The impact of COVID-19 on SME profitability : insights from South Africa

Abstract

This study aims to investigate the impact of COVID-19 on SME profitability, performance, and operational efficiency. The data were gathered using a structured questionnaire targeting SMEs affiliated with the Centre for Social Entrepreneurship (CSE), Productivity SA, Johannesburg Chamber of Commerce (JCCI), and Durban Chamber of Commerce and Industry (DCCI). A purposive sampling was utilized, specifically choosing SME owners or senior management representatives. The Krejcie & Morgan formula was used to calculate a suitable sample size of 348, resulting in an 81% response rate with 282 participants successfully completing the questionnaire. The instruments’ dependability was validated by Cronbach’s alpha coefficients of 0.906 and 0.769 for the impact of COVID-19 on SMEs and profitability variables, respectively. The findings indicated that the average effect of COVID-19 on SME was 40.3546, with a standard deviation of 7.61450. The average profitability was 5.4921, with a standard deviation of 1.92297. An analysis using a one-sample t-test revealed that the influence of COVID-19 on SMEs did not show a statistically significant impact (p = 0.156). However, the effect on profitability was statistically significant (p = 0.001). These findings emphasize the diverse consequences of the pandemic on the functioning of SMEs, specifically pointing out considerable decreases in profitability. The study recommends that government agencies and financial institutions increase support for SMEs to help them recover from the profitability challenges brought on by the pandemic. Tailored financial relief programs, accessible credit facilities, and long-term recovery strategies should be implemented to cushion SMEs against future economic shocks.