Impact of COVID-19 on SMMEs Productivity and Competitiveness, and the role of digital technology

Productivity SA conducted an online survey on the impact of the COVID-19 pandemic on SMME Productivity and Competitiveness and the role of digital technology. The survey covered the SMME situation prior to the onset of the lockdown on 23 March 2020 as a baseline, and focused on the impact of the lockdown over a period of six months which ended in September 2020 when the country was on level-two lockdown, after the gradual lifting of lockdown restrictions from level-five in March 2020. Productivity SA engaged a sample of 3001 companies participating in the entity’s flagship programmes (CIS2) with almost 20% completing the survey. The impact study analysis entails a total of 55 SMME enterprises which includes national representation across the different sectors, though much concentration has been in the manufacturing sector. Respondents included owners of the SMME businesses as well as management.

The aim of the survey is to enable Productivity SA to develop and support appropriate measures tailor-made for small businesses, that can assist the recovery of productivity3 and competitiveness of this crucial business sector going forward. According the 2020 World Competitiveness Yearbook (WCY), South Africa reached its lowest competitiveness rankings
when it fell three notches to be ranked 59 out of 63 countries. The drop in South African competitiveness rankings was mainly attributed to a drop in both economic performance and government efficiency factors. Data from the World Bank Enterprise Survey (2015), confirms that productivity typically increases with firm size, although some variability across countries is observed. Larger enterprises are more productive and there is a persistent productivity gap between SMMEs and larger enterprises. Larger enterprises can exploit economies of scale and invest more in machinery and skilled workers.

In developing countries likes South Africa, the dispersion of productivity across enterprises is further widened by the presence of a large segment of informal enterprises. The SMME Covid-19 impact report provides valuable insights about the effects of the lockdown on SMMEs businesses in terms of employment and business sustainability, health and safety challenges, productivity and profitability, competitiveness, business development support, access to government support as well as technology and digitalisation. The study was conducted against the backdrop of other studies and surveys done since the advent of the Covid-19 pandemic. Although many studies have been conducted on the effects of COVID-19 on small businesses, none of them focused on its impact on SMME productivity and competitiveness. More than 80% of the business surveys were conducted before the end of April, during lockdown level 5, and provided predictions from business owners on the possible effects of the pandemic in the months to follow (Galawe - Msimango, Wits 2020).