SMME sector hardest hit by COVID- 19
Many SMMEs will not survive 2021 SMMEs lost six months worth of revenue due to lockdowns COVID- 19 found an already fragile economy
Small Micro, Medium Enterprises ( SMMEs) have been one of the sectors hardest hit by the COVID- 19 pandemic, says Business Consultant from Analytic Zone, Kagiso Habangana.
He predicts that if serious interventions are not put in place, a lot of SMMEs might not even survive 2021.
“SMMEs depend on individuals coming to them, now when lockdowns, curfews and movement restrictions are imposed, they have no customers,” he says.
According to Habangana, lockdowns and curfews that have been imposed have resulted in SMMEs losing six months worth of revenue.
“As a result of closure of small businesses during the lockdowns, many have had to cease operations and get rid of employees. This has further exacerbated the high unemployment rate,” he says.
He is however, hopeful that several government measures that have been implemented will go a long way in cushioning SMMEs including the Economic Transformation and Recovery Plan, Government Wage Subsidy, and the Industry Support Facility that is being rolled out by CEDA, LEA and NDB.
He however, observes that the challenge for SMMEs is access to the Industry Support Facility as a result of the stringent requirements.
“A lot of SMMEs still struggle with issues like record keeping, and these reduce their chances of being assisted,” he says.
An economist from Absa Bank Botswana, Naledi Madala says their bank is motivated to help grow small businesses. They believe that government alone cannot absorb all those that are seeking employment therefore entrepreneurship should be encouraged and supported.
Madala observes that the outbreak of COVID- 19 came at a point when the economy was already fragile after growing by just three percent in 2019. Many sectors including SMMEs have been severely impacted by public health restrictions.
Research shows that growth and productivity among SMMEs varies widely from country to country. While over a life cycle of 40 years, an average firm in the US is said to grow by seven times its initial size.
In Botswana, however, 70 to 80 percent of SMMEs fail within the first three years of operation. In Madala’s view, this difference in growth and productivity translates into missed opportunities in countries like Botswana where SMMEs face growth constraints.
“SMMEs traditionally struggle with access to finance with banks due to inadequate collateral, no financial records or poor credit histories,” Madala says, adding that the lack of funding then hampers their ability to procure goods or services for the clients and further impacts the SME growth.
She adds that SMMEs require support, business development, technical and operational support, financial and cash flow management training, general business management support, mentoring and advisory in order to run sustainable operations.
Absa Bank Botswana launched the Enterprise and Supply Chain Development ( ESD) in the local market to address challenges that lead to failures of SMMEs. The main objective of ESD is to unlock lending to SMMEs in corporate value chains.
It uses nontraditional bank lending solutions to provide financing to SMMEs and goes further to capacitate them through their Business Development Support framework.
“In 2020, the bank virtually trained 722 SMEs and of this number 122 Absa Business Club members were enrolled in a seven- week training programme,” Madala says.
Habangana is convinced that beyond all initiatives that are meant to help SMMEs, more sustainable solutions like digitalisation will ensure that the sector comes out stronger from this pandemic.
“Digitalisation will also provide a wider footprint and expose SMMEs to a global community. In addition, when a curfew is imposed and a physical store closes its doors, SMMEs on such a platform can continue trading online,” says Habangana.
And indeed this is where Beyond Targets, a youthful local events management and promotions company fits in.
It has collaborated with Gaborone City Council to devise a solution that is expected to enhance market access for SMMEs in an effort to unlock opportunities and assist the sector amid challenges perpetuated by COVID- 19.
The product, an online and virtual platform named Simply Buy Botswana Mall ( SBBM) is expected to bring together SMMEs to create a one- stopshop.
“We have to acknowledge that businesses are currently operating under volatile, uncertain, complex and ambiguous environment that requires them to come up with strategies to help them navigate and sustain themselves in the pandemic,” says Millencent Olyn of Beyond Target.
Olyn has observed that the COVID- 19 pandemic has already caused massive dislocations among small businesses that were forced to temporarily close or reduce hours of operations, among them, those in retail, arts and entertainment personal services, food services, and hospitality businesses.
“Because of these, many small business owners lack motivation to market and resell their products. They are left with products sitting in their homes and warehouses due to insufficient funds to sustain rentals,” she adds.
Simply Buy Botswana Mall is intended to accommodate all SMMEs around the country to provide an opportunity for them to easily sell and freely advertise and sell goods and products. The platform works in two ways- Pop Up markets or roving markets and online mall or virtual stalls.
According to Olyn, the platforms are flexible, adaptable, transparent and will offer cheaper solutions. They anticipate that Pop Up markets will have 150 SMMEs participating in the first quarter, which will attract around 100 new and existing customers daily.
The Pop Up market is also expected to improve customer retention rate by 20 percent and increase sales by 20 percent at the end of the first quarter.
The Online store on the other hand is expected to have 300 SMMEs participating in the first quarter. It will also generate 100 000 views, increase organic search traffic to the website by 20 percent and improve customer retention rate by 20 percent, as well as increase sales by 20 percent each month.
Operations Manager at Beyond Target, Oboletse George adds that creating a one- stop- shop like this will help generate a buzz around their businesses and encourage spontaneous purchases thus increasing their sales.
“SMMEs contribute significantly to employment and the economy, hence the need for them to be supported,” George says.