Putting small businesses front and centre of the recovery

By Funeka Montjane, Chief Executive of Personal and Business Banking at Standard Bank South Africa 

COVID-19 is highlighting the important role that Africa’s entrepreneurs and small businesses play in creating jobs and solving societal problems. It also emphasises the need for a co-ordinated response between large corporates and governments to protect and strengthen this segment in the months ahead. 

The pandemic quickly evolved into a health and an economic crisis, with small businesses and their employees bearing the brunt of national lockdowns as they are far more vulnerable to revenue shocks than more established companies. 

Encouragingly, African governments have been relatively quick to respond to the plight of small businesses, although heavy budget constraints have limited the amount of support they can give. This contrasts with developed economies such as the UK and the US, where governments have rolled out massive support programmes. 

It is therefore critical that large organisations step up and do what they can to safeguard the small business sector. Large organisations with small business creditors must ensure that they pay them on time, or even earlier than before. Late payments disrupt cash flows and can place enormous strain on smaller firms.  

Where possible, corporates should consider providing direct financial support to their small business partners to help them weather the storm. Further, corporates should assess whether they can include more small businesses in their supply chains as well as providing non-financial support. 

The crisis also highlights the need to reform and modernise the informal economy. In South Africa alone, about three-million people work in the informal sector, where access to finance, government support schemes and other safety nets is limited. 

Besides access to funding and support, formalisation brings a range of other benefits. Businesses in the informal sector are generally not registered for value-added tax (VAT), meaning that many miss out on refunds they may be eligible for. 

In South Africa, Standard Bank has partnered with the Small Enterprise Finance Agency (SEFA) to help spaza shops purchase stock through government funding from SEFA-approved wholesalers at discounted prices. 

Embracing digitisation 

Meanwhile, there is an urgent need to help small businesses become more digital. This is especially important in the era of social distancing since businesses that can operate online are holding up better than most. 

Large corporates should consider whether helping small business partners become more digitised. Telecommunications regulators can play their part too by allocating additional spectrum and encouraging the roll-out of broadband services to ensure that small businesses reap the benefits of e-commerce. 

SimplyBlu and Escrow solutions 

Through its SimplyBlu e-commerce solution, Standard Bank offers business owners an innovative all-in-one payment solution that allows a business to set up its own online store and start selling goods and services. With a single secure portal, a business can also monitor payments and issue e-invoices. And to reduce the risk of fraud when buying or selling online, Standard Bank has launched an Escrow service. For buyers, this service safeguards funds in a trust until the seller delivers what was promised. This also gives sellers peace of mind. 

Standard Bank has participated in broader industry initiatives aimed at supporting the small-business sector. South Africa’s R200bn loan-guarantee scheme, a risk-sharing partnership between government and commercial banks, is also easing the financial burden and effects of national lockdowns on small and medium businesses. 

The programme complements the initiatives rolled out by banks in the early days of the pandemic, including extensive loan repayment holidays. 

We have also stepped in to assist by facilitating payments of social grants, reducing ATM fees, supporting the payment of special COVID-19 grants through the Instant Money solution, and reducing cash and acquiring fees. 

Given their fiscal constraints, governments should consider other ways to assist the segment, including a reduction of red tape and the introduction of temporary tax relief measures. 

The magnitude of the crisis calls for ongoing collaboration between business, government and non-profit organisations. Programmes such as the R200bn loan-guarantee scheme are a meaningful and encouraging step in the right direction. 

If we fail to act decisively and appropriately in our collective response, the impact on livelihoods as small businesses fail will be severe. An unhealthy small business sector would also undermine national competitiveness, erode the jobs market and shrink the tax base to the detriment of society at large. 

Our observation is that there is generally a better appreciation for and understanding of the small business segment than ever before, and this sentiment should endure long after COVID-19.