Covid-caused liquidations hit SMMEs hardest, stats show

Liquidations hit small, medium and micro enterprises (SMMEs) hardest and according to Statistics SA data released on Monday, 216 companies were liquidated in March, compared to 178 in February, a jump of 21% and 49% higher than in March last year.

Overall the total number of liquidations increased by 18.9% in the first quarter of 2021 compared to the first quarter of 2020. Financing, insurance, real estate and business services had 77 liquidations, while trade, catering and accommodation had 47 and manufacturing 10.  Small businesses are the hardest hit, says Lings Naidoo, co-founder of BeyondCOVID.

BeyondCOVID Business Survey was launched last year during the hard lockdown and is conducted by specialist management consultancy Redflank to evaluate the impact of the pandemic on SMMEs. This research has shown that smaller, micro and medium-sized businesses are generally 26 times more likely to close their doors in times of economic upheaval than their corporate counterparts.

ALSO READ: 1.2 million workers could be retrenched in next 6 months

Naidoo says BeyondCOVID is determined to help businesses cope with whatever is coming their way this year and beyond, over and above, providing them with trends, forecasts and information they can use to develop survival strategies.

BeyondCOVID has so far talked to Chambers of Commerce and various other players, as well as organising smaller ventures into risk-sharing structures, known as SMME Collectives, that are supported by the organisations networks, services and technological innovations.

“It is true what they say: safety in numbers, also for businesses. Being part of a bigger organisation that has the means individual smaller companies lack, creates more stability. This is exactly what businesses and South Africa need in uncertain times. Covid-19 will be here to stay for a while. We need to work with, not fight, this reality,” he says.

ALSO READ: R200m Covid-19 loan scheme ‘largely dead’ – Intellidex

Liquidations hit SMMEs hardest

Naidoo points out that, despite economic improvements, the situation in South Africa remains precarious as confirmed by the latest statistics of liquidations and insolvencies.

Business consultants say the hardship is a direct result of the past year and affects smaller companies most.

“It is not that more companies suddenly found themselves in trouble. Many of the businesses that have folded in March this year, in all likelihood mostly smaller and medium-sized businesses, have struggled for many months before having to close, if not longer.”

This is how SMMEs are suffering

According to the survey, 26% of SMMEs that participated had to close temporarily or permanently during the lockdown, with 54% of respondents saying they were working below their usual capacity, while a third said they needed funding to continue trading.