South Africa - Kensington. 080420. SANDF members keep watch at the new relocation site of the Greenmarket Square refugees. The City of Cape Town has moved them to the Wingfield base near Goodwood where they have erected a marquee tent to house them during the lockdown period. Picture:Ian Landsberg/Africannewsagency (ANA).
South Africa - Kensington. 080420. SANDF members keep watch at the new relocation site of the Greenmarket Square refugees. The City of Cape Town has moved them to the Wingfield base near Goodwood where they have erected a marquee tent to house them during the lockdown period. Picture:Ian Landsberg/Africannewsagency (ANA).

Impact of Covid-19 on SA businesses paints an alarming picture

By Edward West Time of article published Apr 9, 2020

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CAPE TOWN - In one of the first of its kind, a survey of 233 small business entrepreneurs, most informal employers, paints an alarming picture of destroyed jobs, incomes and businesses due to the impact of the Covid-19 national lockdown.

Estimates are that there are more than 5 million such businesses in South Africa. The National Development Plan envisages that by 2030, nine out of 10 new jobs should be generated by micro, small and medium sized businesses.

According to a statement from the Centre for Development and Enterprise yesterday (Wednesday), six post-graduate students from UCT and two entrepreneurs from Phillippi in the Cape, conducted a survey of the 233 entrepreneurs, most of them operating in townships, in six provinces, across 17 industries.

Eighty-seven percent of them could not run their businesses from home, the same percentage could not support themselves through the lockdown, 86 percent did not know where to access emergency relief funding, and 95 percent could not afford to pay their employees.

Half did not believe their businesses would survive the lockdown. Ninety-three percent do not have any other income sources and 85 percent do not receive any grants.

A full 77 percent of the entrepreneurs questioned for the survey were women, and they employed six people on average.

Of the 233 small businesses, only 24 qualified for SEDA and SEFA funding, one qualified for Spaza Shop Funding, 46 qualified for Tourism Relief Funding, and 95 qualified for the Covid-19 Disaster UIF Funding.

The eligibility gap for these small businesses was due to most funding platforms requiring the businesses to be registered, tax compliant and UIF compliant, with further requirements of 6 months of bank statements and financial projections.

The entrepreneurs also did not know where to find assistance, the funding requirements were often ambiguous, and many entrepreneurs viewed the loans as grants.

There was no funding for foreign-owned businesses that employ South Africans.

Additionally, the waiting period from application to receiving the funds was too long for small businesses in distress, and the turnaround time should ideally be seven days.

In addition, the survey authors said eligibility requirements for funding needed to be relaxed, and funding needs to be made more accessible, with more visible advertising, while application forms needed to be in all the official languages.

Meanwhile, small, medium and micro Enterprises (SMMEs) have been been given a potential funding lifeline through the Covid-19 crisis through the announcement yesterday of the formation of the Giving For Hope Foundation (GFHF), by a group of businesses, led by Willowton Group and Al Baraka Bank.

The start up capital for the GFHF was a R85 million loan from Willowton Group, which has Sunflower Oil among its brands, R10 million would be funded by Al Baraka Bank and R5 million would come from the South African Muslim Charitable Trust.

The aim was to launch with R100 million and Moosa called on businesses across the country to loan money to the GFHF, with the ultimate aim of raising R500 million within the next few weeks.

This would be split into small loans which will be effective for two years. Businesses will only need to begin to repay the loans, in 12 monthly instalments, after the first year. The loan will be interest-free, profit free and admin-cost free basis.

The fund would be administered by Al Baraka Bank. All lending would be fully Shariah-compliant and would meet FICA and other banking regulations.

Moosa said loans would be open to all SMME’s irrespective of sector, race, gender or religion. However, loans would not be advanced for passive income type businesses, such as property investment or alcohol or gambling related business.

“Our duty as large businesses in South Africa extends beyond generating shareholder wealth. The whole intention is to keep people in their jobs.  We want to encourage people to not retrench – and part of this process has to be to assist businesses in distress,” he said.

Loan applications should be made to https://givingforhope.co.za/ will be accepted from potential clients from 15 April, with payouts to clients expected to begin by the end of April.

BUSINESS REPORT 

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