'Shuttered and hopeless': Help is available to small businesses, but many don't know about it

Over 85% of South African small business owners polled in a recent survey did not know how to access emergency relief funds set up by government and the private sector, while many more did not meet the criteria to qualify for assistance.

The survey, by postgraduate students at the University of Cape Town and entrepreneurs from non-profit Phaphama, was conducted among small business owners from six provinces across 17 industries. Eighty-five percent of them did not receive government grants of any kind and 93% had no other source of income.

A total of 77% of the respondent were female. The survey respondents employed six people on average.

The small business owners, which ranged from fashion designers to fruit and veg suppliers, spaza shop owners, filmmakers, informal traders and tour operators, were asked, among other things, how the coronavirus outbreak was impacting their business.

The survey found that a staggering 95% could not afford to pay their employees, 87% were unable to support themselves or their families during the lockdown, and 50% believed their businesses would not survive.

It also found that 86% of the respondents did not know where to go to access emergency funding, 87% were not able to run their businesses from home, and many did not qualify for the help that was on offer.

The researchers said they applauded government for "swift action" taken to help small business owners, but that there were large gaps that had not been addressed.

'Shuttered and hopeless' 

For some small business owners, the 21-day lockdown announced by President Cyril Ramaphosa late last month has proved to be a final nail in the coffin. "The whole situation is severe to my business, my family and my employees' families," said a Khayelitsha business owner in the clothing industry.

"It happened exactly when I was expecting to recover from a quiet January and February into a busy Easter time. I feel shuttered and hopeless. I do not qualify for a business grant because my documents are not up to date."

A transport company owner in Philippi said they were aware that loans were available, but they were not in a position to commit to repayments and had no one to advise them.

A Salt River filmmaker said while they were able to work, their clients couldn’t, and had cancelled contracts. "Reporting news is essential but I cannot get a permit to go out because I cannot find the permit link on the Cipro website," they said.

A fruit and veg supplier who supplies restaurants simply said, "I think that's the end of our business."

Donations, grants, loans

Several initiatives have been set up, supported by both government and the private sector, to assist small businesses during the coronavirus outbreak.

These include relief from the banking industry, which has instituted a number of measures including payment holidays; and a variety of loans and grants.

In terms of private sector initiatives, the South African Future Trust, for example, was established by Jonathan and Nicky Oppenheimer, offering an initial R1 billion in support to SMEs in distress in the form of interest-free loans. The SAFT said on Monday that it expected to assist over 20 000 people in the space of 48 hours this week.

Then there is the R1 billion Sukuma Relief Programme, set up by the Rupert family, which became oversubscribed just days after it opened.

The public sector, for its part, also has several options in place.

Employers may apply for emergency relief to pay employees who have been temporarily laid off through the Temporary Employer/Employee Relief Scheme (TERS). There's also the SMME Relief Finance Scheme, allowing soft-loan funding for businesses impacted by Covid-19.

Financially distressed small-scale farmers may apply for financial assistance from a new agricultural fund, while a separate R200 million relief fund has been established for the ailing tourism sector.

Government has also offered spaza shops and informal traders a lifeline through its spaza shop support scheme. The package includes bulk buying assistance, seed capital and other support tools.

Businesses that are currently financed by the Small Enterprise Finance Agency (SEFA) can apply for a moratorium on debt repayments. And, of course, several tax relief measures have been introduced.

There are also various forms of support for local businesses that specifically manufacture items - i.e. hygiene or medical products - needed to fight the Covid-19 outbreak. 

The NGO sector has stepped via less well-known initiatives such as Open Road, which provides charitable grants to organisations responding directly to the coronavirus crisis, and four loan options to organisations that have been impacted.

Entrepreneur support initiative ygap has developed a business resilience toolkit to support entrepreneurs, while the Miller Centre and Bertha Centre – the latter being a division of the UCT Graduate School of Business – have collated a central pool of resources online that direct SMEs to disaster recovery and funding options.

Not getting the help they need

But are the initiatives reaching their intended targets?

According to the researchers, mostly not.

The first problem was simply that most of them did not know where to go.

The second problem was eligibility. According to the survey results, just 24 – or around 10% – of participants qualified for assistance from SEFA or SEDA (the Small Enterprise Development Agency). Just one participant qualified for Spaza shop funding, and 46 – or 19% – qualified for Tourism Relief.

And though all the participants were impacted by the Covid-19 outbreak, just 40% met the criteria for Covid-19 Disaster UIF funding.

"In terms of eligibility, funding is only available to businesses that are UIF and tax complaint, have bank statements for about six months and a business plan," the researchers noted.  

Lead researcher Catherine Torrington told Fin24 the study raised the question of whether eligibility requirements were too strict.

She also said that even for those who might qualify, there was often a long lag time between applying for funding and receiving it. To her knowledge, on Wednesday, among the survey participants who had applied for assistance, none had yet received funding.

The waiting period between funding applications and disbursement could simply prove too long for businesses in distress to survive, she said.

In SA, like many countries globally, the overwhelming majority of businesses are SMEs. But the 2019 SME South Africa report noted that most generate revenue of less than R200 000 annually, and some 60% of small businesses in the country have been in business for less than three years.

Despite this, the sector currently employs around 30% of South Africans, with government having identified it as a crucial driver of employment going forward.

But for SMEs who are unaware of, or unable to access, assistance, the path ahead appears bleak.

The researchers have called for a relaxation of eligibility criteria going forward, as well as improving accessibility.

Additionally, they say, applications and information must be available in all SA languages, and sources of funding must be centralised and well advertised, with clear communication on the nature of the funding.

They have also called for the turnover from application to funding to occur within a maximum of seven days.

ZAR/USD
17.12
(-1.31)
ZAR/GBP
21.81
(-1.01)
ZAR/EUR
19.93
(-0.95)
ZAR/AUD
12.04
(-0.93)
ZAR/JPY
0.16
(-1.18)
Gold
1859.00
(-0.38)
Silver
22.75
(-1.81)
Platinum
839.12
(-0.87)
Brent Crude
42.26
(+0.47)
Palladium
2186.00
(-0.97)
All Share
53233.40
(-1.87)
Top 40
49181.24
(-1.89)
Financial 15
9438.05
(-1.57)
Industrial 25
72404.62
(-2.46)
Resource 10
52850.04
(-1.23)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 1363 votes
It depends on how the funds are used.
73% - 8838 votes
No. We should have gotten the loan elsewhere.
16% - 1951 votes
Vote