Survivors and strugglers of Covid year
Some sectors thrived, but many key sources of employment did not
● Since this time last year, when SA first entered lockdown, alien concepts such as wearing face masks in public, home offices and online meetings have become ubiquitous.
And words such as “new normal”, “pivot” and “agility” have entered the business lexicon as companies try to articulate their plans in an increasingly dystopian world.
Online retail is also exploding, with digital platforms emerging as the clear winners. Other sectors have been devastated by restrictions, including the restaurant industry and tourism, which ground to a halt for months. The commercial property sector also saw footfall in malls plunge and vast swathes of office space lie empty as office workers stayed home.
The economy has shed 2.2-million jobs since March last year.
Tshifhiwa Tshivhengwa, CEO of the Tourism Business Council of SA, says there “is no doubt tourism, hospitality and related sectors have been the hardest hit”, with more than 300,000 jobs in this sector lost as hotels, game lodges and the like closed during hard lockdown.
They are once again operating during the current level 1 lockdown but, he says, most people who are back at work — also about 300,000 — are working reduced hours or getting only weekend shifts as the midweek market, which was supported by international tourism and corporate travel, has dried up.
There is also apprehension over what a possible Covid-19 third wave could bring.
“We are hearing rumours again there will be restrictions on booze and interprovincial travel in the wake of a third wave. I want to state this categorically: if there is any restriction of interprovincial travel, we are going to kill what is left of this industry,” he says.
There are some promising “green shoots” of late, with tourism companies telling Tshivhengwa they have recently had “their best days of confirmed bookings” since the pandemic began.
“If we interrupt that, we are going to see many employees losing hope and this will further impact the mental health and social wellbeing of people. This is before even getting into the economics of it, which will be even worse,” says Tshivhengwa.
The restaurant sector is also reeling.
Mike Said of restaurant consultancy MikeSaidWhat says no-one knows how many of the estimated 30,000 eating establishments in SA have closed, but there is news “every day of restaurants going up for auction, or goods from premises being sold”.
He says those that have “made it through the last year” are doing “borderline trading and [are] unsure what the future holds”.
The feeling is the tourism industry will take at least until some time in 2022 or in 2023 before we see any recovery, he says, and restaurants that rely on tourists will be affected most. “For instance, Franschhoek is slowly becoming a ghost town because it is so reliant on international tourism.”
Restaurants with more exposure to the local market are expected to recover sooner but “unfortunately no-one knows really when that is going to happen”.
“I would say if there isn’t a third wave, towards the end of the year we will start to see a recovery and a return to normalisation. That’s also assuming a vaccine does get rolled out,” says Said.
Investec chief economist Annabel Bishop says while SA may have made the right choice by entering lockdown when it did, in hindsight it is likely the lockdowns beginning in March last year were “too restrictive”, especially as they resulted in the South African economy contracting 7% last year.
“From our perspective, having a look at how the Covid crisis was handled last year in comparison with the economy, the restrictions were too harsh and came in too early, but I think it was very difficult at the time to make the right choice given there were so many unknowns.”
Investec does not believe that the government will impose such “harsh level 4 and 5 lockdowns again”.
Bishop says job losses in SA have been quite widespread. Initially, at the start of the lockdown, lower-income earners were the most affected by job losses. But transactional data indicates the market started “seeing more pain coming through in the higherincome bands” as lockdowns progressed.
“If you look at the very high income bands you would expect those to have been more shielded, but don’t forget there has been a loss of income on quite a wide-range basis. There has been the impact of lower equity prices [on the stock market] last year, although we have seen a recovery towards the end of last year and this year.”
She says the property market, particularly the commercial sector, was negatively affected by companies deciding to forgo “fixed premises” and this would have hit wealthy individuals active in the property market.
One beneficiary has been mining, as metals prices rose and investors flocked to traditional safe havens.
Vestact portfolio manager Michael Treherne says the mining sector has “been driving the [JSE] market for the last while as the weak exchange rate has been really, really good for them”, with the platinum index up 40% and the gold sector 35% higher in 2020.
The retail sector, meanwhile, has adapted by accelerating online offerings.
Derek Cikes, commercial director of fintech company Payflex, says that a year ago online retail sales made up about 2% of total retail sales in SA and this has dramatically increased to between 3.5% and 4%.
Entering lockdown, Payflex — which allows customers to pay 25% of the purchase price upfront and buy the goods today with Payflex covering the balance (which the customer repays over a fixed period) — had about 5,000 customers and had partnered with 100 merchants. This has since surged to 80,000 customers and led to partnerships with more than 600 merchants, including Superbalist, Cotton On and Runwaysale.
Pick n Pay’s grocery and liquor app Bottles, which has about 400,000 registered users, also reported a dramatic increase in downloads since lockdowns began.
John Bradshaw, head of marketing at Pick n Pay, says Bottles was initially an alcohol delivery app but after the lockdown and the alcohol ban in March 2020, it was adapted “within a short week” to include grocery deliveries. Now the app is “the highest groceryand liquor-on-demand app by users in SA” and since the end of March last year it has had more than 800,000 downloads and has grown orders 400% year on year.
Clicks Group CEO Vikesh Ramsunder says “the online store in Clicks increased sales by over 360% for the second half of the 2020 financial year to August 2020, making it our largest and fastest-growing store”.
Dis-Chem MD Lynette Saltzman says during the peak months of the lockdown in April, May and June last year, the group reported growth of more than 500% in online sales. Though they were “still at very high levels”, they had settled down since then.
“Our online store has now become our biggest store. We have now got all the systems going and it’s going very well and we think going forward that online is going to continue to grow.”
[Any new] restriction on interprovincial travel would kill what is left of this industry Tshifhiwa Tshivhengwa
CEO of the Tourism Business Council of SA