South African small, medium and micro enterprises (SMMEs) have proven to be resilient through the Covid-19 crisis and many remain optimistic about their financial future. However, they remain extremely vulnerable to external shocks, such as lockdown restrictions and civil unrest, and they require significant support if they are to survive and play a role in the country’s economic recovery and job creation. This was revealed in “From Survival to Opportunity through Covid-19 and Beyond: SA Future Trust Baseline SMME Report” released on Thursday, 09 September 2021 by the South African Future Trust.
The SA Future Trust provided financial assistance to SMMEs hit by the Covid-19 lockdown in 2020 in the form of interest-free loans to facilitate direct payments to their employees for a 15-week relief period. A survey of the SMMEs which took up the SA Future Trust loans, was conducted between October 2020 and March 2021, to assess the impact of this funding and what support these businesses require to help them survive and thrive longer term. Of 9656 businesses surveyed, 2849 responses (26% of the total) were received.
One encouraging finding in the report is that most of the businesses that participated in the survey had remained operational – 2772 were still operational at the time of the survey, representing 97% of respondents. Furthermore, across all sectors and skill sets, more jobs were preserved than lost. Data collected from the survey indicates that the various lockdowns depleted the small reserves respondents had on hand, with 69% indicating that they had less than one month of savings accessible.
“In assessing the SA Future Trust’s role in supporting these SMMEs through the Covid-19 crisis, it is interesting to note that, for at least 50% of respondents, the SA Future Trust loan was the only relief they reported to have taken up,” said Ashleigh Fynn-Munda, Social Investment Associate at Oppenheimer Generations Philanthropies.
“Another interesting finding is that, while the SA Future Trust loan was available to qualifying SMMEs with an annual turnover of less than R25 million, micro businesses with fewer than ten employees and a probable turnover of between R5-R20 million made up 71.84% of the loan holder respondents,” she continued. “This is most likely attributable to the SA Future Trust making it easier for smaller businesses to access credit.”
The survey revealed that a significant number of women-owned businesses took up the loan – they made up 43% of survey respondents. Furthermore, women-owned businesses proved to be more resilient – of those that closed, 45% were women-owned and 55% were men-owned businesses.
The report highlights how Covid-19 has changed the economic environment that SMMEs in South Africa operate in, and how it will continue to impact businesses and industry for years to come. Encouragingly, most respondents felt that their total turnover and profit before tax would increase by the end of 2021, and that their debt servicing costs would decrease.
“It will take some years for the South African economy to recover from the impact of the Covid-19 crisis. The SMMEs that emerge will need to operate more efficiently, with more targeted strategies to return to sustainable growth. At the same time, the survey has clearly revealed the need for further funding and access to working capital or grant capital, from organisations like the SA Future Trust, if small businesses are to fulfil their potential as the backbone of our economy and one of the main contributors to job creation,” concluded Dr Emmanuel Owusu-Sekyere, Deputy Director of Research at The Brenthurst Foundation.