SMEs left to fend for themselves as COVID-19 relief denied

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As we approach the end of what has been a terrible year we are starting to see just how big of an effect COVID-19 has had on the world so far.

While we knew that businesses would surely be affected by lockdowns and social distancing guidelines, being able to put a figure on how badly businesses were affected was a waiting game.

Today we have a sample of data from Finfind which has published the results of a survey with 1 489 local SMEs.

The 2020 SA SMME COVID-19 Impact Report was made possible by Finfind with support from the Department of Small Business Development, SEDA, Services SETA, Business Leadership South Africa, the Banking Association South Africa, the Johannesburg Stock Exchange, SAICA Enterprise Development, SAVCA, SAIPA, IBASA and E Squared Investments.

Strap in, because things are not looking good.

For starters, the data reveals that 42.7 percent of the businesses surveyed closed within the first five months of the pandemic reaching South Africa.

Factors that lead to this include, in no particular order:

  • Existing debt
  • Lack of access to relief funding
  • Inability to operate during lockdown
  • Lack of cash reserves
  • Outdated financial information

Of the 42.7 percent of businesses that closed, 53 percent applied for relief funding but 99.9 percent of those applications were rejected.

This is an alarming set of figures to digest and points to a severe lack of readiness on government’s part to support SMEs. While we understand that the pandemic and lockdowns came suddenly, that is not an excuse when it comes to letting a sector that employs so many South Africans remain under serviced for so many years.

A few more shocking figures from the survey results follow on below:

  • There was a 60 percent loss of full-time employees, and a 76.8 percent reduction of part-time employment in the first five months of the pandemic.
  • 59.7 percent of all SMMEs surveyed were unable to trade during lockdown level 5.
  • More than 75 percent of all business experienced a significant decrease in revenue from the end of March to August.
  • Only 35 percent of the SMMEs had cash reserves at the start of lockdown, with more than half of these being able to sustain themselves for between one and three months at most.

A ray of hope?

Of the businesses which managed to remain open this year, the outlook for the future is hopeful though not without trepidation.

For the businesses which managed to remain open, 76.7 percent are optimistic that they will be able to survive to 2021. Unfortunately for the many, many South Africans looking for work, only 32 percent believe they will be able to create new jobs.

But future success relies largely on government coming to the party.

Funding must be more accessible for SMEs and not only during the pandemic. More than that, Finfind stresses the importance of the banking sector evolving.

“It is concerning to note that poor consumer credit scores remain one of the primary reasons cited by banks for rejecting COVID-19 relief funding applications. Banks urgently need to develop new credit assessment models centred on the re-payment history of the business itself, rather than focusing on the business owner’s personal credit record, to determine the business’ credit worthiness,” writes Finfind.

As for working from home, SMEs who were surveyed appear to favour working from home. Only 46.6 percent of those surveyed indicated they would run their business from an office or work premises. The remainder are embracing remote work or considering a hybrid model with smaller premises for when meetings and the like are hosted.

Unfortunately 2020 has been a bloodbath for jobs and businesses and while 2021 is a new year and a chance to wipe the slate clean, it’s clear that we are still rather far away from any semblance of normal, new or otherwise.

[Image – CC 0 Pixabay]

Brendyn Lotz

Brendyn Lotz

Brendyn Lotz writes news, reviews, and opinion pieces for Hypertext. His interests include SMEs, innovation on the African continent, cybersecurity, blockchain, games, geek culture and YouTube.

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