In exports, MSMEs have not been able to recover 2019 levels: Business Performance Survey

Colombia’s micro, small and medium-sized enterprises (MSMEs) showed a slight improvement in business performance in the second quarter of 2023, compared to the previous quarter. This was announced by the Business Performance Survey of the Economic Studies Department of the Colombian Association of Micro, Small and Medium-Sized Enterprises (Acopi Nacional).

You may read: Labor reform softened changes in night work, Sundays and holidays: this is how they were left

The indicators that had the most weight in the improvement were Production and Employment generation. However, compared to the first quarter of 2023, 49.2% of the surveyed businessmen answered that their company experienced a decrease in indicators such as production, sales, market share, investments and profitability. For the second quarter of this year, the percentage decreased to 47.5%.

It is noteworthy that between 40% and 60% of the respondents answered that, in the second quarter of 2023, they presented a decrease in indicators such as Employment Generation, Profitability, Investments made, Market Share, Sales Volume and Level of production of goods/services, compared to the first three months of the year.

Business performance: Level of production of goods and services, and Employment generation

Between April and June 2023, 47% of the entrepreneurs answered that the Level of production of goods and services decreased [-3.9 percentage points (p.p.) compared to the first half of the year]; 37% assured that the level remained the same, and 15% said it increased.

Compared to the results of the previous quarter’s survey, the current report highlights significant changes in the business perception about the level of production, since between January and March 2023, 51% of the respondents answered that there was a decrease in production.

According to the report, this information indicates an improvement in businessmen’s perceptions with respect to the previous quarter’s production performance.

In relation to the perception of Employment Generation, between April and June 2023, 13% of the respondents answered that there was an increase in this indicator, while 45% stated that it remained the same and 42% said that it decreased.

In this employment generation indicator, according to Acopi’s Economic Studies, “it is relevant to mention that a positive evolution is observed, with an average of four dismissals and three new hires. This data indicates an advance in employment compared to the previous quarter, which suggests a trend towards recovery”, say the authors of the survey report.

They also add that this result is similar to the behavior of the national labor market in June, when the unemployment rate was 9.3%, the first single-digit rate in 2023.

Business performance: Concerns about declining profitability

Despite the slight overall improvement, indicators as relevant to business performance as profitability are a major concern.

Between April and June 2023, compared to the previous quarter, the perception of profitability decreased for six (59%) out of ten companies, 31% said their profitability remained the same, and only 9% said it increased.

In this regard, the Department of Economic Studies of Acopi points out that it is crucial to address this issue, in order to ensure the sustainability of these companies that may be affected in aspects such as financial health, competitiveness, expansion capacity and ability to attract investors.

You may also read: South Korea’s economy: How did this Asian tiger industrialize?

Other signs of concern: Exports and raw material supply

The survey results also revealed that fewer MSMEs are exporting. In the second quarter of 2023, there was a 2.8 p.p. drop in the number of exporting companies compared to the previous quarter, and only 10% of entrepreneurs are in the process of exporting.

This percentage is worrying, since it reveals that in terms of exports, MSMEs have not been able to recover the levels of 2019, when their share of exports was 22%.

In addition to the above, the survey points out that in the second quarter of the year there was a significant reduction in the supply of raw materials, with a direct impact on the cost structure of MSMEs.

“This decrease is palpable, since the percentage of businessmen reporting supply difficulties has dropped from 43.1% to 30%”, Acopi assures.

Fair Installment Payment Law

With the purpose of supporting the operation of MSMEs, so that they could receive payment of their invoices within a certain period of time, Law 2024 known as the Fair Installment Payment Law was passed in 2020.

According to the Acopi Survey report, 51% of the entrepreneurs stated that they have received payment of their invoices from their clients between 1 to 45 days; 29% answered that payment is received between day 46 and 60, while 20% of the respondents stated that payment of their invoices comes in after 60 days.

“These data, which reflect the situation prior to the implementation of the Law, highlight the importance of regularizing payment terms, especially to protect companies, especially MSMEs, from the possible negative impacts derived from delays in collections”, the report reads.

Regarding the time period that the surveyed entrepreneurs spend to pay their suppliers, 72% of the respondents indicated that they make payments between 1 to 45 days; 19% in the range of 46 to 60 days, while 9% make payments in terms longer than 61 days.

About Acopi’s Business Performance Survey

The survey universe is composed of 1039 MSMEs in the manufacturing, services and commerce sectors: 61% are micro enterprises, 27% are small enterprises and 12% are medium-sized enterprises.

The companies are located in Bogotá, the Caribbean Region (Atlántico, Bolívar, Cesar, Córdoba, Sucre, Magdalena, La Guajira), Eastern Region (Norte de Santander, Santander, Boyacá, Cundinamarca, Meta, Casanare), Central Region (Caldas, Risaralda, Quindío, Tolima, Huila, Caquetá, Antioquia), Pacific Region (Chocó, Cauca, Nariño, Valle del Cauca), Amazon-Orinoquía Region (Putumayo, Arauca, Amazonas, Vichada, Vaupés, Guaviare), and San Andrés y Providencia.

The sector with the highest participation of MSMEs surveyed is manufacturing industries, with 24%; other services, with 20%; construction, 12%; and wholesale and retail trade, with 6%.

To download the full report, please follow this link.

Keep reading: Labor Reform: Government proposes incentives for companies with generational and gender diversity