{"id":434299,"date":"2020-09-18T07:31:26","date_gmt":"2020-09-18T05:31:26","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=434299"},"modified":"2020-09-18T07:31:26","modified_gmt":"2020-09-18T05:31:26","slug":"how-south-african-companies-are-coping-with-recession","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/434299\/how-south-african-companies-are-coping-with-recession\/","title":{"rendered":"How South African companies are coping with recession"},"content":{"rendered":"

South African businesses have had to respond to the coronavirus and lockdown restrictions since March. At the same time, the country\u2019s economy is in its longest recession in 28 years, with millions reported to have lost their jobs due to the pandemic.<\/p>\n

Here\u2019s how companies in key industries have coped with the unprecedented crisis:<\/p>\n

Banks<\/strong><\/p>\n

South Africa\u2019s biggest lenders were faced with the pressing need to raise provisions to protect against souring loans, while demand for credit slumped as the coronavirus lockdown took a toll on business customers.<\/p>\n

While Standard Bank Group Ltd and Absa Group Ltd boosted profits for the six months through June when provisions are excluded, Nedbank Group Ltd failed to grow earnings by the same measure. FirstRand Ltd, reporting for the full year, also said profit fell before provisions.<\/p>\n

Now banks must wait and see whether they have adequately prepared for future bad debts. South African regulators have encouraged the withholding of dividend payments amid uncertainty about the economic fallout from the pandemic.<\/p>\n

\"\"<\/a><\/p>\n

Retailers<\/strong><\/p>\n

South African retailers can be roughly split between those that were allowed to trade during the country\u2019s strictest lockdown phase and those that weren\u2019t.<\/p>\n

Supermarket giant Shoprite Holdings Ltd was one of the big winners, tightening its grip on the local food market and even raising the dividend. Yet Edcon Holdings Ltd. said within days it may not be able to re-open its clothing stores after the shutdown.<\/p>\n

The owner of the Edgars and Jet chains filed for bankruptcy protection in April, with parts later sold off to other operators.<\/p>\n

\"\"<\/a><\/p>\n

Walmart Inc\u2019s South African unit was in the middle of a turnaround plan when the lockdown started, yet Massmart Holdings Ltd boosted gross margins and, crucially, could lean on its parent for cash.<\/p>\n

Pepkor Holdings Ltd, a low-cost clothing specialist, has taken advantage of those looking for discounts in the tough post-lockdown environment after fully reopening in June.<\/p>\n

\u201cIf you are in anything beyond food, you have a higher risk business,\u201d Shoprite chief executive officer Pieter Engelbrecht said in an interview. \u201cThe terrible fear on our side is job security.<\/p>\n

A lot is going to be determined by how many people are going to lose their jobs and the government\u2019s plan to plug that hole.\u201d<\/p>\n

Miners<\/strong><\/p>\n

Mining companies have been buoyed by a rally in the price of gold and platinum-group metals that\u2019s helped offset operational disruptions caused by South Africa\u2019s lockdown to contain the pandemic.<\/p>\n

Sibanye Stillwater Ltd. restored dividend payments for the first time in three years while Anglo American Platinum Ltd, said it\u2019s maintaining its payout ratio despite lower output.<\/p>\n

Impala Platinum Holdings Ltd paid its highest dividend in nine years with chief executive officer Nico Muller promising more to come.<\/p>\n

\u201cWe believe the strong metal prices will prevail,\u201d the CEO said. \u201cWe have all the belief in the world the dividend will continue to grow from strength to strength.\u201d<\/p>\n

The flipside has been the challenge of returning hundreds of thousands of people to work in South Africa\u2019s mines at a time when Covid-19 infections were surging, causing a string of local outbreaks.<\/p>\n

Platinum producers also suffered from a slump in global demand as automakers halted operations, though China has returned to pre-Covid-19 levels and there\u2019s been no need as yet for job cuts.<\/p>\n

Telecommunications<\/strong><\/p>\n

The pandemic brought some benefits for wireless carriers Vodacom Group Ltd and MTN Group Ltd as the government released broadband spectrum for the first time in fifteen years. This was to deal with a large surge in voice and data traffic as people were forced to work and entertain themselves from home.<\/p>\n

The additional spectrum also enabled the two largest operators in the country to start building commercial 5G networks.<\/p>\n

\u201cTelecom companies have been relative winners in that network traffic — data in particular — has grown, supporting revenue growth,\u201d said Bloomberg Intelligence analyst John Davies. \u201cThe longer term may bring headwinds from depressed economies and rising unemployment.\u201d<\/p>\n

In light of that uncertainty, MTN opted not to pay an interim dividend.<\/p>\n

Leisure<\/strong><\/p>\n

Tourism and lifestyle companies have struggled to navigate a lockdown policy that prohibited leisure travel and saw gyms as danger spots.<\/p>\n

Brait SE\u2019s Virgin Active fitness chain has only recently reopened and a planned sale of the chain will be delayed as much as 18 months.<\/p>\n

Distell Group Holdings Ltd, South Africa\u2019s biggest maker of wine and spirits, was hit by two bans on alcohol sales and reported a 23% slump in earnings in the year through June.<\/p>\n

Sun International Holdings Ltd, a hotel and casino operator that owns the famous Sun City resort, was hurt by the alcohol and travel restrictions even after being allowed to reopen and plans to cut 2,300 jobs. But a swift recovery isn\u2019t impossible, according to chief executive officer Anthony Leeming.<\/p>\n

\u201cWe are quite positive and July was positive and August stronger,\u201d he said.<\/p>\n

\u201cThis business will recover and tourism will recover. Travel is something that most people with financial means want to do. It\u2019s just a matter of time.\u201d<\/p>\n

\n

Read: Foschini Group one step closer to acquiring Jet stores<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

South African businesses have had to respond to the coronavirus and lockdown restrictions since March. At the same time, the country\u2019s economy is in its longest recession in 28 years, with millions reported to have lost their jobs due to the pandemic.<\/p>\n","protected":false},"author":59,"featured_media":427514,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[29,15053,76,26,10387,28,4076,7520,499,11099,27],"class_list":["post-434299","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-absa","tag-distell","tag-fnb","tag-headline","tag-massmart","tag-mtn","tag-pepkor","tag-shoprite","tag-standard-bank","tag-sun-city","tag-vodacom"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/434299","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=434299"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/434299\/revisions"}],"predecessor-version":[{"id":434317,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/434299\/revisions\/434317"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/427514"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=434299"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=434299"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=434299"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}