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Since the start of the lockdown 480 days ago, the government has sought to soften the blow of the economic impact of the pandemic and its response to it (the corresponding lockdowns that come in tandem with the infection waves).

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Since the start of the lockdown 480 days ago, the government has sought to soften the blow of the economic impact of the pandemic and its response to it (the corresponding lockdowns that come in tandem with the infection waves).

One of the flagship interventions by the government was the R500billion COVID relief package. To date, only 41% of the budgeted amount has been disbursed to the intended sectors.

Noteworthy is the sluggish uptake in the subsidized credit guarantee scheme (CGS). The national treasury has identified indebtedness and stringent application

Criteria as the two chief causes of the dismal uptake of this loan scheme. One would note that the participating banks shared in the risk attached to origination. This, therefore, meant that the banks had to apply their traditional (prudent) affordability assessments techniques in granting loans under the scheme. To add salt to the wound, the civil unrest in KZN and Gauteng (South Africa’s top two provinces by GDP and population1) will undoubtedly negatively impact SMEs.

This begs the question; how does the economic cluster “re-prioritise” the R182 billion to boost sustainable economic growth? Two things need to happen. Firstly, consumer demand must be further induced. Secondly, production capacity must also be boosted. 

The USA issued stimulus cheques to induce demand, many countries including SA lowered interest rates to encourage demand as well as lower the cost of capital. One can argue that most of the go-to economics 101 strategies have been exhausted. As such simple innovations may need to be re-visited.  

The treasury reports that manufacturing, transport and communication, construction, and the retail sector were the most affected. Notably, these industries rely on the patronage of unskilled to semi-skilled labour. This explains the subsequent jobs blood-bath in the respective sectors. If their recovery is prioritised SA might see a quicker recovery in consumer demand and sustainable supply increase. We suggest three actions in the quest to attain a speedy economic recovery:

  1. Boost Exports (tap into external demand)

Local manufacturers can take advantage of the weak rand along with the fortunes of its top four trade partners (China, USA, Germany, UK & Japan)2 changing, where COVID devastation is concerned. These efforts can be strengthened by government support by boosting operating capacity (less stringent working capital loans) as well as consolidation of logistical costs to benefit from economies of scale. South Africa can further leverage its economic position boosting regional exports by assisting food manufacturers to boost production.

  1. Financial liberalisation

Traditional funding requires a borrower to satisfy two conditions; collateral and proof of willingness and ability to make repayments. While companies that have been in operation for more than five years may have already built an asset base, the proof of willingness and ability to repay may be a challenge as most traditional commercial banks tend to assess the most recent three years of performance. Of which the past one and a half years may have played against many companies.

The Treasury may have to look at channelling the required financial support through specialist development banks supporting strategic manufacturing, construction, and retail sectors. These would in turn offer financial support in the form of varied financial products such as debt-equity hybrid structures. We need an entrepreneurial approach to funding COVID recovery.

  1. Encourage corporate nuptials

This is an opportune time for the antitrust establishment to restructure (even if temporary) its attitude towards certain types of mergers. This could be a phased approach that boosts mergers and acquisitions between industry-related parties.

Currently, the competition commission will block a merger or acquisition that results in a movement higher than 100 points in the Herfindahl-Hirschman Index (HHI). If adjustments are made, we may see strategic mergers and acquisitions taking place. This could result in the realisation of synergies. Thus, unlocking shareholder value and ensuring the sustainability of the resulting company. 

China is a good example of a state that supports (financially and structurally) its domestic firms when they make international corporate moves such as M&As. SA could make similar commitments to aiding its domestic firms to roll out their footprint into Africa. The timing could not be any better given that other African countries are still reeling from the COVID effects and FDI could assist in reversing unemployment. 

In conclusion, there is a silver lining in the SA economy. Beyond the conventional interventions, the government could look into stimulating demand and driving operational efficiency by thinking differently around exports, financial liberalization, and antitrust provisions. 

Prince. K. Nkiwane (064 478 0742)

Management Consultant | Kettle Consulting (Pty) Ltd


1 – 2021. List of South African provinces by gross domestic product – Wikipedia. [online] Available at: <> [Accessed 20 July 2021].tic_product

2 – Holder, J., 2021. Tracking Coronavirus Vaccinations Around the World. [online] Available at: <> [Accessed 20 July 2021].