In the wake of civil unrest, which saw looting in KwaZulu Natal and Gauteng, a survey by specialist management consultancy Redflank has found that SMMEs will need roughly R16bn in operational funding to recover. Picture: Motshwari Mofokeng, ANA.
In the wake of civil unrest, which saw looting in KwaZulu Natal and Gauteng, a survey by specialist management consultancy Redflank has found that SMMEs will need roughly R16bn in operational funding to recover. Picture: Motshwari Mofokeng, ANA.

89% of businesses hit by civil unrest were SMMEs

By Philippa Larkin Time of article published Aug 3, 2021

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NEW RESEARCH from NPC BeyondCovid, released yesterday found that small businesses, already hard hit by the Covid-19 pandemic, bore the brunt of the recent civil unrest that affected parts of KwaZulu-Natal and Gauteng, accounting for 89 percent of the businesses impacted.

The research, looking specifically at the impact of the riots on businesses across various sectors, found that small, medium and micro enterprises (SMMEs), which provided more than 70 percent of the jobs in South Africa, with almost a third of the population unemployed, stood to lose R3.4 billion a month in revenue as they attempted to resume operations.

The firms would also need about R16bn in operational funding to recover, according to the survey, which was conducted by specialist management consultancy Redflank last month.

Fay Mukaddam, the chairperson of BeyondCovid, said: “The country is now in the grips of the third wave of the pandemic, and there’s no doubt that businesses that have been affected by the unrest will need an urgent lifeline. Unfortunately, it’s not possible to help all businesses at once, and the SMME sector certainly needs particular attention.”

Last month, President Cyril Ramaphosa, in the wake of the civil unrest, announced that the government would reprioritise funding for SMMEs affected by the pandemic through a once-off business survival funding mechanism.

He also announced the reinstatement of a monthly welfare grant of R350 for the poor until the end of March next year, along with a R400 million state contribution to a humanitarian relief fund.

The survey also revealed that 62 percent of impacted small businesses did not have business insurance, and of those that had closed their doors in recent weeks, only 5 percent had business interruption insurance.

Lings Naidoo of Redflank said: “What is alarming is that more than half (51 percent) of the impacted businesses in Gauteng and KwaZulu-Natal have either closed permanently (7 percent) or temporarily (44 percent) The impact of these closures on the economy, and the livelihoods of communities in those areas, is significant.”

Particularly worrying was that only 6 percent of the businesses that were affected by the riots were back to business as usual.

“Businesses have been forced to retrench, on average, 10 percent of their staff,” said Naidoo.

“For SMMEs, the retrenchments are even higher, at 11 percent of the workforce.”

Of the businesses surveyed, 42 percent had reported damage to their premises and 8 percent said they had lost everything, as their premises had been completely destroyed.

The most affected were the retail, accommodation and food, health and social services sectors.

Naidoo estimated the total cost of the damage to property, based on the extent of the destruction listed by respondents, to be about R126bn. “SMMEs are looking at damage of about R55bn, while the cost to informal businesses alone is R4bn,” he said.

More than a third, or 39 percent, of businesses surveyed had their stock looted during the rioters’ rampage. More than half, or 55 percent, of those that lost revenue through looting were large corporates.

Naidoo said businesses that had to repair damage to their premises said it would take six to eight months to recover. For others, it would take about five months to get back to business.

But the survey found that larger businesses were in a better position than their SMME counterparts when it came to insurance.

Of those surveyed, 73 percent said they had some cover. However, even among this group, one in four would have to reopen without the income compensation possible through business interruption insurance. Revenue for all impacted businesses across sectors had dropped by 59 percent since the riots, with informal businesses grappling with a drop of up to 70 percent.

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