Swazi Observer

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‘SMMES STILL CRUCIAL TO RESUSCITATE COUNTRY’S ECONOMY’

By BONGUMUSA SIMELANE | 2020-05-27

THOUGH it seems impossible, Federation of Eswatini business Community (FESBC) Vice-President Hezekiel Mabuza says SMMEs have to withstand the COVID-19 pandemic, as they are the engine for the country’s economic growth and recovery.

He said as government issued shelter-in-place orders, asking residents to remain home for all but essential errands, businesses especially micro and small businesses across the kingdom, are facing difficult decisions.

He said these institutions were crucial to the nation’s economy, employing 47.5 per cent of the total private sector workforce in the kingdom. Mabuza said it was in this premise that the Eswatini National Treasury and Central Bank of Eswatini (CBE) were encouraged to work with commercial banks to provide government-guaranteed loans to SMMEs (small, micro and medium-sized businesses) that may not be able to meet their financial obligations during the partial lockdown and when the economy reopens.

He said the kingdom’s loan guarantee arrangement should make E1 billion in new loans available to SMME customers, of which E200 million should be made available in the first phase. He said Eswatini faced a convergence of economic difficulties that compound the impact of the public health emergency.

By the first quarter of 2020, the country was already in an economic downturn. “Estimates from the IMF, our Central Bank, the SARB-South Africa Reserve Bank and the Organisation for Economic Cooperation and Development suggested that economic growth in Eswatini and South Africa would contract by between six and seven per cent in 2020.

“Our economy currently faces overlapping aggregate demand and supply shocks, which are occurring sequentially. These domestic shocks will be the most significant drag on growth. Our Central Bank and National Treasury estimate that approximately one-third of the resources that were productive in February 2020 have been idled, largely as a result of the partial lockdown.

Real-time economic data, such as average daily transaction values through the payment system have more than halved as economic activity has declined,” he said He mentioned that bigger SMMEs usually supported other smaller businesses and organisations by providing capital, loans, supplies, labour, technology, and raw materials for manufacturing, production and services. “Suddenly, but understandably demand for these services has dropped.

However, SMMEs are not alone as the public sector is also feeling the pinch. At FESBC we advocate and support many SMMEs and private businesses across the kingdom.

But in the past weeks we’ve watched our SMMEs and small businesses that make up the franchise industry struggle with dwindling sales due to this unforeseen economic crisis.” Nevertheless, he added that it would be important that small and micro businesses across the kingdom withstand the pandemic as they are the engine for the nation’s economic growth and recovery.

He added that one of the key challenges for micro and small businesses in the country was access to cash. “Running any business is a risky endeavour; however, small businesses are particularly vulnerable.

According to the Eswatini government’s small business administration, only about half of small businesses last longer than five years. “Overhead costs like rent, payroll, and utilities leave very little liquid cash to owners, especially in the early years.

Add to that the lack of revenue from slowing services and newly-required benefits stemming from the pandemic, and our entrepreneurs will be devastated,” he said. Mabuza said in order to combat this short-term challenge, small business owners should advocate for efforts to provide immediate liquidity and keep businesses solvent.

“Under one of FESBC’s proposal, the ‘Small Business Workforce Stabilisation legislation,” our government should provide financial assistance to those small businesses which were (credit worthy) solvent prior to the crisis.

“This programme would provide immediate cash flow to the most vulnerable businesses, keep employees on payroll, and allow businesses to grow once customers return. The legislation would also increase the loan limit on line expressly from E1 000 to E1 million.

I believe proposals like this are critical tools to stabilise the market and provide relief for owners, workers, and their families.”

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