South Africa’s post-pandemic recovery will depend on sweeping reforms to make it easier for Small, Medium and Micro-sized Enterprises (SMMEs) to succeed, IRR analysts say.
They point out that the SMME sector has proved to be particularly vulnerable to the impact of the Covid-19 lockdown, not least because it entered the crisis in a precarious position.
This was evident from the results from the Small and Medium Enterprise (SME) Confidence Index Quarter 4 of 2017 produced by Business Partners to guage sentiment in the sector.
When asked if they had employed anyone in the previous 12 months, the majority (51.6%) of SME entrepreneurs who responded said no. A further 69% said that they had not taken on any new staff in the previous quarter.
The difficulties small businesses face have been brought to the fore with the government’s transition from level 5 to level 4 lockdown regulations, where, for instance, restaurants are permitted to open, but for deliveries only.
As Natasha Sideris, owner of the popular restaurant chain, Tashas, put it, many restaurants might as well stay closed as deliveries will be too costly.
The pressure on the sector is also reflected in Minister of Small Business Development Khumbudzo Ntshavheni saying that the initial R530 million set aside for small business relief was not sufficient for the number of companies seeking financial support.
But the biggest problems relate to the policy environment small businesses have to contend with.
IRR analysts say interventionist policies have limited the growth of big and small businesses alike. This was reflected in the Global Competitiveness Report 2019, with South Africa ranked 129th in terms of time to start a business; 129th for hiring and firing practices; 139th for cooperation in labour-employer relations; and 134th for flexibility in wage determination. According to the SME Confidence Index, only 28.3% of small and medium businesses indicated that they were either confident or very confident that South African labour laws were conducive to business growth.
The post-pandemic recovery will depend on tackling these impediments head-on, removing unnecessary red tape, reducing the time it takes to launch a business, making it cheaper to become an entrepreneur, and revising labour laws to price people into work.
Analysts point out that from a political point of view, the pace of South Africa’s recovery will have a telling impact on the outcome of the 2021 local elections.