To survive the coming year, entrepreneurs should identify new opportunities amid the pandemic instead of looking to government for aid since nearly half had to shut their doors during lockdown and more than 90% were rejected for Covid-19 relief funding.
The SA Small, Medium and Micro Enterprises (SMMEs) Covid-19 Impact Report by FinFind found that 42.7% of businesses had to close during the lockdown.
A total of 42% of those that closed applied for relief funding from government, banks and other institutions and over 90% of applications were unsuccessful.
In conjunction with the department of small business development, the survey sampled 15 000 SMMEs across all sectors.
It found that sectors hit the hardest by the lockdown and that saw the most closures were construction, food, beverages and hospitality.
Retail and wholesale, IT and business consulting were sectors with the highest percentage of businesses which remained open.
A total of 76% of businesses saw a significant revenue decrease with many not prepared to go digital to manage their businesses.
“Most – 64.2% – of the businesses only had cash reserves that would last between one and three months.
“As lockdown progressed, the cash reserves became depleted. This means these businesses will not have the cash available to help them build their businesses during the tough economic recovery period,” according to the report.
Of businesses which closed and applied for relief funding during lockdown, 99.9% were rejected. This was largely due to lack of response from government (51.5%) and banks declining applications due to poor credit scores (35.3%).
Government’s Unemployment Insurance Fund temporary employer/employee relief fund was a drop in the ocean when it came to aiding small businesses as the country’s finances were already strained, said Hennie Ferreira, chief executive of digital accountant Osidon.
“The South African economy is not nearly strong enough to subsidise the effects of Covid-19.
“The economy was in trouble before Covid-19 and when the pandemic struck, government didn’t have the resources to try and mitigate the effects.
“There isn’t enough money in the coffers of government,” he said.
There was, however, optimism among small business owners as 76.7% believed their business would still be operating in the coming year.
Some have reported intending to implement changes such as downsizing office space, turning to digital marketing and identifying new revenue streams.
However, funding remained the number one area in which they wanted assistance, the report showed.