CAPE TOWN - As South Africa comes to grips responding to the coronavirus pandemic, it is business unusual with people’s lives being disrupted in unprecedented ways, a debt counselling executive says small-and medium-businesses should prepare for tough times ahead.
Chief operating officer at DebtBusters, Benay Sager, says people in some sectors of the economy, particularly those immediately and most severely affected, such as travel and tourism, may be concerned about their jobs or ability to maintain their income.
“This is likely to intensify as the knock-on effect spreads to other sectors of the economy. It will be especially tough for small- and medium-businesses, which may not have cash reserves to pay their employees beyond the next few months,” he said.
Sager says many governments, especially those in Europe, have already announced plans to offer mortgage-payment holidays of up to three months. So far, similar initiatives have not yet been put in place in South Africa.
And while there has been some talk of local banks restructuring debt and repayment schedules, nothing is official.
“It’s early days but so far, the government has responded well. It has taken some difficult decisions to protect its citizens, knowing these will impact negatively on an already struggling economy, and it has kept people informed,” Sager explained.
Since the President Cyril Ramaphosa speech on Sunday declaring a state of national disaster, government communication has by-and-large been clear and calm, treading a careful line between not downplaying the seriousness of the crisis, while not creating panic.
Inevitably people respond differently, he says some have continued to try and live life as usual, potentially putting themselves and others at risk. Others have a siege-like mentality, hoarding food, cleaning and hygiene products and medication.
Neither extreme is helpful and headlines about empty shelves or people refusing to socially distance detract from the fact that most of us are probably following the advice provided and are taking sensible precautions.
According to Sager, the different reactions, though, do underline the fact that these are very uncertain times and uncertainty makes people feel vulnerable and act in ways they wouldn’t normally.
This includes financial decisions. If and until this happens it would be very unwise for consumers to take it upon themselves to skip any monthly repayments without informing the lenders. Not only will this put you in breach of your contract with the lender but will also affect your credit score.
“A poor credit score will affect your ability to borrow money in future. In uncertain times this is potentially a bad situation to be in.
"Equally, not knowing how things are going to work out, it may be tempting to borrow money while you can, perhaps hoping to benefit from a payment holiday down the line,” Sager said.