Investigating the effects of COVID-19 pandemic on the growth and profitability of Small, Medium and Micro enterprises in the Makhado Local Municipality

Abstract

Small, Medium, and Micro Enterprises (SMMEs) form the backbone of South Africa’s economy, accounting for over 98 percent of businesses, contributing approximately 39 percent to the national GDP, and employing more than 60 percent of the workforce. However, the COVID-19 pandemic severely disrupted economic activity, with particularly adverse effects on SMMEs within the Makhado Local Municipality. This study investigates the impact of COVID- 19 on SMMEs in Makhado Local Municipality, examining financial, operational, and strategic challenges. The study is grounded in the Resource-Based View (RBV) and resilience theory, contributing to academic debates on small business survival and crisis response. The findings offer both practical insights for policy makers and business owners, and theoretical implications for understanding how resources and capabilities shape resilience in times of crisis. A quantitative research design was employed, utilizing self-administered questionnaires distributed to SMME owners and managers. Stratified sampling ensured diverse representation across various SMME sectors, resulting in a response rate of 97 percent. Data were analysed using descriptive statistics, cross-tabulations, Fisher’s Exact Test, and logistic regression. The findings indicate significant revenue losses, acute cash flow challenges, and operational interruptions, often resulting in staff retrenchments and business closures. Notably, increased debt burdens and liquidity shortfalls emerged as critical threats to longterm sustainability. The study also highlights the role of government intervention in mitigating these challenges. Although various relief measures were introduced, many SMMEs faced difficulties accessing support due to complex application procedures and restrictive eligibility criteria. These shortcomings underscore the urgent need for more accessible, targeted policy responses. The study concludes by advocating for streamlined funding mechanisms, improved access to markets, and enhanced digital infrastructure to bolster SMME resilience. These recommendations contribute meaningfully to policy discussions on economic recovery and crisis management, offering practical insights for strengthening the sustainability and preparedness of the SMME sector in the face of future economic disruptions.