Covid-19 in South Africa: the impact on SMEs/SMMEs

Retail Capital

Where does one even begin? Chances are you are the owner of a small or medium-sized enterprise and you know full well what the impact has been on your business.

Let’s also spare a thought for the businesses that closed their doors for the last time, or that were rocked by the long illness or death of staff members and directors. 2020 will live clearly in our minds for the rest of our lives.

However, there were also SMEs/ SMMEs that managed to do well despite lockdown and, in a few rare cases, because of the pandemic.

There are lessons from both sides of the coin in this book, and so it is important to consider the whole picture.

While different SMEs/ SMMEs were affected in different ways, there are a few overarching macro-trends that spanned the length and breadth of the country.

Social distancing

The first, most obvious, impact was the inability to operate, or the inability to operate in the usual manner. Declaring a hard lockdown was unprecedented, because with a single announcement, our president had in effect switched off the economy. Or did he?

Every business that wasn’t an essential service had to shut shop. Even essential services were affected – their operations were greatly reduced and very strict social distancing rules changed the rules of engagement for them, too.

Others were simply forbidden from operating during level 5, and these restrictions stayed in place for many months for enterprises such as beauty salons, hairdressers and gyms. Many personal trainers and gyms, however, pivoted quickly and embraced online training to take advantage of a captive audience under lockdown at home.

Disrupted supply chains

The national shutdown meant that borders – known to be porous at the best of times – were suddenly shut. Supply chains were cut and SMEs/ SMMEs that relied on these suddenly had no inventory. While this resulted in some closing down, others switched to local suppliers and were exposed to new supply chains and different products and customers.

Funding and payment terms

Once President Cyril Ramaphosa announced the SME relief scheme, many SMEs/ SMMEs rushed to see how they could be saved. It wasn’t long before it became apparent that the terms and conditions were in fact skewed to favour big, healthy businesses and that distressed entities stood no chance of qualifying for funding. The exercise benefited banks more than anyone else.

Wherever they could, businesses tried to negotiate payment holidays and flexible payment terms with landlords and suppliers. In some cases, landlords didn’t budge. However, because many businesses and their office space requirements have changed as a result of the lockdown, there could be a shift in the power balance. It won’t be surprising if there are increased vacancies at prime office and retail parks.

Retail Capital continued to disburse business funds, and we implemented payment holidays. It is about doing the right thing. Our business supports SME/ SMME growth and so the onus was on us to put our money where our mouth is. We found various ways in which to support SMEs/ SMMEs, and throughout this book the reader will develop a clear sense of how, when and why access to capital and funding is vital for SMEs/ SMMEs – in the good times and the bad.

Communication

During the course of the pandemic, ancient virtues such as communication, transparency and honesty once again became commonplace. Business owners were forced to have direct, candid discussions with their stakeholders and employees about the state of their businesses, their prospects and what the various scenarios looked like.

They also needed to communicate with their customers and suppliers – again built on transparency. If this is a lasting legacy of Covid-19, it is a good one. We saw a marked increase in new communication channels and networks transformed into communities.

Jobs

One of the strengths of SMEs/ SMMEs is their agility. Their value is their ability to provide and preserve jobs. Many jobs were lost as businesses downsized or shut down but it was remarkable how small businesses made every effort to retain and support their teams on and off site. It is always a tragedy when people who provide for families need to be told there’s nothing left for them.

A key trait of all crises is the clarity of focus that they trigger. This pandemic, global and unprecedented in scale, required all hands on deck. However, the unique challenges triggered by a hard lockdown meant that a few, key objectives were defined, and everyone worked with a dogged focus to ensure they were attained. There was no time for superfluous activities or projects that didn’t speak to the very existence of the enterprise.

It would serve all SMEs/ SMMEs very well to maintain this focus: where talent stays focused on core tasks and there is no wastage. A lot of effort and many articles during the pandemic went into how technology was used to streamline processes, but the streamlining of shared objectives is just as important.

Chasing opportunity

As the lockdown levels were eased, and more restrictions lifted, some businesses were able to open their doors, but not to do what they did before. There was a clear distinction here between businesses that looked for opportunities and businesses that froze in the headlights.

Restaurants that had built their name serving hot sit-down meals suddenly became cold-meat delivery experts. Wine bars served food, then wine and food. Some businesses switched industries altogether and helped prop up others, which benefited them in turn. Some businesses closed down. During the course of this book we will take a closer look at the differentiators that determined success or failure.

Digital transformation

Very early on in the lockdown a meme did the rounds implying that Covid-19 was the wrecking ball that would finally beat down any resistance to digital transformation. This was accurate.

The immediate and obvious initial step was remote working – this required businesses to embrace the cloud in order to facilitate a host of collaboration tools. It forced them to consider security, and they found ways to monitor and track progress. This is important, because even as workforces return to offices – these processes and their related efficiencies are here to stay. Business trips are likely to be fewer and farther between. Businesses have changed how they look internally.

Externally, embracing digital transformation has literally opened the world to formerly regional businesses. eCommerce is no longer a luxury, but a necessity, not only for companies that sell goods but also those that provide services and consulting. SMEs/ SMMEs learnt quickly that the switch to eCommerce is not just a decision, but an entire strategy that requires meticulous planning, expertise and funding to enable.

Many sped up their transformation into cashless businesses and enterprises previously seen as only having a website for marketing were suddenly exploring apps and tools to aid with booking and payments. They were thinking about how they could add value to all their stakeholders to build a positive differentiator for themselves.

Speaking of marketing, because of the way the economy was shut down, SMEs/ SMMEs had no choice but to embrace digital marketing in all its guises. Social distancing meant events were impossible, no traffic meant no eyes on billboards and classic activations just couldn’t occur. Suddenly, businesses were exploring content marketing, paid social media, influencer marketing and much more.

The New Normal

Covid-19 had a profound impact on SMEs/ SMMEs, and this list is certainly not an exhaustive look at every possible outcome for businesses during the year. However, as you can tell this wasn’t one-dimensional and it certainly was uniform. Irrespective of whether some closed, some just survived or others thrived, the take-home lesson is that 2020 was a year of immense, ongoing and fundamental change. This is what we call disruption on steroids. Adapt or die – it’s that simple.

Doing business in 2021 and beyond is going to require an appreciation of this. Things will never return to how they were before. Sure, once the virus is a memory, perhaps office parks will be full again – but the way the businesses in those office parks conduct their affairs will have been changed forever.

This is not bad news. This is incredibly exciting. It means that we have the opportunity to reimagine our futures, and reimagine the wealth and prosperity we can build for ourselves and our children.

The smart SME will take stock of what happened, how it reacted, where it failed and where it succeeded, then glean the experience from those that flourished, and do what it needs to do to build resilience and scale. It requires knowledge, networks, an opportunity mindset, funding, a cool head but hard hand, a little luck and a poster on the boardroom wall that reads:

“The definition of insanity is doing the same thing over and over again and expecting a different result.”

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