Why SMEs are sceptical about business future

Small and Medium Enterprises (SMEs) are sceptical about what the future holds following the devastating economic effects of the Covid-19 pandemic on their businesses.

A report from Africa 118 in partnership with Geopoll shows that SMEs are still trying to recover lost revenue as a result of the disrupted business environment.

The report notes that despite many businesses resuming work to some extent, employment opportunities remain scarce.

“Overall, 43 per cent of the SMEs say they are not likely to hire or rehire staff in the next three months, with only a quarter saying they are very likely to fill positions,” reads the Africa SME Pulse Survey report titled “How small businesses in Africa are bouncing back from a pandemic”.

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Some 312 businesses participated in the survey that cut across Kenya, Nigeria and South Africa.

Compared to the other two countries, the report indicates that Nigeria has the highest segment of respondents that express optimism about hiring soon with 36 per cent saying they are likely to hire or rehire staff in the next three months.

That number drops all the way down to 14 per cent in South Africa. The report states that optimism is a good indicator of the business environment that the SMEs are operating in and how they feel.

“When asked how optimistic they are that their business conditions will improve in the next three months, the largest segment of SMEs across all three countries (34 per cent) rate their optimism a three on a five-point scale,” the report reads. “The next largest segment, however, at 27 per cent, say they are extremely optimistic. Nigeria once again stands out for its positive outlook, with 31 per cent saying they are extremely optimistic.”

According to the report, almost six in every 10 SMEs surveyed had to lay off, halt work or reduce salaries for employees in the past two years.

“This remains consistent across the three countries,” the report says. “The construction industry was hit particularly hard, with 80 per cent saying they had to take adverse hiring measures.”

With less income coming in, the report notes that many construction clients likely halted long term projects over short-term uncertainties. It adds that GeoPoll’s COVID-19 Tracker surveys from 2020 and 2021 consistently pointed to a shift in spending towards food and other essentials (away from non-essentials).

“More than 70 per cent of the SMEs were forced to close their businesses at least temporarily due to the pandemic, of which only 17 per cent have fully resumed normal operations. The largest percentage (42 per cent) shut down temporarily and have opened at limited capacity,” it adds.