Thousands of restaurants face closure in South Africa – franchise body

The Franchise Association of South Africa (FASA) has warned of untold damage to the restaurant industry as a result of the current lockdown restrictions in place, which includes a ban on the sale of alcohol.

FASA has also added its voice of support to the Restaurant Association of South Africa (RASA) and the Federated Hospitality Association (FEDHASA) in their objections over the new rules by the newly formed Bargaining Council for the restaurant industry, and the continued banning of liquor sales which is crippling the sector.

Both bodies have threatened legal action against government over the new rules for the industry, which they claim will have a devastating impact.

Under the new rulesall restaurants and fast-food outlets, including those not part of the council, will have to 

  • Pay a wage to all employees that exceeds the national minimum wage;
  • Grant employees wage increases of 1.5% above inflation;
  • Give employees a December bonus as well as weekly payments to clean their uniforms.

FASA said that while it is the voluntary representative body of the broader franchise sector in South Africa – representing franchise brands across 14 different business sectors – the largest of its franchise sectors is fast foods & restaurants which make up 26% of the franchise pie.

Akhona Qengqe, FASA’s chairperson and  chief people & transformation manager at the country’s largest fast food chain, KFC, said that many franchise brands have somewhat managed to weather the pandemic, and most are in recovery mode, but together with thousands more restaurants, bars and QSRs will face financial ruin should the proposed measures be adopted.

“The franchise sector as a whole, which in 2019 contributed almost 14% to the country’s GDP, through its over 800 franchise systems, its 48,000 outlets and a workforce of close to half a million, is too valuable to crash,” said Qengqe.

“Our food franchise members, many of whom are also members of RASA and Fedhasa, have been hard hit by the continuing restrictions and must get the acknowledgement and necessary support from government.”

“The longer the lockdown measures are applied across the board, the deeper the losses will be,” said Tony da Fonseca, immediate past chairman of FASA and CEO of the OBC Group – especially for those sectors that have added restrictions like the restaurant sector.

At the time of the strict lockdown, around 80% of members canvassed in the first half of 2020, believed that they would not be able to continue to maintain their businesses beyond the end of the year, unless they were  allowed to trade normally, the franchise body said.

“These added punitive regulations for the food sector come at a time when many businesses are hanging by a thread – this is a travesty and urgent interventions are required for the sake of those entrepreneurs and small businesses that have spent a lifetime building their businesses, contributing to the country’s economy and providing much-needed jobs,” da Fonseca said.

Lifting the ban unclear

It is not yet clear when government might lift the ban on the sale and distribution of alcohol. The ban was put in place for a third time by president Cyril Ramaphosa when he announced the extension of South Africa’s adjusted level 3 lockdown, on 28 December 2020.

The president said that the consumption of alcohol had exacerbated the stress put on healthcare facilities, driving up the number of trauma cases in hospitals, at a time of rising Covid-19 infections, brought on by a second wave.

Recent data from the government, however, indicates that infection numbers in the country are declining.

Meanwhile, the number of people dying from Covid-19 during a resurgence of the disease may have peaked, Bloomberg reported on Thursday, citing a report on excess deaths published by the South African Medical Research Council.

The number of excess deaths, a measure of mortality over what would normally be expected from natural causes, fell to 13,374 in the week ending Jan. 23 from a crest of 15,486 the week earlier, the SAMRC said in a statement on Thursday.

The SAMRC said 125,744 excess deaths have been recorded since May 3 in South Africa. That compares with an official death toll of 42,550 – the highest in Africa.

“It will probably be some years before we have the information about the medical cause of death and so we cannot distinguish between deaths directly associated with Covid-19 and those that may has resulted due to the health system being over-burdened” said Debbie Bradshaw, chief specialist Scientist at the SAMRC and a co-author of the report, in the statement.


Read: South Africa’s extended alcohol ban will cost jobs, businesses warn

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Thousands of restaurants face closure in South Africa – franchise body