Chal­lenge looms as con­fi­dence dips

The Advertiser - - BUSINESS - MARTIN HAESE MARTIN HAESE IS CHIEF EX­EC­U­TIVE OF BUSI­NESS SA.

IT is clear that the chaos caused by COVID-19 has pre­sented a mon­u­men­tal chal­lenge for the lo­cal busi­ness com­mu­nity, the likes of which have not been seen since the Sec­ond World War.

The sen­ti­ment from the March quar­ter Busi­ness SAWil­liam Buck Sur­vey of Busi­ness Ex­pec­ta­tions is best de­scribed as grim.

Both con­fi­dence, which has fallen 44.1 points to an all-time low of 41 points, and con­di­tions, down 30.5 points to an­other all-time low of 66.8 points, have been sent freefallin­g well into neg­a­tive ter­ri­tory.

Un­for­tu­nately, we ex­pect con­di­tions to worsen be­fore they get bet­ter, with busi­nesses ex­pect­ing fur­ther falls over the June quar­ter, which will then cap­ture the full dis­rup­tion to busi­nesses caused by COVID-19 re­stric­tions.

The Busi­ness SA-Wil­liam

Buck Sur­vey of Busi­ness Ex­pec­ta­tions in par­tic­u­lar high­lighted the im­pacts on those sec­tors that have re­ally felt the brunt of the pan­demic.

While busi­nesses across the board felt anx­i­ety around the im­me­di­ate months ahead, with 36 per cent cast­ing doubt over whether they could sur­vive an­other three months of re­stric­tions, in the ac­com­mo­da­tion, food and re­tail sec­tor this was even higher with 52 per cent say­ing it was un­likely they would sur­vive an­other three months of such trad­ing.

There is no doubt that this dra­matic fall in con­fi­dence and con­di­tions is cat­a­strophic for the SA econ­omy.

How­ever, amid the hor­ror story there is a strong sense of busi­nesses get­ting good sup­port from both the state and fed­eral gov­ern­ments, as well as the banks. Count­less busi­nesses told us that with­out this sup­port, their sit­u­a­tion would have been worse.

The $130 bil­lion Job­Keeper pack­age from the Fed­eral Govern­ment was hailed as a game changer, with 50 per cent of busi­nesses re­port­ing they had ben­e­fited from the sup­port scheme. Pay­roll tax ad­just­ments and the State Govern­ment’s $10,000 emer­gency cash grants have also been very wel­come and, for the most part, busi­nesses re­ported good out­comes with their banks.

For busi­nesses that had re­quested ad­di­tional fi­nan­cial sup­port and re­ceived a re­sponse, 89 per cent re­ported they were suc­cess­ful. How­ever, long de­lays on pro­cess­ing claims were raised as a con­cern, which is some­thing the banks should look at im­prov­ing given the ur­gency around cash flow re­quire­ments.

We are a long way from be­ing out of the woods, but we should take some com­fort that the re­sponse mea­sures to date have been ef­fec­tive. How­ever, we would ar­gue they need to be con­tin­u­ally looked at to en­sure they re­main help­ful to evolv­ing busi­ness needs.

There were sev­eral sto­ries of land­lords act­ing in good faith pass­ing on rent re­duc­tions and de­fer­rals to COVID-19-im­pacted ten­ants, but a size­able mi­nor­ity of busi­nesses made com­plaints about un­rea­son­able con­duct from land­lords.

This was also re­flected in data which showed that of the im­pacted busi­nesses which had ap­proached their land­lord for a rent re­duc­tion, 56 per cent re­ceived a re­duc­tion pro­por­tion­ate to turnover, 20 per cent a re­duc­tion less than pro­por­tion­ate to turnover, and 24 per cent no re­duc­tion at all.

Small busi­nesses with a turnover less than $500,000 were found to be twice less likely to be suc­cess­ful in rent re­duc­tion ne­go­ti­a­tions than busi­nesses in the $2 mil­lion-$5 mil­lion turnover bracket. This shows the need to en­sure the Na­tional Cab­i­net Manda­tory Code of Con­duct for SME Com­mer­cial Leases is also man­dated here in SA.

There is no ques­tion the eco­nomic re­cov­ery is the next ma­jor chal­lenge for South Aus­tralia, and we must en­sure we do ev­ery­thing pos­si­ble to set up our busi­nesses for suc­cess, across all sec­tors.

The sur­vival of many might just de­pend on it.

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