Article written by Karl Westvig (CEO Retail Capital)
South African small business owners should accept that government does nothing for the sector and that announcements about relief for small and medium enterprises (SMEs) are merely political rhetoric. Once we collectively come to that understanding, the current survival and future sustainability of the sector can be addressed meaningfully.
That the government enjoys publicity from headlines announcing R1,4-billion relief or even the R200-billion Covid-19 scheme, is disappointing. One merely needs to look at how much of this money has actually reached the coffers of distressed businesses to understand the blurry space between a publicity stunt and a meaningful intervention.
Beyond this, it is high time that SMEs and opinion-makers in the country call efforts such as a R1,4-billion relief what they are: pitiful. To illustrate this, South Africa’s is roughly a R5-trillion economy. SMEs make up 30% of this. This means that SMEs account for R1,5-trillion of our GDP, and yet the government gets headlines for R1,4-billion – even before it is even demonstrated whether this tiny amount will even reach the intended recipients. It doesn’t even move the dial.
Remember the R200bn Covid-19 funding scheme? The disappointment is still palpable, as of the R17,5-odd-billion that was eventually disbursed, almost nothing went to real small businesses, and rather found its way to the bigger players with closer to R300-million turnover. The government expected the banks to take on the risk, and banks, as we know, do not lend to distressed businesses. Alternative lenders do.
It’s all smoke and mirrors, which is disappointing because while all this rhetoric fills the airwaves, there are real women and men, real businesses, that are hemorrhaging and in desperate need of support.
In my travels around the continent I have witnessed a different way of seeing the government’s role in the business sector. There are immensely successful businesses, in countries throughout the continent that understand that they need to rid themselves of any dependence on their government. Out of necessity, they have built self-sustainability.
It would be natural to ask whether coming to this conclusion is unpatriotic. Absolutely not. The opposite is true, because the real support, the real solution, lies in relying on fellow South Africans and fellow businesses that firmly believe in the immense potential of this country. It is among ourselves, those of us who ply our trade in the daily realities of the sector that the real hope for SMEs lies.
We started a new year during a notably stricter lockdown. Collectively, we learnt a lot during the hard lockdown of last year. These lessons have become institutional wisdom in the SME sector. At Retail Capital, we are privileged to have a broad customer base across industries, and with this, a bird’s eye view of what does and does not work, and we can categorically state that there are definitely steps that every business owner can take to protect their business and survive now, and then pivot to emerge on the other side stronger and more resilient than before.
The first, and one that most businesses we have encountered have done, is cut costs. Trim the fat, tighten the belt, use whichever metaphor you must, but simply put, make sure that your costs are as low as possible. This is a stopgap to keep your head above water.
Then, at the same time, innovate. Look at different ways of bringing the most cost-effective product or services to the market. Analyse every aspect of your business and consider different channels. We have encountered businesses that went from selling swimwear to being successful fresh produce distributors.
The single-biggest effect of the pandemic has been digital transformation. It doesn’t matter how many times you hear it repeated, if you do not embrace the digital wave you are going to become obsolete.
We have witnessed a sharp increase in e-Commerce investment. All sorts of SMEs, who know that their survival depends on action, have signed up with online payment portals, set up a store on a public platform, invested in warehousing and delivery solutions, and enjoyed a staggering volume of online purchases. You guessed it, they didn’t get the funding for this from the government.
To demonstrate what real support looks like, when we disburse funds for an e-Commerce investment, it doesn’t come with smoke and mirrors. We make available a game plan, or blueprint, built from best practice across sectors. It is in our interest, as much as the business’s that the investment works.
But here is where it becomes exciting: we have witnessed businesses fundamentally change their fortunes by taking action during the pandemic. While e-Commerce has traditionally been a very small part of total retail in the country, we know of businesses doing 2.5 times their turnover using this new channel.
Digital investment doesn’t end with online commerce – it includes digital marketing, automating of systems, cloud-based payroll, apps, chat bots, and more. Beyond digital transformation, businesses can look at what stock they carry, their menus, their suppliers, their in-store experience and how they deploy their staff.
The point is, each business is unique and each business owner would do well to connect with support networks and objective advisors and find the gaps and opportunities for their own companies.
In their quest to become self-sustaining, SME owners should seek out platforms and networks with a wealth of resources that have been set up to support the sector. That’s what SMEs need to rebound and rebuild, not more empty promises.