By Simone Cooper

Many small- and medium-sized enterprises (SMEs) are grappling with hefty reopening costs in the wake of the hard lockdown, and some entrepreneurs are resorting to using their personal savings to cover costs. To help small businesses get back on their feet, the banking sector has an important role to play in terms of both short-term finance and longer-term business support.

Owing to trading restrictions and weaker demand, SMEs continue to be significantly impacted by the COVID-19 pandemic. It is critical that this segment of the market receives the support it needs, especially when considering that businesses with turnover between R15 million and R500 million provide about 80% of Africa’s jobs.

In South Africa, SMEs account for more than 98% of businesses and employ more people than large organisations. The country’s economy, which was already struggling to grow in recent years, has been hit hard by COVID-19 and this adds to the pressure on small businesses. 

Companies of all sizes have had to shelve their expansion plans, and in many cases, retrench employees or scale down their operations. 

With more relaxed lockdown regulations now in place, business owners and management teams are having a difficult time capacitating teams as they seek to get their businesses back on track. Further, cashflow and liquidity challenges abound.

Against this backdrop, the banking industry can assist by providing innovative short-term funding, coupled with financial literacy training, as well as longer-term business support.

It is crucial that customers understand the options available to them, and that banks explain these proactively. 

During this difficult time, banks should be engaging their customers with empathy. Mutual trust and understanding are the foundation on which robust commercial relationships are built.

Further, there needs to be a focus on helping SMEs adopt appropriate technologies. COVID-19 has shown that technologically savvy businesses are more resilient and better placed to navigate economic downturns. In addition to utilising appropriate technology, SME’s should be adopting various strategies to ensure sustainability into the future i.e. innovative sales strategies, examining costs etc.   

During this period banks have had to increasingly utilise data to make objective decisions to assist SME’s. Standard Bank has adopted these strategies in its response to the pandemic, having prioritised short-term funding as well as measures that contribute to the long-term resilience of SMEs.

In addition to its own support measures – including loan repayment holidays, insurance relief and fee waivers – the bank distributed funding on behalf of the South African Future Trust (SAFT) and participated in the COVID-19 loan-guarantee scheme. 

Standard Bank also has a range of support measures specifically for small black-owned businesses in South Africa. The bank engaged with 833 black-owned SMEs as suppliers in 2019, and recognises the importance of building on recent gains in transformation, despite the challenges posed by the pandemic.

In 2018 and 2019, the bank made targeted investments amounting to R5.8 billion in empowerment financing and enterprise and supplier development. Of this amount, R2.5 billion went towards financing black-owned SMEs and R81.6 million was invested in black agriculture.

As we look to the COVID-19 recovery phase, we believe that banks should be communicating proactively with customers, and with empathy, and should also be assisting in the adoption of technologies. By also prioritising support, the banking industry can act as a safety net as SMEs reopen for business, while also ensuring that small business clients are able to future-proof themselves.

SMEs will continue to be the lifeblood of the South African economy, and banks can contribute meaningfully towards economic growth and job creation by supporting them.

Simone is Head of Business Banking, Standard Bank South Africa