Despite a number of challenges in the current economic climate, Australian SMEs are predicting a bright future for exports.
SME exporters are feeling optimistic about opportunities in international markets and are forecasting an increase in overseas sales over the next year.
However, despite this confidence, many exporters are concerned that they may face some roadblocks along the way.
EFIC, the Australian Government’s export credit agency, recently conducted new research aimed at understanding what opportunities SMEs see overseas and what they are concerned may hold them back.
Sales and profits predicted to grow
The research found that confidence is growing for a third of SMEs, with 36 per cent of respondents saying theyexpect their overseas sales to increase in the next 12 months, and an overall 94 per cent predicting exports will increase or stay the same.When asked for the reason behind the sales increase, the falling AUD was identified by 71 per cent of exporters.
In particular, the recent depreciation of the dollar from its highs of US$1.05 nearly 12 months ago has made exporters of agricultural and manufactured goods and services such as tourism and education, feel more confident. In addition, 12 per cent of respondents felt optimistic about the future of resources exports.
On the flipside, many SME exporters of all sizes also noted the negative effect a falling AUD/USD rate is expected to have on their cost base.
Growth markets provide promising opportunities
Our research showed that SME businesses generate an average of 13 per cent of annual revenue from overseas, and regional markets remain crucial for Australian exporters.
Nearly 80 per cent of SME exporters believe Asia and Oceania will be the most crucial market over the next year. The research showed that SMEs expected growth in China, India and South Korea in particular, and all were expected to become more important to their businesses over the next year.
Navigating export obstacles
Despite the optimistic sales and profits outlook, our research revealed that exporters believe some obstacles exist. Besides currency fluctuations, SMEs identified the main factors impeding their competitiveness as market access (54 per cent), access to finance (28 per cent), and logistics (10 per cent).
We have seen that access to finance is a consistent barrier to SMEs looking to expand their export operations. Almost 20 per cent of SMEs expect access to finance to get more difficult over the next three months and get harder still as the year goes on.
We know that difficulty in accessing finance can hold SMEs back from maximising opportunities in foreign markets, as when faced with a knock back from a bank or preferred source of funding, many are unaware of where to turn for assistance.
This indicates that there is still a key role for external bodies, from both Government and industry, including EFIC and Austrade, to help SMEs access markets and funding, as well as provide advice and education on overseas expansion.
A promising 2014
Despite these challenges with market access and finance, our research is testament to the growth potential of Australia’s small exporters in the face of rapidly changing markets.
As world economic growth is accelerating, interest rates remain low, and Asia is continuing to move up the income scale and expanding its demand for resources, food and services – sectors which Australia should be highly competitive in – SMEs have many reasons to look to the future with anticipation.
*Andrew Hunter is Managing Director of Export Finance and Insurance Corporation (EFIC)