IMPACT OF COVID ON SMEs

Chapter 1: Introduction1.1 IntroductionIn December 2019, there were pneumonia cases that were reported in Wuhan China which had unknown origin. Investigations were conducted which led to the identification of a novel virus. The novel virus that was identified is called SARS – Cov – 2. The virus was highly infectious and many people contracted it within a very short time. The novel virus spread not only in Wuhan in China but also the neighboring cities and eventually due to international travels, the virus spread across the world. SARS – Cov – 2 was eventually pronounced a disaster (United Nations, 2019).In early 2020, the virus had spread across several continents including Africa. The first case of COVID – 19 in South Africa was recorded on March 5, 2020. This was after a person who was coming from Italy tested positive of the virus. Since COVID – 19 was caused by a very infectious virus, it eventually spread within South Africa. According to Mehtar et al. (2020, pp. e881), many people started to test positive of the virus thus forcing the government to implement strict measures in order to prevent further spread of the virus in the country.The strict measures that were implemented by the government had impact on the economy of the country. The operation of SMEs in the country was affected in many ways. There were many negative impacts of the measures that were implemented by the government on the SMEs including; Change in market, financial constraints, disruption on the chain of supply, difficulty in access to finances and change in the operation of SMEs (Stiegler & Bouchard, 2020, pp. 696).On the impact of market changes, there was change in the spending behavior of the consumers. Since the future of the economy was uncertain, the consumers had to reduce their spending. During COVID – 19 period, some people lost their jobs because some companies had to shut down their operations completely. As a result, consumer spending on non – basic goods and services reduced and this affected SMEs the most especially the ones that depend on non-basic goods and services. The SMEs had to remain viable in the market and therefore they had to explore other marketing strategies. One major strategy that most SMEs adopted, according to Fubah and Moos (2022, pp.1944), was to explore the e–commerce way of doing business.The measures that were implemented by the government to curb spread of COVID – 19 also affected the operational methods that SMEs used to use in production (Fubah and Moos, 2022, pp. 1944). The social distancing and the lockdown that were implemented during COVID – 19 era affected the operation of SMEs resulting to negative impact on its profit. Remote working was one of the new ways that the SMEs adopted in order to ensure that all the employees are safe. Remote working required advancement in technology which as a result the SMEs had to incur the cost.According to Naidoo (2021, pp. 421), the measures that were implemented by the government to curb spread of COVID – 19 also impacted the financial capabilities of SMEs. This occurred because there was decrease in the consumer ability to buy and lockdown is also a contributor in the financial constraints of the SMEs. There was reduction in the revenue collection in the SMEs, the flow of money reduced significantly, and there were difficulties in meeting obligations that required money such as salary for employees, buying of stock and others (Naidoo, 2021, pp. 423).Due to the measures that were implemented by the government, there was also difficulty in access to finance for the SMEs. Most of the SMEs if not all depend on banks for credit to expand their operation. During the COVID – 19 era banks and other creditors had uncertainty of the future of the economy and as a result they had to give credits cautiously. Therefore there was reduced in the availability of credit to SMEs and thus hindering their expansion. There was therefore no finances to finance long term growth of SMEs.The pandemic had a lot of negative impact on the SMEs but that does not mean that nothing was learned after the pandemic. Due to the pandemic, it was evident that SMEs can adopt technology in their production and as a result accelerate production efficiency. When there was lockdown in the country and SMEs had to explore e – commerce which as a result facilitated the increase in the demand of goods and services after the pandemic. The SMEs after the pandemic could use the old ways of reaching the market plus the ones that were adopted during the pandemic such as the e – commerce. SMEs have the ability to adapt and remain viable in the market and this is based on the research that was done post COVID -19 (Rajagopaul, Magwentshu, & Kalidas, 2022).It is important to do further research on the sustainability of SMEs in times of pandemic. The research should be based on the long term sustainability strategies for SMEs in case there is another pandemic. This will help in the preparedness of the SMEs for the harsh economic times like the one that was experienced during COVID – 19 period. According to Rajagopaul, Magwentshu, and Kalidas (2020), strategies should be adopted based on the lessons learned from the Covid-19 period.In this research the impact of Covid -19 will be discussed further on the growth and sustainability of selected SMEs. It is important to note that the impact that Covid – 19 had on SMEs varies depending on the region, industry and finally it depends on an individual business. 