Almost three-quarters of small and medium enterprises (SMEs) will not survive a lockdown that lasts longer than between one and three months.
This is according to a research report, The Impact of Covid-19 on SMEs, which was released this week by financial services group Sasfin and sme.africa, an online platform for small businesses.
More than 1 000 SMEs in various sectors across the country participated in the survey.
The report indicated that 7% of them had already laid off personnel; 53% said it had not been necessary yet, but that layoffs were unavoidable. Only 40% said they did not think it would be necessary to lay off personnel.
Asked if their businesses would survive 21 days of lockdown, 4.5% said no and 59% said yes; 36% said they were uncertain.
Asked how long their business would keep running if the lockdown were to continue, 28% said they would survive only for another month; 45% said they would be able to continue for between one and three months; and 12% estimated that they could continue to operate for between three and six months. Only 7% said they would survive a lockdown of longer than six months.
Of the respondents, 61% indicated that their biggest challenge during the lockdown was cashflow to pay expenses; 13% indicated they had already lost clients; 14% said they were not getting any new business.
Five percent were battling to collect debt and another 2% said they could not get stock.
Waheed Adam, president of the Entrepreneurs’ Organisation in Cape Town, which represents 200 SMEs, told City Press’ sister newspaper, Rapport, that there were already big businesses that could not pay all their debts to SMEs.
“Some of the examples are that these big businesses are simply refusing to pay for services that have already been rendered and, in some cases, are even insisting on payment extensions for invoices that had already been issued.”
Adam said the lockdown, to date, had been “exceptionally bad” for SMEs.
Some had gone from “successful” businesses to businesses that had “no turnover”.
A new initiative, Say Siyabonga, was launched this week, allowing people to buy gift cards from, for example, restaurants, which could be redeemed after the lockdown.
The aim was to give businesses that had ground to a halt during the lockdown a way of generating income.
On Thursday night, President Cyril Ramaphosa said that, during the extended lockdown, the government would institute “risk-adjusted measures” to make a phased recovery of the economy possible and that this would mean that certain sectors could become operational again.
At the time of going to press, the nature of these measures had not been disclosed.
Piet le Roux, CEO of Sakeliga, said businesses that had found creative ways of staying open during the lockdown deserved praise.
“The long-term wellbeing of all communities rests on the shoulders of business.”
According to Sakeliga’s estimates, the business sector, at a conservative estimate, was losing turnover in the region of R4.2 billion every day that the lockdown continued.
Sakeliga announced the establishment of a legal aid package for informal, and small and medium enterprises.
In terms of the package, Sakeliga would give the business a 50% subsidy for a tailored legal opinion about essential business activities, as well as a certificate containing all the necessary information, subject to the regulations, needed to remain open.
In the meantime, Solidarity had launched a court case to compel the small business development department to disclose the guidelines it would use for the release of funding from the Covid-19 relief fund.
In the application, which will be heard in the Johannesburg High Court on April 28, Solidarity argued that the department’s refusal to disclose the guidelines contravened the Promotion of Access to Information Act.
Solidarity also wanted the tourism department to make its guidelines available, according to the application.
Mmamoloko Kubayi-Ngubane, the minister of tourism, said two weeks ago that 70% of the businesses that would benefit from the R200 million aid package established under her department had to be black-owned. In addition, 50% had to be owned by women, 30% by youth and 4% by people with disabilities.
Solidarity wants the court to set aside all race-based criteria for the awarding of Covid-19 relief funds.
The DA and AfriForum had also threatened legal action because, they argued, the guidelines were discriminatory and racist.
Source : https://city-press.news24.com/Business/75-of-smes-may-not-survive-lockdown-20200412