🔒 Small Business Institute CE John Dludlu proposes risk adjusted approach to avoid economic catastrophe

The small business sector is widely seen as a life blood of the economy, and it is no different for South Africa. In an interview with Biznews editor-in-chief Alec Hogg, Chief Executive of the Small Business Institute, John Dludlu, laments the fact that when the country was moved from Stage 5 to Stage 4 in its lockdown small businesses were left behind. As Dludlu proposes a risk adjusted approach to the reopening of the economy, he sees lives and livelihoods intertwined and says as adults who have rights, so too small business owners have responsibilities to ensure their and the safety of their employees. He also discusses the steps the SBI has taken to engage with government in an attempt to develop a voice for its 3.9 million members who need to be heard and allowed to move on in order to avoid a catastrophe in the country. – Nadya Swart

John Dludlu is the Chief Executive of the Small Business Institute. How many companies do you guys represent?
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We represent over a hundred Chambers of Commerce, small businesses as well as informal businesses in the township and village economies. We are not directly representing businesses, we are representing Chambers of Commerce. So, for example, take one in KZN – the Durban Chamber of Commerce – has 8,000 members. The Township Economic Enterprise Alliance represents 34,000 people, so we are quite a big organisation.

But only for small business? 

Only for small business. So if you remember our trajectory, Alec, we used to be called the Afrikaanse Handelsinstituut up until three years ago. Three years ago we took two decisions; the first one was to change the name, the second one was to niche ourselves so that we actually represent the small business segment of the economy – not represent all businesses in South Africa. So there are other organisations that represent businesses regardless of their size. We also respect other organisations that represent a specific race group in South Africa, but we don’t represent races; we represent the small business segment of the economy – formal and increasingly informal sector of the economy as well.

Do you have any idea how many people your members would employ?

That’s very hard. In fact, it’s an exercise that we’re currently doing now. But if you do take the small business segment in the economy – by that, what I mean is the formally registered businesses (SMEs) – so it’s 3.9 million people. But let’s not forget what has happened in the economy. Before Covid, there was the technical recession which I think has migrated into a formal recession and we must be entering some kind of a depression by now. There was obviously load shedding and our members are not nimble enough to deal with things like load shedding – they can’t get themselves off the grid.

There is now obviously the multiple credit downgrade which has happened and two other things. We found in a study that we did that a small business owner typically spends as much as nine days a month just complying with regulation policies – whether it’s to change your bank account in a formal SARS branch or whether it’s complying with bylaws. That’s quite a lot of money – it’s up to 10% of turnover in certain instances. And then, of course, there was the other problem which we’ve been trying to lobby government, big business and state-owned enterprises, which is late payments. We found that in certain instances; in worst case scenarios – businesses are paid as late as 101 days. But, that’s not the worst – at least they get paid in the private sector. In the government sector – they don’t get paid sometimes.

I’ll give you a real example about myself; I was consulting for one of the airlines – state-owned airlines – and after fighting with them, to-ing and fro-ing, submitting all the documents – and by the way I was a registered supplier – I had complied, I had been paid for about two years and we then had this dispute. I took them to court and I spent months with lawyers, their lawyers as well. It was only two days before the court case that I got paid. And, of course, I had to share my money now with the lawyers because they take 20% of the money.

So before Covid arrived, it was as bad as that for small businesses in South Africa, and then Covid arrived – where are we now? I think we are in a worse position, because if you take other jurisdictions – like the UK, like the US – where they have stats about big business and the small business segment of the economy; they know how many people have filed for unemployment in the past two, three months of Covid. We don’t know, and I suspect it’s the reason why the money has taken so long to flow to the required people – the small businesses in South Africa, because we just don’t have these facts.

You represent 3.9 million people – let’s just use that as the baseline. It’s probably much bigger than that, but we’ll just use that as the number. Does government consult with you at all? We know it consults a lot with big business.

Things have improved quite a lot – in the last week, two things have happened; as SBI, we are setting up the SME task team within BUSA and we will lead that. We will now have a voice in all the consultative forums with business. Our Chairman, Sipho Nkosi, has been invited to participate in another forum which predates Covid. That forum was all the affiliates, the bigger affiliates of BUSA had gotten together through their leaders to just talk about how to restructure the economy. So, we have a voice there as well. And then last week, we had a meeting with the Ministry of Small Business Development. So the environment has slightly changed for us, and I think for business in South Africa. We do have a direct voice through BUSA, which listens to us as members.

