ACADEMIA Letters

Frugality in Business context: South African Small and

medium-sized enterprises (SMEs) prudential measures in
the face of COVID 19
Limkile Mpofu, University of KwaZulu-Natal

Introduction
The COVID-19 viral pandemic has disrupted lives across all countries and communities and
negatively affected their economies (Jackson et al., n.d.). These disruptions have seen the el-
evated costs of poverty, lives being overturned and some lost, careers derailed, and increased
social unrest (Hakovirta & Denuwara, 2020). Some estimates have indicated that 95 million
people may have entered extreme poverty in 2020, with 80 million more undernourished than
pre-pandemic levels (Jackson et al., n.d.). The new viral strands of corona have worsened the
economic impact in some developing economies like South Africa despite the efforts made
by the South African Government. Throughout the various phases of the health crisis, South
Africa adopted policies to lock down social activities to curtail the spread of COVID 19. South
Africans need to exercise “frugal living when presented with such economic shocks.” Ac-
cording to Sidmou (2021), frugal living is the conscious handling of food and other products
and services suddenly available in much more limited quantities. Still, affordability remains
a determining parameter of frugality. For businesses, frugality is the way to maximize the
meager resources at their disposal. The COVID-19 pandemic has had severe economic penal-
ties globally, which have caused dramatic changes in the way businesses act. COVID-19 has
forced many businesses to close as it caused unprecedented trade disruptions in most indus-
trial sectors (Lal et al., 2020). Companies face many short-term challenges, such as health

Academia Letters, January 2022 ©2022 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Limkile Mpofu, leempofu@gmail.com

Citation: Mpofu, L. (2022). Frugality in Business context: South African Small and medium-sized enterprises
(SMEs) prudential measures in the face of COVID 19. Academia Letters, Article 4671.
https://doi.org/10.20935/AL4671.
1
and safety, supply chain, workforce, cash flow, consumer demand, sales, and marketing (Don-
thu & Gustafsson, 2020). Faced with such disruptions, companies have learned to exercise
prudential measures to address COVID-19.
Prudential standards by businesses/firms are needed seeing as the outbreak of COVID-19
has far-reaching effects, leading to about ‘half a million firms at risk of collapse’ (Jayaram et
al., 2020).

The Diminishing Expectations

The business of staying alive has become so complex that other concerns, so obviously less
urgent in the face of these matters of basic survival, must be forgotten. The remaking of insti-
tutional or business practice as a supposed response to the COVID 19 crisis speaks to many
businesses’ lived experience of the situation (Pradies et al., 2021).Thus, a call for the remak-
ing of business institutions in the image of these disappointments remains the option. COVID
19 has impacted many businesses (Anakpo & Mishi, 2021). When business life processes
are redesigned to imply that things cannot get better and may worsen, this disappointment
chimes with the other events of people’s lives. A lack of hope seems reasonable in the cir-
cumstances, even though companies hope to get funding for their businesses. To explore the
prudential measures adopted by SMEs in the face of COVID 19, the author uses the principle
of valuation as elongated below.

The principle of valuation

The valuation principle teaches companies to value human capital and treat them with care
to benefit from them. Human capital is defined at the individual level as the combination of
unique capabilities in organizations to create commercial value and solve business problems
(Souleh, 2016). Businesses witness a new economic era that produces new goods and services
and creates value for survival.
The COVID 19 pandemic demands a permanent shift towards teleworking. It has changed
the face of employment as it requires a change in businesses’ organizational policies and strate-
gies (Anakpo & Mishi, 2021). The COVID-19 outbreak caused enterprises to implement a
complete or partial “lockdown” to protect their employees and customers (Albitar et al., 2021).
SMEs adopted a strategy of encouraging those who could telework from their homes to curb
the spread of COVID 19. Companies took a series of measures to simplify its use to promote
a rapid move to telework for all operations that allow it. Researchers like Bathini and col-
leagues have indicated the benefits of teleworking for both the employers and employees as

Academia Letters, January 2022 ©2022 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Limkile Mpofu, leempofu@gmail.com

