SME in a Covid World: Stimulating Small Business Growth

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This Webinar was hosted by the Mail & Guardian and Absa. It featured Motlatjo Moholwa, Deputy Director-General (Economic Planning) at the Gauteng Department of Economic Development and Acting Chief Executive Officer at the Gauteng Enterprise Propeller (GEP); Oscar Siziba, Managing Executive of the Relationship Banking Coverage segment for Gauteng and Limpopo at Absa’s Retail and Business Bank; and business speaker Vusi Thembekwayo. It was facilitated by Michael Avery, Anchor for Classic Business and Editor of Catalyst Private Equity Magazine.

We’re clearly going through new and interesting times, and the South African economy has changed so much, particularly regarding manufacturing. “Proximity to customers is the most important thing for SMEs right now,” said Vusi Thembekwayo.

Small businesses must re-examine their business models and endeavour to understand their customers, and know what their new needs are. Some SMEs have been able to pivot fast: some that used to sell suits are now selling masks. “Revise your costs, and think about what your core business is — this will enable you to get over this mountain. Use this moment to focus on what you are really good at,” advised Oscar Siziba.

As SMEs will be critical to restarting the economy, the government’s core strategy right now is making sure that all SMEs have access to relief. At the GEP we are giving small businesses a six-month debt holiday, and the private sector must do the same. No business should be black-listed at this stage. SMEs also need market access, and we are partnering with the private sector in this regard. “Basically we must de-risk this sector, or reduce risk as much as possible,” said Motlajo Moholwa.

The simple answers are the best answers in a crisis like this. We all think are providing essential services, but are we, or are we actually frills? All the frill purchases have been cut, such as advertising. If you are not essential, this may be the basis of your business pivot. “Perfect” is the enemy of good enough: if your product is good enough, get it out into the market.

“South Africans have a bad relationship with small businesses; they are used to being serviced by large organisations, so if a small business lapses in any way with delivery of goods or services, they default back to the large corporations. We need to rethink that mind-set,” said Thembekwayo.

Siziba said that Absa is committed to its engagement with it SMEs. “We are banking those SMEs that are in good standing, to help them through this crisis. We are really deepening our understanding of the entrepreneur, and our solutions have to be tailor-made, because the things that we have on the shelves are no longer relevant. We are reaching out to the private sector and asking businesses to partner with us to help keep SMEs afloat. We have had to rethink things entirely.”

PPE is required by all government departments, said Moholwa, so we took the stance that all PPE and masks are bought from SMEs. We are emphasising local production post-Covid-19 as well. From July the borders will be opened up, which will create many opportunities for small businesses. Banks are getting strict, so this is the time for banks to provide grants to SMEs, and supply clusters are very important.

The world hasn’t experienced anything like this before, but there are many opportunities in this crisis. It is not just a health crisis, but also a financial crisis, and the virus has spread very fast. We went into this crisis already on our knees, with the South African economy in depression. There will be blood on the streets in sectors like tourism. Many people who were in the sector will have to change direction.

Payment to SMEs within 30 days has become crucial under the Coronavirus. Government is making an effort to ensure that the books show that this is happening, or within an even shorter time period, such as 15 days. The government estimates that in Gauteng alone there will be between 800 000 and two million jobs lost. SMEs will be at the centre of the province’s economic recovery. To this end, the GEP is doing house visits to SMEs, chatting with them, checking what their problems are, giving some loan repayment relief.

“In the banking sector, there are big changes; we have had to revise our criteria for which SMEs qualify for loans,” said Siziba. “We have done a lot of hand-holding and given a lot of advice, for instance asking small businesses what new directions they can go in. The key issue is cash flow, and keeping your cash working, not necessarily showing profit. Businesses have to be taught how to manage their cash, loans, debtors and the process of buying and selling. And banks have to ensure that they don’t overfund small businesses, which can kill them really fast.”

The issue of debt and cash flow has become huge. Some businesses work on year-long sales cycles, and are now caught in a three-month long crisis: should your business forego its relationship with a business it invested in because now there are immediate repayment issues? All businesses have been affected by this crisis, with no exception.

SMEs must above all demonstrate their commitment with regard to the government guaranteed scheme. Small businesses require a lot of support with things like infrastructure and developing their accounting skills. Everyone — banks, the private sector, government — is going to have to become involved in the process of keeping small business alive.

Remember, if you are an owner of a small business: this moment will pass. The question is, who will you be at the end of this?

To register to become a supplier of PPE, visit https://covid19.gauteng.gov.za/ and click on the PPE-Suppliers menu to download the form.

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