You also have a direct voice through open letters and your open letter that you wrote to the President has gone viral. I’ve had a number of people sending it to me to say, ‘Now here’s a guy who knows what he’s talking about’. What are you asking government to do for the millions of people you represent? 

Despite what I’ve just said now – that we do have a voice – the voices only started being heard in the last few days, when we formalised the engagement with government. Where did the letter come from? It came from two places. The first one is – government told us when the President made the announcement about moving us from Stage 5 to Stage 4; we were always made to understand that Stage 4 is a transitional stage – it is unlike Stage 5, which was locked in a time period. We were given a month first and that was extended by another two weeks, and we moved from there to Stage 4. Now, our members were in a limbo. What we also realised was that when we moved from Stage 5 as a country to Stage 4 – something else happened; small businesses were left behind.

So, because government took a sector approach, let’s take mining – mining has caught both big business and small businesses, but the small businesses did not return to work, so they were getting frustrated. So we had a lot of our members screaming and shouting and begging us to say ‘could you please just move this Stage 4 to a real sense of Stage 4, where we take a risk adjusted approach?’. In other words, we look at all those activities that lend themselves to high risk and we don’t reopen them.

There are some provinces, for example, let’s just take one in central Karoo – up until this week they did not have a single infection, they did not have a single fatality as a result of Covid. Now, according to the risk adjusted approach, that portion of the Western Cape should have been able to move to Stage 3 instead of being locked down to Stage 4, even though the risk was so low there.

Then the other thing that we’re asking government to do is to please look sensibly at what businesses lend themselves to safer practices. Small businesses, by their very nature, are able and nimble to do some of the things to apply the health protocols that are required. They can sanitise, they can communicate, train their employees and, of course, they are still within the maximum amount allowed in social gatherings, which is 50 people. So we said to government; ‘Please, let’s take this to its logical conclusion – let us apply the risk adjusted approach’. A risk adjusted approach looks at the activities that are high risk and then move with those that are low risk, and we thought our members – not only our members, even the informal sector economy – they normally employ about two or three people at most. They should actually be allowed to move on and start operating. Otherwise, we are risking a catastrophe in this country. 

You also say in your letter – you refer to your members who are ‘still standing’. What did you mean by that?

We do know from an anecdotal point of view that there are businesses that have shut down forever, especially restaurants, the leisure industry, the hotel industry – those jobs are not coming back. Now, knowing what we know – which is the fact that the small business segment of the economy is by and large undocumented in the country – we feared the worst; that during Covid, as it is running its course in the economy, there may not be too many businesses to save. Especially because of what we have seen as well – the frustration around accessing the economic support measures that have been laid out by government and the private sector, like the Oppenheimer and the Rupert families. So we were very nervous that what’s happening in the economy is quite dire than what we hear from our members who are frustrated and still wanting to contribute. Every day, for example, one of our chambers wakes up, every day they band together to go and feed people in the nearest townships. Thank God, they can still do that – but are they going back to their businesses? The longer you keep the lockdown, the higher the chances are that they will not be reopening those stores anymore.

We had the news today from the Minister of Health that until infections fall – the lockdown will continue. That does suggest that it could be with us for quite some months.

We prefer to listen to the President. The President has said to us that he is hearing us. I’m not saying the Minister of Health is not telling the truth right now, but certain provinces (certain portions), for example, the metros – we know the metros are the high risk areas and they are the epicenter of this disease. So it’s completely nonsensical to say they can reopen willy nilly. Otherwise we will be taking our people’s lives for granted. We do expect, though, that by the end of the month at the very latest there will be an announcement that reopens huge swaths of the economy and that the reopening this time around it is more nuanced. It is not just based on a mechanical sector approach.

Also, to start treating people with respect. Start treating people as adults. What do adults do? Adults recognise that with rights come responsibilities. So, if I’m reopening my business tomorrow – it is up to me to ensure that my business is ready to receive workers, my workers have been tested before they return to work, because I don’t know where they’ve been. So I carry a lot of responsibility as well as business. Please, let’s just appreciate that we are adults, all of us are adults here. We have rights and we have responsibilities as well. I don’t think businesses are there to kill people. I think businesses are there to save livelihoods and, more importantly, they’re there to save lives as well.