🔒 Bernard Swanepoel, Alec Hogg: How to help small business SURVIVE Covid-19 war

Small Business Institute executive director Bernard Swanepoel, perhaps best known for his former role as CEO of Harmony Gold – which he built up from a small gold producer to one of the world’s largest – is on the boards of a number of South African mining companies, including Impala Platinum and African Rainbow Minerals. He is also the co-founder of his own small business, a specialist strategy consultancy THINKspiration, and a partner at To-The-Point Growth Specialists. In this podcast, Swanepoel speaks to BizNews editor-in-chief Alec Hogg – a media entrepreneur who founded Moneyweb and BizNews – about how small business can survive the onslaught of the Covid-19 virus, which he describes as a war on the economy. Swanepoel reminds us that there is not enough money for government to help everyone, so we should all do as much as we can to keep small businesses around us afloat as the coronavirus washes over the world. – Jackie Cameron

Welcome to Bernard Swanepoel of the Small Business Institute. Bernard, there’s been a lot of controversy – before we go into what was said last night by the president about small businesses – social media was full this morning about concerns that the support for small businesses would only be for 51% black owned companies. Seems like somebody was on a really nice fake news bandwagon there.

Yeah, I’m so glad that turned out not to be the case. Our understanding is that it was a draft document – which is quite scary that somebody in government could contemplate something like that – but let’s all be grateful that it didn’t survive the test of the scrutiny process. Right now, the announcement of the president will be extended to all small businesses, regardless of their ownership structure or racial category.

What did you make of the announcement last night?

I’m one of those proud South Africans. Thank goodness we’ve got a true leader. This is the man for the moment. But clearly our economy and our country just can’t afford to do what is really required. So in time we will wish we didn’t have the hangover of the state capture, we will wish that we had a strong growing economy, but that’s unfortunately not the case. So I think within the constraints – the president and the government – is doing what they can. In terms of proactively shutting down, they did exactly the right thing. Could we have done with billions of rands of stimulus and more support? Absolutely, but where’s that money going to come from? So we’re all pragmatically saying this is probably as much as we can afford as a country at this stage.

And the fact that the support from the government is focused on small business.

That’s a very good very good line and getting those two families – the Ruperts and Oppenheimers to each commit a R1bn – has to be seen in a context of the further R100m that the government committed previously (as well as another R150m) – clearly President Rhamaposa is asking us as South Africans to step up and support small businesses. But we can do more than that. You can say, I can’t donate R1bn but you can continue to use your pilates teacher, you can continue to shop locally at shops you would normally support and everyone should ask ourselves what we can do to help our neighbourhood shop our corner shop. What can we do to help the people in our lives that are small and self-employed businesses. We can’t expect government – well we can expect – but it is not going to happen. Government just can’t step up and solve all our problems.

How exactly is all of this going to work? Do you have any of the details?

No. We are all awaiting the details. Part of the problem is obviously the president has to go out and make the big announcements and in three days all of this has to be implemented and I am aware of – and participating on behalf of the SBI – part of the processes is to try and fill in the details. For example what would constitute essential services? That’s not so obvious. What would care maintenance looks like? That is not so obvious. The details of how small businesses would access these funds, how would you qualify, how would you prove that the damage done to your business by Covid is what you claimed? That detail simply doesn’t exist at this stage. But I have to say our government and our society and business is collaborating in ways that we haven’t seen in a long long time. So I’m quite positive that – by the end of the week – the detail will be publicly available.

It’s interesting to reflect on what some of the investment guys have been saying, they talk about a war economy. And in a time of war you shouldn’t hold back on your spending because they might not be here tomorrow. Are you seeing it the same way that perhaps it’s a good start but really it’s important that these businesses survive and whatever it takes almost must be applied?

I do agree this is a war. This is a war on our economy. It certainly is a war in which the small businesses are in the front line. My message consistently to all the big businesses is you can’t survive on your own. You can’t come out on the other side of this having survived and then you have no suppliers, you have no local economy, you have no local businesses to procure from. So we have to survive together. Despite all the positive things, I do think our Reserve Bank is going to drop the rates substantially more and I’m asking why did they not do that up front? We were told that the petrol price is going to drop – well it certainly was heading for a significant drop – but why didn’t we drop it immediately? Why are we sticking to a monthly adjustment in the middle of a war? A state of natural disaster, which is like a state of emergency, you need to act quicker, faster. I’m not sure the banks can justify having a 2% margin on the money they get from the Reserve Bank that they loan on to the economy. Perhaps 1% is enough for times like this. With hindsight, we’ll say we should have done more, we should have done it quicker. But let’s be realistic we’re moving way faster than some of the economies of the world.

Bernard, what did you make of the president’s focus – right up front – about companies profiteering and I want to frame this very personally. We pay for parking in a building that’s owned by Redefine. The parking operator today sent an email to say we’re going to freeze the payments because obviously you can’t come in for the next 21 days, Redefine overturned that and said, no we are charging you for the next 21 days. Now to me that almost fits squarely into the kind of behaviour that the president was trying to avoid. How can you charge or continue to charge people when they’re not allowed to use your service?

