With the country gearing to ease lockdown restrictions even further, one industry getting left behind is the tourism and hospitality sector.
According to Statistics South Africa’s Tourism Satellite Account released in 2019, the sector directly employed 740 000 in 2018. The World Travel & Tourism Council report says in 2018 the sector contributed 2.8% of the country’s real GDP while its indirect contribution accounted for 8.2% of GDP.
When SA implemented a hard nationwide lockdown in March calling for strict physical distancing and limited economic activity the sector which involves, travel, accommodation, conference centres, restaurants, bars and other leisure activities, was brought to a standstill.
Much of the industry will remain so as the country moves to Level 3 in June in order to “maintain social distancing” said President Cyril Ramaphosa in a televised national briefing on Sunday.
In April the International Finance Corporation together with the Department of Tourism and the Tourism Business Council of South Africa released the first of three surveys looking at the impact of Covid-19 on businesses in the sector.
Among 1 610 respondents, 99% of the firms said they had been negatively affected as 58% were unable to service their debts and 54% could not cover their fixed costs in March.
When it comes to employees 50% of the respondents had reduced staff wages, 32% had placed workers on a leave of absence and 11% have made their workers redundant.
“A total devastation,” said Lee Zama, chief executive of the Federated Hospitality Association of Southern Africa in describing how the virus has impacted the industry.
Apart from a few hotels that have been enlisted by the government to provide quarantine facilities the industry was completely closed down Zama explained.
“Our members have lost a lot of money, there are very few small businesses that would have a buffer for four or five months without any income,” she said.
“It’s just impossible.”
Ramaphosa said the government would consider the proposals that have been made by the tourism, hotel and restaurant industry regarding the health and safety measures they will put in place when they are permitted to open but gave no definitive timeline on when that will be.
According to the government’s five-level risk framework, activities in the tourism and hospitality sector largely fall under alert Levels 2 and 1, where there is a reduced chance of infection.
“There’s an unfortunate understanding that the tourism industry is the one that brought the virus and is responsible for distributing it around South Africa,” said Zama.
Zama said the sector should be opened further because the extension of the restrictions beyond the current moment would “result in an even bigger demise of the sector” requiring an even longer recovery period.
“Like any segment of the economy, we are aware of the virus and the economic impacts thereof and we will put sufficient safety mechanisms [in place] to protect our employees, our guests and the country,” she said.
Signs of recovery may only be seen two years from now, said Zama, when taking into account that only business travel and accommodation will only be allowed in June.
“I personally don’t see a future for most of my business,” said Randolf Jorberg, chief executive of bar chain Beerhouse and founder of Hospitality Leadership, an interest group consisting of the founders and directors of restaurant and hospitality companies.
“No one can change the fundamental issue which is restaurants have no way to make up the loss of income during this period,” said Jorberg, explaining that while some industries may be able to claw back some of the losses made during the lockdown, for a restaurant, a seat that is not sold today “cannot be sold twice tomorrow”.
Jorberg said contrary to popular belief, restaurants by their nature are not “super-profitable” and rely on cash flow because the business has a lot of running and fixed costs, which is why the ones that don’t succeed at attracting customers close after a year or two.
“The reality is that due to no income for such a long period you will now see the death of restaurants of all sizes at a massively accelerated speed,” he said.
This is because even though the businesses have been closed, costs such as rent and levies continue to accumulate. Jorberg said many businesses that might reopen for sit-downs will close in a few weeks as they don’t have enough cash flow because traffic will be slow due to fear.
Over the past two months the country has been in Levels 5 and 4 of lockdown, where the sale of alcohol was not permitted. In May restaurants were allowed to deliver food under Level 4.
This was cold comfort for Jorberg who said as a late-night operation the focus of his business is not food and 80% of the turnover “is in the liquid”.
“The mission of my business was beer connecting people and the very mission of the virus is the opposite of that,” he said.
Beerhouse has a restaurant on Cape Town’s popular Long Street and another in Tyger Valley.
Jorberg said they will reopen the Tyger Valley restaurant as a delivery-only shop and start virtual restaurants under the brands Pizzahouse and Burgerhouse.
“That’s the one attempt to rescue some turnover and generate some employment.”
Before Covid-19, Beerhouse employed some 100 people on a full-time basis. Under its new structure, Jorberg said they will possibly hire some kitchen staff and drivers on a casual basis.