South Africa's small businesses hit hardest by COVID regulations: Study

A recent study revealed that the coronavirus pandemic regulations have had a significant economic impact on small enterprises and the informal sector in South Africa, with over 3 million jobs affected. The study, titled "The Impact of COVID-19 on Micro and Informal Businesses in South Africa," noted that the COVID-19 pandemic and lockdowns were unprecedented, and have been termed as more devastating than the financial catastrophe of a decade ago in the country. The informal sector, which accounted for 8% of South Africa's Gross Domestic Development and employed at least 27% of the workforce, was the hardest hit, found the study which was conducted by the Department of Small Business Development in collaboration with the United Nations Development Program (UNDP). The findings also revealed that micro and informal enterprises that reopened after the lockdown was lifted were still far from regaining or achieving their pre-pandemic income or employment levels.

The study also noted that while the pandemic had a devastating impact on many economic sectors, many other areas such as construction, hospitality, food and beverage, also witnessed a greater fall. The pandemic had a significant impact on women too, with many of them left jobless, according to the report. Though the government provided financial assistance to help reduce the effects of the pandemic, the study found that it concentrated mainly on registered formal companies. Notably, Small and Medium-sized Enterprises (SMEs) play a significant role in economies in Africa as they employ at least 80% of the continent’s workforce in both sectors - formal and informal - but they are often found to be the least robust during times of crisis. This is due to the fact that they often have lesser cash reserves, client bases, and commercial pressure management capabilities compared to larger enterprises, noted the study. 

'Majority of small businesses forced to cut back on spending to survive'

The findings stated that many small businesses in South Africa have seen their earnings plummet as a result of the lockdown measures, and the majority have been forced to cut back on business spending to stay afloat. However, this may not be enough for some, since economists expect that roughly 60% of SMEs will close before the pandemic is completely over. According to the study, the country's micro-businesses were already facing severe challenges. A stagnant economy, combined with repeated downgrades in credit ratings, has had a negative impact on SMEs year after year, and the impact due to COVID-19 is likely to exacerbate these trends, claimed the study. 

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