Article provided by Liberty Corporate
It is now almost a month since South Africa moved back to Alert Level 1 of lockdown. This has brought about much positivity from an economic perspective, providing businesses the opportunity to begin the process to recovery. On a social front, there are now fewer restrictions on the freedom of movement, improving the morale of many people and possibly reversing some of the job losses reported throughout 2020. Being at this level of lockdown tells us that we have done well as a country to help fight the battle, but the war is not over as many of the risks associated with the pandemic remain, with the looming potential of a third wave.
A snapshot of the comprehensive response to the COVID-19 pandemic
Almost a year ago, President Cyril Ramaphosa announced a nationwide lockdown to limit the spread of COVID-19. South Africa was praised around the world for the strict measures taken to protect its citizens. These measures meant that only essential services could operate, placing 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 contributing to national health and humanitarian relief efforts. In addition to this, an economic response plan was formulated, and several measures were put in place to mitigate the anticipated negative financial consequences of the pandemic. This included additional grants such as the basic income grant as well as support from UIF to about [2.5] million employees. Finally, the economic response plan also included the provision of loans, grants and debt-restructuring to SMMEs totalling over R500 million.
On the monetary front, the South African Reserve Bank supported our economy by significantly reducing the repo interest rate and taking other measures to improve liquidity in the economy.
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.
The impact of the COVID-19 pandemic on SMMEs
The COVID-19 pandemic and consequent lockdowns impacted the turnover of many businesses, particularly SMMEs. These businesses experienced a significant reduction in turnover starting 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 from the company demonstrates how the turnover of SMMEs increased as we reopened the economy by progressing into less stringent lockdown levels. 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 businesses prior to when the lockdown was implemented is used as a base for comparison against subsequent turnover. 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 some organisations may potentially never completely return to how they used to operate. A possible lasting change is that organisations are expected to offer employees the choice to work from home or the office, and 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 localisation has created jobs and opportunities, helping to stimulate the South African economy. This trend 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.
Government’s ongoing support has focussed 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 may 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.