Slow road to recovery for KZN businesses and informal economy

• Requirements to qualify for state relief after unrest are onerous and many informal businesses are not registered or tax-compliant

Entrepreneurs struggling to rebuild themselves from the ruins of the looting and lawlessness that decimated KwaZuluNatal’s economy in July are looking to big business and the government for financial and other support.

The looting in the province and in Gauteng caused mayhem and devastation, crippling many businesses, both new and established. For many the restart is proceeding slowly. It is a long and arduous journey and many have no insurance to help them restock and rebuild.

In an attempt to remedy the situation, the department of trade, industry & competition has designated R3.9bn to support affected businesses. And the department of small business development has established a recovery fund, which will make a grant of 60% combined with a 40% loan available to identifiable businesses that are registered and tax-compliant.

But this government intervention comes with its own challenges. Many informal businesses are not registered and not tax-compliant.

COMPLEXITY

John Dludlu, CEO of the Small Business Institute, said providing financial relief to those affected has got off to a slow start.

“This is as a result of a combination of factors — strict qualifying requirements plus complexity of the relief packaging [blended finance of grant and loan]. We hope the early involvement of nonfinancial agencies like the Small Enterprise Development Agency and business associations will assist in improving the uptake,” he said.

“Surprisingly, calls we are receiving from affected owners are positive about the outlook [for reopening], provided help arrives on time.” While there is a need to strictly observe governance compliance given these are public funds, there is scope for “creativity” in extending the relief measures, Dludlu said.

“It is worth noting that the providers and designers of the relief measures have sought to be inclusive and open-minded in their approach.”

For many businesses it has been a struggle on two fronts. First Covid-19 hit them hard and staff numbers had to be reduced. While still reeling from the pandemic, destruction from the unrest and looting further cast them onto the road to financial ruin. While some will wait for insurance payouts and decide on their future, or want to leave the province and even the country, others are making do with what meagre savings they have.

Lindo Nzimande started his brick and block manufacturing firm six years ago in Plessislaer outside Pietermaritzburg. He helped entrepreneurs in townships and rural areas start their own businesses. But after the wave of looting, he is running his business from under a tree.

“Our facility was situated next to an alcohol distributor, and when the looters were done there they came to the neighbouring premises. All our stock was stolen, our premises were completely burnt and our machinery destroyed.” They have had to use their savings to buy entry-level machinery to deal with back orders.

Durban Chamber of Commerce CEO Palesa Phili said: “We don’t have the final figures, but we can say for certain that many have been affected. We have, through the intervention of the private sector, been able to give immediate reprieve to a few entrepreneurs who needed stock and small machinery.”

The chamber said it had launched a series of initiatives aimed at assisting businesses and to rebuild the community.

In rural KwaZulu-Natal, communities are rallying to help each other.

“We have had support from the private sector outside the province. Currently, we are sitting at estimated losses of more than R100m for the smaller entrepreneurs,” said Pietermaritzburg & Midlands Chamber of Business CEO Melanie Veness.

The SA Institute of Professional Accountants (Saipa) said it was concerned over the slow progress with assisting small, medium and micro enterprises (SMMEs). “The department of small business development has announced relief programmes for particularly the uninsured SME market. However, its history with response and turnaround times has left a lot of SMMEs not knowing if their applications were successful or not,” said Saipa executive Faith Ngwenya.

Some of the requirements to qualify for relief are quite onerous, the institute said. It has urged the department to improve its communication with applicants who are waiting anxiously to hear whether they will receive relief or not.

However, independent economist Bonke Dumisa said: “Entrepreneurship as an activity is not easy, and worldwide figures show that [after] five years, almost 80% [go] out of business. In SA, there has been a tendency for an overdependency on the state with individuals not wanting to risk their own money.”

HELP ON HAND

The situation of informal and township-based entrepreneurs is worrying, but help is on hand for the several thousands of informal traders affected.

“We have been helping about 5,000 traders meet the deadline for food vouchers and financial aid. Only a handful can access forms online,” said Mhlengi Mncwabe, chair of the National Informal Traders Association.

Rosheda Muller, president of the SA Informal Traders Association, said: “We are concerned that the process is so slow. We have been in touch with the department of small business development to fast-track the process. While redress is going well in the main metros, it’s the rural and outer lying areas that need urgent attention.”