The Small Business Institute (SBI) and the Franchise Association of South Africa (Fasa) last week welcomed the government’s Bounce Back Support Scheme, which came into effect last week, which enables additional funding to qualifying businesses and small medium enterprises (SMEs).
John Dludlu, the CEO of the SBI, said although the current Bounce Back Support Scheme appeared to be targeting formal sector small-medium enterprises (SME), there was still a need to extend help to informal sector operators, especially in KwaZulu-Natal (KZN) and the Eastern Cape.
But Dludlu said this initiative was welcome as SMEs had been brutally smacked by the Covid-19 pandemic, the July mayhem (in Gauteng and KZN) and, most recently, the floods in parts of KZN and the Eastern Cape.
“The SME ecosystem has been advocating for something like this, especially the ‘first loss’ element in financial assistance. Hopefully, SMEs, especially those with high growth potential, will utilise this scheme. After all, the country’s job crisis can only be resolved by thriving small businesses,” Dludlu said.
Last week, the Treasury announced that the Bounce Bank Support Scheme for businesses signalled in the Minister of Finance’s February 2022 Budget Speech had come into effect. It said that the purpose of the Bounce Back Support Scheme was to provide additional funding to qualifying businesses in order to grow the South African economy and to facilitate job creation.
“The scheme is expected to facilitate the recovery and bounce back of businesses beyond the Covid-19 pandemic lockdowns. The scheme will also help those businesses recovering from the July 2021 civil unrest in KwaZulu-Natal and Gauteng, as well as the current ongoing flood-related disaster,” the Treasury said in a statement.
Dludlu said the key lesson from past interventions was that simplicity was key to how many businesses would take up the scheme.
According to the SBI, the latest scheme appeared to have taken into account previous failures. Inclusion of commercial, non-traditional financiers and development finance institutions was helpful given the capacity challenges faced by the state.
Dludlu warned that South Africans needed to keep in mind the reality that faced firms and households as the levels of indebtedness were too high to take on more debt.
“We look forward to the equity scheme promised by the National Treasury which is planned for later in the year.”
Freddy Makgato, the CEO of Fasa, also welcomed the new Bounce Back Support Scheme, especially in light of the recent devastating floods and subsequent looting in KZN, which once again had affected businesses.
“Whilst established franchises have insurance cover to fall back on, it is the franchise sector as a whole that needs the support of the government with funding schemes that will assist existing and new entrepreneurs to renew and develop new business concepts that will feed into the economy, providing much-needed training and job creation,” Makgato said.
The government should also be looking to try and stimulate entrepreneurship, the establishment of new business and especially franchises that had the “duplication” effect, strong skills transfer and could contribute to job creation.
Fasa’s 2019 survey showed more than 800 franchise systems and more than 38 000 outlets, employed more than 300 000 people.
The social unrest and looting that erupted in July last year had adversely affected the franchise sector both directly and indirectly with an estimated damage to franchised stores and infrastructure sitting at a staggering R20.48 billion.
Fasa said from the feedback they have had from their members, they had learnt that some lost investment opportunities in that franchise deals that were ready to be launched were cancelled as a result of the riots.
Some franchisees lost trading time and stock translating to both franchisors and franchisees losing revenue. Some indicated that they might not even reopen as they were already devastated by lockdowns, Fasa said.
Some were trying to open but supply chain disruptions affected their attempts to resume trading. Other franchisor members also considered providing franchise fee relief to franchisees whose turnovers had been affected, Fasa said.
Most of the employees of Fasa members experienced income shortages and the majority of them would definitely default on rental payments while others struggled to meet their school fee payment obligations. In some cases, employers assisted employees where they could; however, the looting had further wiped off the little cash that was available for such assistance.
Fasa said it had decided to embark on a Fasa Social Initiative drive to raise funds for donations and highlighted that there was an urgent Debt Relief mechanism required for businesses.
BUSINESS REPORT