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New business opportunities following the outbreak of the COVID-19 pandemic

Article provided by Liberty Corporate

More than seven months ago, our president, Cyril Ramaphosa, announced a nationwide lockdown to limit the spread of COVID-19. President Ramaphosa was praised around the world for the strict measures taken to protect South Africans. These measures meant that only essential services were allowed to operate during this period and, as a result, placed significant strain on many South Africans and the economy.

Along with the nationwide lockdown came the announcement of the creation of The Solidarity Fund, a public benefit organisation created to help South Africans in the fight against COVID-19 by supporting and contributing to national health and humanitarian relief efforts. In addition to this, an economic response plan was formulated, and a number of measures were put in place to mitigate the anticipated negative financial effects of the pandemic and the resulting lockdown on South Africans and the South African economy. This included additional grants such as the basic income grant as well as support in the form of income to about 2.5 million employees. The provision of loans, grants and debt-restructuring to small, medium and micro enterprises (SMMEs) totalling over R500 million were also contained within the economic response plan.

The South African Reserve Bank also supported our economy by greatly reducing the prime interest rate and taking other measures to improve liquidity in the country.

In further supporting the COVID-19 economic relief efforts, some financial service providers offered their clients assistance through relief measures such as fee waivers and loan guarantees. These measures aimed to assist South Africans who were negatively affected by the lockdown.

Some industries performed well during this period such as telecommunications, technology and the agriculture sectors. Many organisations made significant changes as a result of the changing restrictions enforced by the different levels of lockdown. Some of these changes included embracing e-commerce, rethinking the ways in which they operate and providing alternative services and products to customers to ensure sustainability.

The impact of the COVID-19 pandemic on Small, Medium and Micro Enterprises (SMMEs)

The COVID-19 pandemic and consequent lockdown proved to negatively impact the turnover of many organisations, particularly SMMEs. A significant reduction in turnover of SMMEs in South Africa was seen in April 2020, when the country was in the strictest lockdown level and when most economic activity across the country had stopped. As the stringent lockdown measures eased in the months thereafter, increased economic activity resulted in improved turnover for many of these organisations.

Yoco is a technology company that provides payment tools to over 80 000 South African SMMEs. Data provided by Yoco illustrates how the turnover of SMMEs within our country increased through the less stringent lockdown levels and as the economy opened up. This can be seen in the graph below illustrating the average turnover index across the three largest metropolitan areas across the country.

The level of turnover of organisations prior to when the lockdown was implemented is used as a base for comparison against the turnover of organisations thereafter. In the graph above, this is depicted by the 100% baseline. The index tracks the turnover of the SMMEs against this, and has been steadily increasing over time in line with the easing of lockdown measures.

The increasing trend illustrated in the graph is particularly encouraging for South African SMMEs looking to grow and succeed in the current environment.

The road ahead

The COVID-19 pandemic is likely to change aspects of people’s lives forever and organisations may potentially never completely return to how they used to operate. A possible lasting change is that organisations may continue to offer employees the choice to work from home or the office, as well as the choice to do so interchangeably, resulting in greater flexibility for their staff.

Another positive outcome has been a move from South African clothing retailers to source and manufacture more of their products locally. This has created and continues to create jobs and opportunities, helping to stimulate the South African economy. In future, this may also happen in other industries as the COVID-19 pandemic exposes how the dependence on imports and exports can negatively affect lost opportunities within our country.

The ongoing support from government focusses on creating jobs, accelerating economic reforms to unlock investment growth and reindustrialising the economy. This, together with changes in the business landscape, provides many prospects for SMMEs. SMMEs can diversify into new sectors to meet gaps in the market that the pandemic has exposed, or create new services that are needed as a result of this crisis.

The COVID-19 pandemic has caused significant economic distress, which is likely to have a lasting impact into the future. However, it has also resulted in many new opportunities for small, medium and micro-enterprises. During this time, Liberty will continue to be in it with you to navigate through what lies ahead and to help ensure success of what is to come.

Liberty Corporate is a proud Partner of the NSBC