The State of African American Business: Surviving the Economic Crisis?

By Joy M. Tyler

“My grandmother always told me: when there is peace, prepare for war. When there is sunshine, prepare for rain.” Sage advice that Dama Beauty Supply owner Catherine Ndama has taken to heart in managing her business. She knows firsthand how the current economic downturn is affecting black businesses throughout the Bay Area.

The wife and mother of four who runs the supply store with her family in Vacaville, Calif. worries about their survival during the worst economic crisis this country has experienced since the great depression.

“It keeps me up at night sometimes,” she confesses. “It stays in the back of my mind. A lot of regular customers have lost their jobs and some have moved away. On the service side of the business, our income has fallen by more than twenty five percent. What I used to earn in a week now takes about a month.”

Operating since 2001, Ndama explained the current economy isn’t the only stressor that factors in their survival. Black businesses sometimes must deal with cultural issues that impede their ability to function at the most basic level. She says that local Korean wholesalers often will not sell to them or they sell items at higher prices than they do to others in the community. This creates a further strain on the financial resources of the business because they have to purchase from vendors on the east coast.

Several other salons owned by African Americans in the area have been forced out of business — shop owners must now rent booths at the remaining salons to generate a living.

But Ndama is also philosophical about the often unspoken problem that plagues our community. “Sometimes we don’t support one another enough. We second-guess each other and it’s kind of depressing but that’s just life — we need to learn to trust each other. The Mexicans give each other breaks but we don’t do it for us. It would make things easier. If we could get a wholesale business for ourselves we would be able to buy from one another.”

Unfortunately this is not a unique situation in the business community at-large these days, but it is especially troublesome for African Americans. According to the 2008 The State of Black California, a report released by the State of California’s Legislative Black Caucus, ownership of businesses by blacks stands at 2.6% in Oakland, 5.9% in San Francisco and 3.7% for San Jose. For whites the ownership rate is 6.45% in Oakland, 17.4% for San Francisco and 12.5% in San Jose.

The disparity is also evident in the unemployment figures. For African Americans in Oakland, the unemployment rate was at 10.6% versus 3.6% for whites. San Francisco stood at 10.4% for blacks and 2.8% for whites. San Jose saw 5.9% for blacks and 2.9% for whites. These disparities have created a greater divide for African Americans who want to spend money in their own communities; there is simply a lot less of it to support our businesses.

President Obama’s administration is especially sensitive about the struggles of small businesses. It recently acknowledged it would be targeting them for special consideration because they are the backbone of the US economy, responsible for half of all private sector jobs; creating roughly 70% of all new jobs during the past decade alone.

The administration is attempting to help by providing loans and tax cuts through the Small Business Administration (SBA) to try and reverse the trend of financial institutions putting the squeeze on small business loans. Banks fear the risks of such loans are too high especially after taking a beating during the freefall in the home mortgage sectors during the past two years.

Many banks have simply closed the door for lending money to cover payroll, order supplies and expand, leaving mom-and-pop operations to their own devices. Many businesses have simply not survived the credit crunch. Action by the federal government is needed quickly.

Bruce Jones, owner of Mega Video in Oakland’s Lake Merritt district, which has been operating since 1988, says it’s not easy staying afloat. He wonders how he will manage to keep his doors open for another year.

Jones knows that being an independent owner has its advantages but minimizing the menacing distractions that affect his bottom line is becoming harder with each passing month. Various circumstances affect his profits, but ultimately, he says, choosing to stay in business is determined by competition and operating costs, not just the current state of the economy.

“It’s hard to pinpoint one thing and say it’s the reason why business is up or down. Is it the competition, the economy or the season? When you’ve been in business as long as I have you learn to make adjustments quickly. I manage to survive by trying to improve service and the quality of the product at a price my customers can afford.”

Competition from Netflix, Amazon, Rental boxes and cable television are the biggest threats to his survival. Jones says he has maintained longevity because he is able to react quickly to changes in the market place that often hinder the larger chain stores working within corporate structures that aren’t as flexible.

“I’ve seen everything you can imagine. But it takes a while to see a trend — you can’t base a decision on a couple of days of business, but when I see a need to change I can do it quickly.”

He was recently forced to increase the cost of rentals by fifty cents. “There hasn’t been any increase in business lately, and my costs are going up so quickly … something’s got to give,” Jones says.

Reactions from customers have been mixed. “Some understand, but some complain because they don’t know what it takes to stay in business. Some of the supplies I need to operate have doubled in cost just in the past two months alone.”

What does he project business will look like a year from now? If things remain the same and customers continue to cut back on their spending, ultimately he will be forced to consider selling the business or liquidate.

Contact Dama Beauty Supply at 711 Jackson Street, Fairfield, Calif., (707) 422-8694.

Contact MegaVideo at 1900 Park Boulevard, Oakland, Calif., (510) 835-2854.

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