Covid-19 And Its Effect On Small Food Businesses

COVID-19 has hit small- and medium-sized enterprises in South Africa’s food sector hard. Andrew Bowman, a lecturer at the Centre of African Studies at the University of Edinburgh in Scotland, and Dr Reena das Nair, a senior researcher at the Centre for Competition, Regulation and Economic Development at the University of Johannesburg, discuss some of the approaches that can be followed to better support these businesses.

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COVID-19 has prompted widespread discussion of the resilience of food systems and how efficiency and competitiveness have previously been understood. Recent decades have seen the growth of increasingly complex food value chains. These are underpinned by just-in-time delivery systems, a growing share of food products sold through supermarkets, and increasing concentration of ownership among powerful, large food manufacturers.

The pandemic has further emphasized the need for a more diverse and inclusive food system, in which small- and medium-sized enterprises (SMEs) play a key role.

As part of a larger project investigating challenges faced by agro-processing SMEs, we conducted qualitative telephone interviews with 16 SME maize-milling and dairy firms during lockdown to gauge the effects of the pandemic.

As essential businesses, food manufacturers continued to operate through lockdown, and it might be assumed that the impact of COVID- 19 on these industries was minimal. However, this was not the case. While aggregate production levels were maintained, super maize meal output in April was 25% higher than the same month last year and consumer prices remained relatively stable, SMEs in these industries faced multiple disruptions throughout their supply chains.

Despite this, there are still steps that can be taken to shield these enterprises from the worst effects of the pandemic. This should go beyond financial aid and improved access to credit to include, for example, supporting them in diversifying their routes to markets. Such support is critical because the exit of SMEs will exacerbate high levels of concentration and reduce diversity, with consequences for social inclusion and food system resilience.

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