In announcing a two-week extension of the national lockdown to halt the spread of Covid-19, President Cyril Ramaphosa on Thursday night appealed to big businesses in South Africa to pay suppliers and not to opt for force majeure in the interests of the country’s economy.
“I would like to call on all businesses to continue to pay their suppliers, to the extent that they can, to ensure that those suppliers can also continue to operate and pay their staff and suppliers,” he said.
“I would like to appeal to all large businesses not to resort to force majeure and stop paying their suppliers and rental commitments, as such practice has a domino effect on all other businesses dependent on that chain,” the president added.
His comments come as several companies are considering drawing on force majeure provisions to mitigate the impact of the economic fallout from the Covid-19 lockdown, which has effectively seen thousands of businesses countrywide being forced to halt their operations. Many are applying the ‘no-work, no pay’ principle in addition to job cuts to stay in business.
Major retailers first to move
Since the lockdown started on March 27, Moneyweb has reported extensively on moves by several major retailers – including the likes of TFG, Pepkor and KFC – not to pay rentals to landlords for April due to their stores being closed. The move is effectively based on the ‘force majeure’ legal position.
Property industry bodies such as the South African Property Owners Association and the SA Real Estate Investment Trust Association have warned that the retail property sector could face collapse if there is widespread non-payment of rentals, especially by the major retailers that can afford to do so.
Meanwhile, during his address to the nation on Thursday night, Ramaphosa applauded all employers that have continued to pay their workers during what he described as a “very difficult time”. He also commended the employers that are working with unions and government to help their employees access Unemployment Insurance Fund (UIF) benefits.
Billions in employee assistance
The president noted that the UIF had set aside R40 billion to help employees who will be unable to work as part of efforts to prevent jobs losses due to the lockdown. He said the fund had already paid out R356 million.
“We must do all we can to ensure that the underlying economy continues to function and to focus support on those small businesses that really need [it],” Ramaphosa stressed.
The extension of the nationwide lockdown by a further two weeks, effectively to May 1, means that most of the existing lockdown measures will remain in force until further notice.
“We will use the coming days to evaluate how we will embark on risk-adjusted measures that can enable a phased recovery of the economy, allowing the return to operation of certain sectors under strictly controlled conditions,” Ramaphosa noted.