Daily Maverick: Three out of four SMMEs will close: Bold steps are required to avert a crisis

The government has pledged more than R500bn towards relief for its citizens. A new survey shows that 68% of SMMEs that applied for funding were unsuccessful. Bold decisions need to be made to combat the crisis. These decisions include moving part of the relief funding to alternative lenders, investing in available financial technology and establishing an ongoing SMME research hub.

The relationship between South African SMMEs, the government and banks is a bloody mess right now. A new survey conducted by entrepreneur platform Heavy Chef and its nonprofit arm, the Heavy Chef Foundation, highlights a real danger that the fracture will deepen unless urgent changes are made in government’s approach to small business. Immediate action is required – and, no, we cannot wait for any more levels to be unlocked.

After reviewing the results of the #CombatCovid SMME Survey released by a consortium of SMME-focused organisations, the seriousness of this challenge quickly becomes evident:
  • One out three SMMEs reduced salaries between 75% and 100%.
  • Prolonged lockdown will force 71% of SMMEs to retrench staff.
  • Three out of four SMMEs will not survive beyond July 2020 under lockdown.

The extreme nature of these results is not surprising. After all, these are extraordinary circumstances. However, it also underscores the incapacity of the current relief channels to respond effectively to SMMEs’ plight.

Part of the problem is inherited. Over the past three decades, our government has promised to ease barriers within the small business sector. As it stands, South Africa is ranked 139th out of 190 countries in this regard. Even before Covid-19, we have had little to show for our efforts.

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by Daily Maverick – https://www.dailymaverick.co.za/article/2020-05-21-three-out-of-four-smmes-will-close-bold-steps-are-required-to-avert-a-crisis/

Louis Janse van Rensburg and Lukhanyo Neer