Lockdown | JSE-listed companies share their frustrations

Despite their access to capital markets, even JSE-listed companies have not been spared during this lockdown.
Despite their access to capital markets, even JSE-listed companies have not been spared during this lockdown.

As businesses wait to hear which other sectors can resume operations next in South Africa's "risk-adjusted" approach to re-opening the economy, it's not only small businesses concerned about whether they will survive the current meltdown.

Hosken Consolidated Investments (HCI) [JSE:HCI], which owns stakes in Tsogo Sun, casinos, eMedia and the Gallagher Convention Centre, said even with its size, "it will be interesting to see how a holding company like this survives".

Because HCI's primary investee companies are in manufacturing, hotels and casinos, most have completely closed, and the CEO, John Anthony Copelyn, said they will not reopen when the lockdown is lifted and will probably operate under this cloud for most of 2020 save for manufacturing. Making matters worse, as an investment holding company that spends money to acquire new ventures, HCI's balance sheet is highly leveraged.

"We are a business with a lot more debt, relatively speaking," said Copelyn, speaking at a panel discussion hosted by the Centre for Development Enterprise on Wednesday. "So, it's much more threatening to us to shut down."

On the opposite end of the spectrum are companies like Sanlam and Anglo American Platinum, who have adapted without major setbacks to the current situation.

Anglo-American Platinum [JSE:AMS] chairman, Normal Mbazima, pointed out that having dealt with TB, HIV and general occupational health diseases in mines before, the company was relatively better prepared to deal with the coronavirus (Covid-19), even though this time the challenges are more intense. For instance, in the past Anglo-American Platinum could still process ore even if its other operations had to be halted. But with Covid-19, it could not produce anything at all, which forced the company to declare force majeure on 20 March.

With mining allowed to resume limited operations now, things are looking up again, except for uncertainty on demand as motor manufacturers in Europe and US are still on lockdown.

"Recover? We are going to start very rapidly. That's really what we want to do but we will not start anything until we are sure we've done everything to protect our employees. But we need to contribute very quickly to our economy because our economy is really suffering," he said.

Sanlam [JSE:SLM], on the other hand, said it will "not let this crisis go to waste". Having been certified as an essential service provider, outgoing CEO, Ian Kirk said 87% of the insurer's employees are working, although remotely. As the company does not have debt, it is one of those that are able to keep paying the same level of salaries to employees and to meet its financial obligations to landlords and suppliers.

"But our business is impacted, there's no doubt about it, the market impacts us," said Kirk.

Like other insurers and banks, Sanlam had to give premium holidays to those who cannot afford to pay right now and reduce premiums across the board on some product lines, like motor insurance. But even then, Kirk said 2020 still present opportunities.

"The next nine months is quite an exciting time to get new things done," he said adding that insurers can possibly design new products to cover the emerging risk.

Meanwhile CDE, which hosted the discussion, is appealing to companies with big balance sheets to help smaller players who are struggling the most during the Covid-19 crisis.

The development think tank said all countries were learning along the way how to safely re-open their economies and as SA walks that road, companies must not pass the Covid-19 burden by not paying their landlords and suppliers when they can afford to.

"[We must] keep firms alive and keep as many jobs as possible. We have to find a way to reopen our economy and rebuild in such a way that we have a chance for economic recovery," said the CDE's executive director, Ann Bernstein.

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