Prof Nzewi participates in continental Covid-19 discussion

Prof Ogo Nzewi,  Associate Professor and Head of the Department Public Administration,  is among a group of academics from Africa who recently participated in a digital seminar on the Covid-19 pandemic. The session was hosted by the University of Cape Coast in Ghana

Below, are excerpts from her presentation titled: Coronavirus Pandemic and Implications for Entrepreneurship and Enterprise Development

The Corona Virus (Covid-19) outbreak represents a perfect storm to test both the economic and health disaster management apparatus of government. Indeed, the virus presents both economic and human life contradictions. This is the sense that the virus compels social distances, which in effect renders much of the economic activities grounded.

The complex debate globally on opening the economy versus protecting the most vulnerable in society is no different in South Africa. Groups with vested interests continue to lobby for one approach or the other. Both the economy and public health safety are huge responsibilities of government. The debates vary and many of them have valid points. However,  the information and evidence feed supporting some of these views range from fact-based to the hysterical. There should be no doubt as to the total damage this virus has impacted so far on entrepreneurship and the economy in general.

This presentation must be taken within the context of the broad inequalities in South Africa. This is because, the well-known expression that ‘the poor die first’,  is clearly displayed when there is a fight for survival. For instance, in the United States, more than 245 public companies applied for at least $905 million from the government programme that was billed as emergency funding for small businesses without access to other sources of capital, according to data analytics firm Fact Squared. When public companies use their clout and power of access to trample on the opportunities for SMEs,  it becomes something of a concern.  This is the nature of society in emergencies and war.  The responsibility of government is to provide as much fairness and equity as possible,  through its interventions during such times.

Government plans and current impact on entrepreneurship

In addition to short term measures of poverty alleviation, entrepreneurship represents one of the biggest long term plans of the South African government in addressing unemployment among the youth. These efforts range from broader-based government invention in championing entrepreneurship ventures like the Broad-Based Black Economic Empowerment Act  (BBBEE 2004) to more focused interventions through programmes by government departments like the Department of Small Business Development.

However, the issue is that these inputs have not yielded commensurate outcomes. For instance, a 2018 study by the Small Business Institute (SBI), shows that South Africa has about 250,000 thousand formal small, medium and micro-sized enterprises (SMMEs) delivering only 28% of all jobs. 56% of jobs in South Africa are created by the 1,000 largest employers, including the government. Then you have the informal economy which is largely neglected in these formal statistics and measures.

For purposes of Covid-19, this is an important sector to note. This is because research into the informal economy has shown us that many populations we usually see as lacking in entrepreneurial spirit,  are quite enterprising as informal entrepreneurs. The informal economy is huge in Africa and must not be underestimated.

 According to the International Labour Organisation,  its percentage of the GDP  ranges from under 30% in South Africa and up to 60% in Nigeria. The informal economy is thus a vibrant and impactful employer of labour. However,  it is also controversial due to the difficulty of regulating this sector.

 In this case,  reports abound of child labour, low wages (especially for women) and low job security. Some scholars like Fantu Cheru,  have argued that despite this chasm against this sector, it represents great opportunity. In the seeming lack of structure is a community-based structure of hierarchies, adaptation, learning, rewards and sanctions which have defied state encroachment. I will argue that this sector will be the most impacted by the pandemic. It  is also this group that will most likely fall through the cracks of government interventions and programmes targeted to support the economy.

Be that as it may, on a grand scale, the South African government has provided both economic and social relief measures during this pandemic. The Disaster Management Act of 2002, was enforced with the enactment of regulations attached to the Act. Then there is the Disaster Management Tax Relief Bill (draft), Covid-19 temporary Employee/Employer Relief Schemes and the Social Relief and Economic Support Package announced by President Ramaphosa of R500 billion (10% of the GDP).

