Lockdown level 2 brings economic road to recovery

André Bakker, Director at VennCap said the shock of the nationwide lockdown will be felt for a long time to come.
“StatsSA reported in their survey in April 2020 that 85% of businesses’ turnover dropped below normal levels while only 54% of all businesses could survive for about three months, while Business Tech revealed in May 2020 that more than 53% of small businesses applied for relief funding of which only 6% of the applicants received actual funding. The UIF assistance did assist to pay employees during the crisis, but in most cases not enough to keep all personnel.
Cash flow
According to Bakker, most small businesses will only now start feeling the pain of a lack of operating capital and cash flow to service their creditors, landlords and the banks.
“Businesses need to supplement their stock levels, but are under severe pressure with limited or no cash flow. Retailers and SMME’s cannot supply their clients’ demands and in many cases the SMME’s are replaced with the bigger supplier who managed to get through the crisis.”
He said many suppliers don’t have the capacity to uphold their contractual obligations because of a cash flow crunch.
There is some light at the end of the tunnel with the change to level two status, he said.
“People are mobile again, can move across provincial borders and have realised that social distancing is part of the new way of doing business.”
Restrictions on inter-provincial travel being lifted is important for a number of reasons, but especially for the hard-hit hospitality sector, which depends on tourists from outside their home province.
SANParks tweeted early on Sunday that their online booking system was experiencing major technical difficulties amid an unprecedented surge in booking activity after the lifting of the inter-provincial ban.
Tourism
Data published by Statistics SA this week showed that the tourism industry was decimated by the country’s lockdown. Measured in nominal terms, total income for the tourist accommodation industry decreased by 95,3% in June 2020 compared with a year prior. Income from accommodation decreased by 94,5% year-on-year in June 2020 – the result of a 92,3% decrease in the number of stay unit nights sold and, a 29,5% decrease in the average income per stay unit nights sold.
President Cyril Ramaphosa announced that government is working with partners on an urgent economic recovery programme and a Nedlac task team was put together to evaluate the proposals and draw up a set of priority actions required for economic reconstruction.
Bakker encourages businesses to manage their cash flow carefully in coming months. “Where cash flow problems occur and defaults result, approach your creditors, landlords and banks timeously, before the default, and make timely, realistic and viable commitments to which you can keep.”
“VennCap specialises in end-to-end business solutions, with the core focus the raising of operational and expansion capital for their clients, whether by government incentive, venture capital of private equity – or an optimal combination thereof and invites businesses to visit their website.”

Story: Nelie Erasmus