Looking back over the past 22 months or so, one would be forgiven for wishing to never hear another word about the pandemic again. It has had a devastating effect on personal lives, as well as on the economy, with some sectors all but grinding to a halt as a result of the lockdowns.

By Miguel Da Silva, MD of Retail Capital.

And so, with talk of a cluster outbreak in Tshwane possibly signalling the start of the much-feared fourth wave, and with the usual mass migration of people during December less than a month away, business owners could be forgiven for thinking: “not again.”

While we can all do our best to prevent the spread of the disease, and while we all have no say over what the government will or won’t do regarding restrictions, we can take important learnings from the first three waves into this December period, into 2022 and beyond.


Manage cash flow and keep costs under control

The hard lockdown tested most SMEs to breaking point. The importance of well-managed cash flow could not have been demonstrated more clearly. Cost-containment was another lesson, as was healthy relationships with debtors and creditors.

Those that were in a good position were able to weather the storm a little more comfortably. Those that weren’t, were either forced to close their doors for good or go on a rapid and concerted cost-cutting drive to mop up any inefficiencies. Of course, in many cases the casualties were men and women who either lost their employment or were forced to take salary cuts.


Rethink 4IR business models

The fourth industrial revolution has been spoken about for many years, but the pandemic served up a reason to fast-track business models into the digital age. While some industries such as tourism have been throttled beyond anyone’s wildest imagination prior to 2020, others have been able to change how they do business.

Prior to the pandemic, businesses such as fitness training or health & beauty spas or retailers relied entirely on in-person contact.

The pandemic forced these industries to pivot, with online or virtual training seeing fitness and home training equipment businesses boom, and things such as virtual fitting sessions or makeup masterclasses have seen health and beauty catapult into the 21st Century. This theme has carried across to businesses such as restaurants, where successful masterclasses with chefs, for instance, enabled sales to continue, or even grow.


Geography matters less than before

Related to the last point, successful migrations to online commerce have drastically changed the playing field for many businesses.

Successful e-commerce strategies have seen businesses open for business to customers from anywhere in the country as opposed to being restricted to their immediate communities.

Of course, switching to online retail is far more complex than simply setting up a store, with digital marketing, cybersecurity, warehousing and logistics being key pillars. This requires funding, which leads to the next lesson SMEs learnt.


Government relief excludes most smaller SMEs

We have been lobbying and calling on government to meaningfully support micro-enterprises by making funding channels available and materially changing the environment in which they operate. The failed government Covid-19 bailouts were a stark reminder that the government, and the mainstream banks through which relief was distributed, are not geared toward smaller or earlier-stage enterprises. Certainly, on our books, 90% of sub-R10-million SMEs were unable to take advantage of pandemic relief as the conditions were too onerous.

Instead, SMEs have come to accept that they either need to look after themselves or turn to alternative, private funders who stand ready to provide the funding they need to scale. Retail Capital’s lesson during the pandemic was that many SMEs who made use of our funding were able to evolve into digital-ready businesses and grow – in some instances well beyond where they were prior to 2020. Access to finance to achieve this cannot be overestimated.


Opportunity mindset

While this lesson may be categorised as a “soft lesson”, it is fundamental to success. Businesses that looked at the situation and proactively looked for opportunity emerged the strongest. Sit-down restaurants pivoted into cold food delivery services and beauty retailers evolved into selling online experiences. As hard as it appears, an opportunity mindset is crucial.


Prospects for 2022 and beyond

There is a great deal of unspent investment. Similarly, there is a significant appetite among consumers to spend on goods and experiences. Both are taking a wait-and-see approach as the much-publicised fourth wave looms.

Depending on the length or severity of the expected wave, there is likely going to be a strong rebound in hospitality, tourism and retail demand. Businesses that prepare themselves now and invest in building digital capacity will be first to benefit.

The SME sector is highly resilient. Retail Capital experienced a record October, with even more demand for funding expected in November. This is a sign of a sector that is ready to invest and scale.

However, the SME sector’s full potential will only be realised when the government finally puts its weight behind the sector. After the mid-term budget policy statement, it is clear that this kind of support is still a long way off, and so our call is for SMEs to adopt an opportunity mindset, lean on their networks, learn lessons from past lockdowns, and seek out alternative funders.