The Small Business Institute (SBI) says much more could have been done to coordinate a more considered, rapid, comprehensive and successful response to forestall the brutal effect of Covid-19 on small, medium-sized and microenterprises (SMMEs) in South Africa.

SBI has undertaken a review of about 160 published papers, surveys and scenarios that are concerned with the formal and informal SMME landscape in the country since the arrival of the pandemic. 

CEO John Dludlu says the overwhelming conclusion after the institute had sifted through all the remarkable output is that South African SMMEs were brutally smacked and that more could have been done to minimise the effect on these businesses, their owners and their employees.

The institute finds that the disruptions following the extended lockdown containment measures severely affected SMMEs’ liquidity positions and their 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, have told of increasing debt, the inability to pay bills and pointed 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-sized firms employing fewer than a 100 people.

SBI reports that institutions having provided 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 SMMEs will not survive, or have already closed their doors,” says Dludlu.

SBI cites that international policy responses were more varied, considered, multipronged and longer-term than those of South Africa. Many have incorporated forward-thinking structural reforms and improvements both in terms of e-governance and digital support for SMMEs.

"We know far more about the informal sector than ever before, owing to geospatial mapping and digital surveying. For example, we know that there are more than 150 000 spaza shops in South Africa and we have learned how vital the sector is for food security nationally,” Dludlu says.

There is also more knowledge about the informal sector as a result of technological developments and innovative applications of programmes available to anyone with a smartphone, which accelerated further over the Covid-19 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, SBI will conduct further research, funded by JSE-listed diversified miner Exxaro Resources, which will focus on four themes.

The first theme is localisation and will entail a more micro, bottom-up examination of economic recovery. The research will seek to inform government’s district development planning model, as well as understand the developmental role of big businesses in small towns;

Secondly, in terms of formalisation, SBI will explore, through a new lens, 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;

The third theme is digitalisation. SBI says a new wave of technology innovations and startups will follow the disruptive effects of the pandemic. This research will present recommendations for policy and regulatory reform to help advance these opportunities for small businesses;

Lastly, SBI will also consider the structural challenges for SMMEs. SBI will develop recommendations for both government and big businesses to resolve the systemic and regulatory hurdles impeding the growth of SMMEs.

“We have much to learn from this and reflecting on our responses to Covid-19 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,” Dludlu concludes.