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Small Business, Heal Thyself

How much can we rely on government to help small businesses survive the calamitous effects of COVID-19?

Small Business, Heal Thyself

Infection rates in the second wave of COVID-19 are not only bigger, but the virus is spreading at a much faster rate than in wave 1. If you think the jump back to stricter lockdowns is bad, I’m sorry to warn, worse is still to come.

Much worse.

Countering the health and economic risks must be a communal, collective effort. Unfortunately, it’s obvious we can’t count on government much.

The minister of Small Business Development issued a press release on 14 Jan. 2021 proudly announcing that R316 million of the R513 million available to the Debt Relief Scheme has been disbursed.

To any small business, the average pay-out of R211,000 is not insignificant. But in the context of there being 35,865 applications to the Debt Relief Scheme, 14,451 were completed correctly and only 1,497 were approved.

Apparently, this will help retain an estimated 23,254 jobs for a few months. (The scheme allows for up to 6 months’ forecast costs to be supported.)

In October, Stats SA reported that SA had already lost over 600,000 formal-sector jobs. Of the informal sector, who knows how many more jobs we’re losing? So although saving 20,000+ thousand jobs (for a short while) is invaluable to each worker, the effect is barely a token in the greater scheme.

The numbers get worse: of the balance of the fully completed 14,451 applications for debt relief, the financial support needed totals R4.4 billion, of which R3.6 b is purely for salaries (again, for a very limited period).

A similar picture shows up in other places. For example, as at 7 Dec. 2020, banks had approved only 27% of the 47,000 applications for the COVID-19 Loan Guarantee Scheme. (Fin24)

Can government help?

Effectively, no.

The mounting unemployment, adding to an already extreme unemployment rate, reduces government’s tax base. BusinessTech reported that from “2017 to June 2020, the [tax base] declined from 6,100,000 to 2,700,000 individuals . . . a large chunk of that reduction occurred after February 2020.”

At least Ramaphosa isn’t lying too much, as reported by Business Day in its 15 January headline: “No money for Covid-19 relief, says Ramaphosa”.

The writing is on the wall: as small business owners, surviving and recovering from the COVID-19 effects is pretty much up to us.

Get help where you can, but as usual, don’t expect much help from government.

Instead, we must do what good entrepreneurs do best: rely on our own ingenuity.