This weekend, I spent a considerable amount of time studying the newly released report by financial services company Finfind into South Africa’s small business sector. Its findings are both sobering and unsettling, pointing to a sector neglected and undersupported by the government long before the virus outbreak in Wuhan fundamentally altered our established ways of life.
The SA SMME Covid-19 Impact Report surveyed almost 1,500 small businesses, mapping their standing before lockdown and then focusing on the impact of the lockdown over a five-month period, starting at Level 5.
Three top-line findings stood out to me: (1) that over three-quarters of SMMEs experienced a “significant” decrease in revenue; (2) that 99.9 % of those closed businesses which applied for government relief funding were rejected; and (3) that 42.7% of SMMEs have closed since the start of Level 5 lockdown in March of this year.
There is much debate as to whether the hard lockdown should have persisted as long as it did, and there is merit to parts of the argument. But what isn’t up for debate is that the government failed start-ups and entrepreneurs long before the lockdown. This meant that a sector already on its knees became the biggest victim of the Covid-19 lockdown.
A job brings so much more than just an income. It brings order, meaning and value to an otherwise chaotic existence. In the words of former US president Bill Clinton, “I do not believe we can repair the basic fabric of society until people who are willing to work have work. Work organises life. It gives structure and discipline to life.” This is true for SA today as it was for the US in the late 1990s.
By the government’s own admission, 90% of all jobs to be created by 2030 will be in the SMME sector. In a country with one of the highest unemployment rates in the world, each and every policy, regulation, law and decision should be viewed through the prism of “will this support entrepreneurs and start-ups in creating jobs?”
I maintain that for SA to succeed we must become a “start-up nation”. In light of this, last month the One South Africa Movement launched “The 8” entrepreneurship initiative alongside several partners. The 8 is a collective of small businesses and entrepreneurs that share audiences, resources and intelligence to grow their own visibility and size. While growing, The 8 grows new businesses and launches them into its ecosystem.
The 8 champions and promotes some key factors, as follows:
Firstly, simplicity is the name of the game in starting SMMEs. The red tape that strangles nascent entrepreneurs is inefficient and unnecessary. Therefore, registration should be free and simplified so that any South African with a new idea can get up and running within days.
Secondly, we require a funding overhaul. The 8’s key focus is to facilitate smaller funding amounts that are easily accessible and have more flexible repayment terms. Most entrepreneurs require small amounts of initial seed capital and access to loans of R20,000 to R80,000 ought to be more accessible. Moreover, tax exemptions are crucial to this sector. First year tax-free is a policy Treasury and SARS could explore.
Thirdly, we must have a multilayered support system for SMMEs. This includes mentors, brand recognition and promotion, and leveraging social capital in key markets. This is how we expand the net and the reach instead of keeping it within only a few hands.
Fourthly, incentivising buying local and stimulating local consumption. This will require national campaigns alongside amending tariffs which in turn lower input costs for local SMMEs.
The truth is that future industries are about smaller companies and the decline of a company like Kodak holds instructive lessons in this regard. Here a multimillion-dollar company with thousands of employees was relegated to history and replaced by a few innovators at Instagram.
President Cyril Ramaphosa has now held several investor conferences focusing on big business and big labour. This is an industrial-era strategy that isn’t future-focused. Instead, let’s hold quarterly SMME indabas that will model innovation and open the door for start-ups and entrepreneurs.
South Africa needs change in how we think about start-ups and the world of work. And that work starts now. DM