Unrest: Small businesses will take economy down with them

Small businesses took the biggest hit from the recent bouts of looting and riots in Kwa-Zulu Natal and Gauteng, according to a recent survey by Beyond-Covid, and their inability to bounce back might be detrimental to the country’s economy as a whole.

The non-profit company (NPC) and other experts suggest these events have exposed how vulnerable small businesses are to volatility, despite being the backbone of employment in South Africa. It is estimated that 72% of businesses affected by the looting sprees in early July fall in the category of small and micro enterprises, including informal traders.

“What is worrying is that the small, micro and informal businesses reported an average drop in revenue of 63%, so the impact of those riots has cost them two thirds of their revenue,” says Beyond-Covid founder Lings Naidoo. Of those businesses, an average of three out of ten surveyed informal traders and micro-businesses have retrenched staff.

Also Read: The looting and violence is all about unfinished business in SA

“An example closer to home for me is that my sister-in-law works at a trading store in Kliptown, Soweto, where about five stores on that road were burned to the ground completely and the owners have no idea when they will go back to business. She says she doesn’t think she will work for the next three to six months,” Naidoo remarks.

Another immediate threat to the economy is that two thirds of small businesses who suffered as a result of the recent unrest are not insured, he adds.

The company is embarking on emergency measures to help such businesses with cash injections and other resources. The report on the survey will be released later this week, but early indications are that cash injections,  infrastructure and services are among the most immediate needs for most affected enterprises to get back on their feet.

Small businesses have been in crisis since the onset of the pandemic.  According to Beyond-Covid data from earlier this year, only 13% of small businesses affected by Covid-19 related restrictions had bounced back by March this year, compared to 71% of medium and larger enterprises.

Rebuilding the township economy

Another NPC rushing to the rescue of small businesses affected by the riots is Afrika Tikkun NPC, which last week launched the #RebuildingTownshipEconomies campaign, aimed at small businesses trading in  townships around Gauteng and KwaZulu-Natal.

Afrika Tikkun CEO Alef Meulenberg says the company is concerned about the devastation caused to households whose livelihoods depend on small businesses in these communities. “We need to save small businesses in the communities to safe people’s jobs. We have started recruiting 200 businesses to assist immediately. That saves about 1000 jobs.”

Doomed without a lifeline

The majority of small businesses affected by the riots may not have the chance to bounce back if rescue doesn’t come their way, suggests Busisiwe Mdletshe, Group CEO of tax company Btmt Capital.

“Property damages and stock losses have resulted in businesses halting their activities until properties are restored and stock is replenished.  There is still an issue on insurance claims, whether insurance companies or the South African Special Risks Insurance Association (SASRIA) is responsible,” she remarks.

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“We need to also bear in mind that a lot of small businesses did not have insurance, they thus have to rely on their savings to recover, and this might not be possible. While business activities are on hold, that will have an adverse impact on corporate income tax collected by the country from business owners; decline on personal income tax from individuals that could lose their jobs due to businesses being unable to recover, and reduction in VAT collected from consumers due to a decrease in household disposable income.”

Signs of a broken, disparate society

The expected fallout includes more angry unemployed youth and the risk of the cycle repeating itself, warns Action SA KZN leader Dr Makhosi Khoza.

Currently the province has seen a rise in crime levels affecting small businesses and traders even further post the riots. This is because of the ripple effect caused by the targeting of large retailers and producers who are relied upon for food security as well as employment.

Food and essential goods have become more expensive for the most vulnerable consumers, says Khoza who visited townships around Durban this weekend. Food and essential goods traders in vulnerable communities relied on the very retailers and wholesalers who were targeted and shut down in the province, making food scarce and driving up the prices.

Khoza claims some traders have had to double or even triple their prices because their costs have sky-rocketed.

“If you look at what is going on in Inanda right now, the traders are facing a double blow because they are increasingly becoming victims of crime. They say that even today, 20% of their stock is being stolen because of the rising crime levels as an after-effect of the unrest,” explains Khoza.

What is most tragic is that most of the people who took part in looting are part of the vulnerable communities which are now suffering, she concludes.

Simnikiweh@citizen.co.za