Covid-19 impact on small business is immediate — and many fall through the official safety net

These are the accounts of four small businesses in lockdown. Questions also arise over in particular the hospitality workforce of waiters and bar staff — but also restaurant owners.

Nadine, beauty therapist*

As self-employed owner operator, she does not qualify for any Covid-19-related relief benefits. Although Small Business Development Minister Khumbudzo Ntshavheni has launched SMME debt relief funding, and now also for spaza shop support, it was made clear right at the start that hawkers and the self-employed would not be covered.

“I checked. I don’t qualify,” says Nadine. “Almost two weeks before the lockdown, work ground to a halt. I had just managed to pay, but then there was no income.”

On 15 March, President Cyril Ramaphosa announced the first measures to contain Covid-19 which led to school closures and the implementation of physical distancing, among other measures. Not easy in a treatment room for waxing, manicures, pedicures or a massage.

“I can’t pay the landlord (for the working space). She says she understands… Others are in the same boat. My overheads, I can’t pay.”

There is no cushion of savings, and yet the home, school fees and food need to be paid for.

“I’ll have money for a week… If I didn’t have backing like my dad and my sister (for groceries), I don’t know what I would do.”

Eyes firmly on the end of lockdown to restart the business she’s relied on for years, Nadine shrugs philosophically: “It could be worse”.

Co-managers, bistro*

Lockdown came a day early for the two non-South African managers of an inner-Cape Town bistro.

Provisions were stashed. The establishment had the last cleaning. The four workers were paid for the next two weeks into the lockdown. After that, it wasn’t clear.

The two managers are not South African citizens. Therefore they do not qualify for any of the official support such as the SMME Debt Relief Scheme. Its criteria for the soft loans on offer are clear, including that the “company must be 100% owned by South African citizens”.

“We have been checking to apply,” the two say in a series of WhatsApp messages that indicate the business was properly registered. “The main concern for us seems to be the business needs to be owned by South African citizens. We are still checking with a lawyer friend to confirm this. If it is true then there is nothing to do.”

A big concern is the rent.

“We need to make an agreement with the landlord to see how they can assist us.”

They remain upbeat. When asked whether they are in a position to reopen when the lockdown ends, the response was, “Well, it’s the plan!”

Paula Zapata, owner of Café Columbia

“I’m trying to keep positive,” she says, but admits: “This is going to be a big challenge.”

Business had dropped in the previous week or so after a slow start to the year. The books balanced then, but only just. And now the lockdown has upped pressures.

Zapata says she’s trying to apply for the Covid-19 SMME debt relief scheme, but is worried that larger small businesses with, say, 20 staff, would receive preference.

“We tried, but we are not sure… We are trying to get payment (from the Unemployment Insurance Fund) for our workers.” The café has four employees, but only two qualify.

It’s not clear whether the special Covid-19 UIF funding is available if other relief funding is applied for from, for example, the Small Business Development Department.

Zapata has a support system, and also a freelance gig. But having closely worked with her staff, she worries.

“What kills me, I have people who depend on this (job). I do other freelance work. If I have to close the coffee shop, so be it for me. But what about my staff? That is the crazy thing!”

Faizal Parker, Parker’s corner shop

It’s slow. But that’s perhaps a good thing, given the rules to sanitise the shop surfaces between customers.

Parker’s shop has been at the same street corner since around 1915. It’s a family affair in Woodstock, one of Cape Town’s inner-city suburbs, come apartheid forced removals (dodged) or now the lockdown.

“We are not busy. But the customers are buying more,” says Parker, adding, however, that he’s taken the cigarettes off the shelves. “The legislation [sic] is not clear. We are getting different messages.”

He’s decided to err on the side of caution and not to sell cigarettes, even if some are now saying it would be okay as long as the tobacco is bought with essential goods.

“Going to fetch stock is a challenge. There’s always roadblocks. I have my paperwork on me. I’ve had no problems.” But going to the usual supplier of braai wood in Mitchell’s Plain has ground to a halt during lockdown.

It’s not business as usual for the corner shop that sells food, newspapers, essential toiletries and electricity. Despite the uncertainty, Parker is hopeful:

“At this stage, we’ll come through. We will survive. I’m grateful to my local customers and community”.

These four small businesses are struggling through the lockdown, and for those that qualify, there is the voluminous red tape to access funding to bridge these uncertain days.

In the hospitality sector, the restaurant workforce of waiters and bar staff are particularly hard hit.

There have been further complications.

Restaurant Association of South Africa CEO Wendy Alberts said they are investigating reports of companies revising restaurants’ pay protection insurance policies and policies protecting against service interruption.

It remains unclear how, in a sector where foreign nationals make up a significant portion of the workforce, employees who do not qualify for UIF can be supported.

“It’s a major challenge. We are looking to do something,” said Alberts, adding the association had not been approached to start facilitating UIF payments through the special Covid-19 temporary employee/employer relief scheme that will pay at least that sector’s minimum wage per worker.

This Covid-19 measure was announced by Labour Minister Thulas Nxesi on Tuesday.

It would be handled through industry associations, bargaining chambers or sectoral organisations as the UIF would otherwise not be able to cope.

“The UIF cannot deal with millions of individual claims. This would lead to delays in the processing of such claims. We have put in place systems to pay out UIF benefits through companies, sectoral associations and bargaining councils,” Nxesi said, highlighting a soon-to-be-finalised textile sector agreement and talks in the travel and tourism industry.

“If companies don’t claim, we will look at the option to look at workers applying to UIF directly. But it will be an administrative nightmare…”

The paperwork is onerous.

The Covid-19 special benefit application Nxesi touted requires a memorandum of understanding between the company and its workers, a letter of authority from the company, a completed application template, evidence of payroll and a document in which the bank confirms banking details.

A dedicated email is set up — [email protected] – for applications. The how to guide on the Labour website puts it like this:

“NB: If the spreadsheet is complete; valid and accurate, it will be dumped into an automated calculator to produce the benefit amount due to the beneficiaries and the total amount to be transferred to the employer or bargaining council or whichever method agreed.”

The burden of paperwork compliance is no less burdensome for the Small Business Debt Relief Scheme, including certified copies of directors’ IDs, the latest three months of bank statements and the latest annual financial statements or management accounts.

For some small enterprises, applying for relief is an option, for others it is not. No one wants to close, but times are grim. It should really be all hands on deck. DM

*Full names are known to Daily Maverick.