Economist and Personal Finance Coach and Mentor, Thapelo Moloi – CEO of Umdali Centre for Financial Literacy  

The road to success is not straight. You will experience unexpected bumps along the way, but you cannot flow through life like a stream; your path being redirected by the difficulties you face. If you do, you will find yourself meandering through life and never reaching your goals. Therefore, whether in your personal, professional, or academic life, planning is essential. Knowing what you are working towards means having a clear plan with short, medium and long-term goals so that when you experience a knock, which you undoubtedly will, you will be able to see how far you have deviated from the plan. When you face challenges with your plan firmly in tow as your guide, you will be able to determine the type of measures you need to get you back on track.

Thapelo Moloi, CEO of Umdali Centre for Financial Literacy, is an economist and personal finance coach and mentor who discusses the importance of having a personal financial plan and gives us a heads up on the predicted global recession in 2023. Who better to hear from than an expert economist that is passionate about the welfare and growth of small and medium enterprises (SMEs) in South Africa?

Thapelo pointed out that a close study of the relevant indicators (which are currently on the upside), indicates with near certainty that South Africa will experience the predicted global recession. America is sitting at about 10%, while South Africa and Asia hang back just behind them. Scary as it may be to admit, global inflation is soaring at an elevated risk and global economic growth statistics focusing on emerging markets all point towards a recession. The indicators are already showing evidence of widespread muted growth in emerging markets. With the continent already feeling the effects of growth stagnation, it has been predicted that South Africa along with other African countries will grow at less than 2% this year. There do exist a handful of isolated incidents that suggest positive results, such as Congo which has been predicted to grow at about 5%. We all know that unwelcome news is often followed by good news, they go hand in hand. The good news for this year is that throughout the continent, we can expect to see a wave of new technological growth. This puts hope back into seeing a good year end. We cannot run from the facts when considering muted growth and rising unemployment rates because all indicators point to a global recession occurring in 2023. The severity of this recession will depend on the measures each country puts in place to offset that risk.

Our continent battles with an endless struggle; the three biggest issues being fuel, food, and interest rates (which are also indicative of an imminent increase soon). Unless serious steps are taken to counteract it, these issues magnify the likelihood of a recession. Regardless of any proactive steps, it remains that the biggest risk to fuel prices specifically is the exchange rate. If the Rand weakens against the Dollar, it will lead to an increase in fuel, transportation, and food prices. All of which would directly affect any chance of South Africa avoiding a recession.

Delving deeper, we consider ways in which small businesses can weather the global recession while still trying to recover from the COVID-19 pandemic. SMEs are well positioned to survive a global recession due to their adaptable business models which allow them to be agile and respond easily to shocks in the market. The biggest risk they will face this year is lower demand. The only way to get through this is by cutting costs, reducing staff volumes, downsizing office space or adopting a remote work-from-home setup. Either way, South Africa is in for a bumpy ride, with or without a global recession.

As the bearer of unwelcome news, Thapelo warns us that the messy environment we find ourselves in already is about to worsen, at least for the next few months. Over and above a recession, South Africa has its own issues that include (but are certainly not limited to) the ever-present dark cloud that is load shedding, the dilapidation of our infrastructure and a stagnant economy. These affect everyone, SMEs however are the ones bearing the greatest brunt and are ultimately buckling under the extreme loadshedding schedules.

This year, bigger corporates are going to have to step up to find ways of not only creating market access for SMEs but also innovative ways to offer support. Enterprise and supplier development (ESD) programmes can help SMEs build capacity within their businesses. The question is: will it be too little too late? Very soon we are going to see SMEs relying heavily on corporate support, yet over and above that there's a grave issue to be dealt with. Corporates need to find ways of reducing the red tape that is stifling SME growth. By lowering the requirements, corporates can help SMEs grow and build sustainability. Another enormous shortfall that is often ignored by most ESD programmes compounds on these challenges, the management of personal finances. Since the line between business finance and personal finance is often blurred, ESD programmes should look into implementing personal finance management training for small business owners.

The wellbeing of South Africa's SMEs is the driving force behind Thapelo's company, Umdali Centre for Financial Literacy. The average salary in S.A lasts no more than five days and for every Rand we earn, seventy cents goes to debt. Thapelo explains that this is a behavioural problem that an advisor cannot change. It requires the help of a financial management coach who will help transform our behavioural habits and restructure our financial plans. The proposed behavioural modifications are uniquely designed around our values and current financial situation.

He is adamant that personal finance planning is essential during a global recession. It prepares us for the unexpected and helps us to manage our finances more effectively. By revising our budgets, prioritizing expenses, increasing emergency savings, managing debt, and exploring additional sources of income, we can weather the financial storm thus emerge stronger and more financially secure. It will most assuredly require sacrifice and hard work, but the benefits of personal financial planning are well worth the effort in uncertain economic times. Taking these proactive steps towards building a future that has a solid financial plan without debt will allow us to support our lifestyles throughout our eventual retirement. Nothing is as nice as knowing that even during our retirement, we will still be better off. It gives meaning to our work, making the long hours and late nights carry a purpose.

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