The Covid-19 lockdown has created hardship for the SMME sector, whose members are battling to pay rental to their landlords because they have lost income, according to the author. Picture Henk Kruger/African News Agency (ANA)
The Covid-19 lockdown has created hardship for the SMME sector, whose members are battling to pay rental to their landlords because they have lost income, according to the author. Picture Henk Kruger/African News Agency (ANA)

Bullying tactics by landlords are killing SMMEs

By Opinion Time of article published Feb 28, 2021

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Lucky Motsamai

Bloemfontein - The national lockdown caught everyone off-guard in March 2020. It confined everyone to their homes.

All South Africans observed the lockdown to stop the spread of the coronavirus, as responsible citizens should.

Unfortunately, the lockdown did not affect everybody in the same manner. Unlike those with salaries or investments from which to draw income since the lockdown took effect, small businesses (SMMEs) took a pounding and many of them closed down.

Having respected the lockdown regulation by staying at home, small business owners sacrificed their businesses and the livelihoods of their employees because they understood that COVID-19 was a threat to lives, let alone the right to earn a living.

When the economy was gradually reopened in the second half of 2020, there was no rental holiday for most SMMEs, but an expectation by landlords to receive all outstanding rentals as a lump sum.

Our experience in the Free State was that landlords were not amenable to any discussion of an arrangement to pay the outstanding amount in instalments. The landlords insisted on the SMMEs settling all outstanding rental and utility payments before being allowed to resume their operations.

The Central Business District (CBD) of the Mangaung Metropolitan Municipality is dominated by SMMEs: salons, clothing and food retailers, car washes – mostly servicing government employees, as well as other clients in the city centre.

The majority of these SMMEs are black-owned and many are members of the Free State Black Business Chamber.

Inevitably, as the chamber of business, we engaged with some of the landlords who were willing to engage with us, to give some amnesty to our members and waive the rent due during the lockdown period. Most of them refused, because, as they indicated to us, most of our members had outstanding rent even before the lockdown period and this gave no justification for waiver of rent due during the lockdown.

We were left with no option but to approach the Office of the Consumer Protector in the provincial Department of Small Business, Economic Development, Tourism and Environmental Affairs (DESTEA).

We realised that the landlords, mainly family-owned businesses and large property companies, were not keen on working with the business chamber, and continued to bully the tenants by threatening to lock them out or cutting their utilities off.

Our position as the Free State Black Business Chamber is that this was a necessary step to bring the government to the aid of struggling black businesses within the province.

Our members were not asking to skip paying rent, but wanted to be allowed to resume their operations to be able to generate income. By disrupting their utilities, the landlords effectively eliminated all avenues for the tenants to generate income to honour their obligations – a self-defeating exercise. On the other hand, many of the SMMEs did not qualify for the loan schemes provided by the banks because their credit record had already been impaired since the commencement of the lockdown.

The pressure from the landlords added to other difficulties already facing black-owned SMMEs, such as, the lack of adequate resources i.e. working premises & capital, slow payment for work performed, difficulties in accessing finance, non-compliance with legislative requirements, the lack of adequate support from both the public and private sector, and the vices of the negative economic growth - even before the lockdown started.

SMMEs remain the poor cousins of business in South Africa. The form of treatment by landlords is proof of how this crucial sector of the economy continues to be marginalised by policies, decisions and actions of big business and the government, regardless of the invaluable contribution of SMMEs to the economy.

This was confirmed by the Small Enterprise Development Agency (SEDA) in its August 2019 Quarterly Update.

Against the backdrop of a 0.4-percent contraction of the South African economy, the number of SMMEs still grew by 4 percent year on year to 2.55 million in the first quarter of 2019. These SMMEs employed 10.8 million people, including the owners. That is 66% of the country’s total employment, in keeping with trends across the world.

One grim revelation of this quarterly update, however, was that the SMME share of the total turnover of all enterprises continued to slide, dropping to 38.2 percent from 39.5 percent, in the previous year.

How do we, as a country, keep on ill-treating the very sector of our economy that creates so much employment and maintains socio economic stability, as it supports so many livelihoods?

By bullying their law-abiding tenants, who observed the lockdown restrictions by closing their business to aid the fight against the pandemic, the landlords are not only destroying these small businesses, but are also reducing their own chances of ever sustaining their rental income, the very reason they invested in property in the first place.

As the Free State Black Business Chamber, we acknowledge that the landlords have their own obligations to the banks and shareholders.

However, many South African banks have offered payment holidays to their clients and up to R45.5 billion (August 2020 numbers) in financial relief and loan guarantees to businesses and individuals in distress due to the pandemic and national lockdown.

The Reserve Bank and National Treasury offered some relief with the guaranteeing of R100 billion for bank loans issued under this arrangement – which could be stretched to R200 billion.

This is an indication that not all is lost for property owners, who we also invited to become members of the FSBBC to assist in creating a better future for the people of the Free State Province.

Landlords and property owners have options, not ideal, but certainly better than turning a deaf ear to the plight of tenants who are willing to negotiate.

Consumer journalist Wendy Knowler stressed that the amended Alert Level-3 lockdown regulations make room for tenants who cannot honour their rent due to the disaster, even though the landlords “will still be entitled to demand their rentals and cancel leases if tenants remain in breach indefinitely”. Fair enough; landlords are business people too.

Quoting rental property attorney Marlon Shevelew, Knowler lists some unfair practices by landlords in terms of the current Disaster Management Act. These include cutting off or electricity without reasonable notice or creating space for tenants’ representation, the imposition of a late payment penalty if the default was due to the disaster and the failure of the landlord to engage reasonably and in good faith to help the tenant deal with the impact of the disaster.

It would be easier for these landlords to help their existing tenants to stay in business, by giving them a payment holiday, than to throw them out and go looking for a replacement in these tough and uncertain economic times.

But the latter is an indication of our skewed economic structure as a country, our failure as a country to speed up the “land” question and redress the injustices of the past.

This creates a permanent situation where black entrepreneurs in particular move one step forward by taking the initiative and risk of going into business to sustain their livelihoods, create jobs and ultimately grow the economy.

Black entrepreneurs are pulled back by the vices of the lack of ownership of property or land, strategic barriers of entry into markets, lack of finance and investments, capital bullying and corruption in both the public and private sector.

Maybe the pandemic is a necessary reminder of the grim reality faced by black-owned businesses in South Africa.

* Lucky Motsamai is CEO of the Free State Black Business Council.

** The views expressed here are not necessarily those of Independent Media.

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