CAPE TOWN – Small, medium- and micro-sized enterprises (SMMEs) could have shed as many as 813 000 jobs during the lockdown, according to the findings of a survey by the Inclusive Society Institute (ISI), during the period.
The ISI, an autonomous and independent institution that functions independently from any other entity, said this could be somewhat mitigated should the lockdown be suspended by the end of April, as the enterprises indicated that most jobs would be reinstated, either when they reopen or as soon as cash flow permitted.
The ISI survey was conducted among SMMEs from across the country between April 10 and 13 2020, with a total of 1 084 South African SMMEs drawn from all sectors forming part of the poll.
The survey found that the heavily impacted SMME sector might be able to recuperate should the lockdown be lifted at the end of April 2020, however, any further extension of the lockdown in its current format would have dire consequences for the sustainability of small businesses in the longer term.
The ISI said in the longer term, this would mean that the real job loss figure in the SMME sector due to the Covid-19 calamity would be about 80 000. “However, should the lockdown be extended beyond April, the position would be profoundly different, with 76 percent of enterprises indicating that they would need to further retrench staff in that event.
“Moreover, 70 percent of participating enterprises suggested that they would not survive a further extension without external support. Confidence in their ability to survive the lockdown drastically declines from 69 percent should the lockdown end on April 30, to only 30 percent should it be extended.
“Results in terms of SMME cash flow reveal a similar picture. While cashflow already seemed problematic in April – 76 percent of respondents indicated cash flow problems – the position under a lockdown extension becomes even more critical – 91 percent would not have sufficient cash flow to fund operations.
“Some 56 percent of the enterprises had applied for support from the various funds set up to help alleviate the economic hardship imposed by the Covid-19 measures. A worrying observation, however, is that by the time of the survey, only 4 percent of the survey respondents had received approval, despite the fact that nearly three weeks had passed since the relief measures were first announced. The full effect of these measures is to be determined,” reads the ISI report released on Friday.
The survey also tested the enterprises’ acceptance of new fiscal measures aimed at supporting economic recovery.
A substantial number of respondents seem to support additional tax measures, such as a once-off “Covid-19 Recovery Levy” on turnover, and a 1 percent to 2 percent once-off “Solidarity Tax” on individuals with a taxable income of over R240 000 per annum.
At a 0.25 percent levy on turnover, the recovery levy could potentially raise around R25 billion, while a 1 percent solidarity tax could generate as much as R2.8 billion.
Recommendations
- Policymakers should give due regard to the finding that 70 percent of enterprises surveyed do not believe they would survive a further extension of the lockdown in its current form, and that 76 percent of enterprises would need to further reduce staff in that event. Should an extended lockdown be considered crucial to curb the spread of Covid-19, mechanisms must be considered to allow SMMEs to operate more effectively, albeit with strict social distancing rules.
- It is further proposed that policymakers undertake economic modelling to examine the feasibility of the new fiscal measures explored in the survey (ie the recovery levy and solidarity tax).
- Finally, additional mechanisms need to be considered to support SMMEs specifically, and all mechanisms, both current and future, should be streamlined to ensure speedier decision-making and transfer of financial aid to enterprises in need.