Pan­demic could prove to be the fi­nal straw for ail­ing small busi­nesses

The gov­ern­ment should fol­low the global trend and back small-, medium- and mi­croen­ter­prises

Business Day - - OPINION - Dan Brot­man and Mpho MacCham­bers ●

In re­cent years, the health of SA’s small-, medium- and mi­croen­ter­prises (SMMEs) has been se­verely com­pro­mised by our dire econ­omy, with many small busi­nesses across the coun­try fight­ing for our lives. With the sud­den spread of Covid-19, the sit­u­a­tion has be­come even more des­per­ate, as the pan­demic threat­ens not only the health of the global pop­u­la­tion but also the immunity and sur­vival of SMMEs that are al­ready in in­ten­sive care. Dur­ing this time of cri­sis and un­cer­tainty for ev­ery­one, SMMEs are in a state of emer­gency as many busi­nesses are suf­fer­ing the blow of Covid19 with­out the types of financial relief and in­ter­ven­tions we des­per­ately need from the al­ready strug­gling pub­lic and pri­vate sec­tors.

As two ac­tive cit­i­zens and small busi­nesses own­ers, we were stunned to dis­cover while con­duct­ing re­search for a pre­vi­ous ar­ti­cle that 70% of SMMEs in SA fail within the first two years, and that the few en­ter­prises that do sur­vive strug­gle to stay afloat as they con­tin­u­ously grap­ple with in­ad­e­quate pub­lic pol­icy, in­ef­fi­cient sup­port from en­ter­prise & sup­plier de­vel­op­ment (ESD) pro­grammes, and more crit­i­cally the coun­try’s de­bil­i­tat­ing elec­tric­ity sup­ply cri­sis.

With the threat of Covid-19 now on the rise, many SMMEs that were al­ready ad­versely af­fected by the grim state of af­fairs are ac­ing an in­creased prob­a­bil­ity of hav­ing to close their doors as the coun­try’s health and eco­nomic con­di­tions take a turn for the worse. While many global in­sti­tu­tions have made proac­tive and vis­i­ble at­tempts to of­fer SMMEs prac­ti­cal sup­port at this time, too few SA or­gan­i­sa­tions to date have pro­vided the nec­es­sary lead­er­ship, in­for­ma­tion, com­mu­ni­ca­tion and ac­tion plans re­quired to help SMMEs nav­i­gate Covid-19.

To as­sist the gov­ern­ment and big busi­ness in for­mu­lat­ing po­ten­tial so­lu­tions to pro­vide relief to the coun­try’s small busi­ness ecosys­tem, we reached out to and in­ter­viewed busi­ness lead­ers in coun­tries that have al­ready an­nounced dras­tic mea­sures to save their SMME sec­tors.

The first global trend we iden­ti­fied is na­tional and mu­nic­i­pal gov­ern­ments of­fer­ing low-in­ter­est loans and cash grants for small busi­nesses in dis­tress. The De­vel­op­ment Bank of Canada and Ex­port De­vel­op­ment Canada are of­fer­ing loans of up to C$100,000 to SMMEs af­fected by the pan­demic, on con­di­tion that they have been gen­er­at­ing rev­enue for at least two years. The US Small Busi­ness Ad­min­is­tra­tion has an­nounced low-in­ter­est loans of up to $2m for SMMEs that have lost rev­enue due to the pan­demic. New York City is of­fer­ing zero-in­ter­est loans of up to $75,000 to SMMEs with fewer than 100 em­ploy­ees and cash grants of up to the equiv­a­lent of 40% of two months’ pay­roll for busi­nesses with fewer than five em­ploy­ees. In part­ner­ship with the North­east Com­mu­nity Fed­eral Credit Union, San Fran­cisco is of­fer­ing cash grants of up to $10,000 to busi­nesses with fewer than five em­ploy­ees that have lost at least 25% rev­enue.

In Asia, Hong Kong is of­fer­ing low-in­ter­est loans of up to 2-mil­lion Hong Kong dol­lars (R4.45m), with a re­pay­ment mora­to­rium for the first two months and Malaysia’s SME Bank’s Spe­cial Relief Fund is of­fer­ing up to 1-mil­lion ring­git (R3.8m) in work­ing cap­i­tal, with no col­lat­eral re­quired and a re­pay­ment pe­riod of five­and -a-half years.

