Small business resilence is remarkable

The past 18 months might well rank as the worst period for owners of small businesses. Many will not have had much to celebrate during World Entrepreneurs Day on Saturday. The decade leading into 2020 was hardly rosy for SA’s businesses. It was in August 2007 that the world got a sense that something was amiss when French bank BNP Paribas announced that it was suspending redemptions in some mutual funds. The global financial crisis was thought to have reached a climax with the collapse of Lehman Brothers in 2008, which froze global credit markets and equity slumps across the world.

For the world economy, fed on unprecedented stimulus from central banks, the recovery was swift. SA was unfortunately left behind as that was just the beginning of the lost decade under former president Jacob Zuma. A period of stagnation, rampant corruption and rising unemployment followed.

By the time 2020 came, small businesses were braced for SA losing its last remaining investment-grade credit rating and the prospect of higher borrowing costs depressing the economy further. And then came Covid-19.

Suddenly the economy was closed. From owners of coffee shops to hairdressers, entrepreneurs found themselves without an income and had to either fire workers or cut their wages. Government help was either late or too little. Some of those businesses that were lost will never return.

The outlook for one of the bright spots prior to the Covid-19 outbreak, tourism, is far from bright. SA is still subject to travel bans and the government is seemingly ineffective or not interested in fighting for the tourism sector.

Before the lockdown, the sector was responsible for nearly 3% of SA’s GDP and about 4.5% of total employment. And how much did it get from the government? Rather than speak up for her department’s Tourism Relief Fund, then minister Mmamoloko Kubayi should have been ashamed at the R200m. Even that was allowed to be bogged down in a legal fight over the application of BEE rules.

The government won, but that was a perfect example of a Pyrrhic victory. In reality, the government will never have enough money to reverse the devastation suffered by the sector, from five-star hotels to tourist guides, through grants. What is needed is the return of foreign visitors to SA. That is why the portfolio is of such great interest.

There has been no word yet from new minister Lindiwe Sisulu, so it is hard to judge if she is the champion the sector needs. Perhaps, unbeknown to the rest of SA, she has been lobbying her counterparts in the UK, the source of the biggest number of tourists prior to the Covid-19 outbreak, to have SA removed from its red list, which has cut SA off.

At least the country’s major banks can hold their heads high, despite coming in for heavy criticism over the perceived failure of the credit guarantee scheme, which by June had delivered just R18.4bn, compared with the R200bn that the government said was its target. That number was made up to make President Cyril Ramaphosa’s stimulus package look bigger than it was.

The start of the government’s scheme was slow and caught up in bureaucracy. By the time it came through, relief in the order of R600bn had already been provided by individual banks. Any South African with a business or asset loan or mortgage would have felt the impact. Insurance and investment companies did their part, as did owners of shopping malls, which offered breaks on rent payments.

Not having recovered from that, small businesses had to cope with the violence and looting that followed Zuma’s arrest in July. In addition to their own direct losses, they will suffer as many of their potential clients lose jobs and a weak economy further constrains spending. Late in July, Ramaphosa announced further measures, including the reinstatement of the R350-a-month social relief grant, as well as tax relief to encourage hiring.

Even while we wish the government would do more, ultimately the best it can hope to do is to provide an environment that allows for a growing economy that creates jobs.

SA’s small business owners have shown that they can do the rest. We celebrate their resilience.

MANY WILL NOT HAVE HAD MUCH TO CELEBRATE ON WORLD ENTREPRENEURS DAY