Covid-19 is having a devastating impact on the global economy, forcing thousands of businesses to close and leaving millions of people out of work. But even before the coronavirus first arrived in South Africa, the country’s economy was in a recession – with high unemployment, low growth, rising delinquencies (on a corporate and consumer level), and the falling state of government debt.
“We went into this crisis already on our knees,” says entrepreneur and venture capitalist Vusi Thembekwayo. “We were not ready for a fight. We were on our last breath and now we’ve had the wind taken out us.” Seasoned in the business world and with his own multiple entrepreneurial ventures, Vusi has great insight into how business owners can cope during this time. Here are some of his tips:
1. FORGET ABOUT THE MACROECONOMICS
Indeed, Covid-19 is causing massive shifts is the economy, so much so that it’s hard to know where it stands or how valid the GDP mix still is. Are we a services economy, or a manufacturing economy, or an industrial economy, or a financial services economy? Nobody can answer these questions accurately right now and perhaps won’t be able to do so for at least a year.
“It’s hard to understand where the South African economy is at a macro level,” Vusi says. “What we do know is that it isn’t the way it was before. So the most important thing for every single entrepreneur to be doing right now is getting as close to customers as possible. They’ll give you the information, the knowledge, and the insight about where we are.”
2. THINK ON YOUR FEET AND PIVOT TO SOMETHING NEW
As you spend time understanding customer needs, you’ll start to see how their behaviour has changed and identify where there are short-term opportunities for you to respond. Thereafter, you can think of how to apply your existing skillset to develop a new offering.
“There are so many examples of people in the textile industry – whether they were making tights for the fitness industry or making bespoke suits for black tie events – that are now making masks,” Vusi says. “That’s the kind of quick pivot you can do now. Then there are examples like Netflorist, who were doing one thing [delivering flowers] but had an incidental competence that they’re using as an extension of the moment we’re in [delivering groceries].”
3. KEEP IT SIMPLE BUT ESSENTIAL
Right now, companies are focusing on the most important elements that will keep them going. For this reason, it’s important to pivot to the kind of offering your customers can’t live without. When pivoting, it also helps to keep things as simple as possible. “I think one of the interesting things about living through time such as this, with this much level of complexity, is that the simpler answers are usually the best,” says Vusi. “For example, I think what you’re going to see is that more and more people who work in these large tourism operations are going to go back to their homes, with a laptop and cell phone, and are going to create a product or platform to get into the economy again. I think that’s going to become a reality for the next few years at least.”
4. MAKE AN OFFERING THAT’S GOOD ENOUGH
Indeed, Vusi believes that in the medium to the long term, the real lasting business models are going to get back to the core. In other words, the road to becoming essential starts with removing what’s not essential. It’s about creating a minimum viable product (MPV) that you can put into the market, possibly to monetise but most likely just to test. “There’s an old expression they use in Silicon Valley: Don’t let perfect be the enemy of good,” Vusi says. “So, if you are in a start-up stage and you have a good enough product, this is the time to go to market. It might not have all the bells and whistles but, if it’s going to do the job, you can let the market give you feedback.”
5. MOVE ON FROM YOUR MISTAKES
Of course, not every idea that people create during Covid-19 will be a winner. Just like plumbers can’t pivot to offering their services through digital platforms, not every SME will become the next giant online retailer or home-sharing king. But that shouldn’t stop entrepreneurs from putting their work out into the market, aware that they will make mistakes along the way.
“Zoom is a great example,” Vusi says. “They had massive security issues but we’re still using them. Nobody went on social media and created the hashtag ‘Zoom must fall’. I can promise you now that if it happened in South Africa that would have happened.”
6. RETHINK YOUR RELATIONSHIPS
Indeed, Vusi believes that South Africans have a somewhat unhealthy relationship with SMEs. Because we might be used to receiving a certain standard of service from established entities, we expect too much from the newcomers.
“We don’t understand the natural process of the evolution of a business so, when there are lapses in service or delivery, we flake out and we push them aside,” he says. “But we need to rethink that mindset in terms of how we’re engaging with small businesses. They’re going to get things wrong, its natural in the start-up phase.”
7. SHOW SOME COMPASSION
Part of rethinking our relationship with SMEs during Covid-19 comes from understanding that everybody’s under strain right now. And just like entrepreneurs should expect forgiveness from their customers and clients for their mistakes, SMEs should also be prepared to forgive their suppliers and partners for their failings too. This might be hard when it comes to money but that makes it even more crucial.
“We’ve been affected at several levels,” Vusi says. “We’ve had several debtors with whom we’ve had to have difficult conversations. We’re a global firm so some of them are outside of South Africa – Covid-19 hit them long before it happened to the rest of us – so that began to eat into our into our cash flows. So there are times when we’ve had to co-create a solution with the client, whether it’s deferring payments, taking a portion, or accepting payment in kind.”