1.2 Background of the StudyThe outbreak of Covid-19 had impact on the global economy and even the national economies. The outbreak resulted to unforeseen risks to the business enterprises with the small and medium- sized enterprises being the most affected by the pandemic. The main purpose of doing this research is to analyze in details the impact of the Covid-19 pandemic on the selected SMEs. By doing this research we will get to understand the unique struggles that were faces by the selected SMEs.SMEs are key players in the global economy. They play major role in the global economy by contributing in innovation, creating jobs and contributing in the growth of the economy both in the country of its location and global economy at large. SMEs are the main economic activity in the local communities in which they are located because it creates employment to the local people thus it helps to improve the living standards of the locals. However, if you compare large companies with SMEs, the SMEs tend to receive limited support and this results to the financial limitation and little resources. The fact that SMEs have limited resources and finances, they are susceptible to slight change in the local or global market. Since Covid-19 affected both local and global market, SMEs were affected more compared to the large companies.During the Covid-19 pandemic, there was a global economic impact that occurred and it affected the SME most. Covid-19 was caused by a highly infectious virus. The virus was first reported in Wuhan I China and with time due to international travels it spread to other countries and eventually it was reported in South Africa. The government had to put up measures to contain further spread of the virus in the country. The measures that were put include total lockdown, social distancing and restrictions in travel. Although the measures helped to reduce the spread of the virus, Anakpo and Mishi (2021, pp. 7) but they also affected the economic dynamic of the country and since SMEs are the most vulnerable, they were hit hard by the measures.Covid-19 affected the marked dynamics. The consumers had to alter their purchasing culture so that they can purchase basic goods and services while absconding goods and services that were not basic. There was a significant decline in the demand of local and international tourism. When tourism is doing good that means that local people who are making local goods and offering services through their SMEs benefit but when tourism is struggling the local sellers also will not get market for their goods and services. In other cases, sectors such as healthcare experienced increase in demand which resulted in growth of other SMEs.During the pandemic there was also disruption in operation which resulted to the SMEs to make efforts in adaptation of the new changes. The measures that were put by the government forced SMEs to adapt to the new normal. During the pandemic the number of people in a particular place at a particular time was limited. This resulted to some companies to lay off some employees others had to make arrangement for the workers to work in shifts to regulate the number of people. As a result, the production rate reduced significantly thus SMEs made losses. Other measures that were put by the government that resulted to operational changes are the social distancing and total lockdown. Some SMEs that could not adapt to the new normal were shut down completely.During the Covid-19 pandemic, SMEs faced financial constraints. Since consumers had to reduce purchase of non- basic goods and services, there was decrease in the revenue collection by most SMEs (Anakpo & Mishi, 2021. pp. 7). The operational cost increased since they had to do technological adaptation so as to reduce the number of human forces at the work site. Banks and other lenders had to be stricter while giving credits to SMEs because of the uncertainty of the future of the market. As a result, SMEs lacked funds to finance its essential operations.SMEs play a vital role in the global economy and the government is aware of that. By recognizing the impact of SMEs, governments in most countries offered support to SMEs. The support that was offered include; tax relief, loans at a lower interest and grants. In addition to that, SMEs were educated on ways of recovering from the Covid-19 impact.Research ProblemExploring the sustainable strategies of Small and Medium- sized Enterprises in responding to the impact that Covid-19 had in their operation.The unpredictable challenges that Covid-19 had on SMEs threatened their sustainability