You are currently viewing our desktop site, do you want to visit our Mobile web app instead?

Will businesses survive a 21-day shutdown?

African business expert Victor Kgomoeswana looks ahead at businesses closing, job losses, payment holidays, the Solidarity Fund, and why this is ‘more than a health issue’.

NOMPU SIZIBA: President Cyril Ramaphosa confirmed that which was expected. The country is set to go into national lockdown, effectively, on Friday; that is one minute past 12 in the morning. And, of course, critically, the reason is curbing the spread of the coronavirus. At the time of his speaking yesterday, the official case load stood at 402. That’s now jumped to over 550 today [March 24]. And the Health Minister Zweli Mkhize has warned that we’re going to see that number rise further before it declines.

In the shutdown, non-essential businesses must close, with the likes of supermarkets, petrol stations, and pharmacies being allowed to stay open. While the President outlined some measures to help mitigate the economic impact of the decision with basically no real fiscal measures as yet, the question is how businesses, particularly small businesses, will look at the end of the 21-day period. Will some even exist?

Well, to discuss this matter further. I’m joined on the line by Victor Kgomoeswana, a media commentator and the author of Africa is Open for Business. Thanks very much for joining us, Victor. First and foremost, do you think the President made the right call in trying to deal with the health crisis that’s potentially on our country’s doorstep?

VICTOR KGOMOESWANA: Good evening, Nompu. The lockdown was inevitable. It’s really the only logical way you can contain this. We have been seeing examples of how we do not take the virus seriously enough, and people are still not quite as vigilant as [they] could be. So the lockdown was inevitable because then people want things under control.

The question, though, is – I listened to your previous guest and I agree we should continue to drive it. But, remember, a lockdown has economic implications. You can’t say you do one before and then the other, because asking people you stay at home comes with the question of how [you will] survive. You are over-indebted, as it is, small businesses to your point employ a larger chunk per rand generated in revenue; they employ more people, with more jobs than big business. So, to go out and just hope we will come out and sort out the economy later might be problematic.

NOMPU SIZIBA: That’s a little bit unfair to say, because of course there were measures that were introduced yesterday. I’ll list a few of them.

There was this Solidarity Fund, which the public has been invited to contribute to. There’s the tax exemption for those who are earning less than R6 500; the President said that will cover some four million people. There will be assistance for those workers who fall ill with the coronavirus from the Compensation Fund. And there’ll also be opportunities to tap on the Unemployment Insurance Fund. Specifically, when it comes to small businesses, they’re able to tap on R500 million in terms of support from the government.

So, specifically around the R500 million – it does really sound inconsequential – but to what extent do you think these measures will help to keep small businesses alive?

VICTOR KGOMOESWANA: They will help only as far as they address one thing that keeps businesses alive, and fails them, Nompumelelo. And if you ask everybody who’s in business, they will tell you: turnover is vanity, profit is sanity, and cashflow is reality.

The question is, all these measures – are they going to alleviate the cashflow problems of small businesses? I suspect not. Tax breaks – tax is something you pay after you have made profit. Now you’ve got to make sales before you can make profit. Now the businesses are closed, so there’s no top one, not even that which we call vanity.

And then look at the method of the things you mentioned that we are going to have to do – even the Solidarity Fund. I mean, we’re not all Oppenheimers and Ruperts … we don’t have. If you don’t even know how long this is going to last for, how many people will really be able to donate and for how long? That’s my question. My question is, will this grant system, the one by the Department of Small Business Development, admit people have been reporting errors for the past 24 hours? I tried it myself and it kicked me out.

You are placing way too many way too many obstacles and too many bureaucratic levels at which people must talk.

I thought, if you are in an emergency situation, you want to minimise the steps where you are going to stop, and try and pick up your bag, pick up your phone. You’ll want to make sure you are only focused on dealing with emergencies in a very direct way.

I appreciate whatever the President and his team are trying to do. The question is, will they alleviate the cashflow problems of small businesses, especially because in less than seven days it’s month end. Those debtors must suck every liquidity that’s left in the personal account, in the business account we will be staring down still seven days of the lockdown or certainly more than 30 …… It’s going to be chaotic. Unless you can answer the cashflow requirement of the small businesses, we are going to be tainted on the economic side.

NOMPU SIZIBA: Look, you raise a fundamental issue. That is, in order to get revenue you need sales. And then you talked about the whole vanity and sanity thing, which I won’t try and break down. You’re absolutely correct.

But of course the President did hint that the banking sector might be announcing measures to assist small businesses. We have heard some members of the banking sector coming forward to say that they’re going to give payment holidays to students, and certain other sectors of the community. What do you think the banking sector could do to assist in this situation?

VICTOR KGOMOESWANA: I chuckle when I hear student loans. I’m a parent of a university student, so I know that’s not the most pressing of my problems, I can tell you. The most pressing is will I have money to take him to school? Will I have petrol in the car to drive him [when] I have to. Will I have food for him, will I have time for him to study at home, while this lockdown is in force?

