South Africa has the 12th fastest-growing rate of entrepreneurship globally, with the pace of small business creation growing by 13% from 2019 to 2020.
This is one of the findings from Mastercard’s Recovery Insights: Small Business Reset, which examined 19 markets around the world. The report also revealed that sales at small- and medium-sized enterprises (SMEs) lagged larger companies by up to 20 percentage points at the peak of the crisis.
However, spending has recovered in 2021. Total sales at SMEs rose 4,5% through August 2021 year-to-date compared to the same period in 2020, while e-commerce sales are up 31,4.
Drawing on the Mastercard Economics Institute’s new Small Business Performance Index of aggregated and anonymised sales activity within the Mastercard network, Recovery Insights: Small Business Reset identifies several key trends:
* Closures: Globally, small businesses that closed early in the pandemic were about three times as likely as larger businesses to remain closed long term. One-third of small businesses that closed in April 2020 remained closed after six months, and about one-fifth were still closed after 12 months. In South Africa, roughly 9% of the small retailers remained closed after six months versus 3% of the large retailers.
* Location: Globally, spending at SME retailers in central business districts is down 33% versus 2019, while sales at residential neighborhood small retailers grew 8%. As tourists and workers stay closer to home, small businesses in commercial districts around the globe are seeing sales suffer.
* E-Commerce: Following shutdowns, the number of businesses globally going online each month tripled from pre-pandemic levels, peaking in July 2020. Online retail in South Africa more than doubled in just two years, growing 66% in 2020 to reach an estimated R30,2-billion. According to the Mastercard SME Confidence Index, 64% of South African SMEs said that the rapid rise of e-commerce will have a positive impact on future business.
* Entrepreneurship: One-third more small retailers launched in 2020 than in 2019, nearly 8-times the number of larger firms created. This trend of considerable new SMB formation in 2020 is reflected around the world: UK (+101%), US (+86%), Australia (+73%), Germany (+62%), Brazil (+35%), and South Africa (+13%).
* Sectors – Restaurants, Lodging and Grocers: In Middle East and Africa (MEA), small lodging businesses have consistently outperformed larger businesses in 2021, seen specifically in South Africa. Where people are traveling, the trend to stay local has benefited small lodging companies (and hurt big cities’ big hotels). Small grocers in South Africa too have seen consistently higher performance than large grocers. Globally, restaurants were a different story, with SME eateries underperforming large ones by roughly 17 percentage points in 2021 YTD.
“Supporting neighborhood businesses has been a rallying point throughout the pandemic. However, the challenges faced have been very real, due to their dependency on local markets, local supply chains and tighter cash flows,” says Bricklin Dwyer, Mastercard chief economist and head of the Mastercard Economics Institute. “But, we see brighter opportunities ahead. The shift to digital opened the door to the pandemic’s silver lining: a resurgence of entrepreneurship and innovation.”