Citation: Mpofu, L. (2022). Frugality in Business context: South African Small and medium-sized enterprises
(SMEs) prudential measures in the face of COVID 19. Academia Letters, Article 4671.
https://doi.org/10.20935/AL4671.
2
providing more autonomy and increasing the employee’s work effort and wellbeing (Bathini
& Kandathil, 2019). Thus, employees’ teleworking curtailed the spread for small to medium
companies and provided more excellent talent to manage their work and family lives, espe-
cially since the closed schools and childcare facilities.
Moreover, when SMEs value human capital, they treat them differently by implementing
comprehensive occupational health and safety (OHS) standards. These companies set stricter
sanitary guidelines that involved using personal protective equipment (PPE), such as masks,
gloves, and other protective clothing. They also restricted the maximum number of workers
allowed to be physically present on companies’ premises. Information on OHS measures was
readily available to these businesses (Bailey & Breslin, 2021). These businesses also negoti-
ated guides that defined their protocols for health and safety to support business continuity.
The businesses also continuously assessed and managed the occupational risks as the situation
evolved. Above all, social distancing measures remained a top priority within the policy plan
concerning the public and businesses involved (Bailey & Breslin, 2021). Stimulating work
environments are critical to developing a culture of innovation (CDC, 2020). These SMEs
and their employees customised their workspaces to ready themselves for the pandemic. Such
customisation of their workspaces promoted better communication between individuals and
departments. SMEs were able to think outside the box and beyond the traditional solutions.
That is the value of human capital as they learned to cope with the changes in their environ-
ment through prudential means.
Many businesses expanded or even initiated sick leave policies in response to the pan-
demic (Heymann et al., 2020). The companies used sickness benefits and allowed workers
to self-isolate to control coronavirus spread. Such a policy ensured support to the employees
by protecting their incomes, jobs, and health. On the whole, it also curbed poverty risks as
any gap in protection threatened public health. Without income security, workers are com-
pelled to work even when they are sick and risk spreading to others. Thus, the Government of
South Africa has used other measures to ensure income security for those affected by COVID
19, such as providing crisis payments or short-time work benefits for their employees in the
form of bank loans to cushion employees’ income. The National Treasury, working with the
South African Reserve Bank (SARB) and significant banks, established an R200 billion loan
guarantee scheme to assist businesses in paying rent and salaries. An estimated seven hun-
dred thousand firms and more than three million employees benefited from the program (The
Presidency, 2020a).
The COVID 19 crisis increased the demands on many workers to provide family care.
During the pandemic, with school and day-care being closed, with no domestic services, the
employees had to devote more hours to care work. Such a burden strained the total number of

Academia Letters, January 2022 ©2022 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Limkile Mpofu, leempofu@gmail.com

Citation: Mpofu, L. (2022). Frugality in Business context: South African Small and medium-sized enterprises
(SMEs) prudential measures in the face of COVID 19. Academia Letters, Article 4671.
https://doi.org/10.20935/AL4671.
3
hours the employees could work while teleworking. It became difficult to balance work and
family (European Union, 2020). This was even more challenging if both parents were working
unless there were some childcare services. Thus, the businesses then extended the duration
of special paid leave, including parental leave. According to the labour guide, these special
leave days last ten to twelve days per year. Most of these companies fund the particular rest
through taxation, Unemployment Insurance Fund (UIF), or social insurance as the continued
payment of salaries can be demanding for them (OECD, 2020).
Above all, the COVID 19 has dramatically increased awareness or consciousness and be-
lief that things are not and will not get better soon. The pandemic has already caused massive
dislocation among small businesses. As a result, tips to become trained, self-marketed, con-
stantly innovating, and ready to adapt have saturated employers’ minds. This arises primarily
due to the multitude of casualized contracts. This process has stripped away regular work
from many businesses (Mpofu, 2019). Accompanying the erosion of secure contracts is a
broader erosion of working conditions as companies grapple with setting the right conditions
for their employees.
Moreover, companies also grapple with adjusting their businesses to take advantage of
the aid schemes offered by the Government. It can be argued that the emergence and spread
of the COVID 19 have impacted popular consciousness so that the sense of nothing being
stable, no job being safe, has seeped into understandings of what business might look like
(Bhattacharyya, 2015). Companies are learning to survive in a world that can offer only a
series of shaky economies, social unrest, and business attacks from COVID 19 and its variants.
Therefore, entrepreneurs need to prepare their businesses for any uncertainty.

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Academia Letters, January 2022 ©2022 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Limkile Mpofu, leempofu@gmail.com

Citation: Mpofu, L. (2022). Frugality in Business context: South African Small and medium-sized enterprises
(SMEs) prudential measures in the face of COVID 19. Academia Letters, Article 4671.
https://doi.org/10.20935/AL4671.
4
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Corresponding Author: Limkile Mpofu, leempofu@gmail.com

Citation: Mpofu, L. (2022). Frugality in Business context: South African Small and medium-sized enterprises
(SMEs) prudential measures in the face of COVID 19. Academia Letters, Article 4671.
https://doi.org/10.20935/AL4671.
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Academia Letters, January 2022 ©2022 by the author — Open Access — Distributed under CC BY 4.0

Corresponding Author: Limkile Mpofu, leempofu@gmail.com

Citation: Mpofu, L. (2022). Frugality in Business context: South African Small and medium-sized enterprises
(SMEs) prudential measures in the face of COVID 19. Academia Letters, Article 4671.
https://doi.org/10.20935/AL4671.
6