The effects of the Covid-19 pandemic hit South African entrepreneurs hard. According to an April 2020 report entitled Covid-19 Impact on South Africa’s SMMEs, small businesses struggled to respond and adapt to the hard lockdown. It noted that 55,000 SMMEs would not survive the lockdown, and as many as 423,500 people faced unemployment as a result.

In a GIBS study funded by the Walmart Foundation, we are looking to understand how township entrepreneurs respond to crises and how we can better support such entrepreneurs in the future. Although this research is in its infancy, our initial review has already highlighted interesting insights around the response of our country’s township entrepreneurs to the disruptions brought on by the pandemic.

The entrepreneurs

Our research focused on township entrepreneurs from various sectors within the retail industry. Their businesses included spaza shops, restaurants and food stands, as well as farmers and suppliers. They were typically smaller businesses that employed two to three people, including the owner, and reported an average monthly revenue of between R15,000 and R20,000 per month.

The entrepreneurs we surveyed have a history of running businesses and did not classify themselves as survivalists. They are entrepreneurs in the truest sense. Our initial review of the research indicates that these businesspeople have a positive view of their abilities as entrepreneurs. Our data shows they are very positive regarding self-belief and self-efficacy. Most of our respondents displayed a strong sense of collectivism and were more committed to helping their communities than amassing personal wealth.

Even before the pandemic hit, these entrepreneurs listed their business challenges as cashflow management, funding, effectively costing and pricing their goods, and marketing. When the pandemic struck, many of these entrepreneurs stated that they were ill-prepared to face the additional challenges. Many also expressed shock at how quickly the business environment changed and how rapidly they needed to adapt.

The challenges

At the height of the pandemic, our respondents noted that they felt enormous uncertainty. Like everyone else, these entrepreneurs had to come to terms with the pandemic personally. They also had to deal with the uncertainty around their businesses and what the future held. Many respondents’ fears were further fuelled by a lack of information about what the future may bring, so it was impossible to plan for what was coming, meaning they could only focus on the present moment.

The respondents also spoke about the consumers’ response to the pandemic and how buying patterns changed. For example, a cabbage farmer who sold freshly cut cabbages directly to the public talked about how consumers started viewing her products as unsanitary and turned to big retail outlets for their fresh produce.

Due to supply shortages and the increased cost of goods, the increases in the cost of doing business posed another significant challenge to these small entrepreneurs. Moreover, unlike bigger, more formalised businesses, these microenterprises did not have the cashflow or the finance facilities available to help them navigate these periods of short supply. Added to these entrepreneurs’ woes was that they had to start laying off employees. It was a double-edged sword – they had to choose between dismissing employees or losing their businesses.

Their business relationships were also put under tremendous strain. Entrepreneurs noted that they could not connect with business associates or customers sufficiently. The successful entrepreneurs spoke about how they needed a good dose of personal resilience; in addition to their businesses, many entrepreneurs were also facing challenges in their personal relationships.

The unexpected nature of the lockdown and the consumer responses saw entrepreneurs needing to pivot rapidly or shut shop. Like all segments of society and industry, some township entrepreneurs took immediate action and made changes to their businesses by introducing alternative products and services that became relevant to the market. Others, unfortunately, did not.

Entrepreneurs often noted the reason for their apparent paralysis was that they were waiting for the government to provide clarity in terms of what the next stage in this pandemic would be. They wanted to know how they could move forward with the stringent regulations in place. Many felt they had to obey the rules in place and could not trade the way they had before or deliver their products like they used to, and they were navigating in an environment where the streets were being patrolled and controlled by law enforcement. Those without the necessary permits to trade and those who did not adapt quickly to the new circumstances were dealt a heavy blow.

Their response

To survive, the respondents acknowledged that they needed to be very flexible and experimental and that it was necessary to hustle if they wanted to keep their businesses afloat. Although it could be argued that operating within the informal sector gave them an advantage when it came to business agility, what is emerging from the research is that our respondents were not really prepared to deal with the challenges brought on by the pandemic and resulting lockdowns.

Many of our entrepreneurs admitted to breaking the rules in order to survive. They needed to operate around the obstacles imposed by hard lockdowns, like staying at home or operating within the curfew restrictions.

Many entrepreneurs spoke about taking creative risks and making quick changes to their businesses. They started behaving experimentally – some changed everything while others adapted their offering. An example was a mushroom farmer who could not supply fresh mushrooms to restaurants and shops, so she adopted her business and started making mushroom biltong. Many changed their product offering – those who started selling hand-sanitiser, for example, did very well.

