Some SME green shoots among the thorns: one year on and there are signs of life

It’s one year on from the start of South Africa’s hard lockdown, which closed every business except those in essential services. We have seen the devastation that this, and subsequent lockdowns have caused, both in terms of the loss of lives and livelihoods. Yet, according to a Retail Capital survey – which was conducted in February of this year – 12 months later there are some green shoots among the thorns, with some SMEs reporting that they have not only survived but thrived. The survey was based on 500 respondents, with the majority aged between 36 and 45, are male (60%) and live in Gauteng (33,1%).

Key findings indicate that over the past year:

  • 7,9% of businesses’ financial performance improved over lockdown
  • 4,2% employed more staff
  • 9,2% of businesses’ profits increased
  • 11,7% reported that profits stayed the same
  • 9,2% saw their turnover go up

“While these may be relatively low percentages, they are encouraging and indicate that it has not necessarily been doom and gloom for all SMEs,” says Karl Westvig, CEO of Retail Capital.

Acting fast

This could in large part be due to many SMEs’ quick response to the pandemic, changing their business models and operations overnight. “38,8% reported that they had pivoted their business’s services and offerings, 22,7% went completely remote while a further 21,9% continued trading as usual,” says Westvig. “Collectively, that is 83,4% of the SMEs surveyed who reported that they managed to make it through the year.

“The same sample also positively reported that over the next 12 months, they will make their business work (60,4%) although a more cautious 26% said they would manage, if there were no further lockdowns,” comments Westvig.

Third wave possible

Of course, we are sitting on the edge of a possible third wave as Easter celebrations get underway, with many expected to attend religious gatherings. While we remain on Level 1, following the President’s most recent Family Meeting, the increased inter-provincial travel could drive infections up again, which currently sit on around 1000 a day – this is down from the 21 000 experienced during the peak of the second wave.

Fortunately, given alcohol can still be enjoyed on-consumption and travel is possible, the tourism, hospitality and alcohol these industries will be saved this time from a complete shutdown, which is a life-saver as they are also those sectors that cannot turn to tech to help them through the tough times.

“Businesses that rely on people to be physically present at their premises, such as hotels and events, or that are not outright banned as has been the case with alcohol, don’t have the luxury of going online, which has been a lifeline for many as our survey suggests: 39,6% teched-up and made use of ecommerce platforms to continue to trade,” says Westvig.



Finding financial aid

When it comes to generating income, besides the fortunate 9,2% whose profits increased or the 11,7% whose profits stayed the same, most of those surveyed reported a decline in sales since last March: 31,5% are currently running at a loss, while 29,6% are only just breaking even.

Interestingly, while the majority were affected financially, a large portion (50,2%) did not reduce their staff complement. “This is typical of a small business owner. We have seen time and time again that they will do everything in their power to reduce costs before implementing retrenchments or salary cuts, even cutting their own salaries before anyone else’s. This demonstrates a huge sense of empathy among our SMEs, and that they are fighting not only for their survival but also that of their staff,” says Westvig.

Many also turned to those that could offer financial aid, with 46,2% reporting they had taken this route. The majority approached the banks (41,4%), or SMME Relief Finance Facilities (26,6%) while 26,6% applied for TERs. Yet, as is common knowledge, the majority did not receive any pay-outs from these organisations, with 60,8% reporting this was the case. Among those that did acquire funding (39,2%), the majority was from TERS (49,4%), Financial Institutions/ Private Lenders (26,4%) and the banks (21,8%).

Alternative options a lifeline for smaller SMEs

“Procuring financial help has been widely reported on, with Government and the banks in particular coming under fire due to their lack of support of smaller SMEs that earn under R100k per month. Fortunately alternative lenders like ourselves fill this gap, and we have seen an increase in applications for this type of finance over the past 12 months, particularly among business that sell electronics, home improvements, exercise equipment and home furnishings. Collectively, this brings our total contribution for the lockdown period to date to R1,2-billion,” concludes Westvig.

As we get closer to winter and an inevitable third wave becomes more probable, Westvig advises SMEs to turn to technology wherever possible, cut financial corners where they can and seek financial aids that can assist them when they need it most.


Karl Westvig, CEO of Retail Capital

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