Financial services company Finfind has published a new report showing how Small, Medium and Micro Enterprises (SMMEs) bore the brunt of the country’s coronavirus lockdown.
The study, which was published in collaboration with the Department of Small Business Development and a number of business groups, is based on a survey of 1,489 businesses across every major sector.
The data shows that in the first five months of lockdown, 76.2% of businesses surveyed experienced a significant decrease in revenue.
35.2% had cash reserves saved, and of these, 62.6% thought their cash reserves would last between one and three months. However, only 29.2% of businesses were confident they could pay expenses the following month.
Existing debt, lack of cash reserves, outdated financials, no access to relief funding, and an inability to operate during the lockdown, forced the closure of 42.7% of small businesses.
Surprisingly, only 47.9% of businesses that closed had applied for Covid-19 relief funding. However, virtually all (99.9%) of these funding applications were rejected, Finfind said.
While the outlook for the future is largely uncertain for SMMEs, 76.7% of the business owners who were able to remain open, are optimistic about being able to survive in 2021.
Only 32%, however, believe that they will be able to create new jobs – a significant alarm bell during an unprecedented unemployment crisis, Finfind said.
“Access to funding remains top of the list of challenges reported by SMMEs. It is concerning to note that poor consumer credit scores remain one of the primary reasons cited by banks for rejecting Covid-19 relief funding applications.
“Banks urgently need to develop new credit assessment models centred on the re-payment history of the business itself, rather than focusing on the business owner’s personal credit record, to determine the business’ credit worthiness.”
Going forward, the common thread among the businesses surveyed is that funding and ‘going digital’ are major priorities, Finfind said.
“In the wake of 2020, the coming year will likely be a rocky road for most South Africans, but there is still some optimism from entrepreneurs, who courageously continue to build this vital business sector.”