Online retail in South Africa has more than doubled in just two years, growing 66 percent in 2020 to reach an estimated R30.2 billion, according to Mastercard. Picture: Elise Amendola.
Online retail in South Africa has more than doubled in just two years, growing 66 percent in 2020 to reach an estimated R30.2 billion, according to Mastercard. Picture: Elise Amendola.

The country has 12th-fastest growing rate of entrepreneurship globally – Mastercard

By Given Majola Time of article published Nov 12, 2021

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SOUTH Africa has the 12th-fastest growing rate of entrepreneurship globally, with the pace of small business creation growing by 13 percent from 2019 to 2020, according to Mastercard’s recently released Recovery Insights: Small Business Reset.

Looking at 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 had since recovered this year with total sales at SMEs rising 4.5 percent through August 2021 year-to-date compared to the same period last year. This was while e-commerce sales were up 31.4 percent.

The report 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 shed light on the impact of the global health crisis and the ongoing recovery thereof that has had a significant impact on small businesses globally.

Regarding 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 last year remained closed after six months and about one-fifth were still closed after 12 months. In South Africa, roughly 9 percent of the small retailers remained closed after six months versus 3 percent of the large retailers.

Regarding the location, globally, spending at SME retailers in central business districts was down 33 percent compared to 2019, while sales at residential neighbourhoods for small retailers grew by 8 percent. As tourists and workers stay closer to home, small businesses in commercial districts around the globe saw their sales suffer.

With regards to e-Commerce, following shut downs, the number of businesses globally going online each month tripled from pre-pandemic levels, peaking in July last year.

Online retail in South Africa more than doubled in just two years, growing 66 percent in 2020 to reach an estimated R30.2 billion. According to the Mastercard SME Confidence Index, 64 percent of South African SMEs said that the rapid rise of e-commerce will have a positive impact on future business.

On entrepreneurship, the report showed that one-third more small retailers launched last year than in 2019, nearly 8 times the number of larger firms created. This trend of considerable new SMB formation last year was reflected around the world with the UK at 101 percent, the US with 86 percent, Australia at 73 percent, Germany at 62 percent, Brazil at 35 percent and South Africa with 13 percent.

With focus on sectors, restaurants, lodging and grocers, in the Middle East and Africa (MEA), small lodging businesses had consistently outperformed larger businesses this year, seen specifically in South Africa.

Where people were travelling, the trend to stay local had benefited small lodging companies and hurt big cities’ big hotels. Small grocers in South Africa too had seen consistently higher performance than large grocers. Globally, restaurants were a different story, with SME eateries under-performing large ones by roughly 17 percentage points in 2021 year to date.

Bricklin Dwyer, Mastercard chief economist and head of the Mastercard Economics Institute, said supporting neighbourhood businesses had 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. 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,” Dwyer said.

Mastercard said it continued to support small businesses and has pledged to bring 50 million small businesses and 25 million women entrepreneurs into the digital economy by 2025.

In South Africa, Mastercard said it has collaborated with Google and Standard Bank to help SMEs move their businesses online, accept digital payments and attract more customers.

Through the collaboration, SMEs were said to get free access to Standard Bank’s SimplyBlu, an all-in-one e-commerce solution powered by Mastercard Payment Gateway Services, plus free Google Ads to the value of R500 until the end of December this year.

Mastercard’s Digital Doors curriculum also helped businesses get online and stay protected, ensuring they had the right tools to maximise their digital presence and integrate e-commerce seamlessly, including the free Small Business Digital Readiness Diagnostic.

Most recently, Mastercard said it committed $25 million (R380m) to help more than 5 million micro and SMEs digitise through the Strive initiative. Through its partnership with Junior Achievement South Africa, Mastercard said it has helped more than 3 000 women gain entrepreneurial skills to start and grow their own businesses.

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