A year since the Covid-19 pandemic hit South Africa, research from the BeyondCOVID Business Survey paints a bleak picture for the future of South Africa’s small business sector.
Some 26% of SMMEs report being forced to close their doors, 7% permanently, with forecasts that they expect to lay off a collective 1.2 million staff over the next six months.
Small businesses are also 26 times more likely to close than their corporate counterparts, and will require a hefty R1.1 trillion in relief funding if they have any hope of staying open over the next 12 months.
BeyondCOVID, a registered non-profit company, is setting itself the ambitious target of developing an enabling and supportive framework for the creation of SMME opportunities for scale and employment.
Specialist management consultancy Redflank conducted the BeyondCOVID Business Survey between July 2020 and March 2021, surveying nearly 4 500 companies, more than half of which were micro to small businesses.
A snapshot of the findings, which offer critical insights into the state of South Africa’s economy on the first anniversary of the hard lockdown, include:
· 21% of businesses polled are closed, although 64% of them indicated they do expect to reopen
· 54% of businesses said they were currently operating below capacity
· 41% of businesses are planning to retrench staff over the next six months. Construction, accommodation & food, manufacturing and ICT are worst impacted, with the public sector, healthcare and financial services least impacted.
· A third of businesses have expressed the need for funding over a six-month period in order to continue trading over the next year
· Businesses expect recovery to pre-Covid-19 levels to take six months longer now (3.5 years) compared to their projection of three years at the onset of the pandemic
· Businesses that are cash positive now number 5%, up from 2% at the start of the pandemic
· The number of businesses with staff working from home has dropped from 74% in July 2020 to 57% now; up to 61% of businesses have indicated a willingness to allow staff to continue working from home post-pandemic
· The ICT, financial services and real estate sectors have the most people working from home, and agriculture, transportation and construction sectors the least.
Sectors that are worst impacted, according to the survey, include accommodation and food; arts, entertainment and recreation; water and waste management; construction; and education. Sectors where corporates are improving but where SMMEs are still struggling are cited as agriculture and construction.
SMME respondents indicated that they planned to retrench an average 13% of their staff - or 1.2million people - in the next six months, against a 5% figure for corporates, said Lings Naidoo, director at Redflank and BeyondCOVID co-founder. “At face value, businesses appeared to be in a slightly better position this year, but closer examination showed that this applies only to corporates. The situation is worsening for SMMEs.”
While 44% of corporates indicate that they have returned to “business as usual” mode this year, the comparative number for SMMEs was a 15% drop. While large and small businesses had been equally at risk of closure at the start of the lockdown one year ago, SMMEs were now 26 times more likely to have to shut shop, the survey found.
The goal of BeyondCOVID is to help create an SMME sector that is less vulnerable and better able to ride out economic shocks and the organisation believes this can be achieved via risk-sharing structures, or SMME collectives that offer these businesses safety in numbers. They have dedicated the past few months to recruiting a board, amongst other key activities, with the calibre of credentials to support the initiative.
The plan is to use the organisation’s business networks within the private sector and government to leverage funding and investments, commercial and otherwise, with the overall aim being to provide enabling services and technology to make small businesses more robust, sustainable and bankable.
To this end, BeyondCOVID has engaged professional associations, including Chambers of Commerce, Kisby SME Fund and others, as strategic partners, to deliver on key objectives.
“If they’re organised into SMME collectives supported by BeyondCOVID’s networks, services and technology, the risk is reduced and they become more resilient, thanks to being part of a bigger organisation that has the means they lack,” said Fay Mukaddam, chairperson of BeyondCOVID.
To find out more about BeyondCOVID visit https://www.beyondcovid.co.za/