SMEs hit hard by rising costs, restrictions and heavy looting
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JULY HAS come with severe challenges for South Africa’s small and medium enterprises (SMEs), which have to face, in addition to an extended lockdown and widespread looting, increases in electricity charges, a hike in property rates and higher fuel prices.
This as SMEs across the country, particularly in looting-hit KwaZulu-Natal and Gauteng, began picking up the pieces after they were wiped out when protesters helped themselves to goods.
According to insights from funder Retail Capital, the lockdowns impact SMEs not only financially, but also sentimentally, because as soon as increased restrictions are put in place, there is a general hold on spending.
This, in addition to having to fork out extra money for utilities and fuel, means that available income is compromised, which has a significant knock-on effect.
Retail Capital managing director Miguel da Silva said that electricity had increased between 13.48 and 14.59 percent, depending on where the business operated, while an annual 2 percent rise in property rates and a 6.8 percent hike for water and sanitation was applied in Joburg.
Cape Town saw a 4.5 percent increase in property rates and a 5 percent increase in water and sanitation charges, while in Durban property rates increased 4.9 percent and water and sanitation charges went up 8.5 percent.
Motorists have been paying 23 cents per litre extra for petrol and 38c for diesel, while paraffin cost 32c more, since earlier this month.
“The riots and unrest have been damaging to business confidence. Customers are scared. They were scared even without the lockdown to go out and spend. It is essential that law and order be restored quickly,” Da Silva said.
For SMEs outside of the restaurant, tourism, hospitality and alcohol industries, bottom lines were being affected, which could mean the difference between keeping staff on fulltime or choosing to put them on short time or even retrench them.
Da Silva said it was critical that SMEs didn’t get stuck in the trenches.
“Keep looking ahead and search for new opportunities. Of course, continuing to innovate is not always possible, and many SMEs pivoted where they could in the first and second wave. But this lockdown will end, and business will pick up, as it did between the previous waves.
“The vaccine roll-out will also play a massive role in our recovery and is critical to the opening up of the economy,” he said.
Michael Evans, from Webber Wentzel Attorneys, warned that the further restrictions on the public could restrict movement and could have an impact on trade. Any restrictions on movement could also impact employees travelling to and from work.
Credit bureau TPN said about R3 billion in rental relief had been provided to SMME retail tenants during the first hard lockdown.
TPN analysis indicated that even this substantial of relief had failed to stem the flood of rental delinquencies, as tenants three months or more in arrears increased from 7 percent before the lockdown to 10 percent in April last year in the initial months of rental relief, peaking at 19.12 percent, or one-in-five tenants more than three months in arrears in September 2020.
As the economy opened up again in the last quarter of 2020 and the first quarter of 2021, severe commercial tenant delinquencies improved to 15.42 percent by March 2021.
“New level 4 restrictions will no doubt reverse some of these gains, as business owners in affected sectors are struggling for their very survival.”
Wendy Alberts, chief executive of the Restaurant Association of South Africa, said close to 1 million jobs in the restaurant industry are at risk.
The commercial real estate sector had just started to show signs of recovery before the latest pandemic restrictions were announced. Should the restrictions be extended, it is very likely more businesses in affected industries would fall into the arrears category
Da Silva told Business Report that it would be extremely difficult for SMEs affected by looting to recover.