Government concerned Covid-19 will hurt black-owned businesses

2 September 2020 by Edward West 

CAPE TOWN – The government is concerned that the Covid-19 pandemic will reverse gains made over the 20 years in Broad-Based Black Economic Empowerment, deputy minister of Trade, Industry and Competition Nomalungelo Gina said yesterday (tue).

Speaking at a virtual seminar hosted by the Broad-Based Black Economic Empowerment (B-BBEE) and Commission for Employment Equity (CEE), she said the economic effects of the pandemic meant that black-owned businesses would be in a difficult conundrum, as of their fragile balance sheets were not likely to have sufficient collateral to assist them in accessing credit, even though the government had cut the base for lending rate,” said Gina.

She added that there was also a real danger that because of liquidity challenges, some of the companies might face closure and be forced to sell the larger percentages to non-black companies and thereby lose their B-BBEE 100 percent ownership.

A South African SME Finance Association survey last month showed that despite the help offered by thegovernment and the private sector towards SME’s, only a fraction of these businesses had any support.

Only 47 percent of business owners had applied for relief from government or financial institutions, because many did not believe they would qualify.

And even among the 47 percent that did apply, only 32 perent were successful.

This means only 15 percent of SMEs with a turnover of below R10 million per year, had any support.

“Small and medium enterprises (SMEs), which is where the most of the black women-owned businesses are found, are the hardest hit by Covid-19. It is by no exaggeration that many of the SMEs will not survive after this pandemic. Many are facing closure and some have already closed shops. This is a troubling reality for the government,” she said.

She said the full scale effects of Covid-19 on black businesses would be felt through the numbers of retrenchments that had already begun from these companies, because of loss of trade.

“Small and medium enterprises were the locomotive engine of our economy and employment because most of them were labour intensive,” said Gina.

However, Gina said it was not all doom and gloom as various sectors of the economy and government were already working out plans for the post-Covid-19 economic recovery.

President Cyril Ramaphosa recently announced that the government would make a 40 percent set-aside on procurement for women-owned companies.

“This is a huge step in the right direction. Our task is to monitor, track and enforce the implementation of this initiative. As women we must… ensure that we are part of the decision-making processes,” she said.

She said women corporate leaders needed to insist on compliance in the preferential procurement processes of the government, municipalities, state-owned enterprises and the private sector, that women-owned companies, in the post-Covid environment, must occupy a prominent position for preferences in awarding tenders.

Source: IOL at https://www.iol.co.za/business-report/economy/government-concerned-covid-19-will-hurt-black-owned-businesses–5c678ada-d21a-4a91-b438-f25bc35792e1