Small firms battle uncertainty as scores scramble for relief

When the reality of the coronavirus pandemic and the subsequent lockdown hit, Claudia Pillay knew she needed to find a solution for her biggest concern — her employees.

“I was going to try everything just to see what would come back,” the owner of a travel franchise in Johannesburg that employs five people, told Business Day.

And try everything she did — from the Unemployment Insurance Fund Temporary Employee/Employer Relief Scheme (Ters), to the department of small business development’s relief scheme for small, medium and micro-enterprises (SMMEs).

So far it has been the SA Future Trust (SAFT) — the fund set up by the Oppenheimer family and administered through the country’s major banks — that has come through and been “a tremendous relief”, said Pillay

The trust lends small businesses the money they need to pay each employee R750/week for 15 weeks. The interest-free loan must then be repaid over five years.

The amounts may sound small but “it’s a huge help for any small business if there is nothing coming in”, said Teresa Settas, the marketing director for OneEnergy, a renewable energy franchise group that helps people get off the grid. Settas’s husband owns one of the franchises, based in Boksburg, and his small business received SAFT funds to cover three staff members.

The employees are on their fourth payment, said Settas, adding that the application process was smooth, with approval coming within a week of the application. By contrast, the application to the UIF Ters has been administratively painful and bureaucratic, and a month after applying Settas said there is still not clarity on where their applications stands.

“That uncertainty is just hideous,” she said.

But uncertainty is now a mainstay for SA’s small businesses as they await confirmation that the economy can start reopening at the end of May, moving to lockdown level 3.

But the support needed to help small businesses — not only through the lockdown, but to restart operations in what will likely remain a constrained economy — is immense.

By last week all of the R1.12bn contributed to the SAFT fund was fully subscribed, with banks such as FNB announcing that its portion of the SAFT funds has been exhausted.

Though it approved funds for 2,300 businesses, FNB received 12,000 qualifying applications, while the bank has assessed about 40,000 business clients for financial and nonfinancial support overall.

“The need for help is massive,” Jesse Weinberg, FNB’s head of the SME customer segment, told Business Day.

Given the overwhelming number of applications received, the bank has been channelling applicants towards other forms of support — including the government-backed Covid-19 loan guarantee scheme, launched last week. The scheme provides government-guaranteed loans to firms with turnover of less than R300m, to help cover their operational expenses.

The department of small business development — which announced its SMME debt relief scheme in March ahead of the full lockdown — is facing a similar overwhelming need for support. Applications for its scheme amount to roughly double the funds available.

The department launched the scheme with R513m, and as part of the government’s economic stimulus package is set to receive a further R2bn. But the department says “the pipeline for SMME debt relief is already sitting at more than R5bn, which means more resources are needed to support SMMEs”.

By May 13, the department had approved 1,497 small businesses, though more than 26,000 had applied. The scheme gives concessionary loans to cover small firms’ working capital needs. The money is disbursed in monthly tranches, the department said.

So far R10.1m has been disbursed with R85.5m in disbursements expected by the end of May, it said. But the scheme has been plagued by difficulties, with more than 19,200 applications delayed. According to the department, this is chiefly due to supporting documents not being submitted. The department said it is encouraging businesses to submit their documents in whatever form they can — including by taking pictures of the necessary documents.

The financial pressure is mounting, however, as businesses wait to hear if their applications will succeed.

A recent Stats SA survey of 2,182 businesses conducted between April 14 and 30 found that almost 90% of respondents had seen their turnover decline during the lockdown and almost half — 47.9% — had said they had temporarily closed or paused trading activity. Businesses with turnover of R300m or less dominated the survey, making up 1,975 of participants.

The report found that 36.4% had temporarily laid off staff, while a further 45.6% “expected their workforce size to decrease in the two weeks following the reference period”.

Settas does not believe the lockdown can be sustained much longer. “I don’t believe it’s sustainable for any business.”

And once businesses can reopen, she does not expect it will be a matter of picking up where SA left off, as households have lost incomes and had to cut into any savings or discretionary spending to stay afloat.

“When they lift these lockdowns and reopen the economy, we are going back to such a radically changed economic environment,” she said. “We are going back to an environment where people are not working and where your disposable income has been decimated.”

Consumer confidence and discretionary spending “is going to be under pressure for a very long time”, she said.