Strengthening the ecosystems in which small businesses operate to help them survive COVID 19 and protect them in the future

In addition to being a global health crisis, the COVID-19 pandemic has extensive socio-economic impacts, putting many companies in our economy at risk of being forced out of business. Up to 41% of businesses are likely to close their doors (Starts SA). The crisis has hit small businesses — classified as small, medium, and micro-enterprises (SMMEs) — and their workers particularly hard. The COVID-19 pandemic has severely affected SMMEs across the world in three fundamental ways: a collapse in supply, a collapse in demand and through confinement requirements.

In some countries, governments have provided financial support programmes to soften the blow of the crisis. Most developing countries, however, are not able to do so to the detriment of their SMMEs/MSMEs and the affected communities. We must be grateful for the quick response of the South African government in leading the charge for protecting our business sector and the jobs it provides. Time will tell if the national effort will justify the investment made.

It is becoming clear that some parts of the economy will be decimated, especially in the services sector (hospitality, beauty, are examples). We hope that manufacturing, agriculture, and the ICT sectors will count among those that will be more resilient. But then, there is still so much that we do not know. How long is the coronavirus’ visit here? Your guess is as good as mine.

The current situation points to a need for more robust ecosystems to support small businesses and their production, jobs, livelihoods, and societal welfare. Better access to information, addressing logistical issues, technology and other barriers, better access to finance, public procurement, e-commerce, tax abatement, and loan repayment holidays etc. are some important elements to help small businesses face and survive the pandemic’s consequences.

In addition, ‘stress testing’ the supportive ecosystems in which the SMMEs operate might be a good idea. A stress or pressure test can help identify the systems’ weaknesses and help understand how to strengthen their robustness. Stress and shock testing financial systems in the aftermath of the 2008-09 financial crisis provided interesting and useful insights into making these systems more resilient.

Within business ecosystems, the institutions involved play a critical role. A key insight from the current crisis is that capable and competent institutions, underpinned by citizens’ trust in these institutions, make a huge difference for the country’s’ ability to address the crisis. This applies to business support organizations (government agencies, incubators and accelerators), many practitioners and professional serving the small business community in various capacities as well as government institutions at various levels.

One of the often-repeated weaknesses of our ecosystem, is its lack of connectedness and the high degree of silos within it, which is inefficient, porous, and therefore wasteful. Take, as an example, the over-concentration of business development support (BDS) services in specific parts of a few metros and the almost total lack of basic support services in rural communities and township areas. This is perhaps an opportunity to put to scrutiny the way we go about our work in the ecosystem and do some serious and urgent ‘scaffolding and renovations’ to our business models so that we are stronger and sharper to support a strong post COVID 19 economic recovery phase. Perhaps we can take our own advice and leverage strategic partnership and technology to aide effective delivery of services to our small business community – if they survive and thrive we will have earned the credit for the critical contribution we would have made. We will be more relevant and closer to our clients in their recovery phase post-COVID 19.

Sifiso Ndwandwe, ED

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