South African SMEs Begin Road to Economic Recovery

South African President Cyril Ramaphosa. Image sourced from Forbes.

Small businesses in South Africa were at a low point on 10 April. Under the weight of the COVID-19 burden, many companies were almost at breaking point. Turnover has been down by 92% relative to the period before the lockdown went into effect on 24 March.

There are now signs that economic activity is beginning to pick up, according to Tech Cabal.

As of 21 May, trading within the Small Medium and Micro Enterprises (SMME) sector was at 44% of pre-lockdown levels. That’s according to the Small Business Recovery Monitor launched by Yoco, a South African fintech.

Sourced from Yoco.

In the last week of April, the South African government eased restrictions by stepping down the lockdown from Level 5 to 4. It was the beginning of a “phased and gradual return to economic activity,” President Cyril Ramaphosa said on 30 April. The consequence, according to Yoco’s data, is a gradual uptick in sales for small businesses.

As the country with the highest number of recorded cases in Africa, South Africa is under the microscope as a case study in how the continent’s economy reacts to the downturn. The country was already battling a recession before the pandemic turned up the heat, leading to warnings by concerned groups that continued lockdowns will create a humanitarian crisis.

Katlego Maphai, Yoco’s CEO and co-founder, agrees the pandemic and the associated lockdown has been devastating. But going by the data they are seeing, he hopes this is “the start of a story of recovery and resurgence.”

Now that South Africa will begin to enter level 3 at the beginning of June, President Ramaphosa plans to vary alert levels to accelerate return to normalcy in regions with lesser disease burdens.

At level 4, online shopping was no longer restricted to the range of goods only physical stores could sell. Restaurants were allowed to sell hot food on delivery within a specified period. These relaxed rules increased activity in three sectors: retail, food and hospitality, and health and fitness.

The biggest jump in SME trading, per Yoco’s recovery monitor, has been in retail with turnover at more than 70% of pre-lockdown levels. Food is at 44% as delivery businesses received a freer hand, though they are subject to a curfew.

It is the government’s hope that, when initiated, level 3 will bring “a progressively greater relaxation of restrictions” in work and social activities, Ramaphosa says. It could increase public confidence and spur more people towards consumption, thereby having an uplifting effect on small businesses.

Edited by Luis Monzon
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