ENTERPRISE & SUPPLIER DEVELOPMENT IN THE COVID-19 WORLD
If you are reading this, you must be passionate about small business and fully aware of the severity of the current situation. It’s no secret, we’re all feeling unsure, but there is a way forward. Through research, dialogue, shared experiences and information we are providing valuable assistance for SMEs to navigate this new economic crisis.
The speed of reaction, and how we adapt to new market realities is of the utmost importance. We need to look at context, how SMEs will be affected, the support needed and what future projections might look like. We need to accept the inevitable fact of a global recession and acknowledge that even before COVID-19 we were already in a local recession.
How long could this last?
The variables playing into this projection depend on how South Africa’s politicians and health system manages its response to the pandemic, how effectively we can contain its spread, and how prepared we are for a likely resurgence. Projections estimate that the pressure on our system will last anywhere from 2-5 years. The effectiveness of local economic policies will be tested, and unfortunately SMEs will be hit hard.
What does this mean in a Social and Economic context and is this the right time to invest in SMEs?
In the larger picture, this pandemic has severe implications. Disrupted supply chains, weaker demand for South African exports and an already weakened economy have already left a deep wound.
Corporate restructuring has already started and just one of the many consequences of higher rates of unemployment is the impact on spending activity and consumer behaviour.
How can SMEs survive this crisis?
A survey across the SMEs that we work with helped us to understand their status, immediate needs and what a bigger picture within our current context looks like. Liquidity becomes a critical factor when determining how long an SME can stay in business.
It is really worrying to note that most SMEs will run out of cash before the first 3 months of lockdown are over, as lockdown measures contribute to a faster demise of businesses with less than a 3 month buffer. Add to that the psychological and emotional strain affecting business owners and employees alike. Sufficient support is critical, and government has done a lot to alleviate pressure, but it is still not enough. This places a huge responsibility on corporate enterprise and supplier development.
What types of support are there?
Debt relief/referral becomes an important avenue of support in cash and cash-flow. Counselling and emotional support for staff and consulting services for business owners can assist in developing solutions for survival and crisis management.
We recommended a 4 phase approach:
React - Day 1 - React to this crisis in a way that puts your employee’s safety first - closing of businesses to adapt to changes and new regulations, implement safety measures.
Respond - Week 1/Month 1 - stabilize the business and equip it with the right tools to survive going forward. Cut unnecessary expenses, assign funds for emergency staff payments, keep the lights on.
Re-strategize - Month 1/Year 1 - adapt to the new norm, make it work for your business. What can this business do differently? How can we work with our clients and suppliers to help each other out? Adapting business operations to an online format, deliveries, virtual meetings, etc.
Re-launch - Month 2/Year 2 - consult with strategists, come up with new business models and scale it to operations to ensure long-term survival.
All businesses will be affected by this and access to useful tool kits and digital content that help them survive and navigate this new normal is essential.
How can ‘Enterprise and Supplier Development’ programmes help?
An early response is critical, but how you respond is even more so.
These are some of the questions to ask when adapting your approach:
Why are you helping and who are you helping?
This differs for each business and depends on their context. It’s important to prioritize support to the most essential aspects of the business, support based both on effectiveness and feasibility.
What’s the best way to help my business?
Diverting resources to areas that are most effective. Asking yourself, what can my business do in order to ensure survival?
What levers does my business have?
Each business is unique, there has to be a critical assessment of risk and impact of this crisis. Many businesses will not survive, the key is to determine a way to minimize the impact of this significant short term disruption and its long term realities.
Enterprise and Supplier Development programmes may need to repurpose some of their scope and delivery mechanisms in order to provide support. This can be broken down into non-financial and financial support.
Non-financial support could include customer management, researching types of available support, providing legal support for things like retrenchments and layoffs, HR support, counselling and assistance with a new business strategy going forward.
Financially, ESD programmes can restructure or pause loan payments for at least 3-6 months and provide relief, depending on the situation.
What can Corporates do?
The first step for big corporations is to recognize the new norm. For the coming months, if not years, success can mean survival for a large number of businesses. Getting by in this new economic landscape is already more than most will be able to do and means that corporations need to adjust operations accordingly.
Do not cancel your purchase orders - work with suppliers to find a mutually beneficial solution. Pay your bills earlier if you can, but try and pay on time - cash flow is vital.
What can your business do to assist your suppliers based on their economic model?
It’s important to not only think in terms of post-lockdown, but how they can already make a difference now, during the lockdown. What skills and internal capacities does your business have access to that can help while closed? Do you have employee wellness measures, and can these measures be extended to maximise the support your SMEs can receive in this trying time?
Responsibilities of business owners
Our current situation means all business owners have a responsibility to acknowledge the role they play in key market access and business opportunities. Going forward, there needs to be understanding that SMEs will need more support than most. Corporates must restructure their existing programmes to ensure maximum support where possible and recognize that there is always more that can be done. Payment holidays, tax-breaks and other measures are effective tools at their disposal, all geared towards ensuring a strategic, controlled response to the impact of this crisis on the economy.
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