challenges by becoming more resilient or can they exploit such volatility as an opportunity (i.e. importing when the rand is strong) to capitalize on resilience to ensure business growth?”

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