NOMPU SIZIBA: A group of students from the University of Cape Town put together a document that brings to light the problems faced by businesses in the townships during the 21-day lockdown. Their work is entitled “Covid-19: The impact on small businesses and the gaps in current solutions – the case for better solutions to support entrepreneurs in townships.” To tell us more about their work, their findings and recommendations, I’m joined on the line by Kiren Rutsch, a UCT student and a member of the Phaphama Small Enterprise Development Initiative.
Thanks very much care, Kiren, for joining us. Before we get into the nuts and bolts of your research, tell us who formed part of your research team in terms of the disciplines that you guys are studying at UCT, and what prompted you to do this study.
KIREN RUTSCH: Yes, the team that we set up comes predominantly from UCT, and were all students at UCT. We also have two entrepreneurs that we have worked with through the organisation, Phaphama 30. It’s a small enterprise-development initiative. The UCT students also come from this organisation, so the team is made up of a handful of students and two entrepreneurs that have come from Phaphama.
NOMPU SIZIBA: Excellent. It’s a rough time out there for most businesses and no doubt an even tougher period for the businesses that you surveyed, given that many of them will be survivalist in nature. So just tell us how many small businesses or entrepreneurs you spoke to, how did you engage with them in light of the social-distancing rules, and what were they saying are the immediate impacts of the shutdown on their livelihoods and their ability to pay their staff?
KIREN RUTSCH: It is an incredibly challenging time for these businesses. We weren’t able to speak to these entrepreneurs on such short notice, because of this organisation that I previously mentioned, Phaphama. Basically Phaphama works with about 20 to 30 entrepreneurs per year, and we’ve been running for about four or five years, so we have a lot of networks with entrepreneurs that operate out of developing communities such as Philippi and Khayelitsha in Cape Town.
And so when we wanted to hear what was happening on the ground, and how entrepreneurs that operate on a micro and a small scale are interacting with the system, and how is the shutdown affecting them, we were able to tap into these networks and set up a social-support forum across WhatsApp with these entrepreneurs. Quickly this forum became something of a support network, where entrepreneurs were able to share the challenges that they’re facing, as also share the opportunities and the sort of assistance that was available to them.
So we thought this would be a really good opportunity to be able to collectively speak to the entrepreneurs, and to find out from them what they are going through. So we set up a survey, and we asked these entrepreneurs – at the time there were about 60 to 70 entrepreneurs on the WhatsApp group that we set up with the Phaphama entrepreneurs, and we asked them to fill out a survey. We tried to keep very short, and the survey just had a few questions as to the nature of entrepreneurs’ businesses and also the sort of level of compliance – whether they were UIF compliant, whether they were registered; those were the questions. On top of this we also asked entrepreneurs if they wouldn’t mind sharing the survey around with their own personal networks, and their own business networks. I think we surpassed about 250 responses to the survey, which was very helpful for us because it allowed us to draw certain findings from their feedback.
NOMPU SIZIBA: Yes. And what were the main findings?
KIREN RUTSCH: In terms of the findings we found that, at the time that we were conducting this research, the vast majority of entrepreneurs weren’t aware of the assistance that was available to them, which is obviously a problem. I think the general consensus is that the government has set up very positive structures to at least mitigate, to some degree, the effects that coronavirus is having on small businesses.
But the issue was that entrepreneurs weren’t aware of which assistance was available to them. Oftentimes the assistance that was available had very stringent eligibility requirements. A lot of [4:24]…… negated a lot of access for those entrepreneurs. So we found that, like I said, a high number of entrepreneurs weren’t aware of what assistance was available to them, how to access that assistance. And, moreover, quite worryingly only a small fraction of the businesses that we spoke to would then qualify based on all the stringent requirements for each of the different funding assistance available.
NOMPU SIZIBA: In terms of their experience, before realising that there was support out there for those who could get it, what did they say or what did they tell you was the immediate impact on their lives when lockdown actually happened and they were under the impression that they couldn’t do any work whatsoever, and they had to make do with whatever rands and cents they had in their pocket?
KIREN RUTSCH: Yes. In a nutshell we felt that all or the majority of the entrepreneurs were telling us that they felt that they didn’t have enough reserve funds to make it even through the month if the lockdown continued, and if they didn’t receive any assistance. Naturally this was very worrying.
