Covid-19 lessons for SA’s restaurant industry

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From having contributed R6 billion monthly to the national economy and employing more than 500 000 people last year, the Covid-19 coronavirus has resulted in many once-bustling restaurant businesses having to fight for survival.
From having contributed R6 billion monthly to the national economy and employing more than 500 000 people last year, the Covid-19 coronavirus has resulted in many once-bustling restaurant businesses having to fight for survival.
Gallo Images/Nardus Engelbrecht

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While many sectors have found reprieve in the gradual easing of the national lockdown, the South African restaurant industry continues to struggle with gruelling challenges such as the international travel ban, curfew and maximum capacity restrictions.

From having contributed R6 billion monthly to the national economy and employing more than 500 000 people last year, the Covid-19 coronavirus has resulted in many once-bustling restaurant businesses having to fight for survival.

The Restaurant Association of SA has stated that nearly a third of local restaurants have already closed shop since the onset of the lockdown, while 70% have had to retrench employees.

Yet despite being one of the hardest hit industries, the latest Fitch SA Consumer and Retail Report estimates that 40% of restaurants have not received any form of government loan or support. Unfortunately, these figures may be on the conservative side.

From a private financing perspective, the situation appears just as dire.

Based on the administrative involvement of fund management company Business/Partners in the Sukuma Relief Programme – a private initiative aimed at supporting small and medium enterprises –that are financially impacted by Covid-19 – businesses in the restaurant industry did not fare well.

Read: Economic revival lies in us being proudly SA and buying local

Of all applications received, the sector only accounted for roughly 8% and of the restaurant businesses that did apply, only about 30% got approved for relief funding.

Generally speaking, the reasons for such a small percentage of restaurants receiving financial support during this challenging period appear to be two-fold.

Firstly, employment in the industry is typically unstable, with most restaurants employing only their front-of-house and kitchen personnel permanently. Because wait staff and other roles are typically filled by casual workers, while a business can only base its employment statistics on permanent staff, it is difficult to prove economic impact in terms of employment when applying for finance.

Essentially, the number of permanent employees on paper is far less than the actual number of people supported by the industry.

Secondly, and arguably most importantly, it is often difficult to prove the financial viability of a restaurant.

Read: Data reveal impact of Covid-19 on economy

This is either because the restaurant’s financial information – balance sheets, profit statements and so on – is not readily available or up-to-date, or, if it is, many of these businesses have been running at a loss over the past financial year. This is because the South African restaurant industry has been through a rough few years.

While the industry recovered fairly well from the Great Recession, picking up nicely by around 2015, load shedding soon became a major obstacle and, along with the drought that plagued the country from about 2018, times have been tough for the sector ever since, with 2019 proving to be a particularly difficult year.

Essentially, this highlights the lack of resilience associated with the industry and shows how vulnerable it is to cyclical economic downturns and consumer trends.

Botha is Stellenbosch area manager for business partners limited


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