Covid lockdown highlights battles faced by cash-strapped SMMEs

Existing debt, lack of cash reserves, outdated financials, no access to relief funding and an inability to operate during the lockdown forced the closure of 42.7% of 1,489 small businesses surveyed across SA during the first five months of the pandemic.

Only 43% of the businesses that closed had applied for Covid-19 relief funding, with 99.9% of these funding applications being rejected.

This is according to the SA Small, Medium and Micro Enterprises (SMMEs) Covid-19 Impact Report conducted by Finfind, in partnership with the department of small business development and other stakeholders.

The report reveals several key challenges commonly faced by the SMME sector in SA during lockdown:

• existing debt;
• lack of cash reserves;
• no access to relief funding;
• an inability to operate during the lockdown; and
• outdated financial information.

Robynne Erwin, head of research projects at Finfind, said most of the job losses happened a few months into the pandemic.

“For example, full-time jobs were reduced by 60% and part-time by 76%. The lockdown and reduced trading opportunities confronting small businesses has also badly affected job opportunities for casual labourers and consultants,” she said.

More than 75% of all businesses experienced a significant decrease in revenue from the end of March to August. Only 35% of the SMMEs had cash reserves at the start of lockdown.

“This survey shows that the use of casual labour reduced by 53% and small businesses used 41% fewer consultants than they had before the pandemic,” said Erwin.

“The reality is that small businesses do not have the same resources available, and therefore their ability to survive the shock of lockdown is very precarious. This affects significantly their abilities to create jobs and work opportunities for casual labourers and consultants.”

One of the key findings from the report was that 76.2% of businesses surveyed experienced a significant decrease in revenue in the first five months of lockdown, while 35.2% had cash reserves saved and, of these, 62.6% thought their cash reserves would last between one and three months.

Eric Sibanda, manager for Pheli Shisanyama in Atteridgeville, said the business was only able to function normally under level 1 and is now still trying to recover from its losses.

Sibanda said the business was doing well since restarting, though under strict conditions brought on by Covid-19.

During the lockdown, his employees had to sit at home without salaries as there was no revenue being generated.

“Things are becoming better, slowly. From 100%, I can say we are 50%. I think we are doing good. We were able to hire more staff,” he said.

Sibanda said they have had to change how their business operates.

“Now people have to book to come so that there can be social distancing. Some people we have to send home so that we don’t violate the regulations. We are losing, but not that much,” he said.

Note: A previous version of this story had an incorrect headline referring UIF Ters funding applications, rather than Covid relief applications. This story has also been updated to reflect the size of the sample in the report.

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