CELESTE LE ROUX: Entrepreneurs desperately seek new hope
One year into the Covid-19 meltdown, SMEs look to government leadership for signs of life
It has now been more than a year since the first Covid-19 lockdown forever changed the face of SA’s business environment. Certain sectors such as tourism, property and events management bore the full force of the economic downturn, and entrepreneurs like me were affected.
In January, Stats SA announced that the overall number of companies that have been liquidated increased by 20.5% in the fourth quarter of 2020 compared with the same period in 2019. The list of well-known companies planning to shut their doors permanently is also growing.
The ripple effect on jobs is devastating.
The Commission for Conciliation, Mediation & Arbitration (CCMA) revealed that between April 1 and December 31 2020, it got 985 large-scale retrenchment referrals — nearly double the 555 for the same period of 2019, according to the Mail & Guardian.
The small business sector, by some estimates, has lost more than 2-million jobs.
Many are hoping government’s vaccination drive will be the panacea that gets us back to normal, but we need more than that: government must put in place a proper support system to enable SMEs to recover. The economic cluster must pull out all the stops to stimulate the survival and growth of these businesses.
Often you wonder if the government understands this.
As a business owner, I was disappointed to see that finance minister Tito Mboweni paid scant attention to small businesses in his 2021 budget speech, other than where he said the department of small business had allocated R4bn to the sector.
When it came to employment, Mboweni focused on the R83.2bn available for the public employment programmes, while allocating R11bn for the Presidential Youth Employment Initiative. But there was no specific reference to the role small business can play in creating jobs.
In my case, I run a nuts-and-bolts business. We service properties across the country and have a very real view of what is happening in shopping malls, office parks and residential properties. While we have escaped the worst of the economic onslaught, you’d have to be blind not to see the struggles of many of the businesses we service.
What SA is missing here is that small businesses are the biggest creators of employment. Consultancy McKinsey says that small enterprises constitute 98% of all SA companies, and employ between 50% and 60% of the country’s workforce. These companies are responsible for a quarter of job growth in the private sector.
When the pandemic hit, I had hoped to see more detailed measures to support small businesses. We wanted to see tangible steps to remove red tape; simplify tax compliance measures and, in our low-skill economy, we needed a significant investment in education, training and incubation hubs.
Instead, we saw the opposite.
A few days after Mboweni's budget speech, the North Gauteng High Court granted Eskom an order allowing it to hike electricity prices by 15.63% on April 1. It meant that small businesses already facing serious financial pressures had yet another input cost to factor in. This, coupled with the unstable electricity grid, did little to instil confidence.
Confidence is in short supply and creating the right perception by addressing the challenges of Covid is vital.
Though it was not without its issues, the R200bn Credit Guarantee Scheme, which provided loans to struggling companies in 2020, is the kind of initiative that we need to help entrepreneurs scale up. It is the kind of thing that could spark the kind of positive mentality that is so lacking in our public discourse.
And yet, amid all of this, there is hope on the horizon for SMEs. President Cyril Ramaphosa in February recommitted his government to putting small business at the centre of his National Development Plan, suggesting this sector could create 90% of the 11-million new jobs he wants by 2030.
Ramaphosa said government “would need to introduce new business processes, technologies and equipment” to assist small business. It’s a smart move since these companies typically contribute up to 40% of national income (measured by GDP) in emerging economies.
We need more of this. For one thing, it lets entrepreneurs know that they’ll be supported during times like this. More importantly there is, at the very least, the promise of a plan to extricate us from our current financial and mental malaise.
And, as any battle-hardened entrepreneur will tell you, a little hope goes a long way.
*Le Roux, CEO of React24, was Standard Bank's Top Woman Entrepreneur for 2021. Last year, she was awarded the 2020 Woman Mentor of the Year Award by the Construction Industry Development Board
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