The sec­ond global trend we iden­ti­fied is big busi­ness eas­ing credit, re­pay­ment terms and fees for small busi­ness, as well as cre­at­ing their own relief funds. Ex­am­ples of this in­clude Citi, which has waived fees on monthly ser­vice fees, re­mote de­posit cap­ture and penal­ties for early CD with­drawal; Malaysia’s May­bank of­fer­ing col­lat­eral-free fi­nanc­ing for up to 1-mil­lion ring­git; and Canada’s six largest banks of­fer­ing six-month pay­ment de­fer­rals on bonds and relief on other credit prod­ucts.

Though relief for small busi­ness is gov­ern­ment-led, tech gi­ants such as Ama­zon have launched a $5m Neigh­bour­hood Small Relief Fund for busi­nesses near its Seat­tle of­fices with fewer than 50 em­ploy­ees and se­verely re­duced foot traf­fic; and Face­book an­nounced $100m cash grants and ad cred­its for up to 30,000 SMMEs hit by Covid-19 in 30 coun­tries.

At the time of writ­ing we had yet to re­ceive com­mu­ni­ca­tion from lo­cal banks on the spe­cific relief they are pro­vid­ing to small busi­ness clients, sup­pli­ers or en­ter­prise sup­plier de­vel­op­ment ben­e­fi­cia­ries. The third global trend we have iden­ti­fied is con­stant, pub­licly ac­ces­si­ble vir­tual com­mu­ni­ca­tion, to al­le­vi­ate small busi­ness own­ers’ spi­ralling anx­i­ety. In­no­va­tion, Science and Eco­nomic De­vel­op­ment Canada con­ducts fre­quent con­fer­ence calls, open to the wider busi­ness com­mu­nity, on which it pro­vides up­dates on Covid-19 and fields ques­tions from lis­ten­ers. Pub­lic Works and Gov­ern­ment Ser­vices Canada has es­tab­lished a “buy & sell” web­site where busi­nesses can reg­is­ter to sup­ply prod­ucts and ser­vices in sup­port of Canada’s re­sponse to Covid-19.

We re­cently lis­tened in on one of the calls or­gan­ised by the Coun­cil of Cana­dian In­no­va­tors, the busi­ness coun­cil com­posed of CEOs from Canada’s fastest grow­ing tech­nol­ogy com­pa­nies. The speak­ers on that call in­cluded rep­re­sen­ta­tives from gov­ern­ment and pri­vate sec­tor ex­ec­u­tives.

In ad­di­tion, the coun­cil has cre­ated a Slack chan­nel open to the pub­lic, where its com­mu­nity shares re­sources on Covid-19; Face­book has launched ed­u­ca­tional re­sources for SMMEs dur­ing this un­prece­dented time, in­clud­ing a busi­ness re­source hub and vir­tual train­ing and ma­te­ri­als.

At the time of writ­ing the web­site of the SA gov­ern­ment’s depart­ment of small busi­ness de­vel­op­ment was not work­ing.

Based on our con­ver­sa­tions with busi­ness lead­ers and or­gan­i­sa­tions over­seas, our im­me­di­ate rec­om­men­da­tions for the SA gov­ern­ment and big busi­ness are:

A gov­ern­ment-led relief fund for SMMEs should be es­tab­lished, to be ad­min­is­tered by the pri­vate sec­tor.

Banks should im­me­di­ately pro­vide low­in­ter­est loans, in­sti­tute overly gen­er­ous mora­to­ri­ums on re­pay­ment, and tem­po­rar­ily waive monthly fees.

Big busi­nesses should use their in­ter­nal ex­per­tise to launch we­bi­nars and on­line re­sources to guide SMMEs now on life sup­port.

The depart­ment of small busi­ness de­vel­op­ment and large busi­ness as­so­ci­a­tions should con­duct fre­quent vir­tual town hall meet­ings and live on­line com­mu­ni­ca­tion chan­nels with SMMEs.

The gov­ern­ment and big busi­ness should launch a pub­lic cam­paign en­cour­ag­ing cit­i­zens to con­tinue to sup­port lo­cal busi­nesses, and pro­vide ideas on how to con­tinue procur­ing from SMMEs from the con­fines of one’s home.

This cri­sis presents a golden op­por­tu­nity to fi­nally in­sti­tute real pol­icy re­forms and prac­ti­cal in­ter­ven­tions that make it less bur­den­some for en­trepreneur­s whose busi­nesses will have ei­ther closed down or barely sur­vived dur­ing the Covid19 pan­demic, to re­launch and pros­per.

Brot­man is founder and CEO of En-no­vate and MacCham­bers is founder and CEO of Kula.

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