Business Day

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

- 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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