Pay SMEs to keep them afloat

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South Africa’s bigger corporations have been urged to pay their small business counterparts at the beginning of this week, Monday April, 20, 2020 as a way to ease the extraordinary cash-flow difficulties that they are experiencing at the moment.

Both Business for South Africa (BSA), an alliance of business bodies and organisations, and the CEO Initiative, a collaboration between government and business to address some of South Africa’s most pressing economic challenges, have made the call as a way to help keep the more than 500,000 formal small and medium enterprises (SMEs) in the country afloat.

Sim Tshabalala, CEO at Standard Bank and CEO Initiative member, said these are extraordinary times that require extraordinary commitment from CEOs and large corporates.

“The government has asked South Africans to stay home under a 35-day lockdown. This is tough for every individual and every business, but most especially difficult for SMEs,” he said.

“We believe early payment is the right thing to do and will have a significant impact on their ability to survive and keep paying their employees,” Tshabalala added.

The CEO Initiative says there are approximately 525 000 formal SMEs employing 6.6 million people. Given the lockdown, the vast majority are unable to pay their rent, utilities and importantly, their employees. Initial surveys indicate that 60% of SMEs are either considering retrenching employees, or already have.

Tshabalala has been supported by Adrian Gore, Discovery CEO, a member of the CEO Initiative and also chairman of the SA SME Fund. “This is a significant threat to the SA economy, with many millions of jobs at risk. We need to act boldly now and pay all outstanding SME creditors,” he said.

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