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Recovery after the riots: how small businesses can bounce back from adversities/external shocks

03 August 2021 | Story Prof Brownhilder Neneh | Photo Supplied

Prof Neneh_web read more — Prof Brownhilder Neneh is an Associate Professor and Academic Head (HOD) of the Department of Business Management, University of the Free State.

Opinion article by Prof Brownhilder Neneh, Associate Professor and Academic Head (HOD) of the Department of Business Management, University of the Free State.

South Africa was recently rocked by the worst violence, riots, and chaos that has devastated the business community. An estimated 40 000 businesses were affected, costing the country about R50 billion in lost output and endangering around 150 000 jobs. It is important to stress that the situation regarding riots and looting in South Africa is not a once-off phenomenon, because in the past few years, South Africa has witnessed rioting and looting as one of the reoccurring events happening in the country, which often left big and small businesses to bear the burden as they pay the price for the actions of angry citizens. The aftermath of the Zuma imprisonment has once again put immense pressure on small and big businesses that were already disproportionately struggling with decreasing revenue and dismal forecasts of earnings due to the continuing COVID-19 pandemic and lockdowns. The losses have had a devastating effect on particularly small businesses, which are typically not insured against damage during protests, and do not have much cash reserves at their disposal. Some small business owners’ years of hard work and entire life savings were completely wiped out overnight, putting the reopening plans of some on hold and completely shutting down others.

Given that riots and protests are not unusual in South Africa, some people on social media have argued that South Africa is a volatile country when it comes to riots and protests, and that small businesses should have anticipated such risks and should have made an effort to obtain business insurance. A critical question to ask is whether all small businesses can afford insurance? In most cases we expect the answer to be ‘no’. This is because small businesses operate under various difficult circumstances, such as liabilities of newness, smallness, poorness, and lack of access to external financing. Nonetheless, it is important to educate small businesses about the importance of getting insurance, especially any form of insurance that covers their core assets. But more importantly, what needs more insight within the South African context, is a critical discussion on how small businesses can minimise losses incurred during riots and bounce back from external shocks.

Many uninsured small businesses might not reopen unless government helps them

Depending on the extent of the damage across the different businesses affected during the recent protests, it could take up to 18 months to reconstruct the malls and for businesses to become fully operational again. This means that many of the small businesses might have to temporarily change their business location or relocate completely. The major problem with this strategy is the risk of paying double rent, both to the damaged mall as well as at the new location. The law does not provide for these SMEs to stop paying rent to the damaged mall, regardless of whether they want to relocate. In addition, most of the assets that these businesses had, such as furniture, equipment, inventory, and debtors, were destroyed. This is a double negative, which implies that they have lost almost all of the assets they could use as collateral to obtain loans from financial institutions, as well as having to replace these assets.

Many of these small businesses that were not insured and have very little or no cash reserves may not be able to reopen their businesses, unless they receive assistance from the government. The South Africa government and the entire civil society have come out to condemn these barbaric actions, and have put in place some measures to redress the situation and bring stability to the country. As part of the recovery strategies, the government funds allocated to small businesses through its different departments, such as provincial development corporations, the IDC, and national youth funds, should be used to provide interest-free loans to those small businesses that were profitable before the looting crisis. Government should also consider paying business rentals to the damaged malls until these malls reopen. Tax incentives for some of these businesses for a certain period of time is another option to be explored. Likewise, unemployment funds should be made available to pay their employees until they are fully operational again.