Relationships became a key focus for entrepreneurs, and many of our respondents noted that they needed to rely on strong relationships more than before. They formed partnerships, developed closer relationships with suppliers, and actively connected with their customers. They needed to address the challenges arising from falling sales and an inability to deliver, so it was vital for them to maintain positive relationships with employees and clients.

Positives of the Covid-19 pandemic

During this time, not all of the entrepreneurs’ experiences were negative. Respondents noted that the pandemic introduced new opportunities to their businesses. Some noted that they picked up more customers, while others said more business opportunities opened up for them as they adapted their offering to meet customers' needs. One example that stood out was the entrepreneur who was a web designer and ran on-site computer training – she transformed her business into an online computer school.

Many of these entrepreneurs were also forced to adopt innovative technologies, like online meeting platforms, to run their businesses. This adoption of technology opened new doors for these businesses. Many respondents also mentioned that their brand and standing in their communities were enhanced during the period.

As the effects of the pandemic start to settle, our research suggests that many of our entrepreneurs are extremely optimistic. They believe in the potential of their businesses and are incredibly positive, motivated and ambitious. Rather than adopt a survivalist mindset, they have big entrepreneurial intentions, growth strategies and plans for the future. They are ready to pick up the pieces and leverage the resilience that they, and their businesses, showed at the height of the pandemic.

KEY TAKEAWAYS

Although we are still in the process of collating this data for an academic paper on the topic, our research to date has highlighted a few key takeaways from the experience of these entrepreneurs during the Covid-19 pandemic.

It is not unusual for any entrepreneur to experience shock at the changes crises bring on and freeze as a result. This leads them to seek the familiar. They start thinking about the short term and ask questions like, “Where is my next meal coming from?”. Rather than plan and be strategic, entrepreneurs react in an unstructured and unproductive manner. To avoid this, entrepreneurs should consider these five tips:

Get moving, keep moving – Entrepreneurs must force themselves to act in times of crisis. This may go against the grain of thinking, planning and strategising, but action is key to counter paralysis. Entrepreneurs need to trust their intuition because fast and urgent measures are required. The only question that needs answering is, “What can I do now?” The emphasis has to be on the ‘do’.

Focus and take bite-sized action – In times of crisis, it is impossible to predict what will happen and to plan for it. For that reason, it is important to take a series of small actions to ensure the survival of your business. It is about reacting to immediate threats and seizing the opportunities right in front of you.

Use available resources – This is a time to reflect on your resources as an entrepreneur. Tools like knowledge, your brand, customers, employees, partnerships, equipment, and office space can all be used to inspire alternative action. Ask, “This is what I have, so what can I do?”

Push the boundaries – This is the time for super-innovation. Entrepreneurs must push the boundaries of what they think is possible. Ask, “What is the craziest thing I can do?” Being safe and drawn to the familiar will not yield results. But this is not about taking reckless risks and putting your assets on the line; it is about trying new ways of doing business, and entrepreneurs must be prepared to reinvent their businesses.

Leverage partnerships – Crises are not a time for competition. Businesses need to survive. Collaboration, even with competitors, can help entrepreneurs weather uncertain times. Think about the relationships you already have – how can others help? How can you help others? Partnerships make you and your business stronger.

During times of crisis, entrepreneurs need to return to the mindset used when they first started their business. They have to remember their thinking and behaviour when the hustle was all they could do and use that experience to tackle their current situation. It is about taking a chance, innovating and ultimately, surviving.

Professor Anastacia Mamabolo

Professor Anastacia Mamabolo is an associate professor at GIBS, specialising in research and entrepreneurship. Her research identity is the role of human capital in management and entrepreneurial activities. She teaches MBA, MPhil, and doctoral entrepreneurship programmes and applied research design. She has presented at international conferences and published articles in peer-reviewed journals. Anastacia also supervises Master’s and doctoral students.

Sean Smith

Sean Smith is currently the senior manager of monitoring, evaluation and research at GIBS, where he is also a registered doctoral student. His thesis topic entails the construction of a new instrument to measure a behavioural economic thinking style in entrepreneurship. 

Professor Kerrin Myres

Professor Kerrin Myres is a full-time senior lecturer at GIBS, teaching entrepreneurship and qualitative research methodology. She has founded two social enterprises and two for-profit enterprises, as well as mentoring countless entrepreneurs during the start-up and growth phases of their businesses. In addition to her entrepreneurial experience, Kerrin has consulted to a variety of private, public and non-profit enterprises across sub-Saharan Africa. 

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