Never mind 2020, this could be the worst festive season for businesses

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Small businesses remained resilient and tried to stay optimistic, hoping they'd make money around Christmas.
Small businesses remained resilient and tried to stay optimistic, hoping they'd make money around Christmas.
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  • Yoco says its merchants are worried about the speed at which the fourth wave of Covid-19 infections is approaching and the effects of Omicron on international tourism.
  • They fear that even the locals will change their Christmas plans much earlier than last year.
  • Small businesses had remained resilient and tried to stay optimistic, hoping they'd make money around Christmas.

Data from payment devices provider Yoco show that small businesses held their own while navigating the second year of lockdowns.

Different economic data sets paint a confusing picture of how SA is doing, given that the GDP numbers have come out stronger than expected while unemployment is at a record high. But Yoco's small business recovery monitor shows that more sectors have been resilient.

Looking at the 200 000 businesses that now accept payments on Yoco devices countrywide, the company says it is seeing "pretty good" levels of turnover growth.

Around 15% of the businesses that used Yoco devices before the lockdown in March 2020 never used them again. They have likely closed shop permanently. But transaction volumes and turnover of those that remained in business are better than at pre-pandemic levels.

Yoco's Matt Brownell admits that it's hard to isolate how much of this recovery is driven by the shift from cash to using cards and other digital payment methods such as Snapscan, Zapper and other QR codes.

"So, the data are conflicting on our side as well. The reason why it's a little hard to assess the overarching health of small businesses is because there is a major factor driving our numbers and making things look quite positive, i.e., the huge migration from cash to cards and digital," said Brownell.

Yoco has been watching businesses that were using its payment devices before March 2020 for the past 20 months to see how they are recovering.

The health and beauty sector - including hair salons, barbershops, and spas - has surprised on the upside. These businesses account for about 25% of Yoco's customer base.

"They have actually been very resilient throughout this time. They were obviously absolutely destroyed by the initial hard lockdown. But interestingly, we don't see a lot of evidence that people working from home has hurt the health and beauty industry," said Brownell.

Retailers have been relatively resilient too. Merchants that remain disproportionately affected by the lockdown are those in the food and drinks industry and the hospitality sector at large, especially in the Western Cape, because of the lack of international tourism.

Festive hopes dashed

Even though increased usage of cards and other digital payments is muddying the picture, some of that turnover might be coming from additional feet through the door. But Brownell would rather err on the side of caution and not overstate how well businesses are doing.

However, the constant surveys that the company runs to gather merchants' thoughts show that the mood has been upbeat until now.

"There was a huge amount of optimism around this December and January. And that optimism was particularly felt in the hospitality sector," said Brownell.

Businesses were reporting that bookings were up substantially versus last year. Many international flights were scheduled to come in, and everything looked favourable for businesses that rely on international tourism. But when SA announced the discovery of the Omicron Covid-19 variant, cancellations started streaming in.

"Everyone has been waiting for this time of the year. It's now again down to domestic tourists to pick up the slack from international tourists. Even then, lots of locals are also cancelling their trips," said Brownell.

He said Yoco's data have not shown anything in the last week that suggests a significant drop in turnover yet.

But the company will be keenly watching the transaction activity in the coming weeks and into the new year to gauge the aftereffects of the lockout of southern African countries and any possible lockdown restrictions in SA.

"What I can tell you is that our businesses are very, very worried. And they're worried a bit earlier than last year," said Brownell.

Because the first signs of the second wave of Covid-19 infections in 2020 only emerged halfway through December, Yoco said the first two weeks of the festive month were "really excellent" in terms of merchant turnovers. Even the third week leading up to Christmas was still good. Sales only started to tank after Christmas.

"Now there is a feeling of genuine concern that the numbers are going to drop even earlier in December because of the speed upon which the fourth wave is moving. I think people's plans are likely to change a bit earlier than last year," said Brownell.

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