Within the context of entrepreneurship, resilience – which is viewed as the capacity of the business to recover, survive, or grow quickly following a crisis – is one of the capabilities that small businesses can deploy. While small businesses are often regarded as less resilient because of their limited resources, this liability makes them more flexible and adaptable in the face of adversity. Small businesses can become more resilient and less vulnerable to crises by developing an anticipated and containment mindset. An anticipated mindset entails continuous identification of all possible problems and emergencies, while a containment mindset is about embracing flexibility and adapting when responding to crises (conceptual slack), developing capabilities to deal with losses, and making a commitment to resilience. Small businesses can achieve these mindsets by undertaking training in metacognitive awareness, which entails developing coping strategies to respond to uncertain events, developing adaptive thinking to identify and recognise opportunities in an uncertain and dynamic context, and changing responses and strategies according to changes in the environment. Small businesses can also develop resilience by investing in and building resources. These resources can range from social resources (e.g., support from networks of family and friends, business partners); economic resources (e.g., personal savings, stokvels, and financial institutions); and personal resources (e.g., self-determination, inner strength, adopting a problem-solving mentality, emotion regulation, and self-confidence). As a short- to medium-term strategy, the South African government – through its Ministry of Small Business Development – should partner with higher education institutions and private organisations to create nationwide workshops and seminars on how to develop resilience and overcome liabilities of newness, smallness, and poorness.

Small businesses are the panacea for addressing poverty, unemployment, and inequality

Small businesses should also foster cooperative relationships, as these have proven to help entrepreneurs overcome the lack of resources by sharing business resources (equipment, business space, and funds). This ultimately transforms competitive differences into potential growth opportunities for businesses. This is one of the most important business practices adopted by many immigrant businesses for survival. Those who need to start from scratch are encouraged to develop their businesses, using what they can create with the set of resources (computer, land, skills, money, car) at their disposal, no matter how small. Given that the future is unpredictable, instead of defining a specific plan to reach a goal/objective, such entrepreneurs should focus on what means are available to them now. Most successful entrepreneurs around the world – and particularly in Africa, where entrepreneurs are usually constrained by limited resources and support structures – will tell you that they started their businesses with very limited or only one resource that they had at their disposal. It might be quite difficult and painful to undergo the cycle again, so entrepreneurs should tap into their inner grit and remember that although they are starting from scratch, this time around they are wiser and more experienced, which will ultimately translate to higher achievements.

In conclusion, small businesses are the panacea for unleashing and addressing the triple problem of poverty, unemployment, and inequality that South Africa is currently facing. So, if the government is intentional about enhancing the creation, survival, and sustainability of small businesses, it becomes critical that they create an enabling environment that significantly minimises external shocks. The South Africa government should also put in place clear short- and long-term goals to address the causes and issues that give rise to riots and provide practical solutions to transform the country. The South Africa government should also partner with civil society and the media to spread awareness about the negative impact of destructions during riots and protests.

News Archive

UFS to investigate implementation of quality-monitoring system for SA food industry

2006-02-07

Some of the guests who attended the workshop were from the left Prof James du Preez (Chairperson: Department of Biotechnology at the UFS); Prof Lodewyk Kock (Head: South African Fryer Oil Initiative (SAFOI) at the UFS)); Mrs Ina Wilken (Chairperson: South African National Consumer Union (SANCU)); Prof Herman van Schalkwyk (Dean: Faculty of Natural and Agricultural Sciences at the UFS) and Mr Joe Hanekom (Managing Director of Agri Inspec).
Photo: Stephen Collet

UFS to investigate implementation of quality-monitoring system for SA food industry

The University of the Free State (UFS) will be investigating the implementation of a quality-monitoring service for the South African food industry.

This was decided during a workshop to discuss the external quality monitoring in the edible oil industry of South Africa, which was recently held at the UFS.

Major role players in the fast-food sector like Nando's, Spur, Captain
Dorego's, King Pie Holdings, Black Steer Holdings, etc and various oil
distributors like Felda Bridge Africa, Refill Oils, PSS Oils and Ilanga Oils attended
the workshop. Also present was Mrs Ina Wilken, Chairperson of the South African National Consumer Union (SANCU) and key-note speaker of this workshop. She represented the consumer.

These role players all pledged their support to the implementation of this quality- monitoring system for the whole food industry.