Attached to these interventions, some with direct implications for entrepreneurs are:

1. The Industrial Development Corporation which together with the Department of Trade, Industry and Competition,  compiled  more than R3billion for industrial funding bailouts to vulnerable businesses. It is funding that also provides support for what are called essential suppliers to be able to procure Covid-19 related supplies for effectively dealing with the virus. However,  in my view,  these are more tied to businesses that have capacity to meet the criteria for funding,  such as having plans to make a case for 18 to 24 months of potential recovery.
2. The National Endowment Fund which focused on black entrepreneurs with about R200,000,000 in loans available for manufacture and supplies a range of medical products, including medical masks, sanitizers, dispensers and related healthcare products to support the healthcare sector during the Covid-19 crisis.
3. The Department of Small Business Development introduced a "SME Support Intervention" which is a Debt Relief Fund and a Business Growth/Resilience Facility to mitigate the impact of the expected economic slowdown on SMMEs in South Africa. Over 500million rands is available to SMMEs for 6 months. However again, the Business Growth/Resilience Facility of this loan is focused on businesses that supply in-demand medical supplies. The question is how many SMMEs were able to quickly adapt to make use of this opportunity?
4. One of the biggest industries in South Africa that will be most impacted by Covid-19 Is the Tourism industry,  and it represents a big percentage of the SMMEs in South Africa. The Department of Tourism has made R200 000 000 available to assist SMMEs in the hospitality and tourism sector. For these businesses, there are also “formal” requirement for support such as business registration with the Companies and Intellectual Properties Commission (CIPC)
5. There are also various Public Private Institutional (PPI) partnership support such as the private sector support from  South African Future Trust ("SAFT") made up of banks and the Oppenheimer group; and the Guaranteed Loan Scheme for Small and Medium-Sized Enterprises ("SMEs") from SA National Treasure partnership with Banks

These measures were instituted as survival mechanisms for businesses and entrepreneurs to survive during and after the pandemic and to drive economic activity through the crisis. In terms of implementation, taking stock of government’s effort on Covid-19 will continue long after the pandemic.  Some of the noticed challenges of these interventions are:  

1. Slowness in interventions (Recently in the news SANTACO the taxi industry in South Africa revealed it was planning a 172% taxi fare hike)
2. Covering the needs of all businesses (The Tobacco industry is in court over the ban of cigarettes in government emergency plans and some of the BBBEE requirements in some of the bailout is being contested also by businesses that do not fall into that category).
3. The potential size of the missing ‘informal entrepreneur” in terms of benefiting from this support and the impact thereof. Additionally, the role of the support services from government agencies through the Department of Small Business will make for interesting study post Covid-19.
4. The loss for SMMEs is huge, a million jobs lost in the tourism industry alone,  with 60% of businesses unable to make debt repayments. Applications for May in the tourism industry for employees were over 100,000 in May alone and perhaps 600,000 jobs lost in tourism alone.

 The future of entrepreneurship post Covid-19:

Be that as it may, entrepreneurs are facing some of the most daunting times in their usually fragile life histories.  What is clear is that government incentives and access to these will be limited and highly contested. It is thus the resilience of entrepreneurs that will determine their future survival and growth. To this end I envision four types of  entrepreneurs that will emerge from this pandemic:

1. The Failsafers: These are the infallible and dependable (big business with scope and capacity to easily adapt)
2. The Folders: This is where the SMME battle in the era of Covid-19 lies and the determination of success is mostly structural,  where the system will tend to reach those with capacity to access government support.
3. The Opportunists (immediate gratification): For instance, many may seek immediate available opportunities to manufacture and supply relevant Covid-19 related services and goods. However, no learning takes place through this process as it is seen as an opportunity for survival and not growth. 
4. The Innovators: Long term survivors, who use creativity, collaborations and partnerships, keen awareness of their environment and learning for substantive growth. They are imbued with the potential to project into the future through the development of new adaptive patterns that will sustain them not only through this period, but  more specifically after Covid-19.

I wish that this is a period where we see potential folders take up the challenge to survive, adapt and grow. It will be the role of government as it monitors entrepreneurship and economic activities during Covid-19 and take stock thereafter, to consider how it will accommodate entrepreneurs that fall within this scope.

To watch the webinar broadcast, click here: https://web.facebook.com/watch/?v=2618160808513789