So here’s my proposal:

Banks have been wasting too much time talking past each other. This is not the time to try and outdo one another. They should come as the Banking Association and say “we are doing the following thing”.

They have been given the leeway, because the Competition Commission regulations have been relaxed. It’s not even necessary to relax them; they have been not competitive anyway. When they raise interest rates they do that at the same level. So it’s not as they have really been competing. But this time there’s a regulatory leeway for them. They should have done it even before the president came with it. It would be a lot more reassuring is they said we are giving ….. debt-free.

The medical aid companies want …… . cover. The mobile network operators – that’s another big one – they should be trying to sell us more packages that will help us work from home. They should be saying “we understand that network connectivity and data are as good as oxygen in this time”. We are going to give people leeway. They will collect the money eventually. They know who you are, they know what you’ve been doing, they can keep track of the airtime you are spending. But at this time they shouldn’t even be trying to sell us new packages, because they should be helping the nation to stay in touch, especially so that we can make the lockdown, which is, I repeat, a very important step and a very wise worthwhile precedent, and necessary – and we should support it. So make it possible and workable.

NOMPU SIZIBA: Victor, we have a very ugly unemployment rate, and there is a very strong possibility that a number of people will effectively go into unemployment come Friday morning – even if that’s not the intention. Do you anticipate that the unemployment picture in the second quarter of this year might be more horrendous than anything we’ve seen in recent years?

VICTOR KGOMOESWANA: It’s only logical. If you think about it, unemployment is already scaling the 30% range. So, if you now shut down the small businesses that employ the bulk, the larger chunk of your workforce, and field more jobs, pay rent of revenue earned, you are likely, not likely, you are going to have unemployment, because small businesses don’t have a lot of leeway. They don’t have a lot of fuel in the tank. We don’t sit there with cash.

Even now I’m negotiating with my landlord for a rental holiday. It’s only one month of the lockdown; it hasn’t even started yet. It tells you how little we have, and how much rent anxiety we are operating on. So unemployment is a lot more difficult.

That’s why I’m saying, yes, let’s clamp down the coronavirus spread, but let’s worry about keeping the economy chugging along, at least at a minimum rev count, just so that we don’t aggravate the unemployment situation.

And, most of all that desperation of the populace, because people who are hungry are not going to stay at home and say “we are observing the lockdown”. They are going to go out there and say: “If I’m going to die of starvation, maybe I should die of coronavirus.”

NOMPU SIZIBA: That’s hectic indeed. And then of course, we see that countries like the United States are also beginning to suffer with people losing, because they have a very flimsy kind of labour relations there. If you don’t work, you don’t get paid, and they can easily let you go – and all of that. We are seeing a lot of people becoming unemployed, and there we’ve [previously] seen job numbers rising all the time. So there’s a real concern that after a lockdown period, who’s going to take them, if a whole load of businesses are shut thereafter.

So what I’m trying to get to is: do you think that, come the end of the 21 days, even though we’re trying to arrest a health emergency, we might actually have more social problems down the line?

VICTOR KGOMOESWANA: That’s why we can’t look at it only as a health problem, because we know they have food stamps; we don’t here. We struggle with feeding schemes at school; sometimes we struggle with social grants for the poor and the innocent. Now we can’t be having food stamps in the Solidarity Fund. But what happens if we have to go beyond 21 days of the lockdown, because the President realises we haven’t slackened the curve, as it were? Are we are going to get more donations or what, from what exactly, because business are shutting down, are being forced to shut down.

I’m not against businesses shutting down. I’m just saying let’s look at it as a comprehensive holistic issue, not just as a health issue, because it’s not ever just a health issue, especially when people are charging exorbitant prices for sanitisers and masks and all those things that we need to stay healthy.

NOMPU SIZIBA: Victor, you’ve been at the helm of the mic, so you understand when I say it’s time to say goodbye. Thank you very much for your insights.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   6

You must be signed in to comment.

SIGN IN SIGN UP

The alternate question is, will SARS survive the low tax collections that will stem from reduced PAYE-tax, Prov-tax, VAT, Customs?

In sympathy, will govt be able to pro-rata shrink its service, in line with the same drop in economic activity. No, you say??

Well then, it now looks more likely that the ONLY OPTION for funding Govt shortfalls will have to come from prescribed assets on retirement funds…. 🙁

“I mean, we’re not all Oppenheimers and Ruperts”

….I yet to read Patrice Motsepe, defacto King of the North West province offer R1 billion or even our own President, who is Uber wealthy cough up some change like a R1 billion

I love it when people say it like it is.

Do you think for one minute that civil servants will take a pay cut ? , even for 21 days ?

are businesses also living from hand to mouth?

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: