The numbers that tell the real story about how business is collapsing in South Africa

 ·14 May 2020

Statistics South Africa has published its second business impact survey, providing an update on how well South African businesses are currently faring under lockdown. The answer is simple, not very well.

The survey, which features responses from 2,182 businesses, covered the period 14 April – 30 April 2020.

Just over a third (36%) of firms indicated that they are laying off staff in the short term as a measure to cope with the Covid-19 pandemic. This is higher than the 20% reported in the first survey.

A quarter of businesses indicated that they are decreasing working hours, while nearly one in 10 (9%) businesses indicated that they have already ceased operations permanently.

The industries with the highest percentage of firms permanently closing their doors include:

  • Construction (14%);
  • Community, social and personal services (12%);
  • Agriculture, hunting, forestry and fishing (12%).

When asked if they would operate during the level 4 lockdown, 56% of responding businesses indicated that they would continue to do business.

Other key findings include:

  • 90% of businesses’ turnover was lower than their normal expected range, up from 85% in the first survey;
  • Almost half (48%) of businesses reported a pause in trading in the period 14 April – 30 April 2020;
  • 30% of respondents indicated they can survive less than a month without any turnover, while over half (55%) indicated that they can survive between 1 and 3 months;
  • Only 7% can survive for a period of longer than three months.

Stats SA’s data is echoed by a new survey by the South African SME Finance Association (SASFA) which shows that three quarters of small and micro businesses will close down if the lockdown runs beyond 30 June.

The survey, which included responses from 2,300 business owners, found that the majority (70%) of SMMEs cannot trade under the country’s level 4 lockdown restrictions.

Business organisation Sakeliga has also warned that the sound of businesses shutting their doors, and workers becoming unemployed, is fast becoming the hallmark of this lockdown.

A third of businesses polled by Sakeliga expect to go bankrupt within the next three months.

Business for South Africa, a group of business organisations, has warned that 4 million jobs will be placed at risk and the economy could contract 16% this year if the easing of lockdown rules isn’t accelerated.

Meanwhile, a lobby group called The Restaurant Collective, has warned that the seven week Covid-19 lockdown in South Africa could well be a nail in the coffin for the restaurant industry – an ecosystem that employs half a million people.

Easing restrictions

The results from the latest StatsSA survey come after president Cyril Ramaphosa announced that the government is considering a proposal to move the country to level 3 of the national Covid-19 lockdown by the end of May.

“We will immediately begin a process of consultation with relevant stakeholders on a proposal that by the end of May, most of the country be placed on alert level 3, but that those parts of the country with the highest rates of infection remain on level 4.”

“We will make further announcements after the completion of the consultations,” said the president.

This comes after the government implements a risk-adjusted strategy aimed at easing the current lockdown restrictions. However, hotspot areas with high infection rates will remain under level 4.

Outlining the lockdown easing measures, president Ramaphosa said some regulations surrounding retail, e-commerce and exercise would be relaxed.

Mindset change

Business for South Africa (Busa) chief executive officer Cas Coovadia has said that a mindset change is needed by the government to open the economy and enable it to grow.

Instead of begrudgingly opening of the economy with a long list of prescribed goods, the government should open the economy with a shortlist of exclusions.

He said it is now accepted that a spike in Covid-19 infections will happen irrespective of whether South Africa remains under lockdown or not.

So instead of hurting the economy through an extended lockdown, he suggested allowing businesses to operate with a set of conditions to ensure safe operations.

Read: South African restaurants call to open at level 3 – under these conditions

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