Three quarters of small and micro businesses will shut their doors permanently if the lockdown runs beyond June of this year, warns the South Africa SME Finance Association.
And a survey by the National Small Business Chamber (NSBC) has found that 94% of small businesses are either in a cash-flow crisis situation or will be within the next few weeks.
Furthermore, despite the enormous strain that small businesses are under, access to relief funding remains out of reach for many.
NSBC determined that although 53% of small businesses in their survey applied for relief funding, a mere 6% were successful.
Many respondents said that applying for relief funding was a complicated and lengthy process.
Furthermore, support from formal banks is also unattainable for many small and micro businesses, since banks still follow strict conventional credit-vetting criteria which often require surety and security. For banks, it is also expensive and difficult to underwrite funding for small SMEs with turnovers of less than R10 million a year. As a result, medium-sized enterprises often receive support over smaller ones.
Sustaining a strict lockdown will be disastrous not only for business owners. Most of South Africa’s workforce is employed by small businesses either in the formal or the informal sectors. According to the Small Enterprise Development Agency (SEDA), around 9 million people who are employed either own or work for an SMME. IRR analysts warn that unless South Africa’s recovery plan is geared to attracting investment and loosening the government’s grip over the economy, the country faces the risk of a monopolised economy dominated by the state and large enterprises, with millions of once innovative and hard-working entrepreneurs being reduced to grant beneficiaries.