The latest Covid-19 adjusted level 4 lockdown restrictions have dealt a further blow to the embattled liquor, restaurant, leisure, and tourism industries, which were already struggling to recover from the hard lockdown in the second quarter of 2020. These embattled businesses are once again facing restrictions during the third wave with yet another alcohol ban.
Several business owners in these sectors have not yet managed to catch up on arrear rental payments and will be falling further into arrears, according to Michelle Dickens, chief executive officer of the credit bureau, TPN.
The latest restrictions – which some analysts predict may well be extended beyond the initial two weeks announced by president Ramaphosa – have not been accompanied by any plans from the government to provide financial support for businesses impacted by the restrictions.
The Property Industry Group provided R3 billion rental relief to SMME retail tenants during the first hard lockdown, Dickens explained, but analysis of the data indicates that even this substantial value of relief didn’t stem the flood of delinquencies, as tenants three months or more in arrears increased from 7% prior to lockdown, to 10% in April 2020 in the initial months of rental relief, peaking at 19.12%, or one-in-five tenants more than three months in arrears in September 2020.
As the economy slowly opened up in the last quarter of 2020 and the first quarter of 2021, severe commercial tenant delinquencies improved to 15.42% 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,” said Dickens.
Although restaurants have been allowed to deliver takeaways, a considerable proportion of their profits come from alcohol sales. Steve Maresch, co-owner of the Local Grill in Parktown North, said although the business is doing everything it can to make the takeaway space work, it is challenging.
Finding packaging that is strong and sturdy and preparing an expensive piece of fillet steak in a way that allows it to be reheated without being overcooked is just one of the restaurant’s challenges.
“Our rent is in arrears,” he said. “We’ve been in this space for 18 years and although the local community and our landlord have been incredibly supportive and loyal in the past year, there is no denying that this has been a very difficult period. This is our last stand: we have depleted all our resources. If we have to close our door during these latest restrictions, we won’t be re-opening.”
If this were to happen 26 staff members as well as three managers and two co-owners – the majority of whom are the primary breadwinners in their respective families – will be joining the ranks of the unemployed.
“We’re paying most of our supplier’s cash on delivery these days. Neither my partner nor I have drawn a salary for more than a year. Since the onset of Covid, we have become a marginal business.”
Mark Johnston, co-owner of Turn ‘n Tender in the Cresta Shopping Centre, is facing a similar dilemma. The business, which is only three years old, is still paying off new business debt.
“The alcohol bans have all put huge pressure on the business, significantly reducing turnover. And although we were slowly recovering from 2020, we had yet to reach pre-Covid turnover levels,” he said.
CEO of the Restaurant Association of South Africa, Wendy Alberts, told Business Maverick that close to a million jobs in the restaurant industry will be at risk in the next few weeks.
The owner of liquor store Gordon Road Cellars, Lenard Mitchley, said that although the business did manage to keep up with rental payments during the previous three alcohol bans as well as pay its staff members, should the latest ban continue for more than two weeks, he will be falling into rental payment arrears, as his savings have now been depleted.
Hotels have been equally hard hit during the lockdown. Last week Sun International decided to temporarily shut all its hotels and resorts.