File picture: African News Agency (ANA)
File picture: African News Agency (ANA)

'Survival outlook bleak for mid-level companies'

By Tshego Lepule Time of article published May 23, 2020

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Cape Town - Businesses are gearing up for the new normal as more industries reopen after two months under easing lockdown regulations.

The Cape Chamber of Commerce hosted an online summit this week with industry leaders from various sectors to discuss the impact of the lockdown and how businesses would operate going forward.

Chairperson of Cape Union Mart Philip Krawitz outlined the challenges facing the retail sector and those plaguing mid-level companies which do not qualify for relief measures.

“These mid-level businesses are the backbone of this economy and they feature nowhere in the engagements government has with small business and the big five (businesses). Around 80% to 85% of them will founder within six months unless there are interventions,” he said.

Krawitz said despite projections that the peak of the virus was only set for late July, assistance for property rentals were being offered until end of May.

“Unless rentals fall by 30% to 40%, a majority of retailers will go under. Publicly listed companies have access to bonds and can cash them in while most mid-level companies do not. And while there is a range of assistance from banks, a majority of companies know there is no point borrowing money you know you cannot repay,” he said.

“We are going to need more businesses rescues, having someone to interface between creditors and business. We need to stand up in order to preserve our business; it starts with a dedication to sustaining jobs.”

Managing executive for Absa, John Tshabalala, said nine in 10 surveyed businesses reported reduced turnover since the lockdown and one-third of them indicated that they were laying off staff in the short term.

Around 30% of businesses indicated they would survive less than a month without a turnover while 55% said they would stay afloat without turnover for up to three months.

Tshabalala said to date around 376 000 account holders were assisted with cash flow relief of R5.8 billion, of which business clients accounted for R2 billion.

He said Covid-19 had a big impact on many sectors in the province that are big contributors to the local economy. “The wine industry is most affected due to lockdown regulations which did not allow local sales, with an income loss estimated at R300 million per week.”

Weekend Argus

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