The percentage of total tenants that were recorded as being in good standing with their landlords dropped sharply in the second quarter of 2020.
From 81.52% of tenants being in good standing in the first quarter, the percentage declined to 73.5% in the second quarter, a decline of eight percentage points.
Those tenants that paid on time amounted to 59.48% of total tenants in the second quarter, down from 64.84% in the previous quarter.
“This all translates into quarterly increases in the percentage of tenants ‘partially paying’ or not paying at all,” TPN said. “Interestingly, though, is that the percentage paying late remained on the decline in the second quarter.”
From 11.57% in the first quarter, the percentage of tenants making a partial payment jumped to 15.28%. The percentage who did not pay also rose from 6.92% to 11.22% over the same second quarters.
However, the percentage paying late declined from 16.68% to 14.02% after having been on decline from a few preceding quarters.
TPN said that the sharp weakening in tenant performance is strongly related to the Covid-19 lockdowns, the most severe lockdown months being in April and May.
“These widespread business shutdowns likely saw many tenants lose either part or all of their income, especially amongst those employees with more flexible remuneration arrangements, for example casual labour and those that are commission-based,” it said.
In addition, the tenant population went into the lockdown period already under some heightened financial pressure, caused by a long term stagnation in South Africa’s economy, its economic growth having broadly slowed from around 2011/12 to 2019, the group said.
By the second half of 2019 and early-2020, the country was already in mild recession even without any lockdowns.
“Economic stagnation had been taking its toll on tenants, and we had already seen a multi-year decline in the percentage of tenants in good standing, from a decade high of 85.95% back in 2014 to 81.52% in the 1st quarter of 2020, prior to the lockdown.”