It is difficult. This is where we’ll all say, is it worth our while to be charged for services like that in order to keep Redefine – as a company – afloat? On the other hand, some services – personal services, like a personal trainers, you may not make use of it anymore. Legitimately you can stop paying. But what is the effect of that? So I think we should all think of ourselves as a ‘one spoke in a wheel’ or ‘one link in a chain’. If we act in a way that is all about ourselves, we may survive but it will be on our own. I don’t think that is what this time calls for. There can be no right or wrong. When somebody doubles the price of a product, that is just disgusting and we should name and shame them and stop it immediately. But there are lots of gray areas. I would like corporate South Africa to think and ask how we help other South African’s survive. Because we start this with an economy where almost half of South Africans don’t work. I’m not talking about the official unemployment rate, I’m talking about very few South Africans work. We’ve had 17 or 18 million South Africans on social grants. So we have to look out for others. We can’t become too selfish and only care about ourselves.

So when you look into the future after this, there is the saying that one should never let a good crisis go to waste. Could it be that there would be lessons and learnings from this?

Absolutely. This is going to be a transformational event for all of us. The younger people are going to be formed and transformed in ways – and in their thinking – that will change business going forward. I think some businesses, some dinosaurs will die. This is a huge impact on our planet. So some dinosaur businesses will die. We will rethink the strength of community and collaboration and I think our economy got caught at the worst possible time. All the demands, the appeals for us to restructure our economy in a more progressive way, I think we’re going to do it out of necessity and we’re going to come out with a President that knows what it takes to lead. That’s certainly a positive all in its own right.

In the whole Covid-19 battle, or the war that’s against it, do you see an end point? Are you amongst those like David Shapiro yesterday, who was telling us that he sees it as a 90 day war but at the end of that things will calm down?

I do. I would certainly buy in to 90 days as opposed to the 21 day lockdown, but the lasting impact and effect could be very very long. We unfortunately went into this battle quite weak – as a country and as an economy – and we are going to disproportionately lose small businesses. I think we’re going to find many a small business and self-employed people are no longer going to be able to do that. Big corporate South Africa will survive, but will they be the driving engine that drives our economy going forward? That’s hard to see, so I suspect our economy is probably not going to do well for 18 months, but in 90 days at least we will be able to say we’ve got an economy and a country working again, I would go with that view.

So what about those sectors that are most exposed and in the South African context the obvious one is tourism and there’d be a lot of members of the Small Business Institute who are in that area. What should those people be thinking about doing to protect themselves?

I honestly don’t know. I think most of our one man or bed and breakfast or Air B&B businesses in that space, just don’t know. You can always say a business today needs three months worth of turnover in the bank, but it’s a reality that doesn’t exist for so many of these small businesses. So for a lot of our really small businesses it’s a matter of how to survive. And that’s where I do think the survival of an individual citizen and a small business in some cases is the same thing. You can see the countries that can afford it, they are doing helicopter money, they’re putting cash in the hands of normal citizens that obviously stimulates the economy and demand, but it also helps people to survive. We all surely are in that sort of phase of how do we survive? And then when we start again I would hope that the government has made the hurdles – the red tape, the challenges, the costs, the time delays to start a business – has made it easier, because a lot of these businesses will have to go into liquidation and I think we should sort of almost enable those people to try again and to start over.

One of the discussions last night – one of the points made by the president last night – was that the competition laws against banks are no longer going to be applied and that they must get together as banks and work out somehow how they can keep businesses afloat by perhaps extending debt and so on. I’m not sure how that would work practically. Have you got any thoughts?

I heard it in the context where, if every bank tries to come up with solutions on their own we will not be as successful as when we collaborate. Obviously collaboration and anti-competitive behaviour is a huge grey area. I don’t know what that specifically targets, but I can tell you one area I would like banks to collaborate on is to come together and say the difference between what we get charged now by the Reserve Bank and what we on lend, let’s all decide to only charge 1% extra. That would be great anti-competitive behaviour. That would immediately stimulate our economy and help our people survive. But again, there must be clear specific areas – that would have been illegal in the past – that the government would like the banks to collaborate on now. 

How many people work for small businesses? Do you have any understanding, any idea of that?

We tried to do research because 98% of registered companies in this country – by number – are small businesses. What we are finding is that our economy is over-concentrated and we all know that. So our big businesses, our 1,000 largest employers – which includes government – employs just under 70% of South Africans in formal employment. That is completely disproportionate to anything else in the economy. So our small business sector is not as vibrant and as healthy as in any other typical country. So we think that as little as 40% of formal jobs in this country is actually through small and medium enterprises. Our problem has been that large businesses are not job creators anymore. In all the economies we find job creation happens in those businesses that have survived, they employ 50, 60 people and then when they hit a sweet spot for the product, they employ 2,000 or 3,000 people 2 or 3 years later. So those unicorns, those successful growth stories, is what has been missing in our country. Can we afford to shed the 40% of the jobs created by small and medium enterprises? Clearly not. Our supply chains will collapse, our service industry will collapse. There will be no restaurants. There will be no people driving Uber cars, so we can’t afford that.

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