The decision to implement this system follows the various malpractices reported in the press and on TV concerning food adulteration (eg the recent Sudan Red Scare), misrepresentation (eg olive oil scandal exposed in 2001) and the misuse of edible frying oils by the fast-food sector.

“One of the basic rights of consumers is the right to safe food. Consumers must be protected against foods and food production processes which are hazardous to their health. Sufficient guarantee of the safety of all food products and food production processes should be implemented. It does not help to have adequate food standards and legislation and there is no manpower to do the necessary investigation or monitoring,” said Mrs Wilken.

The South African Fryer Oil Initiative (SAFOI), under the auspices of the UFS Department of Microbial, Biochemical and Food Biotechnology, currently monitors edible oils in the food industry and makes a seal of quality available to food distributors.

“Last week’s decision to implement the quality-monitoring system implies that we will now be involving also other departments in the UFS Faculty of Natural and Agricultural Sciences who are involved in various aspects of the food chain in an endeavor to implement this quality monitoring system,” said Prof Herman van Schalkwyk, Dean: Faculty of Natural and Agricultural Sciences at the UFS and one of the main speakers at the workshop.

Prof van Schalkwyk said that the main aim of such a system will be to improve the competitiveness of the South African food industry. “It is clear that the role players attending the workshop are serious about consumer service and that they agree that fraudulent practice should be monitored and corrected as far as possible. Although some of the food outlets have the capacity to monitor the quality of their food, it may not seem to the consumer that this is an objective process. The proposed external monitoring system would counteract this perception amongst consumers,” said Prof van Schalkwyk.

The workshop was also attended by representatives from SAFOI and Agri Inspec, a forensic investigation company collaborating with inter-state and government structures to combat fraud and international trade irregularities.

Agri Inspec has been working closely with SAFOI for a number of years to test the content of edible oils and fats. “Extensive monitoring and control actions have been executed in the edible oil industry during the past four years to ensure that the content and labeling of oil products are correct. Four years ago almost 90% of the samples taken indicated that the content differed from what is indicated on the label. This has changed and the test results currently show that 90% of the products tested are in order. However, to maintain this quality standard, it is necessary that quality monitoring and educational campaigns are continuously performed,” said Mr Joe Hanekom, Managing Director of Agri Inspec.

“The seal of quality presented by SAFOI should also be extended to include all the smaller oil containers used by households,” Mrs Wilken said.

The SAFOI seal of quality is currently displayed mainly on some oil brands packed in bigger 20 liter containers, which include sunflower oil, cottonseed oil, palm oil etc which are used by restaurants and fast food outlets. “Any oil type is eligible to display the seal when meeting certain standards of authenticity. In order to display the seal, the distributor must send a sample of each oil batch they receive from the manufacturer to SAFOI for testing for authenticity, ie that the container’s content matches the oil type described on the label. This is again double checked by Agri Inspec, which also draws samples countrywide from these certified brands from the end-user (restaurant or fast food outlets). If in breach, the seal must be removed from the faulty containers,” said Prof Lodewyk Kock, Head of SAFOI.

“It should however be taken into account that oils without a seal of quality from the UFS can still be of high quality and authentic. Other external laboratories equipped to perform effective authenticity tests may also be used in this respect,” said Prof Kock.

“It is also important to realise that any oil type of quality such as sunflower oil, cottonseed oil, palm oil etc can be used with great success in well controlled frying processes,” he said.

Further discussions will also be held with the Department of Health, the SA National Consumer Union and Agri Inspec to determine priority areas and to develop the most effective low-cost monitoring system.

More information on the UFS oil seal of quality and oil use can be obtained at www.uovs.ac.za/myoilguide

Media release
Issued by: Lacea Loader
Media Representative
Tel: (051) 401-2584
Cell: 083 645 2454
E-mail: loaderl.stg@mail.uovs.ac.za
6 February 2006

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