NOMPU SIZIBA: Initially, the government had said that no foreign spaza shops should be open during the lockdown, but then they realised that perhaps that wasn’t such a great idea – and of course it left a bad taste in the mouths of many, given that all spaza shop service the local community anyway. But presumably those very same spaza shops have also not been able to take advantage of these schemes, even if they’re employing South Africans.
KIREN RUTSCH: Yes. Something that we definitely wanted to draw attention to through our report is we found that for most, if not all, of the funding available, the number one criterion would be you needed to be a South African citizen. I think it is common knowledge that there is a large number of foreign nationals that are operating businesses, especially in areas such Khayelitsha and Philippi that we were speaking to entrepreneurs from, and this has the knock-on effect that these foreign-national owned businesses are still employing South Africans and are working with South Africans, who themselves are not being denied access to these funds. So that was a very worrying conclusion that we drew.
NOMPU SIZIBA: So, to your mind, where else have you seen support gaps for township businesses?
KIREN RUTSCH: In terms of gaps in the currently available assistance, something that was very stark that we started to centre our research around, was that there seemed to be a gap where on one hand you have informal businesses that can operate on a very, very micro scale, and then on the other hand you have legally recognised businesses that have registered, and that fit into that small-business sort of category. But between those two sides there is a large number of entrepreneurs that operate and don’t necessarily fall into, on the one hand, very informal traders, and on the other hand formal traders on a small scale. And this is particularly worrying when we found that most of the entrepreneurs we spoke to do operate in this. And there’s a lot of grey areas, where it’s hard to navigate what is being done to assist those businesses in terms of policy and in terms of the funding available.
NOMPU SIZIBA: Very tricky indeed. They are sort of a missing middle, if you like.
KIREN RUTSCH: Yes. That’s a good way to put it.
NOMPU SIZIBA: Even though the official lockdown is expected to come to an end in a week’s time or so, I guess it’s never too late to come up with how things could be done in a better way during the lockdown period. You guys did come up with recommendations. Just take us through them.
KIREN RUTSCH: I’d be happy to. I do think that, while this is an extremely concerning crisis, there have been some conversations that have been pushed to the forefront in terms of how businesses are interactive assistance, the various sort of administrative bureaucracies that might inhibit businesses’ ability to get the most out of the system that is there to support them.
And so, based on these issues that we did identify in the system, we found that there was some relatively small things that could be enacted upon what’s currently available to assist these small businesses that we spoke to. I have spoken about the fact that legibility requirements were very stringent; oftentimes only a handful of businesses were able to meet every single requirement. You feel that during this time those eligibility requirements need to be relaxed to a degree, so that businesses can access those funds.
The sort of application process for these funds needs to be made much more simple and accessible, and by that I mean there are number of funds that have been set up, but trying to access information on each fund, how to apply for them, what you need to submit as part of the application, is incredibly difficult. And they often don’t take into account the sort of practical side of things, where micro businesses, small businesses, would say the requirement is you might need a six-month projection for your business, or you need new three months’ worth of bank statements. These aren’t easy documents to obtain for businesses during this time, and so those sorts of things really do inhibit the accessibility of funding.
We also feel that during this time, because we’re under such time pressures, efficiency needs to be at the forefront of each of these systems, whether that means that funding meets your needs timeously. Like I said earlier, the majority of our businesses felt that they would have to shut their doors within a month if they received no assistance. And further, distribution of these funds needs to be efficient.
And we’ve had a number of sort of funding portals being closed down, due to the …… applications, and this really does inhibit businesses’ abilities to access these funds.
Without going on for too long, we also just made recommendations around the fact that primarily funding is only available in the form of loans, and for these small businesses that we speak to, taking on extra debt during this time could really be a death sentence for their business.
So we feel there needs to be more of a focus on funding in the form of grants. We understand that this would need to be within practical parameters, and what the government can work around. But we do feel that grants should be the preferred mechanism [with which] this funding is allocated.
And then lastly, maybe in the medium or long term this is more relevant, but there are a number of bodies that are set up to represent small businesses. But it does feel that, for the these businesses that we are speaking to, I think maybe the reason why this report has got as much traction as it has, there isn’t really a mouthpiece for small businesses who are facing challenges to voice their concerns, and then for those concerns to really be recognised by these elements.
So I think there does need to be a but of work done in terms of representation of these small businesses so there isn’t such a disconnect between the businesses on the ground and what they’re facing, and the government and the qualities that they’re enacting.
NOMPU SIZIBA: I hear you. Many thanks, Kiren, for your time.