Riots and looting add to the woes of black SMEs

Many small black-owned businesses may not survive the aftermath of the riots and looting that has hit parts of South Africa over the last week, the Black Business Council (BBC) warns.

It says the unrest and destruction of property comes as a crippling double blow for these businesses, which have also had to face tougher economic conditions as a result of the Covid-19 pandemic.

BBC president Sandile Zungu notes that many of the affected black-owned small and medium-sized enterprises (SMEs) are not likely to have the relevant insurance cover – not even through the state-run South African Special Risk Insurance Association (Sasria). This could lead to the permanent closure of such SMEs.

“The impact has been severe. Most of the SMEs were hit hard by Covid-19 even before the looting spree,” says Zungu.

Insurance

“Many SMEs are not insured with Sasria cover.… Those that sell fresh produce cannot operate [right now] because the places where they used to work have been trashed. All their inventory is no more, and they can’t claim from the insurance.”

Read: Insurance claims from SA unrest seen between R7bn and R10bn – govt insurer

“This is an absolute disaster. The looting has resulted in a lot of hardships for these small businesses,” he adds.

“As much as one talks about the resilience of entrepreneurs and the hopes that they will bounce back … the reality is that some of them will not be able to,” says Zungu.

One of many businesses that were hit

Lucky Lekgwathi’s Kliptown-based eatery Grootman, which was only opened in April this year, was not spared by the looting and destruction in Soweto this week. But he is hopeful that it will reopen.

The former Orlando Pirates footballer says the damage and losses to his business amount to around R400 000, mainly related to equipment and machinery that was stolen or vandalised.

“It took me 20 years to save money and open up the business. I played professional football for 20 years, saving money so that I can have a business [because] I wanted to teach and motivate current players ‘to have their own’ while they are still playing because after they retire it’s going to be tough,” he adds.

Lekgwathi says his restaurant was doing well, with more than 100 customers a day.

Despite the setback, he is confident it will reopen as he has been receiving ‘unbelievable’ support from South Africans.

He says there has been monetary support from South Africans and others have offered their assistance to clean and fix the plumbing and the electricity to help get it back up and running.

Read: SA looting dies down in places as more troops expected

“I took all my savings to open a business with the hope of it doing well. I didn’t expect something like this to happen,” says Lekgwathi.

“But now we are depending on people who have come to the party in helping us rebuild the restaurant. People have offered to contribute and so far, that’s going well. The funds are not enough right now, but we hope that as time goes on, the money raised will be enough.”

Nafcoc reacts

“Black-owned businesses in particular cannot afford this turmoil,” she says.

“Black entrepreneurs throughout South Africa have already been in crisis mode for well over a year following various forms of lockdown restrictions since March 2020.”

Read: Alexandra was already ‘a ticking time-bomb’ – SAHRC report

Nafcoc has appealed to government to expedite efforts to provide comprehensive relief to workers, employers and communities affected by the unrest and looting.

‘Many options’ for government

“There are many options available to the government, including further support through the Unemployment Insurance Fund [UIF], tax relief and debt amnesty provisions,” says Monageng.

“The livelihoods of potentially millions of South Africans [are] at stake.

“We also call on the government to implement urgent interventions that will safeguard our business communities from being further impacted by the devastating protests and ongoing looting that has plagued the country over the last few days.”

Harsh reality

In a radio interview with Moneyweb’s Fifi Peters on Wednesday, founder of the Township Entrepreneurs Alliance Bubelani Balabala pointed out that in the organisation’s most recent report (Lockdown Township Economic Impact Survey) only 2% of entrepreneurs were able to meet the criteria of the UIF Covid-19 Temporary Employer-Employee Relief Scheme.

He also noted that around 80% of the pool of 6 000-plus township and rural entrepreneurs that were engaged through the survey said they didn’t have business insurance.

Listen to Fifi Peters’s interview with Township Entrepreneurs Alliance founder Bubelani Balabala (or read the transcript here):