Small traders say no to offer
SURVEY: ONLY 12% BOTHERED TO APPLY
To qualify for relief, you have to obtain a licence to operate.
Government is showering money on informal sector businesses to tide them over the Covid-19 crisis, but many township entrepreneurs seem less than enthusiastic about the offer. To qualify for the relief offered by the Department of Small Business Development, they will have to obtain a licence to operate from the local municipality.
They will also need to register with an alphabet soup of regulatory agencies – including the Companies and Intellectual Properties Commission (CIPC), the South African Revenue Service (Sars) and the Unemployment Insurance Fund (UIF).
And they will need a bank account – a red flag to many micro enterprises that deal only in cash.
A survey by the Small Enterprise Foundation (SEF), which has 216 000 informal sector entrepreneurs on its loan books, found only 12% had bothered applying for business permits. SEF founder John de Wit says this means even fewer will likely have applied for loans.
Few willing to change
“In our discussions with informal sector entrepreneurs, we are finding that very few of them are willing to go through the process of moving from the informal to the formal sector, mainly because they don’t want to be hounded by the taxman going forward.
“They’re quite happy flying under the radar and not having to comply with all sorts of regulations and having to pay tax,” says De Wit.
Motive?
“We find it incredibly impractical and irresponsible to be offering assistance at this time to informal sector businesses on the condition that they formalise themselves, and it makes us wonder what is the purpose of these programmes – to genuinely assist businesses or to rope them into the formal sector.”
The Department of Small Business Development has launched several initiatives to assist small businesses, including the SMME Debt Relief Scheme, a Spazashop Support Scheme and more recently, a scheme to support township and village businesses.
The department’s website says the SMME Debt Relief Scheme closed recently, with R513 million approved for funding and nearly 13 000 applications received, of which 4 840 are currently being processed.
A further 21 200 applications were incomplete, resulting in delays.
The response appears to be underwhelming says De Wit, based on a sampling of businesses in the SEF network.
More than half of informal sector entrepreneurs had returned to work in the last two weeks, and the figure will likely jump to 100% this month, he says.
“The policing of the lockdown has been a mess, with some police trying a blindeye to workers trying to eke out a living, and others preventing people from doing so,” adds De Wit.
“These are desperate times and you cannot stop people from trying to put food on the table. Law enforcement officers and government officials need to understand this.”
SEF is a non-profit organisation that has lent more than R10 billion to some 650 000 entrepreneurs over the last two decades, and keeps excellent data on the health of the informal sector.
Its bad debt ratio is an astonishingly low 0.22% over the history of the organisation, far superior to anything achieved by the commercial banking sector.