[TOP STORY] Our SMEs’ total turnover is at 112% of pre-pandemic levels

We’ve seen unbelievable growth: our total base is sitting at over 220 000 – almost triple since the pandemic began. There is a huge migration to digital: Matt Brownell, VP of commercial at Yoco.

SIMON BROWN: Chatting now with, Matt Brownell, VP of commercial at Yoco – those little blue devices [used when] you pay for your bread and other bits and pieces, as you do your shopping. I appreciate the time. We’ve chatted a number of times over the course of the pandemic, particularly focusing on your index that tracks the sort of retail spend that’s happening. And the key point we see here is that [there] really has been a massive rebound and the holiday period in particular was strong [with] levels above pre-pandemic. I mean, the short answer is we are out there shopping and the merchant data shows us this.

MATT BROWNELL: Yes, it has been a good performance Simon. So I think if we take a, a step back, we’ve been tracking a base of 30 000 of our customers who are all SMEs … since prior the pandemic and where we’re at now, almost two years later, is that their total turnover is sitting at about 112% of that pre-pandemic level. So all the way back to a state of normality, I suppose, and slightly above.

But what we’ve seen particularly over the last four months is very solid growth.

So, really good month-on-month improvements, a particularly strong December actually. And December is a little isolated to industry. So for example, travel and tourism had a 26% increase year-on-year, December to December – which is a huge jump – whereas the retail was much more muted in December and actually a little bit off in January. So that is offsetting some of the growth in some of the individual industries.

SIMON BROWN: But certainly there [are] indications we were out there flashing our credit cards over the holidays. …Are there cities doing significantly better than other regions, or is it fairly broadly spread?

MATT BROWNELL: It’s pretty good across the country, but actually the Western Cape has become the stand out since about November last year. The Western Cape since day one has been lagging, really due to the reduction in tourism, particularly international tourism. But the Western Cape had an excellent December and a very good January, again really bounced back, I think mostly due to local tourism. But what we have actually seen, which is interesting is that, the number of international cards being used, were sitting at around 2%, all the way through the pandemic of the total number of transactions – a very low number. That’s bounced all the way back towards the 11% level in January, really driven in the Western Cape. So that’s good indications that there’s international tourists that are spending and they’re spending at small business and it’s something which we literally haven’t seen since March 2020.

SIMON BROWN: You talk around the index around 30 000 terminals, have you seen marked growth in the number of terminals that you’ve got out in the market? I mean, are we seeing brave souls start businesses during a pandemic?

MATT BROWNELL: We have seen unbelievable growth. I mean, our total base is now sitting [at] more than 220 000 and that has significantly more than doubled since the pandemic began. In fact, almost three times increased. So there is a huge migration to digital, which has happened and continues to happen and continues to gather pace as more and more people are simply accustomed to paying with digital card, QR code, et cetera, and small businesses adopted that massively.

I think the biggest change is perhaps also happening in the more informal sector, either in cities or townships where we are seeing really now for the first time, the migration to digital payments happening.

And it’s definitely been really boosted by the pandemic and change in behaviour.

SIMON BROWN: Yeah, I suppose it’s that war on cash. I mean, cash was on the way out pre-pandemic and of course now it has … almost become obsolete. Moving away perhaps from the index to a degree, talking around red tape, we saw the State of the Nation Address from the president talking around removing red tape. We saw some positive stuff out of the budget speech as well, but there still is a lot of red tape and for a small business, you’re wanting to be making your product, your widget or whatever it is, and out there selling it, not fighting bureaucracy.

MATT BROWNELL: I think you’re really up against it from day one. And I think anything that’s getting in the way of that is just makes your chance of success so much smaller. Our entire philosophy is remove any kind of barrier that may be getting in the way. And if it’s as simple as a payments barrier, that’s one that’s not quite easy to solve for any small business owner, but I agree with you, there exists far too much red tape at every step of the journey actually.

SIMON BROWN: You talk around massive, significant growth. And some of that obviously is that war on cash, moving away from cash to digital – whether it be credit cards, QR codes, whatever the case may be. This is the old cliché that this is where jobs are going to happen. Particularly if we are looking at the informal sector, you know, someone’s employing one person, they employ a second person. They’ve doubled the number of staff that they hold.

MATT BROWNELL: Yes exactly. I just think that there’s so much innovation happening in the payments space in South Africa at the moment. It’s hugely exciting. I mean, we as a business hired 200 people last year, and that’s just a small example of this ecosystem which is built and our customers are growing at significant rates and are hiring, according to the data that we have. So there are green shoots are there. There’s a long way to go. There are still a huge number of businesses in our base that just never came back on again after the pandemic, particularly in certain industries. So, we are getting back to almost where we were pre-pandemic now, but there’s good signs. And I think that’s something which should be celebrated

SIMON BROWN: And South Africa, and companies such as yourself  – there’s others in the payment space – it’s fair to say we are up there with global leaders. I mean, I think of the US who think chip and PIN are a new concept. They still sign for credit cards, which … kind of smacks of the 1980s.

MATT BROWNELL: Yes. We actually are very progressive. We have progressive regulators. We have now a really significant, burgeoning industry in this country. And it’s concentrated, particularly in the Western Cape interestingly. But there’s a lot of hiring going on. There’s a lot of innovation going on and I think there’s a lot more coming this year, which is particularly exciting. So it’s a sector of the economy which is really firing. And the great news is that,

…we are just now managing to provide access to the real basics of digitisation of small businesses, which were not available a couple of years ago.

There’s now more terminals in the country than any other financial institution out there. And … 80% of our customers never accepted any … form of digital payment before they chose a Yoco device. So it’s real, genuine growing of the pie, which has to be good for small business generally.

SIMON BROWN: Absolutely. I mean it’s a cliche to say a game changer, but it really is a game changer. We’ll leave it there. That’s Matt Brownell, VP of commercial at Yoco.

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