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Quarter of small businesses closed because of Covid-19 — survey

The BeyondCovid Business Survey found that 26% of SMMEs reported being forced to close their doors, 7% of them permanently

26 March 2021 - 07:00 By ernest mabuza
A survey paints a grim picture for the small, medium and micro enterprises sector since the onset of Covid-19, with huge job losses.
A survey paints a grim picture for the small, medium and micro enterprises sector since the onset of Covid-19, with huge job losses.
Image: Graphic: RUBY GAY MARTIN

A quarter of small, medium and micro (SMME) enterprises reported being forced to close their doors as a result of Covid-19 and there was a chance that a collective 1.2 staff could be laid off over the next six months.

These are figures from the BeyondCovid Business Survey, which paints a bleak picture for the future of the country's SMME sector one year on from when the Covid-19 pandemic hit the country.

Specialist management consultancy Redflank conducted the survey between July 2020 and March 2021, surveying nearly 4,500 companies. More than half of the companies (56%) were micro employers (10 or fewer staff) or small businesses (with 11 to 50 staff).

Medium-sized businesses, corporates, the public sector and non-profit organisations were also part of the survey.

BeyondCovid is a company launched by Redflank in August last year. It assists businesses with services and technology to make them more robust to survive the impact of the Covid-19 pandemic.

The survey showed that 26% of SMMEs reported being forced to close their doors, 7% permanently.

Of all businesses across all categories that were polled, findings showed that 21% of businesses were closed, though 64% of them indicated they expected to reopen.

The survey established that small businesses were also 26 times more likely to close than their corporate counterparts, and will require R1.1 trillion in relief funding if they have any hope of staying open over the next 12 months.

While 44% of big corporates indicated that they have returned to “business as usual” this year, the comparative number for SMMEs was a 15% drop.

The survey found that while large and small businesses were equally at risk of closure at the start of the lockdown one year ago, SMMEs are now 26 times more likely to have to shut shop.

Lings Naidoo, director at Redflank and BeyondCovid co-founder, said SMME respondents indicated that they planned to retrench an average 13% of their staff or 1.2 million people in the next six months, against a 5% figure for corporates.

“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,” Naidoo said.

The findings showed that 54% of businesses said they were currently operating below capacity. They also showed that 41% of businesses were planning to retrench staff over the next six months.

The construction, accommodation and food, manufacturing, and ICT sectors were worst affected,  while the public sector, health care and financial services were the least affected.

A third of businesses have expressed the need for funding over six months to continue trading over the next year.

Findings also showed that businesses expected recovery to pre-Covid-19 levels to take six months longer now (three-and-a-half years) compared to their projection of three years at the onset of the pandemic.

Fay Mukaddam, chairperson of BeyondCovid, said the results of the survey highlighted the challenges facing business across sectors.

She said this has prompted BeyondCovid to fine tune its focus to help revive the hard-hit SMME sector as a way to stimulate job creation and contribute to the country’s overall recovery.

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