Study Shows Pandemic's Devastating Impact on South Africa's SMMEs

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South Africa lost a decade worth of jobs in less than six months and saw its economy shrink by 16.4% (Q2, 2020 v. prior year). All of it at the hands of the COVID-19 pandemic and ensuing lockdowns.

Finfind recently published a report detailing the findings of their study on the effects felt by SMMEs in South Africa. The results were drawn from a sample of 15,000 businesses of which 1,489 responded.


We boiled it down to some of the most interesting points.

 

On the positive side, the study found that 81.5% of businesses had at least one owner who was a previously disadvantaged individual (black, Indian, etc.), and more than 65% of businesses had women owners.


Hardest Hit Sectors


The top-three hardest-hit sectors in terms of business closures were:

  • Construction (14.2%)
  • Food & Beverage (9.9%)
  • Hospitality (9.7%)

 
Most Open Sectors

The top three sectors for open rates were:

  • Retail/wholesale (10.5%)
  • IT (10.4%)
  • Business Consulting (9.9%)


Job Losses Hit Casual Workers Hardest


Once lockdown began, SMMEs experienced a 60% loss in full-time jobs. Of these, 68% came from businesses closed during lockdown, with 32% coming from those that survived.


Casual workers experienced a 53.5% dive in employment opportunities.

And 76.8% of part-time employees lost their jobs within the first five months of the pandemic. And more than half coming from businesses that remained open.


Financial Challenges Abound


Most businesses handled their accounting in-house. But the fact only 28% had up to date records was a concerning revelation.


Among businesses that closed, only 89% of businesses that closed had either never produced management accounts or had very outdated management accounts. This would severely impact their ability to make good financial decisions and effectively manage cash flow.


It was uncovered that even if a business was among the 34% with cash reserves, poor and outdated financial records kept them in the dark in terms of knowing how long those reserves would last.

Interestingly, businesses that accepted debt from formal lenders had a higher survival rate than those who didn’t.

Protective equipment and data were runaways for the two most common added expenses. Expenses have largely decreased (35.2%) or stayed the same (43.7%).

 

A full 51.5% of businesses that were rejected for government funding received no response at all. And 35.3% of those turned down by banks cited poor personal credit or lack of business creditworthiness as the reason.

 

Most respondents had some kind of digital presence, but 58% never had an online meeting, and only 40% engaged in paid digital marketing.

Business owners considered various forms of stress and anxiety as the biggest challenges facing them. While access to funding is the number one area where business owners want assistance.

 

And finally, only 46.6% said they will return to physical workspaces as they were after lockdown ends.


 

 

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