SA’s success in slowing the Covid-19 outbreak brings opportunities for SMMEs

SA’s move back to alert level 1 of lockdown has brought positivity from an economic perspective, giving businesses an opportunity to start to recover. Socially, there are now fewer restrictions on the freedom of movement, improving the morale of many people, and possibly reversing some of the job losses reported throughout 2020. 

Being at this level of lockdown is proof that SA has done well to help fight the battle, but the war is not over as many of the risks associated with the pandemic remain, with the looming potential of a third wave.

A snapshot of the response to the pandemic  

A year ago, President Cyril Ramaphosa announced a nationwide lockdown to limit the spread of Covid-19. SA was praised around the world for the strict measures taken to protect its citizens. These measures meant that only essential services could operate, placing strain on many South Africans and the economy.

Along with the  lockdown came the launch of the Solidarity Fund, a public benefit organisation created to help South Africans in the fight against Covid-19 by contributing to national health and humanitarian relief efforts.

An economic response plan was also formulated, and measures put in place to mitigate the expected negative financial consequences of the pandemic. This included additional grants such as the basic income grant and support from UIF to about 2.5-million employees. The plan also included the provision of loans, grants and debt restructuring to SMMEs, totalling more than R500m. 

On the monetary front, the SA Reserve Bank supported the economy by reducing the repo interest rate and taking other measures to improve liquidity in the economy.  

Some financial service providers offered their clients assistance through relief measures such as fee waivers and loan guarantees. 

The impact of the pandemic on SMMEs

The pandemic and consequent lockdowns had an impact on the turnover of many businesses, particularly SMMEs. These businesses experienced a significant reduction in turnover starting in April 2020, when the country was in the strictest lockdown level and when most economic activity across the country had stopped. As the measures eased in the months thereafter, increased economic activity resulted in improved turnover for many businesses.   

Yoco is a technology company that provides payment tools to more than 80,000 SA SMMEs. Data from the company shows how the turnover increased as the economy reopened and moved to less stringent lockdown levels. This can be seen in the graph below, illustrating the average turnover index across the three largest metropolitan areas across the country.

The level of turnover of businesses before lockdown is used as a base for comparison against subsequent turnover. In the graph above, this is depicted by the 100% baseline. The index tracks the turnover of the SMMEs against this, and has been steadily increasing over time in line with the easing of lockdown measures.

The road ahead 

The pandemic is likely to change aspects of people’s lives forever, and some organisations may potentially never completely return to how they used to operate. Organisations are expected to offer employees the choice of working from home or the office, and the choice to do so interchangeably, resulting in greater flexibility for their staff.

Another positive outcome has been a move from SA clothing retailers to source and manufacture more of their products locally. This localisation has created jobs and opportunities, helping to stimulate the economy. This may also happen in other industries as the pandemic exposes how the dependence on imports and exports can result in lost opportunities in SA.

The government has focused on creating jobs, accelerating economic reforms to unlock investment growth, and re-industrialising the economy. This, together with changes in the business landscape, provides many prospects for SMMEs.

SMMEs may diversify into new sectors to meet gaps in the market that the pandemic has exposed, or create new services that are needed as a result of this crisis.

While the pandemic has caused economic distress, it has also created many new opportunities for SMMEs.

This article was paid for by Liberty Group.