Reopening of economy might prevent slide off fiscal cliff
RETAILERS reported robust demand following the lifting of the restrictions on alcohol and cigarette sales, but trade on the JSE remained modest.
Shoprite, Africa’s biggest food retailer, rose 1.28 percent to R120.06 a share, rival Spar increased 1.29 percent to R172.70, while Pick n Pay jumped 1.82 percent to R44.22 and Woolworths rose 1.08 percent to R33.61. Only Massmart bucked the trend, falling 1.69 percent to R20.40.
The sales ban had a knock-on impact on retailers, with Massmart estimating in June that missed liquor sales for April and May would be about R2.3 billion based on prior year sales. Massmart said sales had soared following the lifting of the ban.
“We have experienced robust demand for liquor and tobacco products at our stores today,” it said yesterday.
Pick n Pay said it recorded strong demand for both tobacco and liquor when its stores opened.
“We have worked closely with our suppliers to ensure there is plenty of stock in our stores, and we will replenish stock daily,” said the company.
Tobacco sales had been prohibited since March, while the alcohol ban was relaxed in June, but reintroduced six weeks later on July 12.
The hotel and leisure sector also joined in the frenzy, with Sun International chief operating officer Graham Wood welcoming the easing of the restrictions.
However, Wood said the industry felt the curfew could also have been relaxed further. “However, we are grateful and relieved our restaurants can again serve alcohol,” Wood said. “But lifting the onerous ban on alcohol will boost footfall to our properties. With interprovincial travel restrictions lifted, our tourist hotels and resorts, such as Sun City, will be able to reopen on September 2.”
Radisson Blu Hotel Waterfront general manager Clinton Thom said the easing of the restrictions was a great relief to the industry.
Thom said the past few months had been exceptionally tough on the industry. He said business would rebound fully when international borders reopened.
“The job now is to encourage and convince our fellow South Africans, especially those who routinely travel abroad, to instead spend their tourist rands at home,” he said.
Tourism Business Council of South Africa said the industry had developed comprehensive protocols to cope with the expected upswing in demand.
Chief executive Tshifhiwa Tshivhengwa said its members would introduce protocols that would enable travellers and patrons to stay and eat safely in the establishments.
“The idea of being out and about again may seem daunting. However, the protocols ensure a great, uncompromised experience, with appropriate safety processes embedded seamlessly and unobtrusively throughout the journey or visit.”
Nedbank CIB analyst Munira Kharva said the sit-down restaurant industry contributed R6bn a month. Kharva said profitability this year was unlikely.
Mergence Investment Managers investment analyst Lulama Qongqo said the sector may have to contend with the fact that most people did not have enough disposable income to go to the establishments.
BIG BUSINESS has welcomed the positive impact on the weakened economy of the easing of the Covid-19 lockdown restrictions, which saw alcohol and tobacco products back on the shelves.
Business Leadership South Africa (BLSA) yesterday said the significant reopening of the economy, which also allows for leisure travel across provinces, could rescue the economy from falling off a fiscal cliff.
BLSA managing director of policy and legislation Tebele Luthuli said business must guard against sacrificing lives in its quest to push the country towards regaining a positive economic trajectory.
“This move to unlock the economy does not mean we can let our guard down. As big business, we commend the government, civil society and all stakeholders for their collective efforts to preserve the health and well-being of the people of this country, and at the same time try to protect the economy,” Luthuli said.
“As we collectively look to the post-Covid-19 future, we have an immense task before us to rebuild our shattered economy.”
The introduction of the national lockdown at the end of March, which came on top of a decadelong sluggishness in the economy, pushed South Africa deeper into technical recession.
Rating agencies slashed the country’s credit rating further into junk.
Economic growth is forecast to suffer the worst contraction in 90 years, while unemployment is projected to rise to unprecedented levels.
Business Unity SA president Sipho Pityana said the move to level 2 was long overdue, as the illicit trade in alcohol and cigarettes had deprived the State of legitimate tax revenue.
“We must now focus on making sure that we rebuild our economy and restore the integrity of our systems of governance,” Pityana said.
“There is a lack of decisiveness; one would say almost reckless conduct in terms of the government’s approach to what needs to be done to restore the economy to good health.”
PricewaterhouseCoopers economist Christie Viljoen said easing the restrictions boded well for the economy, as it needed a jump start from its current levels of growth.
“This is undoubtedly a positive development of the economy, as it opens up hospitality and tourism sectors that have been shut for many, many months,” he said.
Many South Africans had continued to purchase alcohol and cigarettes during the lockdown, but a large number of them were now likely to return to formal retail options, thereby reducing the size of the illicit market, he said.
“However, the black market has flourished in recent months and will certainly not disappear,” Viljoen said. “As such, retailers of these products will see markedly different trading conditions – and competitors – as they reopen under lockdown level 2.”