South Africa: Small Business Development and United Nations Development Programme Launch Study On Impact of Covid-19 On Micro and Informal Businesses in South Africa, 28 Sept

press release

The Department of Small Business Development in collaboration with the United Nations Development Programme launches a study on the impact of COVID-19 on Micro and Informal Businesses in South Africa

The Department of Small Business Development (DSBD) in partnership with the United Nations Development Programme (UNDP) in South Africa have launched a study titled: "The Impact of COVID-19 on Micro and Informal Businesses in South Africa" on 28 September 2021. The informal sector remains an important part of the South African economy accounting for 8% of annual GDP and employs 27% of the workforce. In terms of non-agricultural employment, 36.84% of all females are employed in the informal sector. The sector also contributes to the country's equality, poverty reduction and food security. It is well documented that the sector has been the hardest hit by the pandemic.

Given DSBD's mandate to create and enable an environment to support small enterprises inclusive of micro and informal businesses, a qualitative based research study was conducted to establish the depth to which the informal sector has been affected by the pandemic and related lockdown measures paying special attention to the lowest and most vulnerable segment in South Africa's entrepreneurial landscape. Funded by the Government of Japan, this study was commissioned as a recommendation following a partnership between UNDP, the United Nations System, and the Government of South Africa, to analyse the socio-economic impact of the pandemic on the South Africa population, and a rapid emergency needs analysis of the most vulnerable groups. Throught that partnership, two reports were published that paved way for this study.

Despite an increase in surveys focusing on SMMEs in South Africa, particularly since the start of the COVID-19 pandemic, these have not focused specifically on micro and informal businesses or have not included an analysis of their unique situation and needs in all nine provinces in South Africa. This highlighted the importance of conducting a focused study on micro and informal businesses and their recovery from the COVID-19 pandemic. The specific obejctives of the study were to:

Examine the extent to which existing support programmes have reached micro and informal businesses;

Determine which types of assistance entrepreneurs believe are necessary to recover from the COVID-19 pandemic, the associated lockdown and to grow their busuiness in the long run;

Identify which assistance is required to ensure that the sector can contribute to the achievement of the United Nations Sustainable Development Goals; and

Describe the impact on women and youth, as well as the extent to which they were disproportionatetly affected.

The study incorporated both primary and secondary research, including literature review, expert interviews, a nationwide survey with 3746 business owners, and focus groups with female and young entrepreneurs in the sector. The findings of the study demonstrated the severe negative impact on the micro and informal sector across all industries and demographic groups. The findings reveal difficulties faced by vendors at taxi ranks and train stations in cities that have lost the majority of their customers as fewer people commute to work; hair stylists who were not allowed to work and had been without income for months; and business owners who can only make a fraction of their pre-COVID-19 pandemic revenues due to a drop in customers, increase in costs, international travel bans or event cancellations.

The study also reveals how some entrepreneurs successfully adapted their businesses by communicating with customers via digital platforms such as WhatsApp, delivering products to clients' homes, manufacturing essential items such as face masks, assisting learners with home schooling, or illegally selling home-brewed beer or cigarettes because they saw no other option to survive. The release and sharing of the research findings are intended to enhance the implementation of programmes already being rolled out by DSBD and its ecosystem partners across districts and provinces aimed at sustaining SMMEs even beyond COVID-19.

Furthermore, DSBD will be entering into a Memorandum of Understanding (MoU) with all the United Nations agencies. This will enable strengthening a partnership to jointly implement some of the recommendations of the study with UNDP The study is accessible on the website of DSBD (www.dsbd.gov.za) and UNDP (www.undp.org).

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