The sit-down restaurant industry is in crisis following the government’s decision to ban the sale and distribution of alcohol in South Africa for a second time, something it says already has, and will continue to destroy businesses and jobs.
Grace Harding, spokesperson for lobby group, The Restaurant Collective (R|C), has penned an open letter to president Cyril Ramaphosa, in which she outlines a ‘blueprint for recovery’ in the face of an epidemic that has decimated the industry locally in recent weeks.
Restaurant Collective’s 12 members – which include Tashas, Signature Restaurants, Sakhumzi restaurant of Soweto’s Vilakazi Street, Piza e Vino, Ocean Basket and Doppio Zero – have a combined 512 sit-down restaurants around the country.
This is what the letter said:
Dear Mr President,
Just one year ago, the food and beverages industry contributed R6-billion monthly to the SA economy* and employed more than 500 000 people. The majority of these businesses are SMMEs – small entrepreneurial successes.
Fast forward 12 months and it is unlikely any of these businesses will make a profit. At least 70% have had to retrench employees to save costs and 40% have not received any form of government loan or support. (Fitch SA Consumer & Retail Report Q3 2020)
Sit-down restaurants are limping
Since opening on June 29th, most are trading below 50% of usual turnover. This loss of cash-flow has depleted businesses and individuals of any reserves and timing is now critical. Without immediate action, these losses are likely to be permanent.
There are many contributing factors:
- No alcohol sales
- Curfew of 21h00
- Customers uncomfortable eating out
- Customers have lost their jobs – the dire economic state of our country is going to have the biggest impact on our industry
- Implementation of lock down regulations (reduced capacity due to social distancing regulation requirements)
Roadmap to Recovery
The R|C is presenting a blueprint for its own recovery, but we need the ear and the support of the relevant government departments (including the Departments of Small Business Development and Tourism) to make this a reality. We need less experienced restaurant owners to be mentored by more experienced owners. We need to set up a task group of diverse skills – both private and public.
As we begin this journey, the immediate support we need is:
- Speed up and resolve the delays in UIF and TERS pay-outs – thousands of employees are not yet back at work as restaurant owners cannot afford full staff complements;
- Allow restricted alcohol sales for licensed sit-down restaurants;
- Amend the current curfew time to 22h00;
- Reduce VAT by 5% – and keep it that way until June 2021;
- Introduce tax incentives for SMMEs that are able to grow employment;
- Work with banks to reduce credit card and cash deposit fees for one year;
- Reduce rates and utilities costs charged by landlords by 50% for one year;
- Impose on utility providers not to demand payments while restaurants were/are unable to trade;
- Continue PAYE deferments and provide an incentives claim system to aid the long-term ability of entrepreneurs to employ people without shouldering tax burdens;
- Collaborate with key financial institutions to to tailor products to those industries hardest hit by Covid-19; and
- Create qualifying criteria for these relief benefits and develop online applications where an automated scorecard can assist with the allocation of funds.
The Domino Effect
There is a domino effect – as SA business leader Vusi Thembekwayo has explained – and the impact of restaurants closing down includes:
- Greater demand on government for UIF grants;
- Reduced taxes;
- Taxi business is impacted due to reduced number of commuters; this in turn causes an increase in taxi fares for others;
- SMMEs who support restaurants (bakers, farmers, small wholesalers, bookkeepers) lose income;
- Retailers suffer;
- More stores close down;
- Landlords find themselves with empty properties;
- Many centers are owned by pension funds which exacerbates the reliance on government pension contributions; and
- Crime increases.
Of the estimated 15,000 sit-down restaurants in South Africa (Euromonitor 2017), only 1,500 are part of a franchise group; the majority are entrepreneurs navigating this devastating crisis alone.
Based on ruinous revenue losses related to government-ordered closures, economic realities, and projections, the sit-down restaurant industry’s survival is dependent on a targeted collaborative response. An unprecedented crisis of this scale requires that we work together.