More businesses in South Africa are closing because of lockdown

South African architecture firms, which represent some 12,600 workers in the field, say they are under financial stress due to work lost during the nationwide coronovirus lockdown, while waiting for hundreds of millions of rands in outstanding invoices.

Worse still, their financial struggles mean that as many as 3,400 jobs are on the line, as firms look to retrench in the next few months.

A recent survey published by Leading Edge Research polled 1,817 architectural practices in South Africa, representing 12,600 staff, on how the coronavirus lockdown has impacted their businesses and future prospects.

As has been the case in many industries across South Africa, this sector has not come away unscathed.

The South African Council for the Architectural Profession (SACAP) and South African Institutes of Architects have initiated the survey, with support from the South African Institutes of Architectural Technologist, South African Institutes of Building Design, the South African Institutes for Draughting and Freedom Architecture Consulting Empowerment.

According to the survey results, a third (38%) of all architecture firms in the country said they had not received any work at all during lockdown, while another third (35%) only had enough work to meet the costs for one month.

Despite the majority of firms (85%) saying they have not closed for business during lockdown, the outlook is bleak for the few that have. Of all the businesses polled, 19% indicated that they had not closed, but were likely to close for good in the near-term. 9% of businesses said they had already closed down, and were unlikely to re-open again.

Most of these businesses are micro, small or medium businesses, Leading Edge noted.

Retrenchments

The business struggles have fed on to employees, with one fifth of the businesses polled indicating that they have retrenched staff during lockdown.

35% plan to retrench staff in the next three months.

In terms of the staff retrenched, of the 12,600 employees represented by the firms, 7%, or 980 workers have been let go during lockdown. With the planned retrenchments, however, depending on the scenario, this could total 2,000 to 3,400 workers in the next three months.

Looking at specific jobs, architectural technologists appear to be the worst hit, Leading Edge said. These firms could retrench between 35% and 43% of their staff.

The greatest number, in absolute terms, will however come from those in architects practices. Of the 10,000 people currently employed by the 1,057 Architects practices in the survey, a total of between 1,500 and 2,800 staff could be retrenched.

Financial distress

According to Leading Edge, 32% of practices have applied for government aid. 27% applied for aid from UIF TERS and 12% from the Covid-19 Response Fund. 7% applied for both.

Of those who applied, 60% received UIF aid, while only 8% received aid from the Covid Response Fund. 17% of practices in total have received any form of aid, which is 52% of those who applied.

Not only are firms suffering from not having any new work coming in, but they also aren’t being paid for invoices already sent.

62% of practices have invoices that are outstanding for more than 30 days. This creates cash flow problems for many practices, in particular for those where there is no new work coming in.

Among those with outstanding invoices (995 firms), the average amount owed is R846,000 – though this ranges from an average of R119,000 for micro businesses, to R8.2 million for macro businesses.

In total, however, the businesses are collectively owed R842 million in unpaid invoices. These unpaid contracts are split almost down the line between the public and private sector (48% and 52%, respectively).


Read: Treasury forecasts jobs bloodbath in South Africa

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More businesses in South Africa are closing because of lockdown