How has the Covid-19 pandemic and related lockdown measures affected the most vulnerable players in the South African economy and what assistance will they need to recover? A large proportion of the South African workforce makes a living in the approximately three million micro and informal businesses. When the nationwide lockdown started in March 2020, most people in this sector were left without a source of income or a safety net and, as a result, they were either struggling or unable to cover their basic living expenses.
The United Nations Development Programme (UNDP) in South Africa together with the Department of Small Business Development (DSBD) commissioned this research to conduct an assessment of the impact of the Covid-19 pandemic and related lockdown measures on micro and informal businesses in order to understand what these businesses will require to recover and grow in the long-term. Based on the findings of this research, mechanisms and tools were developed to support the South African government’s efforts to assist micro and informal businesses.
This study reflects the difficulties faced by vendors at taxi ranks and train stations in cities that have lost the majority of their customers as fewer people commute to work; hair stylists, who were not allowed to work and had been without income for months, and business owners who can only make a fraction of their pre-Covid-19 pandemic revenues due to a drop in customers, an increase in costs, international travel bans or event cancellations. The research emphasises how many micro and informal entrepreneurs lost their stock or equipment, for example, because their fresh products became rotten when the lockdown was suddenly imposed. The impact of the lockdown on these businesses was direct, they had no capital left to purchase items, failed to pay instalments for their cars or were unable to replace confiscated equipment.
This research also reveals how some entrepreneurs successfully adapted their businesses to the “pandemic economy” by communicating with customers via digital social media such as WhatsApp, delivering products to clients’ homes, manufacturing essential items such as masks, assisting learners with home schooling, or illegally selling home brewed beer or cigarettes because they saw no other option to survive. The South African office of the United Nations Development Programme will use the insights gathered and recommendations provided in this report to develop targeted interventions to support micro and informal businesses in collaboration with relevant stakeholders.
Mr Lindokuhle Mkhumane (Director-General, Small Business Development): “The study will assist DSBD to achieve its mandate which is to lead and coordinate an integrated approach to the promotion and development of entrepreneurship, small businesses, and co-operatives, and ensure an enabling legislative and policy environment to support their growth and sustainability. Furthermore, the study will provide the Small Business Development Portfolio consisting of the Department and its agencies, the Small Enterprise Development Agency (Seda) and the Small Enterprise Finance Agency (sefa) and the informal sector ecosystem with credible evidence-based support interventions to ameliorate the adverse circumstances the said entities are plagued with. The Small Business Development Portfolio and informal sector ecosystem in conjunction with the UNDP and related organisations will partner to take the recommendations flowing from the study forward to substantially enhance the growth and ultimate sustainabilty of micro and informal sector entities in South Africa.”