South African economy is swimming in deep waters, and the Covid-19 outbreak is not making it any easier.
According to Small Business Institute CEO John Dludlu, more should be done not by business owners, but by policy makers to help small businesses to grow and be sustainable.
In an exclusive interview with Vutivi Business News, Dludlu pointed out that not much was being done by the government in a way of lending assistance to invest in the small business economy.
He explained that there was money in government to save Small Medium and Micro Enterprises (SMMEs) but that money was still “trapped in red tape.”
“Our main concern is that there is still more money in the system which, in theory, is available to save the SMMEs (formal and informal), and this money is being trapped by red tape. Our view has always been two-fold: this is a crisis and accordingly we should respond as such.”
Dludlu also cautioned that it would be wrong if the government could use the Covid-19 crisis to resolve other pre-existing problems like a lack of compliance and the need to formalise the SMME sector.
He said that the main focus should be on saving livelihoods while policy makers and lenders should play their part in saving small business.
“In this respect, we propose the following: first, let’s learn from other jurisdictions (where) fewer businesses want loans; second, what’s required is grant funding; and third, we need to confront the truth.”
He lashed out against the government’s failure to match the private sector’s willingness to give SMMEs a helping hand during this pandemic.
“Two charitable foundations, the Oppenheimers and the Ruperts, have been able to commit R2 billion to helping businesses during these difficult times. The question is, why has the public sector been unable?” he asked.
“Government has provided a R100 billion credit guarantee scheme to back up loans to SMEs, and there’s been slow uptake. Why reinvent the wheel? Our proposal is to include non-banking lenders into the mix. Otherwise we continue to have the same disappointing results.”
Dludlu also said that hard truths about the state of the economy have to be faced.
“We really have to stop romanticising the pre-2019 economy. It was hugely imperfect, unequal, racist and unsustainable.”
Dludlu said few steps could be taken by the government in this pandemic affected economic climate.
“Let’s think about localising the supply of Covid-19 related goods and services such as manufacture, distribution and supply of masks. Let’s release the high-demand spectrum, let’s license new sources of energy and let us unleash the potential of the cannabis industry,” he said.
Dludlu also warned that if black people were not included into the economy, the country might face another pandemic.
He argued that the government was not doing enough to ensure that SMMEs which were mostly run by black people were not benefiting from government policies.