The latest Covid-19 level 4 lockdown restrictions have been a further blow to the embattled liquor, restaurant, leisure and tourism industries, which are still struggling to recover from the hard lockdown in the second quarter of 2020 restrictions during the second wave and a total of four alcohol bans. And they shudder to consider what the latest adjusted Level 4 restrictions will bring.
Many business owners in these sectors have not yet managed to catch up on arrear rental payments and will be falling further into arrears as the new adjusted Level 4 restrictions play out.
'No financial support with latest lockdown'
This is according Michelle Dickens, CEO of TPN who says that the latest restrictions (extended until 25 July as announced by President Ramaphosa on 11 July) are not being accompanied by any plans from 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 lock down. TPN 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.
Dickens further explains that as the economy opened up again in the last quarter of 2020 and first quarter of 2021, severe commercial tenant delinquencies improved to 15.42% by March 2021.
'Struggling for survival'
"New level 4 restrictions will no doubt reverse some of these gains as business owners in affected sectors are struggling for their very survival."
These latest restrictions means that businesses will be falling further into arrears as far as its rental payments are concerned.
Although restaurants have been permitted to do takeaways and sit-downs up to 50 people, a significant proportion of their profits come from alcohol sales. Co-owner of the Local Grill in Parktown North, Steve Maresch, says although the business is doing everything it can to make the takeaway space work, it is challenging.
Finding packaging that travels well and preparing an expensive piece of steak in a way that allows it to be reheated without being overcooked is just the start of the restaurant’s challenges.
“Our rent is in arrears,” says Maresch.
“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.”
'My partner nor I have drawn a salary for more than a year'
That means, he reveals, that 26 staff 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.”
Co-owner of the Turn ‘n Tender in Cresta Shopping Centre, Mark Johnston is facing a similar dilemma. The business, which is only three years old, is still trying to pay 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 says.
'A million jobs in the restaurant industry at risk'
Wendy Alberts, CEO of the Restaurant Association of South Africa told Business Maverick that close to a million jobs in the restaurant industry will be at risk in the next few weeks.
Lenard Mitchley, the owner of liquor store Gordon Road Cellars, says that although the business did manage to keep up with rental payments during the previous three alcohol bans as well as pay staff, if this latest ban continues 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. Last week Sun International decided to temporarily shut all its hotels and resorts after the new lockdown restrictions were announced.
Business Liquidations and business rescue
A total of 3 246 businesses have entered into business rescue, with uptake of the mechanism as allowed by companies Act more than ten years ago rather muted, explains Dickens.
"During the pandemic period some 442 businesses have entered into business rescue, with rent often negotiated as part of the business rescue plan, adding additional pressure to the commercial real estate."
The commercial real estate sector was just starting to show signs of recovery, with a small improvement in the number of commercial tenants in good standing, before these latest restrictions were announced. Now that the restrictions have been extended beyond the initial two-week period, "it is very likely that more businesses in affected industries will be falling into the arrears category".
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*This article has been updated to reflect 11 July Lockdown Level 4 extension until 25 July.
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