Study shows lockdown closed down almost half of small businesses
A recent study by financial services company Finfind Small, Medium and Micro Enterprises (SMMEs), small businesses were the hardest hit by the country’s lockdown.
The report, which was in collaboration with the Department of Small Business Development, was based on a survey of 1 489 businesses that represented a cross section of all of the industry sectors in the country.
Other collaborators included the Banking Association of South Africa, the Johannesburg Stock Exchange, and the Institute of Business Advisors Southern Africa among others.
Existing debt, lacking cash reserves, financials which were outdated, no access to relief funding, and operational paralysis during the lockdown, forced the closure of 42.7% of small businesses, according to the study.
Finfind found that only 47.9% of businesses that closed, applied for Covid-19 relief funding. However, nearly all – which was 99.9% of these funding applications were rejected.
The three biggest losers respectively were Gauteng, KwaZulu-Natal and the Western Cape.
Some of the business owners, who remained anonymous, had their remarks published in the study.
One said that the banking industry was poorly trained to service SMME companies.
While another said: “We've actually lost our home, and my children and animals are living with friends and family. We are living with friends and it is stressful. Unable to contribute as we receive little income, getting some from my dad's pension.”
Data showed that within the lockdown’s first five months, 76.2% of businesses surveyed experienced a significant revenue decrease.
Only 35.2% had saved cash reserves, and of these, 62.6% believed that their cash reserves would only last between one and three months. Only 29.2% of businesses were confident they could pay expenses for the upcoming month.
The survey findings showed that 51.9% of the businesses had one owner, 27.4% had two owners and the remaining 20.7% had three or more owners, with a majority of those owners, at 65%, being women, of that, 29.9% of the total being solely women-owned.
The report detailed that of the survey participants, a total of 4 720 full-time jobs were lost. The total number of full-time employees before the start of lockdown was 7 728 and 3 008 by the end of lockdown level three.
“Sixty percent of full-time employees lost their jobs during the first five months of the pandemic, 32% of the full-time job losses were from businesses that remained open.”
On the part-time front, 2 615 out of the total 3 470 part-time jobs were lost.
“76.8% of part-time employees lost their jobs during the first five months of the pandemic 54.4% of the part-time job losses were from businesses that remained open.”
Finfind reported that while the outlook for the future was largely uncertain for SMMEs, 76.7% of the business owners who were able to remain open, were optimistic about being able to survive in 2021.
Jeremy Lang, regional general manager at Business Partners Limited, congratulated the businesses that remained open as they “survived one of the biggest collective economic crises of our generation”.
“While it’s been a difficult period for SMMEs, this past year has also provided invaluable insight into why some businesses proved more resilient than others. Going forward, reliable information is vital to escape the fog of the crisis. Owners who cultivated solid sources were able to withstand considerable misinformation polluting social media this year but their counterparts were prone to decision paralysis,” he said.
Lang said complacency was the enemy and businesses had to adapt or die.
“Businesses that found themselves deepest into their comfort zones had the most trouble adapting to the crisis. Businesses with basic contingency plans and resources proved to be more robust than those without. Agility was key to surviving the lockdown, be it working from home or conducting business virtually,” he said.