Small businesses, already hard hit by the COVID-19 pandemic bear the brunt of the recent civil unrest that affected parts of KwaZulu-Natal and Gauteng, accounting for 89% of the businesses impacted.
New research from NPC BeyondCOVID, looking specifically at the impact of the riots on businesses across various sectors reveals that SMMEs, which provide over 70% of the jobs in a country where almost a third of the population is unemployed, stand to lose a staggering R3.4 billion a month in revenue as they attempt to resume operations. They will also need at least R16 billion in operational funding to recover, according to the survey which was conducted by specialist management consultancy Redflank during July, shortly after riots brought parts of the country to a standstill.
Already battling with access to markets and affordable funding during the pandemic, many small businesses now face a 63% drop in revenue since looters ran rampant through the streets. This blow comes in the wake of the pandemic which, according to BeyondCOVID’s second survey results released in March 2021, had resulted in a massive drop in revenue since March 2020.
For many small businesses, already brought to their knees by the pandemic and economic uncertainty, reopening their doors after recent events will be a considerable challenge. BeyondCOVID’s latest survey reveals that 62% of impacted small businesses do not have business insurance, and of those that have closed their doors in recent weeks, only 5% have business interruption insurance.
Cognisant of the critical role SMMEs play in the economy and job creation, the BeyondCOVID Board of Directors, led by Advocate Fay Mukaddam, is engaging with government, private sector and civil society to grow BeyondCOVID into a national cause. “While government and large business interests are critical to the success of BeyondCOVID, it’s also true that all citizens can contribute. Avenues for crowdfunding contributions, along with the innovative approach to derisking SMME Collectives and related funding partnership opportunities, are being made available,” says Mukaddam.
But it’s not just the SMMEs that need help. The findings of the latest survey, based on 1 070 responses from informal, micro, small and large businesses, show that the unrest has left businesses across sectors in dire financial straits. “As expected, the most affected are in KwaZulu-Natal, where 76% said they have been impacted in some way by the unrest. In Gauteng, the percentage is slightly lower at 54%. But this is still more than half of businesses in the country’s commercial and economic hub,” says Lings Naidoo of Redflank. “What is alarming is that more than half (51%) of the impacted businesses in Gauteng and KwaZulu-Natal have either closed permanently (7%), or temporaraliy (44%) The impact of these closures on the economy, and the livelihoods of communities in those areas, is significant.” Particularly worrying is that only 6% of those businesses that were affected during the riots are back to business as usual. “Businesses have been forced to retrench, on average, 10% of their staff,” says Naidoo. “For SMMEs, the retrenchments are even higher, at 11% of the workforce.”
Damage to property during the riots was extensive, says Naidoo. “Of the businesses we surveyed, 42% reported damage to their premises and 8% said they have lost everything. Their premises were completely destroyed.” The most affected were the retail, accommodation and food, health and social services sectors. One of the stand-out scenes from footage of the unrest is of the South African National Blood Service being vandalised in Durban. “The unrest affected not only businesses, but the provision of health care too,” he says.
Naidoo estimated the total cost of the damage to property, based on the extent of the destruction listed by respondents, to be about R126 billion. “SMMEs are looking at damage of about R55 billion, while the cost to informal businesses alone is R4 billion.” More than a third (39%)of businesses surveyed had their stock looted during the rioters’ rampage. More than half (55%) of those who lost revenue through looting were large corporates. Naidoo says businesses that have to repair damage to their premises say it will take six to eight months to recover. For others, it will take, around five months to get back to business.
Larger businesses are in a better position than their SMME counterparts when it comes to insurance. Of those surveyed, 73% said they have some cover. However, even among this group, one in four will have to reopen without the income compensation possible through business interruption insurance. Revenue for all impacted businesses across sectors has dropped by 59% since the riots, with informal businesses grappling with a drop of up to 70%.
The country is now in the grips of the third wave of the pandemic, and there’s no doubt that businesses that have been affected by the unrest will need an urgent lifeline. “Unfortunately, it’s not possible to help all businesses at once, and the SMME sector certainly needs particular attention. BeyondCOVID will initially focus on several key sectors to build momentum before expanding to other industries. The goal is, however, to grow the number of small business collectives, and to provide a safe harbour to small businesses as far as possible,” says Mukaddam.
Key findings – a snapshot of the impact of the unrest
· Only 6% of impacted business are open as usual
· 51% of impacted businesses in KwaZulu-Natal and Gauteng have closed
· 7% of these businesses have closed permanently
· 44% have closed temporarily
· 89% of the businesses impacted are SMMEs
· 46% of impacted businesses don’t have insurance
· 10% of the staff at impacted organisations have been retrenched
· 8% of businesses had their premises completely destroyed