South Africa’s small, medium and micro enterprises (SMMEs) were ‘brutally smacked’ by the Covid-19 pandemic and subsequent lockdown.
This emerges from a report published by the Small Business Institute. It reviewed more than 160 papers, studies and scenarios that had been conducted on the impact of COVID and the lockdown on SMMEs. Among its findings were that some 55 000 businesses had or would close down. This accounted for some 20% of the country’s formal SMMEs.
The support offered by government in the form of loan relief was deemed a ‘failure’. This was attributed to the onerous compliance measures linked to this. It noted that of the R200 billion credit guarantee, only R16 billion had been dispensed.
Support from the private sector was more impactful, with the Sukuma Relief Programme and SA Future Trust both being fully subscribed.
Informal and township businesses found it very hard to get official support, as they needed to be registered with various bodies – such as the South African Revenue Service – to qualify.
According to the report: ‘Seemingly, government’s motivation has focused more on formalising informal businesses and collecting their data than providing financial aid to distressed businesses during Covid-19. A survey by the Small Enterprise Foundation (SEF), which has 216 000 informal sector entrepreneurs on its loan book found this to be case. Their survey revealed that only 12% of their clients had bothered to apply for business permits to access government’s loan relief, stating that even fewer will likely have applied for loans from government. In an extended radio interview, economist Xhanti Phayi exhorted government not to “register them or their businesses; let them work freely, be enterprising.”’
It also found that the loan-based relief measures might place additional stress on firm’s debt positions.
The report noted, however, that knowledge of the informal sector and its place in the economy was greatly aided by the pandemic. It also noted the growth in online commerce, and cautioned that the pandemic would likely enhance the place of technology in business. Government would need to regulate this appropriately.