Investors from the economic and political implications of Russia鈥檚 invasion of Ukraine鈥攆or over three months. This crisis occurred just as the world economy was finally getting on its feet after two years of the COVID-19 pandemic. Small businesses, responsible for much of the innovation, employment, and growth in our countries, were will be lucky to make it through the economic fallout of the war in Ukraine.
Risks, shocks, and crises are the new normal. We can only expect more human-made and natural disasters linked to climate change, future pandemics, economic shocks, and social problems. Small business leaders urgently need the skills and tools necessary to build resilient organizations. Our policymakers must create an enabling and supportive environment to ensure that small businesses can survive and even thrive through crises.
Why do crises disproportionately affect small businesses?
According to , it took an average of six years for small businesses to recover fully following the 2008鈥�09 financial crisis, whereas it took just four years for large businesses. Small businesses are experiencing similar trends with a slow COVID recovery process, driven by demand and liquidity challenges and inflexible supply chains and operations. They typically operate with slim margins, which have faced intense pressure from decreased customer demand and purchasing power and increased operating expenses linked to government health-and-safety compliance requirements. In addition, many small businesses have been compelled to invest in new technologies to reach customers during periods of partial and complete lockdowns, but this has proved to be both difficult and expensive. Sadly, many small businesses worldwide have not benefited from the government's financial schemes and tax holidays due to a lack of awareness or their inability to meet the application requirements.
This reality is in contrast with the situation facing many large businesses, which鈥攖hough affected by the same shocks鈥攈ave survived given their ability to manage commercial pressures, their deeper pockets, and their long-term relationships with their suppliers and distributors. Many of these large companies also belong to industry associations. They have strong relationships with government officials, enabling them to influence policy to ensure that they receive concessionary financing and incentives for recovering quickly.
It is imperative that we collectively ensure that more small businesses become resilient鈥攎easured by their ability to respond and adapt quickly to disruptions or significant, unplanned changes that could .
What must we do to support small businesses?
There are three critical steps to ensure that small businesses survive and thrive and build resilience to withstand future shocks.
First, we must strengthen the capacity of small business leadership. that businesses that survive have leaders who possess the right mindsets, a positive attitude, and optimism about the future; they are adaptive, and they have significant social capital, including the right networks. Formal and informal training programs can provide this capacity building, with tailored industry knowledge, while being cost-effective. This approach requires investment from the public, private and nonprofit sectors, working collaboratively to ensure that all small business owners鈥攅specially women, youth, and other ethnic minorities鈥攂enefit from these interventions. E-learning that is affordable, tailored, and accessible, in addition to being self-paced, will be critical. It is also imperative that this critical business resilience training incorporates a curriculum to enable entrepreneurs to pivot to green businesses which can withstand shocks associated with climate change.
There are emerging examples worthy of emulation. and the nationwide network of in the United States have developed pioneering curriculum and support structures on business resilience, offered in English and Spanish. In Nigeria, , with support from the Mastercard Foundation, has provided business resilience training to over 1,000 small businesses in the food and agriculture landscape, enabling them to pivot and scale post-COVID.
Second, we must strengthen and support industry and trade associations and enable greater cohesive and responsive engagement between these organizations and the government to ensure timely and appropriate interventions. While large companies have entire departments focused on advocacy and public relations, small businesses cannot afford these additional support services and have to depend on their engagement in industry associations to amplify their voices and gain support.
According to Toki Mabogunje, who spoke at the Max Bell Policy Dialogue in February 2022, 鈥渢he process of policy reform would be ineffective if small businesses attempted to address their issues individually." She underscored that "effective advocacy requires a clear vision of the desired outcomes; a thorough understanding of the issue; the ability to prepare evidence-based policy proposals, and the opportunity to meet with and persuade policymakers and implementers to take or not take action, or to do things differently."
The has utilized this systematic and participatory approach. CIPE has worked with small businesses in Malawi, Nigeria, Paraguay, Peru, Romania, Russia, Montenegro, and the United States to shape the policy landscape by forming coalitions and developing national business agendas (NBA). They have collectively identified laws and regulations limiting business activity through this process and developed concrete recommendations and reforms to remove the barriers and improve the business climate.
Another example is the , which has worked in twenty countries in Africa and Asia. It has used a systems approach and set of tools for leveraging law and regulation for sustainable economic development in an evolving global market with a focus on trade and agriculture.
Third, we must institute appropriate financial recovery instruments, including grants, loans, subsidies, rebates, and tax savings accessible to all small businesses, especially the most vulnerable. Early data from the various COVID-related financial incentives reveal that the funds being allocated by governments are not adequate or suitably tailored for small businesses. As reflected in the comments of Rocco Rossi, the President and CEO of the Ontario Chamber of Commerce, 鈥斺�淲e are deeply concerned about those businesses that will be left behind. On the one hand, the grant is too narrow as it only applies to businesses that were required to fully close. It misses those that are at limited capacity or those losing revenue as a result of restrictions affecting their clients (such as food service suppliers).鈥�
In addition, many vulnerable groups were unaware of the government incentives and could not access them. For example, In July 2020, 96 percent of small businesses in South Africa reported a drop in revenue, and only three percent received relief, based on a (Small Business Research Specialists SBP, 2020).
To address this challenge, policymakers must partner with financial and non-financial service providers to remove bottlenecks and unrealistic hurdles preventing access. This requires an investment in collecting data and actively tracking the disparities in access, ensuring complete transparency, building trust, and actively closing these gaps to ensure a level playing field.
Government must also work with financial institutions and small business agencies to simplify the documentation process required for applying for support. This must include active communication campaigns in local languages and the engagement of religious and cultural leaders to serve as champions and to build trust with minority groups, women, and other vulnerable populations. In addition, there must be a concerted effort to provide systematic support to guide interested entrepreneurs.
As reinforced by the in South Africa, governments must publish all relevant information about the design, development, implementation, and funding of all mechanisms and tools so that small business owners are well informed and can inquire about, investigate, and follow up on misconduct. Digital technologies can simplify the loan application process, facilitate credit decisions, and channel information to businesses if designed in an inclusive manner (Saha, Quak and Carreras, 2020).
Ultimately, there are no silver bullets to protect small businesses from shocks and crises. Still, we must work collaboratively to strengthen their internal capacities to survive and thrive by providing the training and support that they require. We must also encourage their engagement in industry and trade associations and strengthen these entities to effectively support their members during crises and elevate the issues that most affect them in order to influence the policy environment. These associations must also actively track the impact of government actions on the lives of entrepreneurs and their businesses. Finally, governments must partner with the financial services sector to design critical financial instruments that are appropriate for the needs of small businesses. Through effective monitoring and evaluation, they must ensure that they reach the most vulnerable, especially businesses led by women, youth, and minority groups, to ensure a level playing field for all small businesses.
About the author
Ndidi Okonkwo Nwuneli is the co-founder of AACE Foods, Sahel Consulting Agriculture & Nutrition Ltd. She is the founder of LEAP Africa, Nourishing Africa and Changing Narratives Africa and has over 25 years of international development experience. She was the 2021-2022 McConnell Visiting Scholar at the Max Bell School of Public Policy at 苹果淫院.
