SBI releases situational analysis of the status of SMMEs in South Africa during Covid-19

October 6 2020

The Small Business Institute (SBI) released today a review of the unprecedented flood of papers, surveys and scenarios – over 160 – concerned with South African small, micro and medium-sized businesses (SMMEs), formal and informal, written since the arrival of Covid-19 and the country’s lockdown response. Exxaro is funding the SBI follow-up survey on the South African SMMEs, and part of the funding has enabled SBP to conduct the research.

“The overwhelming conclusion after sifting through everything we’ve learned from this remarkable output,” said CEO John Dludlu, “is that South Africa’s SMMEs were brutally smacked. Much more could have been done to coordinate a more considered, rapid, comprehensive and successful response to forestall the effect on these businesses, their owners, and employees.”

Key findings:

  • The disruptions following the extended lockdown containment measures severely affected SMMEs’ liquidity positions, ability to retain staff, pay their bills, and the very survival of many businesses, already in jeopardy prior to Covid-19;
  • Consumers, especially the young, tell of increasing debt, the inability to pay bills and point to the unlikelihood of a demand-driven recovery in the medium term; of the consumers most affected, one survey found that 60% are employed in small and medium firms employing fewer than a 100 people;
  • Providing debt relief with exclusionary qualifying criteria rather than offering grants added to the fragility of small businesses and their future solvency. That so few businesses were beneficiaries of relief led to estimates that some 55 000 SMEs will not survive, or have already closed their doors;
  • International policy responses were more varied, considered, multi-pronged and longer-term than those of South Africa. Many have incorporated forward-thinking structural reforms and improvements both to e-governance and digital support for SMMEs;
  • We know far more about the informal sector than ever before. Thanks to geospatial mapping and digital surveying, for instance, we know there are over 150 000 spaza shops in South Africa and we’ve learned how vital the sector is for food security nationally;
  • Technological developments and innovative applications of programmes available to anyone with a smartphone accelerated over the period. Many business owners were able to pivot their businesses to do things differently and new tech-enabled businesses were developed or grew significantly because of the lockdown.

To follow on from these reflections on the macro aspect of the post-lockdown landscape, Dludlu said SBI’s research will focus on four themes:

  • Localisation – a more micro, bottom-up examination of economic recovery. The research will seek to inform government’s district development planning model as well as understanding the developmental role of big businesses in small towns;
  • Formalisation – an exploration, through a new lens, of how businesses are formed and how they operate and what may be required of governments to think more creatively and act with more agility in the new world;
  • Digitalisation – a new wave of technology innovations and start-ups will follow the disruptive effects of the pandemic. The research will present recommendations for policy and regulatory reform to help advance these opportunities for small businesses;
  • And finally, structural challenges for SMMEs were present – and worsening – before Covid-19. SBI will develop recommendations for both government and big businesses to resolve the systemic and regulatory hurdles impeding the growth of SMMEs.

Dludlu said, “We have much to learn from this and reflecting on our responses to the novel coronavirus can inform our future priorities. We will all have a part to play – government, big business, our chambers and other business formations, to assist SMMEs, get the economy churning, and embrace a new more digital world.”