The end of Malaysian small businesses

There is a small economy rice stall I go to for lunch. With the movement control order (MCO), there are unsurprisingly fewer people visiting here. Usually busy, the owner is much freer now, treating every customer like royalty.

She scooped in more rice for me, and when I picked the meat and vegetables I want, she kept asking the same question: Do you want more? I was not too hungry, so I refused. But towards the end, she asked it again: “Do you want to add more meat? I can charge you lower than usual, but please take some more.”

I asked her why. She said she is worried every day that she could not sell off everything. Because there are fewer customers who come to her stall now, she needs to count on every paying customer paying more. That is the only way she could stop making a loss.

But this is very hard. Most customers are tight on budget. They cut down on the meals they have and how much they pay for each meal. Instead of passing cash to one another, we are passing on desperation.

“Please, please take more,” she said.

Begging to survive

This is not the first time I heard about businesses resorting to begging customers to spend more.

The hair salon I go to has also fallen to bad times. A two-person company, their sales have dipped 90 percent, turning their finances red. Not only has the revenue been insufficient to cover the monthly overhead costs, but they also need to start using their personal savings to make the business work.

Most salons have suffered incredibly. Cutting, dying or styling your hair would not be considered necessary when times are tough. Instead of cutting once a month, you now drag it to three months. The proximity between humans during a haircut would also mean you avoid salons for a foreseeable time.

That is why many salons, even the high-profile ones in shopping malls, are making only RM300 – RM400 in sales per day. Hardly enough to cover their basic costs.

Under these situations, most businesses would decide to close down. And that is precisely what many companies have done since the start of MCO in March 2020.

More than 30,000 businesses have shut down in the short span of six months. When the first MCO started in March, around 9,675 companies closed down. Many still tried to endure, pushing their last mile. But the subsequent period saw 22,794 choosing to shut down as they could not sustain any longer. It was ironically called the “recovery period”.

The second MCO induced by the irresponsible Sabah state election would undoubtedly push more companies into the brink.

Never mind the loss of economic growth and innovation in the society that comes from the death of small businesses, the human cost is also drastic and tragic. I have even heard of suicides and depression when they are pressed to the brink.

No cash to go around

The crucial difference in this pandemic-led economic recession is that they require a near-total halt of economic activity. The cash flow in the economy is severely reduced.

Even if a business owner and its employees are willing to work additional hours, they still may not survive if incoming cash flow remains low. The restriction on movements also means that there are fewer options businesses could adopt as temporary alternative measures to stay afloat.

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 thought day and night on how to diversify your income streams and nothing has come into fruition, you start to become desperate. You start to beg.

Many of my friends in the big banks are already seeing a pattern of increasing bankruptcy cases. Many of my friends have been told that their companies are looking at retrenchment and further salary cuts. Many of my friends are seeing darker days into 2021.

Budget of mediocrity

Finance Minister Tengku Zafrul Abdul Aziz’s Budget 2021 must be seen in this context. That is how we conclude that the budget was indeed lacklustre and unhelpful. Almost no one from the small business community has anything good to say about it. They understand clearly that most policies are not catered to them; and even if they are, they never trickle down.

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 picture of getting small businesses back to the feet, but has nothing of substance.

But the worst part of the budget is its overly optimistic gross domestic product (GDP) growth projection of 7.5 percent. Because what this shows is not just a lack of understanding of how businesses work, it shows a lack of empathy of what is killing us.

You cannot possibly credit yourself for success when more than 30,000 companies have closed down, and almost one million people have lost their jobs. Anything short of an apology would be an insult to the Malaysian people.

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JAMES CHAI is a legal consultant and researcher working for Invoke, among others. He also blogs at jameschai.com.my. You may reach him at jameschai.mpuk@gmail.com. - Mkini

The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.