South Africa’s lockdown is crushing businesses, and employees cannot be paid

The South African government extending the national lockdown will have a devastating impact on many businesses.

Economists have said the initial 21-day lockdown was already devastating to the economy, and the extension will only add to this.

While high-level analysis of the situation is in no short supply, as well as predictions on how many millions of jobs will be lost, it does not provide tangible insight into what the lockdown is doing to South African businesses.

These macro-level effects are also often countered with “people before profit” arguments.

While the national lockdown has helped to stop the spread of the virus and saved lives, positioning health and economic considerations in a diametric fashion is unhelpful.

As stated by Efficient Group economist Dawie Roodt: “The single biggest killer on this planet is not COVID-19, or measles or cancer. The single biggest killer on this planet is poverty.”

We cannot pay our staff

MyBroadband spoke to a small construction company in Johannesburg, who asked to remain anonymous, about the crippling effect the lockdown was having on it.

The company employs just under 30 people, the majority of whom are labourers and artisans.

Their main line of work is planned maintenance and new projects, which have come to a grinding halt since the lockdown started.

“Before the lockdown began, our team would handle around 15 jobs per day. Today, we have two employees on standby who handle emergency callouts only,” said the company’s operations manager.

Due to the lack of work coming in, their cash flow is all but dried up.

“For the employees who are not on standby, they are at home. We want to support our staff, but we are not in a position to do that. We don’t know if we will be able to pay them for April.”

The manager said they had applied to the government’s SMME relief fund for financial support, but after almost two weeks they had not received any feedback.

“We also applied for UIF for our staff members, but we have not heard anything and neither have our employees.”

“It is hard for me to have so many families dependent on our business working and us paying salaries. Not being in a position to help them through the lockdown – it is is something that I am really worried about.”

“It’s not only our staff we are concerned about, we have car payments, rent, and supplier bills to pay, but we simply do not have the money.”

With the extension of the lockdown, the manager said they hope, at the very least, businesses will be allowed to start operating under restrictions.

“We know the lockdown is necessary to keep people safe, but we just don’t know how we will get through it.”

Restaurants and events companies in trouble

Restaurants are yet another casualty of the lockdown regulations and have been forced to close their doors.

This has made it incredibly difficult – and in some cases not possible – to pay staff, suppliers, and rent.

One restaurant which MyBroadband saw asking for help on social media was a small Johannesburg outlet, which asked the community to donate money to it.

The owner said without the donations, they will not be able to pay salaries in April or pay their rent.

While the Department of Tourism has launched a COVID-19 Tourism Relief Fund to assist businesses – including restaurants – during the lockdown, this fund will be administered in line with the “objectives of economic transformation”.

It will therefore be guided by the Broad-Based Black Economic Empowerment codes.

Additionally, the funding businesses may receive is capped at R50,000.

The lockdown also paints a bleak picture for events companies, who felt the impact of the pandemic before a national lockdown was even discussed by the public.

A big ICT casualty was Mobile World Congress 2020, cancelled in February. It resulted in host city Barcelona losing out on an estimated $500 million in revenue.

In South Africa, the situation is dire, with scores of events cancelled in the build-up to the lockdown.

Information shared with MyBroadband by an industry insider detailed how a number of local events companies were forced to close even before the lockdown, due to a lack of business.

“To provide a specific example, one company has 80 staff who are now at home and will not be paid for the foreseeable future,” said the insider.

“The majority of these staff are carpenters, stand builders, and electricians. They are regular working South Africans.”

Now read: Behind-the-scenes photos at top shopping malls during the lockdown

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South Africa’s lockdown is crushing businesses, and employees cannot be paid