Warning from South African businesses: more retrenchments on the way

More than half of businesses in South Africa continue to operate under reduced capacity, with many still temporarily closed as the economy struggles to shake off the impact of Covid-19, and the resulting lockdown.

These were among the finding in a survey conducted by management consultants Redflank, published on Thursday (27 August) for BeyondCOVID. The survey attracted approximately 1,800 responses between 7 June and 22 August 2020.

Worryingly, respondents said on average they plan to retrench another 11% of their staff in the next six months. This is in line with current estimates that about 1.5 million South Africans could lose their jobs.

Nearly half (43%) of respondents said that their companies have made retrenchments, with the biggest cuts coming from small and micro-businesses, and medium-sized businesses. Most of the retrenchments happened in the food/accommodation sector (68%), other services such as hairdressers (62%), and entertainment/recreation (57%).

Half of respondents operated in small to micro businesses, 16% in medium sized businesses, and 15% in large businesses. 11% worked in NGOs.

Revenue dropped by 76% on average for respondents across all sectors. Small to micro-businesses bore the brunt with an 84% loss in revenue and large businesses the least with 64%. The worst impacted sectors were accommodation/food, construction, and entertainment/recreation.

Over one in four (26%) businesses said they will need six months of funding over the next year, to survive.

National Economic Development and Labour Council (Nedlac) executive director Lisa Seftel said that help and funding is available, but businesses need to “hustle”.

Seftel said that businesses want more grant funding, not more debt in the form of loans, evidenced by the little uptake seen in government loan schemes.

“People don’t want loans. They actually need grants. I think if there was this ability for there to be grant funding and not loan funding, it would make a significant difference on the sustainability of companies, particularly small companies,” Seftel said.

According to Redflank director, Lings Naidoo, respondents said they would need more than four  years to recover from the current devastation.


Read: Call to go out and support local businesses

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Warning from South African businesses: more retrenchments on the way