SEATTLE, Washington — In an attempt to slow the spread of COVID-19 infections in South Africa, the government of the South African republic mandated a nation-wide lockdown on March 24, 2020. Due to the strict procedures during the lockdown, small businesses in the country suffered a near-fatal blow. Yoco is a financial technology company based in South Africa that has been overseeing the economic activity of the small business sector before the lockdown went into effect. Through their “Small Business Recovery Monitor”, the impact of the lockdown on the small business sector has been tracked daily. On April 10, 2020, the South African retail sector’s trading activity was only at 10% of its pre-lockdown capacity. Meanwhile, the local hospitality industry was operating at 12%, and on the same day, the beauty and fitness industry hit a low with an alarming turnover index of 1%. These bleak numbers were not beneficial in terms of South Africa’s economic revival.
In spite of the shocking lows that South Africa’s small business sector has endured, Yoco’s “Small Business Recovery Monitor” has collected data that shows economic activity inching its way back to normalcy. With South Africa’s small businesses leading the way, South Africa’s economic revival has already begun. Yoco’s CEO Katlego Maphai acknowledges the damage the pandemic has caused, yet he remains optimistic by aspiring for this to be “the start of a story of recovery and resurgence.”
The Challenge South Africa Faced
The South African lockdown harshly affected the chances for South Africa’s economic revival, as the country was already suffering from a 29% unemployment rate before the COVID-19 pandemic worsened the situation. Statistics South Africa conducted a survey with over 2000 businesses, only to find that nearly 10% of them had already permanently shut down. As if the situation wasn’t grim enough, a poll conducted by the South African SME Finance Association (SASFA) indicated that 75% of the 2,300 small businesses surveyed would face a permanent shutdown if the lockdown persists past June 30, 2020.
According to Alan Mukoki, the CEO of the South African Chamber of Commerce and Industry (SACCI), the South African unemployment rate could reach 50% due to the aftermath of COVID-19 lockdown. The National Treasury of South Africa also predicted that a loss of at least 2.5 million jobs could occur.
The Phases of South Africa’s Lockdown
On May 1, 2020, the government of South Africa began to gradually lower the intensity of lockdown procedures by dropping the alert level from level 5 to level 4. Only key services were authorized to operate at alert level 5, albeit with strict guidelines that placed an emphasis on stemming the flow of COVID-19 infections and protecting public health. At alert level 4, regulations are much less extreme and more business sectors were authorized to open. This, unfortunately, did not include the beauty industry.
On May 21, 2020, data on the small business sector’s trading activity started to show a dramatic upward trend in direct correlation with the relaxation of the lockdown, with the small business sector operating at 44% of pre-lockdown activity. In light of this data, it was abundantly clear that South Africa’s economic revival was on its way, with the small business sector taking the lead.
Continuing to Ease Lockdown Regulations
South African President Cyril Ramaphosa had this to say on April 23, 2020, “Beyond the 30th of April, we will begin a phased and gradual return to economic activity.” As of June 2, 2020, South Africa moved into alert level 3 and the retail sector was operating at 98% of its pre-lockdown activity. On the same day, the hospitality and food sector were at 61%, with the beauty and fitness industry at 38% of their pre-lockdown activity. As of August 18, 2020, the government of the South African republic continued the trend of reducing the lockdown’s alert level by shifting the lockdown to alert level 2. Under these updated guidelines, most areas of businesses were authorized to reopen apart from a select few such as nightclubs and international travel.
As the country continues to relax the lockdown, South Africa’s small business sector’s return to normal levels of trading is indicative of its lead role in aiding South Africa’s economic revival.
– Carlos Williams