and survival. Many studies have been conducted on the negative impacts of Covid-19 pandemic, in this research there is need to focus more on the strategies that selected SMEs adopted in their strive to recovery. This research problem aims at exploring the sustainable strategies that were explored by SMEs in responding to the impact that Covid-19 pandemic had with the aim of identifying strategies that can be adopted in preparedness of SMEs against future crisis that might occur and also for sustainability of SMEs. 1.4 Research AimThe aim of this research was to examine the impact of Covid-19 on growth and sustainability of PAPITO TRADING (PTY) LTDResearch ObjectivesTo examine the impact that Covid-19 pandemic had on PAPITO TRADING (PTY) LTDTo examine strategies adopted by PAPITO TRADING (PTY) LTD in response to Covid-19 pandemic.To provide recommendations on impact of Covid-19 on SMEs and provide effective strategies that were adopted in response to the crisis1.5 Research QuestionsWhat were the impacts of Covid-19 pandemic on SMEs in the operational level, marketing level and financial levels?What were the strategies that SMEs employed in countering the challenges that were caused by the pandemic?What were the roles that external factors such as government, technology and access to credit play on SMEs?What were the business strategies that were adopted by SMEs that played a critical role in sustainability of SMEs?How can the business strategy that was used in the sustainability of SMEs during the pandemic be used widely to ensure overall preparedness of SMEs to a pandemic? What were the main challenges that hindered the implementation of resilient strategies during the pandemic and how to handle the challenges?What was extent did digital transformation helped in the sustainability of SMEs during the pandemic?Vii) Significance of the StudyThis study focuses on the sustainable measures of SMEs in response to the impact of Covid-19 pandemic. COVID-19 disrupted the economic balance in the global economy. Since SMEs are one of the significant players in not only global economy but also in the community in which they are based. SMEs helps in job creation and innovation in the community in which they are based and despite that, they are most vulnerable to crisis than other large businesses. Understanding the strategies used by SMEs to ensure that they remain viable in market will play an important role in the future of SMEs because it will help in the preparedness for unforeseen crisis.ConclusionIn conclusion, Covid-19 caused unplanned challenges to the operation of SMEs which affected their financial capabilities and market. The fact that it is evident SMEs were hardly hit by the impact of Covid-19, there is need to channel more resources and support to SMEs in order to protect them against any unplanned future crisis. After analyzing the existing knowledge of the impact of Covid-19 pandemic on the SMEs, this research aims at contributing to the already existing knowledge on the impact of Covid-19 and to create more awareness on ways of sustainably protecting SMEs against any future crisis that might occur.ReferencesAnakpo, G. and Mishi, S., 2021. Business response to COVID-19 impact: Effectiveness analysis in South Africa. The Southern African Journal of Entrepreneurship and Small Business Management, 13(1), p.7. Available at:  https://doi.org/10.4102/sajesbm.v13i1.397Fubah, C.N. and Moos, M., 2022. Exploring COVID-19 challenges and coping mechanisms for SMEs in the South African entrepreneurial ecosystem. Sustainability, 14(4), p.1944. Available at: https://doi.org/10.3390/su14041944Mehtar, S., Preiser, W., Lakhe, N.A., Bousso, A., TamFum, J.J.M., Kallay, O., Seydi, M., Zumla, A. and Nachega, J.B., 2020. Limiting the spread of COVID-19 in Africa: one size mitigation strategies do not fit all countries. The Lancet Global Health, 8(7), pp.e881-e883. Available at: https://ieeexplore.ieee.org/abstract/document/9256251Naidoo, V., 2021. SME sustainability in South Africa post-COVID-19. In Handbook of research on sustaining SMEs and entrepreneurial innovation in the post-COVID-19 era (pp. 419-437). IGI Global. Available at: https://doi.org/10.4018/978-1-7998-6632-9.ch020Rajagopaul, A., Magwentshu, N. and Kalidas, S., 2020. How South African SMEs can survive and thrive post COVID-19. Providing the right support to enable SME growth now and beyond the crisis. Available at: https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Middle%20East%20and%20Africa/How%20South%20African%20SMEs%20can%20survive%20and%20thrive%20post%20COVID%2019/How-South-African-SMEs-can-survive-and-thrive-post-COVID-19.pdfStiegler, N. and Bouchard, J.P., 2020, September. South Africa: Challenges and successes of the COVID-19 lockdown. In Annales Médico-psychologiques, revue psychiatrique (Vol. 178, No. 7, pp. 695-698). Elsevier Masson. Available at: https://doi.org/10.1016/j.amp.2020.05.006United Nations. (2019, May 11). WHO chief declares end to COVID-19 as a global health emergency. UN News. https://news.un.or