Foreign-owned SMMEs lessen poverty and encourage economic development. They are easily distinguished from their local counterparts by the unique way in which they serve society. For example, retailers from China mostly service the markets in the urban areas while those from Somalia service the township areas. Extant literature focuses on the difficulties that foreign-owned SMMEs face such as insufficient funds, business expertise, and financial knowledge to successfully run businesses. Others see strict laws, compliance requirements, and Xenophobia as major problems that foreign-owned SMMEs face. Unfortunately, the COVID-19 pandemic with its conventions further complicated the situation of the foreign-owned SMMES. Using a qualitative research approach, this study investigated the influence that the COVID-19 pandemic had on the operations of SMMES in Ekurhuleni Township. It found inter alia that the South African government provided some relief for SMMEs, however, foreign-owned SMMEs were not included.
TopIntroduction
The sudden emergence in 2020 of the Coronavirus (COVID-19) pandemic also known as the Coronavirus disease was a major turning point for businesses globally. Governments globally enforced stringent measures to contain the spread of the virus in response to the pandemic. These measures included lockdowns which consequently had macroeconomic effects (Pedauga et al., 2021). Among the different sectors that were adversely affected were Small, Medium and Micro Enterprises (SMMEs). In South Africa, SMMEs constitute up to 91% of formal businesses and create 60% of employment which contributes to 34% of the Gross Domestic Product (GDP) (Fatoki, 2016; Kibuuka & Tustin, 2019).
The SMME sector is split into local and foreign-owned SMMEs, however, extant literature exhibits scant knowledge on foreign-owned SMMEs (Musara, 2019; Kibuuka & Tustin, 2019). During the peak days of the pandemic, the South African government provided SMME relief schemes to curtail the effect of the lockdown measures on SMMEs (Small Business Development Agency, 2021). Foreign-owned SMMEs could not access these government relief schemes which demonstrated a lack of financial inclusion.
This study examined the influence of the pandemic on the operations of foreign-owned SMMEs in a South African township. An interpretive paradigm was adopted using deductive reasoning to answer pertinent questions. The study followed a qualitative approach and engaged a semi-structured interview design to collect data from five conveniently selected entrepreneurs. The findings provide a snapshot of the current situation of the influence of COVID-19 on foreign-owned SMMEs. It further shows that foreign-owned SMMEs were barely surviving during the COVID-19 pandemic resulting in threatened profitability and an increased rate of business closures. Issues around financial inclusion emerged from the data. The findings have practical and theoretical implications.
Scholars agree that cultural diversity and knowledge are some of the important things that foreign-owned SMMEs offer the host nation, and these are needful precursors for cross-cultural learning and advancement (Radipere & Dhliwayo, 2014; Tengeh, 2013). When examined against the backdrop of their counterparts (i.e., local SMMEs), foreign owned SMMEs are vulnerable to experience further challenges (Tengeh, 2013). Ndoro (2016) found that owners of foreign-owned SMMEs operate their businesses in a manner quite dissimilar to local-owned SMMEs. For instance, Ndoro’s (2016) research among Chinese-owned foreign SMMEs discovered the peculiar opportunity detection systems used by these SMMEs. Local economies accrue numerous benefits from business activities of foreign-owned SMMEs.
According to Elo (2016), global business emanating from the enterprise of foreign-owned SMMEs generates networking and competitiveness, while enabling intellectual gain. Nkongolo-Bakenda and Chrysostome (2013) concur that both indigenous and host nations derive significant financial and social benefits from foreign-owned SMMEs. These outcomes stoke the perception that foreign-owned SMMEs bring novel perspectives that instigate growth in the wider SMME sector of host countries. Additionally, the predisposition of foreign-owned SMMEs to make new discoveries and the multiplicity of the areas in which they do business (Ostrovsky & Picot, 2021) offer opportunities for local entrepreneurs to learn and add more value to their home economy. Therefore, it should be expected that when emergencies such as the COVID-19 pandemic arise, governments should find ways to palliate the impact on the SMMEs including those owned by foreign entrepreneurs. In the context of the foregoing, the study from which this chapter is drawn sought to explore how foreign-owned SMMEs in a South African township fared in the face of the COVID-19 pandemic.