Picture: 123RF/LANGSTRUP
Picture: 123RF/LANGSTRUP

SA is a tough place for small, medium and micro enterprises (SMMEs) to survive and prosper. The entrepreneurial journey typically involves much sacrifice in terms of life savings, time and energy, applied over many years.

Most new businesses fail, while many older ones are barely hanging on in the onerous SA economic and regulatory environment. There is little support from the government, despite this being a crucial sector for employment and tax revenue.

Those businesses that do survive through sheer individual determination, hard work and luck can still fall victim to sudden changes in market conditions.

A black swan event such as the novel coronavirus outbreak, and specifically the effects of the outbreak on consumer behaviour, can lead to the wholesale destruction of SMMEs. Few entrepreneurs will be in a position to access the financial resources to sit the crisis out, or to start again. Even if they could, few will opt to relaunch in the deteriorating SA economic environment after the epidemic passes.

Consider the effect a widespread quarantine such as in Italy will have on just the retail industry. No customers, no sales revenue, no funds to pay the rent — all of which spells collateral disaster for employment, the property industry and financial services.

The effects are already acutely apparent in the tourism industry, with cancellations streaming in. It requires little imagination to game out the economic risk exposure.

The deafening silence from the financial sector is deeply concerning. What risk measures are being put in place by the Reserve Bank and the Treasury?

Apart from the destroyed livelihoods of many, there will be very low demand post the event. Worse, occupancies could take decades to recover, if at all. Neither the economy in general, nor landlords and banks, can afford wholesale bankruptcies that will follow the legal enforcement of rental contracts, business loan agreements or suretyships.

What happens to banks when owners of small businesses cannot pay their home loan instalments en masse? Are landlords prepared for the day when their retail tenants cannot pay the rent? Everyone needs to share the pain or nobody may survive.

The Bank should make liquidity arrangements available to the banks, which in turn need to provide payment holidays on business loans and personal loans to small-business owners. Commercial landlords need to pass such instalment deferments on to their tenants until markets return to normal.

The Italian government is making €25bn available to support its economy and putting in place strategies to protect companies, workers and families, which includes letting families temporarily suspend some mortgage and tax payments. State guarantees are being discussed to help banks survive a resulting cash crunch.

SA clearly does not have the money Italy is throwing at the problem, which is equivalent to Eskom’s debt. What we had was spent on propping up SAA and other vanity projects instead of saving for a rainy day. Now it’s raining. What’s the plan?

Jacques le Roux
Hermanus  

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