A study undertaken by the Department of Small Business Development (DSBD), in partnership with the United Nations Development Programme (UNDP) in South Africa, on the impact of Covid-19 on micro and informal businesses in South Africa demonstrated the severe negative impact on the micro and informal sector across all industries and demographic groups.
The study's findings revealed the difficulties faced by vendors at taxi ranks and train stations in cities that have lost the majority of their customers as fewer people commute to work, hair stylists who were not allowed to work and had been without income for months and business owners who can only make a fraction of their pre-Covid-19 pandemic revenues owing to a decrease in customers, higher costs, international travel bans or event cancellations.
The study also revealed how some entrepreneurs successfully adapted their businesses by communicating with customers via digital platforms such as WhatsApp, delivering products to clients’ homes, manufacturing essential items such as face masks, assisting learners with home schooling, or illegally selling home-brewed beer or cigarettes because they saw no other option to survive.
"Given the DSBD’s mandate to create and enable an environment to support small enterprises inclusive of micro and informal businesses, a qualitative-based research study was conducted to establish the depth to which the informal sector has been affected by the pandemic and related lockdown measures, paying special attention to the lowest and most vulnerable segment in South Africa’s entrepreneurial landscape," the DSBD said in a September 28 statement.
The study incorporated both primary and secondary research, including a literature review, expert interviews, a nationwide survey with 3 746 business owners and focus groups with female and young entrepreneurs in the sector.
"The informal sector remains an important part of the South African economy, accounting for 8% of yearly gross domestic product and employing 27% of the workforce.
"In terms of non-agricultural employment, 36.84% of all females are employed in the informal sector. The sector also contributes to the country’s equality, poverty reduction and food security. It is well documented that the sector has been the hardest hit by the pandemic," the DSBD noted.
"The release and sharing of the research findings are intended to enhance the implementation of programmes already being rolled out by the DSBD and its ecosystem partners across districts and provinces aimed at sustaining small, medium-sized and microenterprises (SMMEs) even beyond Covid-19," the department said.
Funded by the government of Japan, the study was commissioned as a recommendation following a partnership between the UNDP, the United Nations System and the government of South Africa to analyse the socioeconomic impact of the pandemic on the South Africa population, and a rapid emergency-needs analysis of the most vulnerable groups. Through that partnership, two reports were published that paved the way for this study.
Despite an increase in surveys focusing on SMMEs in South Africa, particularly since the start of the Covid-19 pandemic, these have not focused specifically on micro and informal businesses or have not included an analysis of their unique situation and needs in all nine provinces in South Africa, the department noted.
This highlighted the importance of conducting a focused study on micro and informal businesses and their recovery from the Covid-19 pandemic.
The specific objectives of the study were to examine the extent to which existing support programmes have reached micro and informal businesses and determine which types of assistance entrepreneurs believe are necessary to recover from the Covid-19 pandemic, the associated lockdown and to grow their business in the long run.
Further, the study aims to identify what assistance is required to ensure the sector can contribute to the achievement of the United Nations Sustainable Development Goals and describe the impact on women and youth, as well as the extent to which they were disproportionately affected.