Tuesday, 24 November 2020

SMEs Shut Down – 30k or 100k?


The SME Association of Malaysia President Datuk Michael Kang said some 100,000 SMEs may have closed down since MCO in March. This is three times the figure available at the CCM, which showed 32,469 SMEs have wound-up between March and September.

Kang says official statistics belies the actual number shuttered down, as some are in the process of winding down. A random survey by the Association showed that about 20% intend to cease operations. Food and beverage is one of the hardest hit.

The local Mak Cik stall is struggling to survive. She doesn’t mind if you want some extras for the same price. It is better than to throw the food away as sales has dropped by at least 40%. The same goes for other F&B outlets. Also true for those in the hair salon or gym business. Not enough revenue to cover fixed costs.

 

Source: https://www.malaymail.com

 

Most businesses do not want to get rid of their employees or impose a salary cut. They are well aware of the cost of rehiring, and the brutal decision of taking away the livelihood of someone you care about. But if you, as a business leader, have wrestled on how to diversify your income stream and nothing has come into fruition, you start to become desperate. You may even start to beg. That goes for professional consultants, lawyers or others in the services sector. Payment is slow and clients look for discount upon discount!

Many friends in the big banks are already seeing a pattern of increasing bankruptcy cases. Some companies are looking at retrenchment and further salary cuts. Many friends see darker days into 2021.

The Finance Minister Tengku Zafrul Abdul Aziz’s Budget 2021 must be seen in this context. Lacklustre and unhelpful. Almost no one from the small business community has anything good to say about it. Businesspeople have long accepted the fact that most politicians do not understand how businesses operate and what is ailing them. This explains why the Budget 2021 portrays a conceptual or theoretical picture of getting small businesses back to their feet, but nothing of substance.

The worst part of the budget is its overly optimistic gross domestic product (GDP) growth of 7.5 percent for 2021. This shows not just a lack of understanding of how businesses work, but a detachment from reality. And that is from someone formerly from the corporate world.

Why is it so difficult to hold “race and religion” in suspense during this Covid-19 period? Is the Malaysian economy driven by one, select group? Where is the leadership for a united, resilient plan to recover?

 

References:

1. The end of Malaysian Small Business, James Chai, Malaysiakini, 17 Nov 2020

2. 100,000 SME put out of business, Kong See Hoh, The Sun, 11 Nov 2020

3. Bombshell-recession now bites harder than Covid-19- Over 30,000 SMEs, the lifeblood of any vibrant economy, have shut down since MCO-while Muhyiddin plays politics & bails out the GLC, Malay Mail, 10 Nov 2020

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